Exhibit 10.2

GUARANTEE AND SECURITY AGREEMENT

 

GUARANTEE AND SECURITY AGREEMENT dated as of October [ ], 2017 (this
“Agreement”), among STELLUS CAPITAL INVESTMENT CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Maryland (the
“Borrower”); SCIC – ERC Blocker 1, Inc., a Delaware corporation (“ERC”), SCIC –
SKP Blocker 1, Inc., a Delaware corporation (“SKP”), SCIC – APE Blocker 1, Inc.,
a Delaware corporation (“APE”), SCIC – HUF Blocker 1, Inc., a Delaware
corporation (“HUF”), SCIC – Hollander Blocker 1, Inc., a Delaware corporation
(“Hollander”), SCIC – CC Blocker 1, Inc., a Delaware corporation (“CC”), SCIC –
Consolidated Blocker, Inc., a Delaware corporation (“Consolidated”), and SCIC –
ASC Blocker 1, Inc., a Delaware corporation (“ASC”), and each entity that
becomes a “SUBSIDIARY GUARANTOR” after the date hereof pursuant to Section 7.04
hereof (collectively, together with ERC, SKP, APE, HUF, Hollander, CC,
Consolidated, and ASC, the “Subsidiary Guarantors” and, together with the
Borrower, the “Obligors”); ZB, N.A. dba AMEGY BANK, as administrative agent for
the parties defined as “Lenders” under the Credit Agreement referred to below
(in such capacity, together with its successors in such capacity, the
“Administrative Agent”); and ZB, N.A. dba AMEGY BANK, as collateral agent for
the Secured Parties hereinafter referred to (in such capacity, together with its
successors in such capacity, the “Collateral Agent”).

 

WITNESSETH:

 

WHEREAS, concurrently with the execution and delivery of this Agreement, the
Borrower, certain lenders and the Administrative Agent are entering into a
Senior Secured Revolving Credit Agreement dated as of the date hereof (the
“Credit Agreement”), pursuant to which such lenders have agreed to extend credit
(by means of loans and letters of credit) to the Borrower from time to time;

 

WHEREAS, to induce such lenders to extend credit to the Borrower under the
Credit Agreement, the Borrower wishes to provide (a) for certain of its
Subsidiaries from time to time to become parties hereto and to guarantee the
payment of the Guaranteed Obligations (as hereinafter defined), and (b) for the
Borrower and the Subsidiary Guarantors to provide collateral security for the
Secured Obligations (as hereinafter defined);

 

WHEREAS, the Administrative Agent (on behalf of itself and such lenders) is or
will be entering into this Agreement for the purpose of setting forth its
respective rights to the Collateral (as hereinafter defined); and

 

WHEREAS, the Obligors and the Secured Parties agree that the Collateral Agent
shall administer the Collateral, and the Collateral Agent is willing to so
administer the Collateral pursuant to the terms and conditions set forth herein;

 

NOW THEREFORE, the parties hereto agree as follows:

 

Section 1. Definitions, Etc.

 

1.01. Certain Uniform Commercial Code Terms. As used herein, the terms
“Account”, “Chattel Paper”, “Commodity Account”, “Commodity Contract”, “Deposit
Account”, “Document”, “Electronic Chattel Paper”, “General Intangible”,
“Instrument”, “Investment Property”, “Letter-of-Credit Right”, “Proceeds”,
“Promissory Note” and “Tangible Chattel Paper” have the respective meanings set
forth in Article 9 of the NYUCC, and the terms “Certificated Security”,
“Clearing Corporation”, “Entitlement Holder”, “Financial Asset”, “Indorsement”,
“Securities Account”, “Security”, “Security Entitlement” and “Uncertificated
Security” have the respective meanings set forth in Article 8 of the NYUCC.

 

  

 

  

1.02. Additional Definitions. In addition, as used herein:

 

“Acceleration” means the Secured Obligations of any Secured Party having been
declared (or become) due and payable following a default by the Borrower and
expiration of any applicable grace period with respect thereto.

 

“Acceleration Notice” has the meaning specified in Section 8.01.

 

“Administrative Agent” has the meaning given to such term in the preamble.

 

“Agent Members” means members of, or participants in, a depositary, including
the Depositary, Euroclear or Clearstream.

 

“Agreement” has the meaning given to such term in the preamble.

 

“Appointed Party” has the meaning specified in Section 5.04.

 

“Borrower” has the meaning given to such term in the preamble.

 

“Cash Management Obligations” means the indebtedness, obligations and
liabilities of any Obligor to any Lender or any Affiliate of Lender which
provides any Cash Management Products and Services to such Obligor (including
all obligations and liabilities owing in respect of any returned items deposited
with such Lender or Affiliate of Lender).

 

“Cash Management Products and Services” means the following products or
services: (a) credit cards, (b) credit card processing services, (c) debit cards
and stored value cards, (d) commercial cards, (e) ACH transactions, and (f) cash
management and treasury management services and products, including controlled
disbursement accounts or services, lockboxes, automated clearinghouse
transactions, return items, overdrafts, and interstate depository network
services.

 

“CFTC” means the Commodity Futures Trading Commission.

 

“Clearing Corporation Security” means a security that is registered in the name
of, or Indorsed to, a Clearing Corporation or its nominee or is in the
possession of the Clearing Corporation in bearer form or Indorsed in blank by an
appropriate Person.

 

“Clearstream” means Clearstream Banking, société anonyme, a corporation
organized under the laws of the Grand Duchy of Luxembourg.

 

“Clearstream Security” means a Security that (a) is a debt or equity security
and (b) is capable of being transferred to an Agent Member’s account at
Clearstream pursuant to the definition of “Delivery”, whether or not such
transfer has occurred.

 

“Collateral” has the meaning assigned to such term in Section 4.

 

“Collateral Agent” has the meaning given to such term in the preamble.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended, and all related rules, regulations and published
interpretations.

 

2 

 

  

“Control” means “control” as defined in Section 9-104, 9-105, 9-106 or 9-107 of
the NYUCC.

 

“Credit Agreement” has the meaning given to such term in the recitals.

 

“Credit Agreement Obligations” means, collectively, all obligations of the
Borrower to the Lenders and the Administrative Agent under the Credit Agreement
and the other Loan Documents (as defined in the Credit Agreement), including in
each case in respect of the principal of and interest on the loans made, or
letters of credit issued, thereunder, and all fees, indemnification payments and
other amounts whatsoever, whether direct or indirect, absolute or contingent,
now or hereafter from time to time owing to the Administrative Agent or the
Lenders or any of them under or in respect of the Credit Agreement and the other
Loan Documents (as defined in the Credit Agreement), and including all interest
and expenses accrued or incurred subsequent to the commencement of any
bankruptcy or insolvency proceeding with respect to the Borrower, whether or not
such interest or expenses are allowed as a claim in such proceeding.

 

“Custodian” means State Street Bank and Trust Company, as custodian holding
Investments on behalf of the Obligors, or any successor in such capacity. The
term “Custodian” includes any agent or sub-custodian acting on behalf of the
Custodian.

 

“Debt Documents” means, collectively, the Credit Agreement, any Hedging
Agreement evidencing or relating to any Hedging Agreement Obligations and the
Security Documents.

 

“Default” means any event that with notice or lapse of time or both would become
an Event of Default.

 

“Deliver”, “Delivered” or “Delivery” (whether to the Collateral Agent or
otherwise) means, with respect to any Investment or other Collateral, that such
Investment or other Collateral is held, registered or covered by a recorded
UCC-1 financing statement as described below, in each case in a manner
satisfactory to the Collateral Agent (it being understood that, until the
Collateral Agent advises the Borrower that it is not satisfied, the conditions
set forth below shall be deemed to have been met):

 

(a)       subject to clause (m) below, in the case of each Certificated Security
(other than a Special Equity Interest, U.S. Government Security, Clearing
Corporation Security, Euroclear Security or Clearstream Security), that such
Certificated Security is either (i) in the possession of the Collateral Agent
and registered in the name of the Collateral Agent (or its nominee) or Indorsed
to the Collateral Agent or in blank, or (ii) in the possession of the Custodian
and registered in the name of the Custodian (or its nominee) or Indorsed in
blank and the Custodian has credited the same to a Securities Account for which
the Custodian is a Securities Intermediary and has agreed that such Certificated
Security constitutes a Financial Asset and that the Collateral Agent has Control
over such Securities Account;

 

(b)       subject to clause (m) below, in the case of each Instrument, that such
Instrument is either (i) in the possession of the Collateral Agent, or (ii) in
the possession of the Custodian where the Custodian has agreed in documentation
reasonably satisfactory to the Collateral Agent to hold such Instrument as
bailee on behalf of the Collateral Agent;

 

(c)       subject to clause (m) below, in the case of each Uncertificated
Security (other than a Special Equity Interest, U.S. Government Security,
Clearing Corporation Security, Euroclear Security or Clearstream Security), that
such Uncertificated Security is either (i) registered on the books of the issuer
thereof to the Collateral Agent (or its nominee), or (ii) registered on the
books of the issuer thereof to the Custodian (or its nominee) under an
arrangement where the Custodian has credited the same to a Securities Account
for which the Custodian is a Securities Intermediary and has agreed that such
Uncertificated Security constitutes a Financial Asset and that the Collateral
Agent has Control over such Securities Account;

 

3 

 

  

(d)       subject to clause (m) below, in the case of each Clearing Corporation
Security, that such Clearing Corporation Security is either (i) credited to a
Securities Account of the Collateral Agent at such Clearing Corporation (and, if
such Clearing Corporation Security is a Certificated Security, that the same is
in the possession of such Clearing Corporation), or (ii) credited to a
Securities Account of the Custodian at such Clearing Corporation (and, if a
Certificated Security, so held in the possession of such Clearing Corporation,
or of an agent or custodian on its behalf) and the Security Entitlement of the
Custodian in such Clearing Corporation Securities Account has been credited by
the Custodian to a Securities Account for which the Custodian is a Securities
Intermediary under an arrangement where the Custodian has agreed that such
Security constitutes a Financial Asset and that the Collateral Agent has Control
over such Securities Account;

 

(e)       in the case of each Euroclear Security and Clearstream Security, that
the actions described in clause (d) above have been taken with respect to such
Security as if such Security were a Clearing Corporation Security and Euroclear
and Clearstream were Clearing Corporations; provided that such additional
actions shall have been taken as shall be necessary under the law of Belgium (in
the case of Euroclear) and Luxembourg (in the case of Clearstream) to accord the
Collateral Agent rights substantially equivalent to Control over such Security
under the NYUCC;

 

(f)       in the case of each U.S. Government Security, that such U.S.
Government Security is either (i) credited to a securities account of the
Collateral Agent at a Federal Reserve Bank, or (ii) credited to a Securities
Account of the Custodian at a Federal Reserve Bank and the Security Entitlement
of the Custodian in such Federal Reserve Bank Securities Account has been
credited by the Custodian to a Securities Account for which the Custodian is a
Securities Intermediary under an arrangement where the Custodian has agreed that
such U.S. Government Security constitutes a Financial Asset and that the
Collateral Agent has Control over such Securities Account;

 

(g)       subject to clause (m) below, in the case of a Special Equity Interest
constituting a Certificated Security, that the holder of the first Lien on such
Certificated Security has possession of such Certificated Security in the United
States (which has been registered in the name of such holder (or its nominee) or
Indorsed to such holder or in blank) and has agreed to deliver the certificates
evidencing such Certificated Security directly to the Collateral Agent upon the
discharge of such Lien and has acknowledged that it holds such certificates for
the Collateral Agent subject to such Lien (it being understood that, upon
receipt of any such Certificated Security, if so requested by the Borrower, the
Collateral Agent shall deliver the same to the Custodian to be held in
accordance with the provisions of clause (a) above) and, in the case of a
Special Equity Interest constituting an Uncertificated Security, that the holder
of the first Lien on such Uncertificated Security has been registered as the
holder thereof on the books of the issuer thereof and acknowledged that it holds
such Uncertificated Security for the Collateral Agent subject to such Lien;

 

(h)       in the case of any Tangible Chattel Paper, that the original of such
Tangible Chattel Paper is either (i) in the possession of the Collateral Agent
in the United States or (ii) in the possession of the Custodian in the United
States under an arrangement where the Custodian has agreed to hold such Tangible
Chattel Paper as bailee on behalf of the Collateral Agent, and in each case any
agreements that constitute or evidence such Tangible Chattel Paper is free of
any marks or notations indicating that it is then pledged, assigned or otherwise
conveyed to any Person other than the Collateral Agent;

 

4 

 

  

(i)       in the case of each General Intangible (including any participation in
a debt obligation, any Commodity Contract and any Commodity Account) of an
Obligor organized in the United States, that such General Intangible falls
within the collateral description of a UCC-1 financing statement, naming the
relevant Obligor as debtor and the Collateral Agent as secured party and filed
in the jurisdiction of organization of such relevant Obligor; provided that in
the case of a participation in a debt obligation where such participation
obligation is evidenced by an Instrument, either (i) such Instrument is in the
possession of the applicable participating institution in the United States, and
such participating institution has agreed that it holds possession of such
Instrument for the benefit of the Collateral Agent (or for the benefit of the
Custodian, and the Custodian has agreed that it holds the interest in such
Instrument as bailee on behalf of the Collateral Agent) or (ii) such Instrument
is in the possession of the applicable participating institution outside of the
United States and such participating institution (and, if applicable, the
obligor that issued such Instrument) has taken such actions as shall be
necessary under the law of the jurisdiction where such Instrument is physically
located to accord the Collateral Agent rights equivalent to Control over such
Instrument under the NYUCC;

 

(j)       in the case of each General Intangible (including any participation in
a debt obligation) of an Obligor not organized in the United States, that such
Obligor shall have taken such action as shall be necessary to accord the
Collateral Agent rights substantially equivalent to a perfected first-priority
security interest in such General Intangible under the NYUCC;

 

(k)       in the case of any Deposit Account or Securities Account, that the
Collateral Agent has Control over such Deposit Account or Securities Account, or
that such Deposit Account or Securities Account is in the name of the Custodian
and the Custodian has credited its rights in respect of such Deposit Account or
Securities Account (the “Underlying Accounts”) to a Securities Account for which
the Custodian is a Securities Intermediary under an arrangement where the
Custodian has agreed that the rights of the Custodian in such Underlying
Accounts constitute a Financial Asset and where the Collateral Agent has Control
over such Securities Account;

 

(l)       in the case of any money (regardless of currency), that such money has
been credited to a Deposit Account over which the Collateral Agent has Control
as described in clause (k) above;

 

(m)       in the case of any Certificated Security, Uncertificated Security,
Instrument or Special Equity Interest issued by a Person organized outside of
the United States, that such additional actions shall have been taken as shall
be necessary under applicable law to accord the Collateral Agent rights
substantially equivalent to those accorded to a secured party under the NYUCC
that has possession or control of such Certificated Security, Uncertificated
Security, Instrument or Special Equity Interest; and

 

(n)       in the case of each Investment not of a type covered by the foregoing
clauses (a) through (m) that such Investment has been transferred to the
Collateral Agent in accordance with applicable law and regulation.

 

“Depositary” means The Depositary Trust Company, its nominees and their
respective successors.

 

“Eligibility Date” means, with respect to each Hedging Agreement, the date on
which this Agreement or any other Loan Document becomes effective with respect
to such Hedging Agreement (for the avoidance of doubt, the Eligibility Date
shall be the date of execution of such Hedging Agreement if this Agreement or
any other Loan Document is then in effect and otherwise it shall be the
Effective Date of this Agreement and/or such other Loan Documents). For purposes
of this defined term, “Effective Date” means the date indicated in a document or
agreement to be the date on which such document or agreement becomes effective,
or, if there is no such indication, the date of execution of such document or
agreement.

 

5 

 

  

“Eligible Contract Participant” means an “eligible contract participant” as
defined in the Commodity Exchange Act and regulations thereunder.

 

“Euroclear” means Euroclear Bank, S.A., as operator of the Euroclear system.

 

“Euroclear Security” means a Security that (a) is a debt or equity Security and
(b) is capable of being transferred to an Agent Member’s account at Euroclear,
whether or not such transfer has occurred.

 

“Event of Default” means any Event of Default as defined in the Credit
Agreement.

 

“Excess Funding Guarantor” has the meaning specified in Section 3.08.

 

“Excess Payment” has the meaning specified in Section 3.08.

 

“Excluded Accounts” means (i) any deposit account, securities account or
commodities account of any Obligor used solely to hold Cash or U.S. Government
Securities subject to a Lien under any Treasury Credit Facility and (ii) any
fiduciary account or any account for which any Obligor is the servicer or agent
for another Person.

 

“Excluded Hedge Obligations” means with respect to any Obligor, each of its
Hedging Agreement Obligations if, and only to the extent that, all or any
portion of this Agreement or any other Loan Document that relates to such
Hedging Agreement Obligations is or becomes illegal under the Commodity Exchange
Act, or any rule, regulation or order of the CFTC, solely by virtue of such
Obligor’s failure to qualify as an Eligible Contract Participant on the
Eligibility Date for such Hedging Agreement. Notwithstanding anything to the
contrary contained in the foregoing or in any other provision of this Agreement
or any other Loan Document, the foregoing is subject to the following provisos:
(a) if any Hedging Agreement Obligations arise under a master agreement
governing more than one Hedging Agreement, this definition shall apply only to
the portion of such Hedging Agreement Obligations that is attributable to
Hedging Agreements for which such guaranty or security interest is or becomes
illegal under the Commodity Exchange Act, or any rule, regulations or order of
the CFTC, solely as a result of the failure by such Obligor for any reason to
qualify as an Eligible Contract Participant on the Eligibility Date for such
Hedging Agreement; (b) if a guarantee of any Hedging Agreement Obligations would
cause such obligation to be an Excluded Hedge Obligation but the grant of a
security interest would not cause such obligation to be an Excluded Hedge
Obligation, such Hedging Agreement Obligation shall constitute an Excluded Hedge
Obligation for purposes of the guaranty but not for purposes of the grant of the
security interest; and (c) if there is more than one Obligor executing this
Agreement or the other Loan Documents and any Hedging Agreement Obligations
would be Excluded Hedge Obligations with respect to one or more of such Persons,
but not all of them, the definition of Excluded Hedge Obligation with respect to
each such Person shall only be deemed applicable to (i) the particular Hedging
Agreement Obligations that constitute Excluded Hedge Obligation with respect to
such Person, and (ii) the particular Person with respect to which such Hedging
Agreement Obligations constitute Excluded Hedge Obligation.

 

“Excluded SBIC Investments” means any Investments in any SBIC Subsidiary;
provided, that if any such SBIC Subsidiary shall at any time cease to be an SBIC
Subsidiary pursuant to the definition thereof in the Credit Agreement, the
Investments in such Person shall no longer constitute Excluded SBIC Investments
and shall become part of the Collateral hereunder.

 

“Guarantee Assumption Agreement” means a Guarantee Assumption Agreement
substantially in the form of Exhibit A, between the Collateral Agent and an
entity that, pursuant to Section 7.04, is required to become a “Subsidiary
Guarantor” hereunder (with such changes as the Collateral Agent shall reasonably
request, consistent with the requirements of Section 7.04).

 

6 

 

  

“Guaranteed Obligations” means, collectively, the Credit Agreement Obligations,
the Cash Management Obligations, and the Hedging Agreement Obligations (other
than Excluded Hedge Obligations).

 

“Hedge Provider” means any Person that, at the time it enters into a Hedging
Agreement permitted under the Credit Agreement, is a Lender, an Affiliate of a
Lender, Administrative Agent, an Affiliate of Administrative Agent, Collateral
Agent, or an Affiliate of Collateral Agent, in its capacity as a party to such
Hedging Agreement.

 

“Hedging Agreement” means a “Hedging Agreement” as defined in the Credit
Agreement.

 

“Hedging Agreement Obligations” means, collectively, all obligations of any
Obligor to any Lender (or any Affiliate thereof) under any Hedging Agreement,
including in each case all fees, indemnification payments and other amounts
whatsoever, whether direct or indirect, absolute or contingent, now or hereafter
from time to time owing to such Lender (or any Affiliate thereof) under such
Hedging Agreement, and including all interest and expenses accrued or incurred
subsequent to the commencement of any bankruptcy or insolvency proceeding with
respect to such Obligor, whether or not such interest or expenses are allowed as
a claim in such proceeding.

 

“Indemnitee” has the meaning specified in Section 9.05.

 

“Indorsed” means, with respect to any Certificated Security, that such
Certificated Security has been assigned or transferred to the applicable
transferee pursuant to an effective Indorsement.

 

“Lenders” means any Lender, or any Issuing Bank or Swingline Lender (in each
case as defined in the Credit Agreement), that are from time to time party to
the Credit Agreement.

 

“Non-Qualifying Party” means any Obligor that on the Eligibility Date fails for
any reason to qualify as an Eligible Contract Participant.

 

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

 

“Obligors” has the meaning given to such term in the preamble.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“Pro Rata Share” has the meaning specified in Section 3.08.

 

“Qualified ECP Loan Party” means any Obligor if on the Eligibility Date it is
(a) a corporation, partnership, proprietorship, organization, trust or other
entity other than a “commodity pool” as defined in Section 1a(10) of the
Commodity Exchange Act and CFTC regulations thereunder that has total assets
exceeding $10,000,000, or (b) an Eligible Contract Participant that can cause
another Person to qualify as an Eligible Contract Participant on the Eligibility
Date under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act by entering
into or otherwise providing a “letter of credit or keepwell, support, or other
agreement” for purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange
Act.

 

7 

 

  

“Required Secured Parties” means (a) so long as no Trigger Event has occurred
and is continuing, the Required Lenders or (b) if a Trigger Event shall have
occurred and be continuing, Secured Parties holding more than 50% of the
aggregate amount of the Credit Agreement Obligations and the Hedging Agreement
Obligations.

 

“Secured Obligations” means, collectively, (a) in the case of the Borrower, the
Credit Agreement Obligations, the Cash Management Obligations, and the Hedging
Agreement Obligations (other than Excluded Hedge Obligations), (b) in the case
of the Subsidiary Guarantors, the obligations of the Subsidiary Guarantors in
respect of the Guaranteed Obligations pursuant to Section 3.01 and (c) in the
case of all Obligors, all present and future obligations of the Obligors to the
Secured Parties, or any of them, hereunder or under any other Security Document.
For the avoidance of doubt, the Secured Obligations shall exclude any Excluded
Hedge Obligations.

 

“Secured Party” means, collectively, the Lenders, any Hedge Provider, the
Administrative Agent and the Collateral Agent.

 

“Security Documents” means, collectively, this Agreement, all Uniform Commercial
Code financing statements filed with respect to the security interests in the
Collateral created pursuant hereto and all other assignments, pledge agreements,
security agreements, control agreements, custodial agreements and other
instruments executed and delivered on or after the date hereof by any of the
Obligors pursuant hereto or otherwise providing or relating to any collateral
security for any of the Secured Obligations.

 

“Shares” means shares of capital stock of a corporation, limited liability
company interests, partnership interests and other ownership or equity interests
of any class in any Person.

 

“Specified Actions” has the meaning specified in Section 5.04.

 

“Subsidiary Guarantors” has the meaning given to such term in the preamble.

 

“Trigger Event” means any of the following events or conditions:

 

(a)       Acceleration of Secured Obligations representing 66-2/3% or more of
the aggregate Secured Obligations at the time outstanding;

 

(b)       an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of any Obligor or its debts, or of a substantial part of its assets,
under any Federal or state bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Obligor or for
a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for a period of 60 or more days or an order
or decree approving or ordering any of the foregoing shall be entered; or

 

(c)       any Obligor shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any Federal
or state bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (b) above,
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Obligor or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any corporate or
other action for the purpose of effecting any of the foregoing.

 

8 

 

  

1.03. Credit Agreement Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided in the Credit Agreement.

 

1.04. Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include”, “includes” and “including” shall be deemed to
be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or therein), (b) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein”, “hereof’ and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Sections, Exhibits and Annexes shall be construed to refer to Sections of,
and Exhibits and Annexes to, this Agreement and (e) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

 

Section 2. Representations and Warranties. Each Obligor represents and warrants
to the Secured Parties that:

 

2.01. Organization. Such Obligor is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.

 

2.02. Authorization; Enforceability. The execution, delivery and performance of
this Agreement, and the granting of the Liens contemplated hereunder, are within
such Obligor’s corporate or other powers and have been duly authorized by all
necessary corporate or other action, including by all necessary shareholder
action. This Agreement has been duly executed and delivered by such Obligor and
constitutes a legal, valid and binding obligation of such Obligor, enforceable
in accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws of
general applicability affecting the enforcement of creditors’ rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

2.03. Governmental Approvals; No Conflicts. The execution, delivery and
performance of this Agreement, and the granting of the Liens contemplated
hereunder, (a) do not require any consent or approval of, registration or filing
with, or any other action by, any Governmental Authority, except for (i) such as
have been or will be obtained or made and are in full force and effect and (ii)
filings and recordings in respect of the Liens created pursuant hereto, (b) will
not violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Obligor or any order of any Governmental
Authority, (c) will not violate or result in a default in any material respect
under any indenture, agreement or other instrument binding upon any Obligor or
any of its assets, or give rise to a right thereunder to require any payment to
be made by any such Person, and (d) except for the Liens created pursuant
hereto, will not result in the creation or imposition of any Lien on any asset
of any Obligor.

 

2.04. Title. Such Obligor is the sole beneficial owner of the Collateral in
which a security interest is granted by such Obligor hereunder and no Lien
exists upon such Collateral other than (a) the security interest created or
provided for herein, which security interest constitutes a valid first and prior
perfected Lien on the Collateral (except that any such security interest in a
Special Equity Interest may be subject to a Lien in favor of a creditor of the
issuer of such Special Equity Interest as contemplated by the definition of such
term in the Credit Agreement) and (b) other Liens not prohibited by the
provisions of any Debt Document.

 

9 

 

  

2.05. Names, Etc. The full and correct legal name, type of organization,
jurisdiction of organization, organizational ID number (if applicable) and
mailing address of each Obligor as of the date hereof are correctly set forth in
Annex 1 (and of each additional Obligor as of the date of the Guarantee
Assumption Agreement referred to below are set forth in the supplement to
Annex 1 in Appendix A to the Guarantee Assumption Agreement executed and
delivered by such Obligor pursuant to Section 7.04).

 

2.06. Changes in Circumstances. No Obligor has (a) within the period of four
months prior to the date hereof (or, in the case of any Subsidiary Guarantor,
within the period of four months prior to the date it becomes a party hereto
pursuant to a Guarantee Assumption Agreement), changed its location (as defined
in Section 9-307 of the NYUCC), (b) as of the date hereof (or, with respect to
any Subsidiary Guarantor, as of the date it becomes a party hereto pursuant to a
Guarantee Assumption Agreement), changed its name or (c) as of the date hereof
(or, with respect to any Subsidiary Guarantor, as of the date it becomes a party
hereto pursuant to a Guarantee Assumption Agreement), become a “new debtor” (as
defined in Section 9-102(a)(56) of the NYUCC) with respect to a currently
effective security agreement previously entered into by any other Person and
binding upon such Obligor, in each case except as notified in writing to the
Collateral Agent prior to the date hereof (or, in the case of any Subsidiary
Guarantor, prior to the date it becomes a party hereto pursuant to a Guarantee
Assumption Agreement).

 

2.07. Promissory Notes. Annex 2 sets forth a complete and correct list of all
Promissory Notes (other than any previously delivered to the Custodian or held
in a Securities Account referred to in Annex 3) held by the Borrower on the date
hereof (or held by a Subsidiary Guarantor on the date it becomes a party hereto
pursuant to a Guarantee Assumption Agreement) and having an aggregate unpaid
principal amount in excess of $1,000,000.

 

2.08. Deposit Accounts and Securities Accounts. Annex 3 sets forth a complete
and correct list of all Deposit Accounts, Securities Accounts and Commodity
Accounts of the Borrower on the date hereof (and of any Subsidiary Guarantor on
the date it becomes a party hereto pursuant to a Guarantee Assumption
Agreement), except for any Deposit Account specially and exclusively used for
payroll, payroll taxes and other employee wage and benefit payments.

 

Section 3. Guarantee.

 

3.01. The Guarantee. The Subsidiary Guarantors hereby jointly and severally
guarantee to each of the Secured Parties and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the Guaranteed Obligations. The Subsidiary
Guarantors hereby further jointly and severally agree that if the Borrower shall
fail to pay in full when due (whether at stated or extended maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary
Guarantors will jointly and severally pay the same without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.

 

3.02. Obligations Unconditional. The obligations of the Subsidiary Guarantors
under Section 3.01 are irrevocable, absolute and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Borrower under this Agreement, the
other Debt Documents or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 3 that the obligations
of the Subsidiary Guarantors hereunder shall be absolute and unconditional under
any and all circumstances. Without limiting the generality of the foregoing, it
is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Subsidiary Guarantors hereunder, which
shall remain absolute and unconditional as described above:

 

10 

 

  

(a)       at any time or from time to time, without notice to the Subsidiary
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or compliance
shall be waived;

 

(b)       any of the acts mentioned in any of the provisions of this Agreement,
the other Debt Documents or any other agreement or instrument referred to herein
or therein shall be done or omitted;

 

(c)       the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement, the
other Debt Documents or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in whole or
in part or otherwise dealt with; or

 

(d)       any lien or security interest granted to, or in favor of, any Secured
Party as security for any of the Guaranteed Obligations shall fail to be
perfected.

 

The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that any
Secured Party exhaust any right, power or remedy or proceed against the Borrower
under this Agreement, the other Debt Documents or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.

 

3.03. Reinstatement. The obligations of the Subsidiary Guarantors under this
Section 3 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Borrower in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Subsidiary Guarantors jointly and
severally agree that they will indemnify the Secured Parties on demand for all
reasonable costs and expenses (including reasonable fees and other charges of
counsel) incurred by the Secured Parties in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.

 

3.04. Subrogation. The Subsidiary Guarantors hereby jointly and severally agree
that until the payment and satisfaction in full of all Guaranteed Obligations,
and the expiration and termination of all letters of credit or commitments to
extend credit under all Debt Documents, they shall not exercise any right or
remedy arising by reason of any performance by them of their guarantee in
Section 3.01, whether by subrogation or otherwise, against the Borrower or any
other guarantor of any of the Guaranteed Obligations or any security for any of
the Guaranteed Obligations.

 

11 

 

  

3.05. Remedies. The Subsidiary Guarantors jointly and severally agree that, as
between the Subsidiary Guarantors and the Secured Parties, a Guaranteed
Obligation may be declared to be forthwith due and payable as provided in the
respective Debt Document therefor including, in the case of the Credit
Agreement, Article VII thereof (and shall be deemed to have become automatically
due and payable in the circumstances provided therein including, in the case of
the Credit Agreement, such Article VII) for purposes of Section 3.01
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against the Borrower or any Subsidiary Guarantors and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by the Borrower)
shall forthwith become due and payable by the Subsidiary Guarantors for purposes
of Section 3.01.

 

3.06. Continuing Guarantee. The guarantee in this Section 3 is a continuing
guarantee of payment (and not of collection), and shall apply to all Guaranteed
Obligations whenever arising.

 

3.07. Instrument for the Payment of Money. Each Subsidiary Guarantor hereby
acknowledges that the guarantee in this Section 3 constitutes an instrument for
the payment of money, and consents and agrees that any Secured Party, at its
sole option, in the event of a dispute by such Subsidiary Guarantor in the
payment of any moneys due hereunder, shall have the right to bring motion action
under New York CPLR Section 3213.

 

3.08. Rights of Contribution. The Obligors hereby agree, as between themselves,
that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as
defined below) by reason of the payment by such Subsidiary Guarantor of any
Guaranteed Obligations, then each other Subsidiary Guarantor shall, on demand of
such Excess Funding Guarantor (but subject to the next sentence), pay to such
Excess Funding Guarantor an amount equal to such Subsidiary Guarantor’s Pro Rata
Share (as defined below and determined, for this purpose, without reference to
the properties, debts and liabilities of such Excess Funding Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations. The
payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor
under this Section 3.08 shall be subordinate and subject in right of payment to
the prior payment in full of the obligations of such Subsidiary Guarantor under
the other provisions of this Section 3 and such Excess Funding Guarantor shall
not exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.

 

For purposes of this Section 3.08, (i) “Excess Funding Guarantor” means, in
respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an
amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii)
“Excess Payment” means, in respect of any Guaranteed Obligations, the amount
paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such
Guaranteed Obligations and (iii) “Pro Rata Share” means, for any Subsidiary
Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate fair saleable value of all properties of such Subsidiary Guarantor
(excluding any shares of stock or other equity interest of any other Subsidiary
Guarantor) exceeds the amount of all the debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all properties of the Borrower and all of
the Subsidiary Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Obligors hereunder) of the Borrower and all of
the Subsidiary Guarantors, determined (A) with respect to any Subsidiary
Guarantor that is a party hereto on the date hereof, as of the date hereof, and
(B) with respect to any other Subsidiary Guarantor, as of the date such
Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.

 

12 

 

  

3.09. General Limitation on Guarantee Obligations. In any action or proceeding
involving any state corporate or other law, or any Federal or state bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of any Subsidiary Guarantor under Section 3.01
would otherwise, taking into account the provisions of Section 3.08, be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under
Section 3.01, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such
Subsidiary Guarantor, any Secured Party or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.

 

3.10. Indemnity by Borrower. In addition to all such rights of indemnity and
subrogation as the Subsidiary Guarantors may have under applicable law (but
subject to Section 3.04), the Borrower agrees that (a) in the event a payment
shall be made by any Subsidiary Guarantor under this Agreement, the Borrower
shall indemnify such Subsidiary Guarantor for the full amount of such payment
and such Subsidiary Guarantor shall be subrogated to the rights of the Person to
whom such payment shall have been made to the extent of such payment and (b) in
the event any assets of any Subsidiary Guarantor shall be sold pursuant to this
Agreement or any other Security Document to satisfy in whole or in part the
Guaranteed Obligations, the Borrower shall indemnify such Subsidiary Guarantor
in an amount equal to the greater of the book value or the fair market value of
the assets so sold.

 

Section 4. Collateral. As collateral security for the payment in full when due
(whether at stated maturity, by acceleration or otherwise) of its Secured
Obligations, each Obligor hereby pledges and grants to the Collateral Agent for
the benefit of the Secured Parties as hereinafter provided a security interest
in all of such Obligor’s right, title and interest in, to and under the
following property, in each case whether tangible or intangible, wherever
located, and whether now owned by such Obligor or hereafter acquired and whether
now existing or hereafter coming into existence (all of the property described
in this Section 4 being collectively referred to herein as “Collateral”):

 

(a)       all Accounts, all Chattel Paper, all Commodity Accounts, all Commodity
Contracts, all Documents, all General Intangibles, all Instruments (including
all Promissory Notes), all Investment Property and all Securities not otherwise
credited to a Securities Account, in each case to the extent constituting
Investments or the Proceeds thereof, but excluding any such asset released
pursuant to Section 10.03(e);

 

(b)       all Letter-of-Credit Rights where the underlying letter of credit
supports any Collateral described in clause (a) of this Section;

 

(c)       all Deposit Accounts and Securities Accounts (including Securities
Entitlements with respect thereto and Financial Assets carried therein);

 

(d)       to the extent related to any Collateral, all books, correspondence,
credit files, records, invoices and other papers (including all tapes, cards,
computer runs and other papers and documents in the possession or under the
control of such Obligor or any computer bureau or service company from time to
time acting for such Obligor); and

 

(e)       all Proceeds of any of the foregoing Collateral.

 

13 

 

  

PROVIDED, HOWEVER, that (A) in no event shall the security interest granted
under this Section 4 attach to (i) any contract, property rights, obligation,
instrument or agreement to which an Obligor is a party (or to any of its rights
or interests thereunder) if the grant of such security interest would constitute
or result in either (x) the abandonment, invalidation or unenforceability of any
right, title or interest of such Obligor therein or (y) in a breach or
termination pursuant to the terms of, or a default under, any such contract,
property rights, obligation, instrument or agreement (other than to the extent
that any such term would be rendered ineffective by Section 9-406, 9-407, 9-408
or 9-409 of the Uniform Commercial Code as in effect in the relevant
jurisdiction); (ii) Equity Interests in directly-held Foreign Subsidiaries in
excess of 65% of the total outstanding voting Equity Interests of each such
Foreign Subsidiary or any Equity Interests in indirectly-held Foreign
Subsidiaries, in each case, except to the extent that, in the reasonable
determination of the Borrower, such a security interest would not reasonably be
expected to result in a materially adverse tax consequence to such Obligor;
(iii) any Excluded Account; or (iv) any Excluded SBIC Investments; and (B) the
Obligors, may by notice to the Collateral Agent, exclude from the grant of a
security interest provided above in this Section 4, any Special Equity Interests
designated by the Borrower in reasonable detail to the Collateral Agent in such
notice (it being understood that the Borrower may at any later time rescind any
such designation by similar notice to the Collateral Agent).

 

Section 5. Certain Agreements Among Secured Parties.

 

5.01. Priorities; Additional Collateral.

 

(a)       Pari Passu Status of Obligations. Each Secured Party by acceptance of
the benefits of this Agreement and the other Security Documents agrees that
their respective interests in the Security Documents and the Collateral shall
rank pari passu and that the Secured Obligations shall be equally and ratably
secured by the Security Documents subject to the terms hereof and the priority
of payment established in Section 8.06.

 

(b)       Sharing of Guaranties and Liens. Each Secured Party by acceptance of
the benefits of this Agreement and the other Security Documents agrees that (i)
such Secured Party will not accept from any Subsidiary of the Borrower any
guarantee of any of the Guaranteed Obligations unless such guarantor
simultaneously guarantees the payment of all of the Guaranteed Obligations owed
to all Secured Parties and (ii) such Secured Party will not hold, take, accept
or obtain any Lien upon any assets of any Obligor or any Subsidiary of the
Borrower to secure the payment and performance of the Secured Obligations except
and to the extent that such Lien is in favor of the Collateral Agent pursuant to
this Agreement or another Security Document to which the Collateral Agent is a
party for the benefit of all of the Secured Parties as provided herein.

 

Anything in this Section, or any other provision of this Agreement, to the
contrary notwithstanding, this Agreement shall be inapplicable to any
debtor-in-possession financing that may be provided by any Secured Party to the
Borrower or any of its Subsidiaries in any Federal or state bankruptcy or
insolvency proceeding, and no consent or approval of any other Secured Party
shall be required as a condition to the provision by any Secured Party of any
such financing, and no other Secured Party shall be entitled to share in any
Lien upon any Collateral granted to any Secured Party to secure repayment of
such debtor-in-possession financing; provided that no Secured Party shall be
barred from objecting to any such financing on the basis of adequate protection
or any other grounds.

 

5.02. Turnover of Collateral. If a Secured Party acquires custody, control or
possession of any Collateral or the Proceeds therefrom, other than pursuant to
the terms of this Agreement, such Secured Party shall promptly (but in any event
within five Business Days) cause such Collateral or Proceeds to be Delivered in
accordance with the provisions of this Agreement. Until such time as such
Secured Party shall have complied with the provisions of the immediately
preceding sentence, such Secured Party shall be deemed to hold such Collateral
and Proceeds in trust for the benefit of the Collateral Agent.

 

14 

 

  

5.03. Cooperation of Secured Parties. Each Secured Party will cooperate with the
Collateral Agent and with each other Secured Party in the enforcement of the
Liens upon the Collateral and otherwise in order to accomplish the purposes of
this Agreement and the Security Documents.

 

5.04. Limitation upon Certain Independent Actions by Secured Parties. No Secured
Party shall have any right to institute any action or proceeding to enforce any
term or provision of the Security Documents or to enforce any of its rights in
respect of the Collateral or to exercise any other remedy pursuant to the
Security Documents or at law or in equity, for the purpose of realizing on the
Collateral, or by reason of jeopardy of any Collateral, or for the execution of
any trust or power hereunder (collectively, the “Specified Actions”), unless the
Required Secured Parties have delivered written instructions to the Collateral
Agent and the Collateral Agent shall have failed to act in accordance with such
instructions within 30 days thereafter. In such case but not otherwise, the
Required Secured Parties may appoint one Person to act on behalf of the Secured
Parties solely to take any of the Specified Actions (the “Appointed Party”),
and, upon the acceptance of its appointment as Appointed Party, the Appointed
Party shall be entitled to commence proceedings in any court of competent
jurisdiction or to take any other Specified Actions as the Collateral Agent
might have taken pursuant to this Agreement or the Security Documents (in
accordance with the directions of the Required Secured Parties). The Obligors
acknowledge and agree that should the Appointed Party act in accordance with
this provision, such Appointed Party will have all the rights, remedies,
benefits and powers as are granted to the Collateral Agent pursuant hereto or
pursuant to any Security Documents.

 

5.05. No Challenges. In no event shall any Secured Party take any action to
challenge, contest or dispute the validity, extent, enforceability, or priority
of the Collateral Agent’s Liens hereunder or under any other Security Document
with respect to any of the Collateral, or that would have the effect of
invalidating any such Lien or support any Person who takes any such action. Each
of the Secured Parties agrees that it will not take any action to challenge,
contest or dispute the validity, enforceability or secured status of any other
Secured Party’s claims against any Obligor (other than any such claim resulting
from a breach of this Agreement by a Secured Party, or any challenge, contest or
dispute alleging arithmetical error in the determination of a claim), or that
would have the effect of invalidating any such claim, or support any Person who
takes any such action.

 

5.06. Rights of Secured Parties as to Secured Obligations. Notwithstanding any
other provision of this Agreement, the right of each Secured Party to receive
payment of the Secured Obligations held by such Secured Party when due (whether
at the stated maturity thereof, by acceleration or otherwise) as expressed in
any instrument evidencing or agreement governing such Secured Obligations, or to
institute suit for the enforcement of such payment on or after such due date,
and the obligation of the Obligors to pay their respective Secured Obligations
when due, shall not be impaired or affected without the consent of such Secured
Party; provided that, notwithstanding the foregoing, each Secured Party agrees
that it will not attempt to exercise remedies with respect to any Collateral
except as provided in this Agreement.

 

Section 6. Recordkeeping. The Collateral Agent will maintain books and records
necessary to enable it to determine at any time all transactions under this
Agreement which have occurred on or prior to such time. Each Obligor agrees that
such books and records maintained in good faith by the Collateral Agent shall be
conclusive as to the matters contained therein absent manifest error. Each
Obligor shall have the right to inspect such books and records at any time upon
reasonable prior notice.

 

Section 7. Covenants of the Obligors. In furtherance of the grant of the
security interest pursuant to Section 4, each Obligor hereby agrees with the
Collateral Agent for the benefit of the Secured Parties as follows:

 

15 

 

  

7.01. Delivery and Other Perfection. (a) Within sixty days after the acquisition
by an Obligor of any Investment constituting part of the Collateral as to which
physical possession by the Collateral Agent or the Custodian is required in
order for such Investment to have been “Delivered”, such Obligor shall take such
actions as shall be necessary to effect Delivery of such Investment. As to all
other Investments constituting part of the Collateral, such Obligor shall cause
the same to be Delivered (to the extent not already Delivered) within five
Business Days of the acquisition thereof. In addition, and without limiting the
generality of the foregoing, each Obligor shall promptly from time to time give,
execute, deliver, file, record, authorize or obtain all such financing
statements, continuation statements, notices, instruments, documents, account
control agreements or any other agreements or consents or other papers as may be
necessary in the judgment of the Collateral Agent to create, preserve, perfect,
maintain the perfection of or validate the security interest granted pursuant
hereto or to enable the Collateral Agent to exercise and enforce its rights
hereunder with respect to such security interest, and without limiting the
foregoing, shall:

 

(i)       keep full and accurate books and records relating to the Collateral in
all material respects, and stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the security interests granted by this Agreement; and

 

(ii)       permit representatives of the Collateral Agent, upon reasonable
notice, at any time during normal business hours to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Collateral Agent to be present at such Obligor’s place of
business to receive copies of communications and remittances relating to the
Collateral, and forward copies of any notices or communications received by such
Obligor with respect to the Collateral, all in such manner as the Collateral
Agent may reasonably require; provided that each such Obligor shall be entitled
to have its representatives and advisors present during any inspection of its
books and records at such Obligor’s place of business.

 

(b)       Unless released from the Collateral pursuant to Section 10.03(e), once
any Investment has been Delivered, the Obligors shall not take or permit any
action that would result in such Investment no longer being Delivered hereunder
and shall promptly from time to time give, execute, deliver, file, record,
authorize or obtain all such financing statements, continuation statements,
notices, instruments, documents, account control agreements or any other
agreements or consents or other papers as may be necessary or desirable in the
judgment of the Collateral Agent to continue the Delivered status of any
Collateral. Without limiting the generality of the foregoing, the Obligors shall
not terminate any arrangement with the Custodian unless and until a successor
Custodian reasonably satisfactory to the Collateral Agent has been appointed and
has executed all documentation necessary to continue the Delivered status of the
Collateral, which documentation shall be in form and substance reasonably
satisfactory to the Collateral Agent.

 

7.02. Name; Jurisdiction of Organization, Etc. Each Obligor agrees that (a)
without providing prior written notice to the Collateral Agent, such Obligor
will not change its name, its place of business or, if more than one, chief
executive office, or its mailing address or organizational identification number
if it has one, (b) if such Obligor does not have an organizational
identification number and later obtains one, such Obligor will forthwith notify
the Collateral Agent of such organizational identification number, and (c) such
Obligor will not change its type of organization, jurisdiction of organization
or other legal structure.

 

7.03. Other Financing Statements or Control. Except as otherwise permitted under
Section 6.02 of the Credit Agreement and the applicable provisions of each other
Debt Document, the Obligors shall not (a) file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to any of the Collateral in
which the Collateral Agent is not named as the sole Collateral Agent for the
benefit of the Secured Parties other than any financing statement or like
instrument in respect of a Lien not prohibited by the provisions of any Debt
Document, or (b) cause or permit any Person other than the Collateral Agent to
have Control of any Deposit Account, Electronic Chattel Paper, Investment
Property or Letter-of-Credit Right constituting part of the Collateral.

 

16 

 

  

7.04. Additional Subsidiary Guarantors. As contemplated by Section 5.08 of the
Credit Agreement, any new Subsidiary (other than a Financing Subsidiary, Foreign
Subsidiary, Immaterial Subsidiary or Subsidiary of a Foreign Subsidiary) of the
Borrower formed or acquired by the Borrower after the date hereof, is required
to become a “Subsidiary Guarantor” under this Agreement, by executing and
delivering to the Collateral Agent a Guarantee Assumption Agreement in the form
of Exhibit A. Accordingly, upon the execution and delivery of any such Guarantee
Assumption Agreement by any such Subsidiary, such new Subsidiary shall
automatically and immediately, and without any further action on the part of any
Person, become a “Subsidiary Guarantor” and an “Obligor” for all purposes of
this Agreement, and Annexes 1 through 3, inclusive, hereto shall be deemed to be
supplemented in the manner specified in such Guarantee Assumption Agreement. In
addition, upon execution and delivery of any such Guarantee Assumption
Agreement, the new Subsidiary Guarantor makes the representations and warranties
set forth in Section 2 as of the date of such Guarantee Assumption Agreement.

 

7.05. Control Agreements. No Obligor shall open any account with any bank,
securities intermediary or commodities intermediary (other than (i) any payroll
account so long as such payroll account is a zero balance account, (ii)
withholding tax and fiduciary accounts, (iii) any Excluded Accounts and (iv) any
account in which the aggregate value of deposits therein, together with all
other such accounts under this clause (iv), does not at any time exceed
$100,000) unless such Obligor has notified the Collateral Agent of such new
account and the Collateral Agent has Control over such account pursuant to a
control agreement in form and substance satisfactory to the Collateral Agent.

 

7.06. Credit Agreement. Each Subsidiary Guarantor agrees to perform, comply with
and be bound by the covenants contained in Articles V and VI of the Credit
Agreement (which provisions are incorporated herein by reference) applicable to
such Subsidiary Guarantor as if each Subsidiary Guarantor were a signatory to
the Credit Agreement.

 

Section 8. Acceleration Notice; Remedies; Distribution of Collateral.

 

8.01. Notice of Acceleration. Upon receipt by the Collateral Agent of a written
notice from any Secured Party or the Borrower which (i) expressly refers to this
Agreement, (ii) describes an event or condition which has occurred and is
continuing and (iii) expressly states that such event or condition constitutes
an Acceleration as defined herein, the Collateral Agent shall promptly notify
each other party hereto of the receipt and contents thereof (any such notice is
referred to herein as a “Acceleration Notice”).

 

8.02. Preservation of Rights. The Collateral Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.

 

8.03. Events of Default, Etc. During the period during which an Event of Default
or Trigger Event shall have occurred and be continuing:

 

(a)       each Obligor shall, at the request of the Collateral Agent, assemble
the Collateral owned by it at such place or places, reasonably convenient to
both the Collateral Agent and such Obligor, designated in the Collateral Agent’s
request;

 

17 

 

  

(b)       the Collateral Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Collateral;

 

(c)       the Collateral Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial Code
(whether or not the Uniform Commercial Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies hereunder may be asserted, including
the right, to the fullest extent permitted by applicable law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral as
if the Collateral Agent were the sole and absolute owner thereof (and each
Obligor agrees to take all such action as may be appropriate to give effect to
such right);

 

(d)       the Collateral Agent in its discretion may, in its name or in the name
of any Obligor or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so; and

 

(e)       the Collateral Agent may, upon ten Business Days’ prior written notice
to the Obligors of the time and place (or, if such sale is to take place on the
NYSE or any other established exchange or market, prior to the time of such sale
or other disposition), with respect to the Collateral or any part thereof which
shall then be or shall thereafter come into the possession, custody or control
of the Collateral Agent, the other Secured Parties or any of their respective
agents, sell, assign or otherwise dispose of all or any part of such Collateral,
at such place or places as the Collateral Agent deems best, and for cash or for
credit or for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such notice
as is required above or by applicable statute and cannot be waived), and the
Collateral Agent or any other Secured Party or anyone else may be the purchaser,
assignee or recipient of any or all of the Collateral so disposed of at any
public sale (or, to the extent permitted by law, at any private sale) and
thereafter, to the fullest extent permitted by law, hold the same absolutely,
free from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Obligors, any such demand, notice
and right or equity being hereby expressly waived and released, to the fullest
extent permitted by law.

 

The Collateral 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 the sale, and such sale may be made at any time
or place to which the sale may be so adjourned.

 

The proceeds of each collection, sale or other disposition under this Section
shall be applied in accordance with Section 8.06.

 

The Obligors recognize that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities laws, the
Collateral Agent may be compelled, with respect to any sale of all or any part
of the Collateral, to limit purchasers to those who will agree, among other
things, to acquire the Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. The Obligors acknowledge that
any such private sales may be at prices and on terms less favorable to the
Collateral Agent than those obtainable through a public sale without such
restrictions, and, notwithstanding such circumstances, agree that to the extent
any such private sale is conducted by the Collateral Agent in a commercially
reasonable manner, the Collateral Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the Obligors, or the issuer thereof, to
register it for public sale.

 

18 

 

  

8.04. Deficiency. If the proceeds of sale, collection or other realization of or
upon the Collateral pursuant to Section 8.03 are insufficient to cover the costs
and expenses of such realization and the payment in full of the Secured
Obligations, the Obligors shall remain liable for any deficiency.

 

8.05. Private Sale. The Collateral Agent and the Secured Parties shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 8.03 conducted in a commercially reasonable
manner. Each Obligor hereby waives any claims against the Collateral Agent or
any other Secured Party arising by reason of the fact that the price at which
the Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Collateral Agent accepts the
first offer received and does not offer the Collateral to more than one offeree,
so long as such private sale was conducted in a commercially reasonable manner.

 

8.06. Application of Proceeds. Except as otherwise herein expressly provided,
the proceeds of any collection, sale or other realization of all or any part of
the Collateral of any Obligor pursuant hereto, and any other cash of any Obligor
at the time held by the Collateral Agent under this Agreement, shall be applied
by the Collateral Agent as follows:

 

First, to the payment of the costs and expenses of such collection, sale or
other realization, including reasonable out-of-pocket costs and expenses of the
Collateral Agent and the reasonable fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Collateral Agent in
connection therewith;

 

Second, to the payment of any fees and other amounts then owing by such Obligor
to the Collateral Agent in its capacity as such;

 

Third, to the payment of any reasonable fees, costs and expenses then owing by
such Obligor to the Secured Parties under the applicable Debt Documents, in each
case to each Secured Party ratably;

 

Fourth, to the payment of the Secured Obligations of such Obligor then due and
payable, in each case to each Secured Party ratably in accordance with the
amount of Secured Obligations then due and payable to such Secured Party (it
being understood that, for the purposes hereof (i) the outstanding principal
amount of the loans under the Credit Agreement shall be deemed then due and
payable whether or not any Acceleration of such loans has occurred, and (ii) to
the extent any cover in respect of a letter of credit shall be due and payable
under a Debt Document, that such cover shall be deemed to be a Secured
Obligation that is due and payable for purposes hereof); and

 

Fifth, after application as provided in clauses “First” “Second”, “Third” and
“Fourth” above, to the payment to the respective Obligor, or their respective
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.

 

In making the allocations required by this Section, the Collateral Agent may
rely upon its records and information supplied to it pursuant to Section 9.02,
and the Collateral Agent shall have no liability to any of the other Secured
Parties for actions taken in reliance on such information, except to the extent
of its gross negligence or willful misconduct. The Collateral Agent may, in its
sole discretion, at the time of any application under this Section, withhold all
or any portion of the proceeds otherwise to be applied to the Secured
Obligations as provided above and maintain the same in a segregated cash
collateral account in the name and under the exclusive Control of the Collateral
Agent, to the extent that it in good faith believes that the information
provided to it pursuant to Section 9.02 is either incomplete or inaccurate and
that application of the full amount of such proceeds to the Secured Obligations
would be disadvantageous to any Secured Party. All distributions made by the
Collateral Agent pursuant to this Section shall be final (subject to any decree
of any court of competent jurisdiction), and the Collateral Agent shall have no
duty to inquire as to the application by the other Secured Parties of any
amounts distributed to them.

 

19 

 

  

8.07. Attorney-in-Fact. Without limiting any rights or powers granted by this
Agreement to the Collateral Agent while no Event of Default or Trigger Event has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default or Trigger Event, the Collateral Agent is hereby appointed
the attorney-in-fact of each Obligor for the purpose of carrying out the
provisions of this Section 8 and taking any action and executing any instruments
which the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, so long as the Collateral Agent shall be entitled under this
Section 8 to make collections in respect of the Collateral, the Collateral Agent
shall have the right and power to receive, endorse and collect all checks made
payable to the order of any Obligor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.

 

Section 9. The Collateral Agent.

 

9.01. Appointment; Powers and Immunities. Each Lender and the Administrative
Agent hereby irrevocably appoints and authorizes Amegy Bank to act as its agent
hereunder with such powers as are specifically delegated to the Collateral Agent
by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Collateral Agent (which term as used in this
sentence and in Section 9.06 and the first sentence of Section 9.07 shall
include reference to its affiliates and its own and its affiliates’ officers,
directors, employees and agents):

 

(a)       shall have no duties or responsibilities except those expressly set
forth in this Agreement and shall not by reason of this Agreement be a trustee
for, or a fiduciary with respect to, any Lender;

 

(b)       shall not be responsible to the Lenders or the Administrative Agent
for any recitals, statements, representations or warranties contained in this
Agreement or in any notice delivered hereunder, or in any other certificate or
other document referred to or provided for in, or received by it under, this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other document referred
to or provided for herein or therein or for any failure by the Obligors or any
other Person to perform any of its obligations hereunder;

 

(c)       shall not be required to initiate or conduct any litigation or
collection proceedings hereunder except, subject to Section 9.07, for any such
litigation or proceedings relating to the enforcement of the guarantee set forth
in Section 3, or the Liens created pursuant to Section 4; and

 

(d)       shall not be responsible for any action taken or omitted to be taken
by it hereunder or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct.

 

9.02. Information Regarding Secured Parties. The Borrower will at such times and
from time to time as shall be reasonably requested by the Collateral Agent,
supply a list in form and detail reasonably satisfactory to the Collateral Agent
setting forth the amount of the Secured Obligations held by each Secured Party
(excluding, so long as Amegy Bank is both the Collateral Agent and the
Administrative Agent, the Credit Agreement Obligations) as of a date specified
in such request. The Collateral Agent shall provide any such list to any Secured
Party upon request. The Collateral Agent shall be entitled to rely upon such
information, and such information shall be conclusive and binding for all
purposes of this Agreement, except to the extent the Collateral Agent shall have
been notified by a Secured Party that such information as set forth on any such
list is inaccurate or in dispute between such Secured Party and the Borrower.

 

20 

 

  

9.03. Reliance by Collateral Agent. The Collateral Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telecopy, telex, telegram, cable or electronic mail)
believed by it in good faith to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Collateral Agent. As to any matters not expressly provided for by this
Agreement, the Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Secured Parties, and such instructions of the
Required Secured Parties, and any action taken or failure to act pursuant
thereto shall be binding on all of the Secured Parties. If in one or more
instances the Collateral Agent takes any action or assumes any responsibility
not specifically delegated to it pursuant to this Agreement, neither the taking
of such action nor the assumption of such responsibility shall be deemed to be
an express or implied undertaking on the part of the Collateral Agent that it
will take the same or similar action or assume the same or similar
responsibility in any other instance.

 

9.04. Rights as a Secured Party. With respect to its obligation to extend credit
under the Credit Agreement, Amegy Bank (and any successor acting as Collateral
Agent) in its capacity as a Lender under the Credit Agreement shall have the
same rights and powers hereunder as any other Secured Party and may exercise the
same as though it were not acting as Collateral Agent, and the term “Secured
Party” or “Secured Parties” shall, unless the context otherwise indicates,
include the Collateral Agent in its individual capacity. Amegy Bank (and any
successor acting as Collateral Agent) and its affiliates may (without having to
account therefor to any other Secured Party) accept deposits from, lend money
to, make investments in and generally engage in any kind of banking, trust or
other business with any of the Obligors (and any of their Subsidiaries or
affiliates) as if it were not acting as Collateral Agent, and Amegy Bank and its
affiliates may accept fees and other consideration from any of the Obligors for
services in connection with this Agreement or otherwise without having to
account for the same to the other Secured Parties.

 

9.05. Indemnification. Each Lender by acceptance of the benefits of this
Agreement and the other Security Documents agrees to indemnify the Collateral
Agent and each Related Party of the Collateral Agent (each such Person being
called an “Indemnitee”) (to the extent not reimbursed under Section 10.04, but
without limiting the obligations of the Obligors under Section 10.04) ratably in
accordance with the aggregate Secured Obligations held by the Lenders, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against any
Indemnitee (including by any other Secured Party) arising out of or by reason of
any investigation in connection with or in any way relating to or arising out of
this Agreement, any other Debt Documents, or any other documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby (including the costs and expenses that the Obligors are obligated to pay
under Section 10.04, but excluding, unless an Event of Default or a Trigger
Event has occurred and is continuing, normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents; provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.

 

21 

 

  

9.06. Non-Reliance on Collateral Agent and Other Secured Parties. The
Administrative Agent (and each Lender by acceptance of the benefits of this
Agreement and the other Security Documents) agrees that it has, independently
and without reliance on the Collateral Agent or any other Secured Party, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower, the Subsidiary Guarantors and their
Subsidiaries and decision to extend credit to the Borrower in reliance on this
Agreement and that it will, independently and without reliance upon the
Collateral Agent or any other Secured Party, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement and
any Debt Document to which it is a party. Except as otherwise expressly provided
herein, the Collateral Agent shall not be required to keep itself informed as to
the performance or observance by any Obligor of this Agreement, any other Debt
Document or any other document referred to or provided for herein or therein or
to inspect the properties or books of any Obligor. The Collateral Agent shall
not have any duty or responsibility to provide any other Secured Party with any
credit or other information concerning the affairs, financial condition or
business of any Obligor or any of its Subsidiaries (or any of their affiliates)
that may come into the possession of the Collateral Agent or any of its
affiliates, except for notices, reports and other documents and information
expressly required to be furnished to the other Secured Parties by the
Collateral Agent hereunder.

 

9.07. Failure to Act. Except for action expressly required of the Collateral
Agent hereunder, the Collateral Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall receive further assurances
to its satisfaction from the other Secured Parties of their indemnification
obligations under Section 9.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.
The Collateral Agent shall not be required to take any action that in the
judgment of the Collateral Agent would violate any applicable law.

 

9.08. Resignation of Collateral Agent. Subject to the appointment and acceptance
of a successor Collateral Agent as provided below, the Collateral Agent may
resign at any time by giving notice thereof to the other Secured Parties and the
Obligors. Upon any such resignation, the Required Secured Parties shall have the
right, with the consent of the Borrower not to be unreasonably withheld (or if
an Event of Default or Trigger Event has occurred and is continuing in
consultation with the Borrower) to appoint a successor Collateral Agent. If no
successor Collateral Agent shall have been so appointed by the Required Secured
Parties and shall have accepted such appointment within 30 days after the
retiring Collateral Agent’s giving of written notice of resignation of the
retiring Collateral Agent, then the retiring Collateral Agent may, on behalf of
the other Secured Parties, appoint a successor Collateral Agent, that shall be a
bank that has an office in New York, New York and has a combined capital and
surplus and undivided profits of at least $1,000,000,000. Upon the acceptance of
any appointment as Collateral Agent hereunder by a successor Collateral Agent,
such successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Collateral
Agent, and the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder. After any retiring Collateral Agent’s resignation
hereunder as Collateral Agent, the provisions of this Section 9 shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Collateral Agent. The Borrower shall pay to any
successor Collateral Agent the fees and charges necessary to induce such
successor Collateral Agent to accept its appointment hereunder.

 

9.09. Agents and Attorneys-in-Fact. The Collateral Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.

 

Section 10. Miscellaneous.

 

10.01. Notices. All notices, requests, consents and other demands hereunder and
other communications provided for herein shall be given or made in writing, (a)
to any party hereto, delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy or electronic mail to the
intended recipient at the “Address for Notices” specified below its name on the
signature pages hereof (provided that notices to any Subsidiary Guarantor shall
be given to such Subsidiary Guarantor care of the Borrower at the address for
the Borrower specified herein) or (b) as to any party, at such other address as
shall be designated by such party in a written notice to each other party. All
notices to any Lender that is not a party hereto shall be given to the
Administrative Agent. All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given on the date of receipt.

 

22 

 

  

10.02. No Deemed Waivers; Remedies Cumulative. No failure or delay by the
Collateral Agent or any other Secured Party in exercising any right or power
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 Collateral Agent and the Secured Parties hereunder are cumulative and are
not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Obligors therefrom shall in any event be effective unless the same shall be
permitted by Section 10.03, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.

 

10.03. Amendments; Waivers; Releases. Except as otherwise provided in any
Security Document, the terms of this Agreement and the other Security Documents
may be waived, altered or amended only by an instrument in writing duly executed
by each Obligor and the Collateral Agent, with the consent of the Required
Secured Parties; provided that

 

(a)       no such amendment shall adversely affect the relative rights of any
Secured Party as against any other Secured Party without the prior written
consent of such first Secured Party,

 

(b)       without the prior written consent of each of the Lenders under the
Credit Agreement, the Collateral Agent shall not release all or substantially
all of the collateral under the Security Documents or release all or
substantially all of the Subsidiary Guarantors from their guarantee obligations
under Section 3 hereof, except that if any amounts have become due and payable
in respect of any periodic or termination payment in respect of any Hedging
Agreement Obligation, and shall have remained unpaid for 30 or more days, then
the prior written consent (voting as a single group) of the holders of a
majority in interest of such Hedging Agreement Obligations, whichever of such
obligations are then due and payable, will also be required to release all or
substantially all of such collateral;

 

(c)       without the consent of each of the Secured Parties, no modification,
supplement or waiver shall modify the definition of the term “Required Secured
Parties” or modify in any other manner the number of percentage of the Secured
Parties required to make any determinations or waive any rights under any
Security Document;

 

(d)       without the consent of the Collateral Agent, no modification,
supplement or waiver shall modify the terms of Section 9 or this Section 10.03;

 

(e)       the Collateral Agent is authorized to release (and shall release) any
Collateral that is either the subject of a disposition not prohibited under the
Credit Agreement or to which the Required Secured Parties shall have consented;
notwithstanding the foregoing, Portfolio Investments constituting the Collateral
shall be automatically released from the lien of this Agreement, without any
action of the Collateral Agent, in connection with any disposition of Portfolio
Investments that (i) occurs in the ordinary course of the Borrower’s business
and (ii) is not prohibited under the Credit Agreement; and

 

23 

 

  

(f)       the Collateral Agent is authorized to release (and shall release) any
Subsidiary Guarantor from any of its guarantee obligations under Section 3
hereof to the extent such Subsidiary Guarantor is an Immaterial Subsidiary or
the Subsidiary Guarantor ceases to be a Subsidiary as a result of a transaction
not prohibited under the Debt Documents, or to which the Required Secured
Parties shall have consented, and, upon such release, the Collateral Agent is
authorized to release (and shall release) any collateral security granted by
such Subsidiary Guarantor hereunder and under the other Security Documents.

 

Any such amendment or waiver shall be binding upon the Collateral Agent, each
Secured Party and each Obligor.

 

10.04. Expenses; Indemnity; Damage Waiver.

 

(a)       Costs and Expenses. The Obligors hereby jointly and severally agree to
reimburse the Collateral Agent and each of the other Secured Parties and their
respective Affiliates for all reasonable out-of-pocket costs and expenses
incurred by them (including the reasonable fees, charges and disbursements of
legal counsel) in connection with (i) any Default or Trigger Event and any
enforcement or collection proceeding resulting therefrom, including all manner
of participation in or other involvement with (w) performance by the Collateral
Agent of any obligations of the Obligors in respect of the Collateral that the
Obligors have failed or refused to perform in the time period required under
this Agreement, (x) bankruptcy, insolvency, receivership, foreclosure, winding
up or liquidation proceedings of any Obligor, or any actual or attempted sale,
or any exchange, enforcement, collection, compromise or settlement in respect of
any of the Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Collateral Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, (y) judicial or
regulatory proceedings arising from or related to this Agreement and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section, and all such costs and expenses shall be
Secured Obligations entitled to the benefits of the collateral security provided
pursuant to Section 4.

 

(b)       Indemnification by the Obligors. The Obligors shall indemnify each
Indemnitee against, and hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses including the reasonable
out-of-pocket fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (i) the execution or delivery of this Agreement or any
agreement or instrument contemplated hereby, the performance by the parties
hereto of their respective obligations hereunder or (ii) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether 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 fraud, willful misconduct or gross negligence of such
Indemnitee.

 

Neither the Borrower nor any Obligor shall be liable to any Indemnitee for any
special, indirect, consequential or punitive damages arising out of, in
connection with, this Agreement asserted by an Indemnitee against the Borrower
or any other Obligor; provided that the foregoing limitation shall not be deemed
to impair or affect the Obligations of the Borrower or any other Obligor under
the preceding provisions of this subsection.

 

10.05. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the Obligors and the
Secured Parties (provided that none of the Obligors shall assign or transfer its
rights or obligations hereunder without the prior written consent of the
Collateral Agent).

 

24 

 

 

10.06. Counterparts; Integration; Effectiveness; Electronic Execution.

 

(a)       Counterparts; Integration; Effectiveness. This Agreement 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 Agreement and any
separate letter agreements with respect to fees payable to the Collateral Agent
constitute the entire contract between and among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective when it shall have been executed by the
Collateral Agent and when the Collateral Agent shall have received counterparts
hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page to this Agreement by telecopy or
electronic mail shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

(b)       Electronic Execution of Assignments. The words “execution”, “signed”,
“signature” shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

 

10.07. Severability. Any provision of this Agreement held to be invalid, illegal
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

10.08. Governing Law; Jurisdiction.

 

(a)       Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of New York.

 

(b)       Submission to Jurisdiction. Each Obligor hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, 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 court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
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 any Secured Party may otherwise have to bring any action or
proceeding relating to this Agreement against any Obligor or its properties in
the courts of any jurisdiction.

 

25 

 

  

(c)       Waiver of Venue. Each Obligor 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 in any court
referred to in paragraph (b) of this Section. 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.

 

(d)       Service of Process. Each party to this Agreement (i) irrevocably
consents to service of process in the manner provided for notices in
Section 10.01 and (ii) agrees that service as provided in the manner provided
for notices in Section 10.01 is sufficient to confer personal jurisdiction over
such party in any proceeding in any court and otherwise constitutes effective
and binding service in every respect. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.

 

10.09. 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
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). 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 BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.10. Keepwell. To the extent that it is a Qualified ECP Loan Party at the time
this Agreement (or any other Guarantee or Security Document) or grant of a
security interest under any of the other Loan Documents, becomes effective with
respect to any Hedging Agreement Obligations, each Obligor hereby jointly and
severally, together with each other Qualified ECP Loan Party, absolutely,
unconditionally and irrevocably (a) guarantees the prompt payment and
performance of all Hedging Agreement Obligations owing by each Non-Qualifying
Party (it being understood and agreed that this guarantee is a guaranty of
payment and not of collection), and (b) undertakes to provide such funds or
other support as may be needed from time to time by any Non-Qualifying Party to
honor all of such Non-Qualifying Party’s obligations under this Agreement or any
other Loan Document in respect of Hedging Agreement Obligations (provided that,
each Obligor shall only be liable under this Section 10.10 for the maximum
amount of such liability that can be hereby incurred without rendering its
obligations under this Section 10.10, or otherwise under this Agreement or any
other Loan Document, voidable under applicable law, including fraudulent
conveyance or fraudulent transfer laws, and not for any greater amount). The
obligations and undertakings of each applicable Obligor under this Section 10.10
shall remain in full force and effect until the Secured Obligations have been
indefeasibly paid and performed in full and all Commitments shall have
irrevocably terminated. Each such Obligor intends this Section 10.10 to
constitute, and this Section 10.10 shall be deemed to constitute, a guarantee of
the obligations of, and a “keepwell, support, or other agreement” for the
benefit of, each Obligor for all purposes of the Commodity Exchange Act.

 

26 

 

  

10.11. Judgment Currency. This is an international loan transaction in which the
specification of Dollars or any Foreign Currency, as the case may be (the
“Specified Currency”), and payment in New York City or the country of the
Specified Currency, as the case may be (the “Specified Place”), is of the
essence, and the Specified Currency shall be the currency of account in all
events relating to Loans denominated in the Specified Currency. The payment
obligations of the Obligors under this Agreement shall not be discharged or
satisfied by an amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the amount so paid on
conversion to the Specified Currency and transfer to the Specified Place under
normal banking procedures does not yield the amount of the Specified Currency at
the Specified Place due hereunder. If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due hereunder in the Specified
Currency into another currency (the “Second Currency”), the rate of exchange
that shall be applied shall be the rate at which in accordance with normal
banking procedures the Administrative Agent could purchase the Specified
Currency with the Second Currency on the Business Day next preceding the day on
which such judgment is rendered. The obligation of any Obligor in respect of any
such sum due from it to the Administrative Agent or any Lender hereunder or
under any other Loan Document (in this Section called an “Entitled Person”)
shall, notwithstanding the rate of exchange actually applied in rendering such
judgment be discharged only to the extent that on the Business Day following
receipt by such Entitled Person of any sum adjudged to be due hereunder in the
Second Currency such Entitled Person may in accordance with normal banking
procedures purchase and transfer to the Specified Place the Specified Currency
with the amount of the Second Currency so adjudged to be due; and the Borrower
hereby, as a separate obligation and notwithstanding any such judgment, agrees
to indemnify such Entitled Person against, and to pay such Entitled Person on
demand, in the Specified Currency. The amount (if any) by which the sum
originally due to such Entitled Person in the Specified Currency hereunder
exceeds the amount of the Specified Currency so purchased and transferred.

 

10.12. Headings. Section headings and the Table of Contents used herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.

 

[Signatures appear on following pages.]

 

27 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Guarantee and Security
Agreement to be duly executed and delivered as of the day and year first above
written.

 

OBLIGORS:

 

STELLUS CAPITAL INVESTMENT CORPORATION,

a Maryland corporation

By:________________________________________
Name:________________________________________
Title:_________________________________________

SCIC – ERC BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – SKP BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – APE BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – HUF BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

Signature Page – Guarantee and Security Agreement

 

 

SCIC – HOLLANDER BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – CC BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – CONSOLIDATED BLOCKER, INC.,

a Delaware corporation

By:________________________________________

Name:________________________________________
Title:_________________________________________

 

 

SCIC – ASC BLOCKER 1, INC.,

a Delaware corporation

By:________________________________________
Name:________________________________________
Title:_________________________________________

 

 

Address for Notices

Stellus Capital Investment Corporation
4400 Post Oak Parkway, Suite 2200
Houston, Texas 77027
Attention: W. Todd Huskinson

Email: Thuskinson@stelluscapital.com; Dblank@stelluscapital.com;
Vgarcia@stelluscapital.com
Telecopy Number: (713) 292-5414
Telephone: (713) 292-5454

 

 

Signature Page – Guarantee and Security Agreement

 

 

ZB, N.A. dba AMEGY BANK,
as Administrative Agent and Collateral Agent

By:________________________________________
Name:________________________________________
Title:_________________________________________

Address for Notices

ZB, N.A. dba Amegy Bank

1717 West Loop South, 23rd Floor

Houston, Texas 77027

Attention: Natalie Garza

E-mail: Natalie.Garza@amegybank.com

Telephone Number: (713) 232-2197

Telecopy Number: (713) 571-5389

 

with a copy to:

Porter Hedges LLP

1000 Main Street, Floor 36

Houston, Texas 77002

Attention: Janine Lundin

E-mail: jlundin@porterhedges.com

Telephone Number: (713) 226-6651

Telecopy Number: (713) 226-6251

 

 

Signature Page – Guarantee and Security Agreement