Guarantee And Collateral Agreement

Exhibit 10.26


GUARANTEE AND COLLATERAL AGREEMENT


made by


ACTERNA LLC


and its parent


ACTERNA CORPORATION


and


certain of its Subsidiaries


in favor of


CD&R VI (Barbados), Ltd.
and the other Secured Parties named herein


Dated as of August 7, 2002


TABLE OF CONTENTS


Page SECTION 1. DEFINED TERMS ............................................................. 2 1.1 Definitions .................................................................. 2 1.2 Other Definitional Provisions ................................................ 8


SECTION 2. GUARANTEE ................................................................. 9 2.1 Guarantee .................................................................... 9 2.2 Right of Contribution ........................................................ 10 2.3 No Subrogation ............................................................... 10 2.4 Amendments, etc. with respect to the Obligations ............................. 10 2.5 Guarantee Absolute and Unconditional ......................................... 11 2.6 Reinstatement ................................................................ 12 2.7 Payments ..................................................................... 12


SECTION 3. GRANT OF SECURITY INTEREST ................................................ 12 3.1 Grant ........................................................................ 12 3.2 Pledged Collateral ........................................................... 14 3.3 Certain Exceptions ........................................................... 14


SECTION 4. REPRESENTATIONS AND WARRANTIES ............................................ 15 4.1 Representations and Warranties of Each Guarantor ............................. 15 4.2 Representations and Warranties of Each Grantor ............................... 15
4.2.1 Title; No Other Liens ............................................... 15
4.2.2 Perfected Third Priority Liens ...................................... 15
4.2.3 Jurisdiction of Organization ........................................ 17
4.2.4 Inventory and Equipment ............................................. 18
4.2.5 Farm Products ....................................................... 18
4.2.6 Accounts ............................................................ 18
4.2.7 Patents and Trademarks .............................................. 18 4.3 Representations and Warranties of Each Pledgor ............................... 18


SECTION 5. COVENANTS ................................................................. 19 5.1 Covenants of Each Guarantor .................................................. 19 5.2 Covenants of Each Grantor .................................................... 20
5.2.1 Delivery of Instruments and Chattel Paper ........................... 20
5.2.2 Maintenance of Insurance ............................................ 20
5.2.3 Payment of Obligations .............................................. 21
5.2.4 Maintenance of Perfected Security Interest; Further Documentation ... 21
5.2.5 Deposit Accounts .................................................... 22
5.2.6 Changes in Name, etc ................................................ 22


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5.2.7 Notices ............................................................. 22
5.2.8 Pledged Securities .................................................. 22
5.2.9 Accounts ............................................................ 23
5.2.10 Maintenance of Records .............................................. 23
5.2.11 Acquisition of Intellectual Property ................................ 23
5.2.12 Protection of Trade Secrets ......................................... 24 5.3 Covenants of Each Pledgor .................................................... 24 5.4 Covenant of the Parent ....................................................... 26


SECTION 6. REMEDIAL PROVISIONS ....................................................... 27 6.1 Certain Matters Relating to Accounts ......................................... 27 6.2 Communications with Obligors; Grantors Remain Liable ......................... 28 6.3 Pledged Stock ................................................................ 29 6.4 Proceeds to be Turned Over to Secured Parties ................................ 30 6.5 Application of Proceeds ...................................................... 31 6.6 Code and Other Remedies ...................................................... 32 6.7 Registration Rights .......................................................... 33 6.8 Waiver; Deficiency ........................................................... 34


SECTION 7. THE SECURED PARTIES ....................................................... 34 7.1 Secured Parties' Appointment as Attorney-in-Fact, etc ........................ 34 7.2 Duty of Secured Parties ...................................................... 36 7.3 Execution of Financing Statements ............................................ 36 7.4 Authority of Secured Parties ................................................. 37 7.5 Right Of Inspection .......................................................... 37


SECTION 8. MISCELLANEOUS ............................................................. 37 8.1 Amendments in Writing ........................................................ 37 8.2 Notices ...................................................................... 37 8.3 No Waiver by Course of Conduct; Cumulative Remedies .......................... 38 8.4 Enforcement Expenses; Indemnification ........................................ 38 8.5 Successors and Assigns ....................................................... 39 8.6 Set-Off ...................................................................... 39 8.7 Counterparts ................................................................. 39 8.8 Severability ................................................................. 39 8.9 Section Headings ............................................................. 40 8.10 Integration .................................................................. 40 8.11 GOVERNING LAW ................................................................ 40 8.12 Submission To Jurisdiction; Waivers .......................................... 40 8.13 Acknowledgments .............................................................. 41 8.14 WAIVER OF JURY TRIAL ......................................................... 41 8.15 Additional Granting Parties .................................................. 41 8.16 Releases ..................................................................... 41


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8.17 Senior Indebtedness .......................................................... 42 8.18 Schedules .................................................................... 43


GUARANTEE AND COLLATERAL AGREEMENT


GUARANTEE AND COLLATERAL AGREEMENT, dated as of August 7, 2002, made by Acterna Corporation, a Delaware corporation (the "Parent"), Acterna LLC, a Delaware limited liability company wholly owned by the Parent (the "Company") and certain Subsidiaries of the Company party hereto, in favor of CD&R VI (Barbados), Ltd. ("CD&R Barbados"), and the other Secured Parties referred to herein.


W I T N E S S E T H:


WHEREAS, the Parent and the Company issued and sold to and Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited partnership ("Fund VI"), $75,000,000 in aggregate principal amount of 12% Senior Convertible Notes due December 31, 2007 of the Company (the "Fund VI Notes"), pursuant to the Investment Agreement, dated as of December 27, 2001 (as amended, waived, supplemented or otherwise modified from time to time, the "Fund VI Investment Agreement"), among the Parent, the Company and Fund VI (the "Fund VI Investment Agreement");


WHEREAS, the Parent and the Company desire to issue and sell to CD&R Barbados, and CD&R Barbados desires to purchase from the Parent and the Company, Senior Convertible Notes due December 31, 2007, Series 2 of the Company (the "Initial Notes"), pursuant to the Investment Agreement, dated as of August 5, 2002 (as amended, waived, supplemented or otherwise modified from time to time, the "Investment Agreement"), among the Parent, the Company and CD&R Barbados;


WHEREAS, the Company is a member of an affiliated group of companies that includes the Parent, the Company's Active Subsidiaries which are Domestic Subsidiaries and any Subsidiary of the Company that becomes a party hereto from time to time after the date hereof (the Company, the Parent, the Company's Active Subsidiaries which are Domestic Subsidiaries and each such other Subsidiary collectively, the "Granting Parties");


WHEREAS, the net proceeds of the issuance and sale of the Initial Notes under the Investment Agreement will be utilized in meeting the working capital needs of such affiliated group, including through making valuable transfers to one or more of the Granting Parties in connection with the operation of their respective businesses;


WHEREAS, the Company and the other Granting Parties are engaged in related businesses, and each such Granting Party will derive substantial direct and indirect benefit from the issuance and sale of the Initial Notes under the Investment Agreement; and


WHEREAS, it is a condition to the obligation of CD&R Barbados to purchase the Initial Notes under the Investment Agreement that the Granting Parties shall execute and deliver this Agreement to CD&R Barbados;


NOW, THEREFORE, in consideration of the premises and to induce CD&R Barbados to enter into the Investment Agreement and purchase the Initial Notes, each Granting Party hereby agrees with and for the benefit of the Investor and the other Secured Parties, as follows:


SECTION 1. DEFINED TERMS


1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Investment Agreement and used herein shall have the meanings given to them in the Investment Agreement, and the following terms that are defined in the Code (as defined below) are used herein as so defined: Chattel Paper, Documents, Electronic Chattel Paper, Equipment, Farm Products and Fixtures.


(b) The following terms shall have the following meanings:


"Accounts": all accounts (as defined in the Code) of each Grantor.


"Administrative Agent": JPMorgan Chase Bank (as successor by merger to Morgan Guaranty Trust Company of New York), in its capacity as administrative agent under the Credit Agreement Security Agreement.


"Agreement": this Guarantee and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time.


"Code": the Uniform Commercial Code as from time to time in effect in the State of New York.


"Collateral": as defined in Section 3.


"Collateral Account Bank": JPMorgan Chase Bank or another bank selected by the relevant Grantor and approved by the Secured Parties.


"Collateral Proceeds Account": the cash collateral account established by the relevant Grantor at an office of the Collateral Account Bank in the name of the Secured Parties or their nominee.


"Company Obligations": the collective reference to the unpaid principal of and interest on the Notes and all other obligations and liabilities of the Company (including, without limitation, interest accruing at the then applicable rate provided in the Investment Agreement after the maturity of such Notes and interest accruing at the then applicable


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rate provided in the Investment Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any of the Secured Parties, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Investment Agreement, this Agreement, the other Note Financing Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to any of the Secured Parties that are required to be paid by the Company pursuant to the terms of any of the foregoing agreements).


"Contracts": with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof (except for the contracts listed on Schedule 6), to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder.


"Controlled Affiliate": as to the Company, any other Person that, directly or indirectly, is controlled by the Company, the Parent, or any Person of which the Company or the Parent is a Subsidiary. For the purposes of this definition, "control" of a Person means the power, directly or indirectly, to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Persons or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.


"Copyright Licenses": with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right to use any Copyright of such Grantor, other than agreements with any Person who is an Affiliate or a Subsidiary of the Company, including, without limitation, any license agreements listed on Schedule 4 hereto, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.


"Copyrights": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States copyrights, whether or not the underlying works of authorship have been published or registered, United States copyright registrations and copyright applications, including, without limitation the copyright registrations, if any,


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listed on Schedule 4 and (a) all renewals thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (c) the right to sue or otherwise recover for past, present and future infringements thereof.


"Credit Agreement": the Credit Agreement, dated as of May 23, 2000, among the Company, the German Borrowers named therein, the lenders from time to time parties thereto, the Administrative Agent, JPMorgan Chase Bank (as successor by merger to Morgan Guaranty Trust Company of New York) as agent for the German Term Loan Lenders, and JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank) and Bankers Trust Company, each in its capacity as documentation agent, as the same may be amended, supplemented or otherwise modified from time to time.


"Credit Agreement Security Agreement": the Guarantee and Collateral Agreement, dated as of May 23, 2000, made by the Company, the Parent and certain subsidiaries of the Company in favor of JPMorgan Chase Bank (as successor by merger to Morgan Guaranty Trust Company of New York), as administrative agent, as the same may be amended, waived, supplemented or otherwise modified from time to time.


"Credit Documents": the collective reference to (x) the Credit Agreement and (y) the Notes, the German L/C, the Applications and the Security Documents, in each case as defined in the Credit Agreement as in effect on the date hereof.


"Deposit Accounts": with respect to any Grantor, all deposit accounts (as defined by the Code) of such Grantor.


"Fund VI Note Financing Documents": the Note Financing Documents as defined in the Fund VI Investment Agreement.


"Fund VI Secured Parties": the Secured Parties as defined in the Fund VI Security Agreement.


"Fund VI Security Agreement": the Guarantee and Collateral Agreement, dated as of December 27, 2001, made by the Company, the Parent and certain subsidiaries of the Company in favor of Fund VI and the other Fund VI Secured Parties referred to therein, as the same may be amended, waived, supplemented or otherwise modified from time to time.


"Excluded Agreements": as defined in Section 3.3(a).


"General Intangibles": all "general intangibles" as such term is defined in Section 9-102(a)(42) of the Uniform Commercial Code in effect in the State of New York on the date hereof.


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"Granting Parties": as defined in the recitals hereto.


"Grantor": the Company and each Domestic Subsidiary of the Company that from time to time becomes a party hereto.


"Guarantor Obligations": with respect to any Guarantor, the collective reference to (i) the Obligations guaranteed by such Guarantor pursuant to Section 2 and (ii) all obligations and liabilities of such Guarantor that may arise under or in connection with this Agreement or any other Note Financing Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to any Secured Party that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Note Financing Document).


"Guarantor": each Granting Party other than the Company.


"Instruments": has the meaning specified in the Code, but excluding the Pledged Securities.


"Intellectual Property": with respect to any Grantor, the collective reference to such Grantor's Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.


"Investment Property": the collective reference to (i) all investment property as such term is defined in Section 9-102(a)(49) of the New York UCC (other than any Capital Stock of any Foreign Subsidiary excluded from the definition of "Pledged Stock") and (ii) whether or not constituting "investment property" as so defined, all Pledged Securities.


"Intercompany Note": with respect to any Grantor, any promissory note in a principal amount in excess of $1,000,000 evidencing loans made by such Grantor to the Company or any of its Subsidiaries.


"Inventory": with respect to any Grantor, all inventory (as defined in the Code) of such Grantor.


"Investor": CD&R Barbados and its successors and assigns, including any transferee of the aggregate outstanding amount of the Notes held thereby that is a member of the CD&R Group.


"Issuers": the collective reference to the Persons identified on Schedule 2 as the issuers of the Pledged Stock.


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"Letter-of-Credit Rights": with respect to any Grantor, all letter-of-credit rights (as defined in the Code) of such Grantor.


"Management Subscription Agreements": as defined in the Credit Agreement as in effect on the date hereof.


"Notes": the collective reference to the "Notes" as defined in the Investment Agreement.


"Obligations": (i) in the case of the Company, the Company Obligations, and (ii) in the case of each Guarantor, the Guarantor Obligations of such Guarantor.


"Patent Licenses": with respect to any Grantor, all United States written license agreements of such Grantor with any Person who is not an Affiliate or a Subsidiary of the Company or such Grantor, in connection with any of the Patents of such Grantor or such other Person's patents, whether such Grantor is a licensor or a licensee under any such agreement, including, without limitation, the license agreements listed on Schedule 4, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.


"Patents": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States patents, patent applications and patentable inventions, including, without limitation, all patents and patent applications identified in Schedule 4, and including, without limitation, (a) all inventions and improvements described and claimed therein, (b) the right to sue or otherwise recover for any and all past, present and future infringement thereof, (c) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (d) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto.


"Permitted Liens": Permitted Liens (as defined in the Investment Agreement) permitted under Section 8.6(a) of the Investment Agreement.


"Pledged Collateral": with respect to any Pledgor, the Pledged Securities owned or at any time acquired by such Pledgor, and any Proceeds thereof.


"Pledged Notes": with respect to any Pledgor, all Intercompany Notes at any time issued to such Pledgor.


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"Pledged Securities": the collective reference to the Pledged Notes and the Pledged Stock.


"Pledged Stock": with respect to any Pledgor, the shares of Capital Stock listed on Schedule 2 as held by such Pledgor, together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Issuer that may be issued or granted to, or held by, such Pledgor while this Agreement is in effect (provided that, in no event shall there be pledged, nor shall any Pledgor be required to pledge, directly or indirectly, more than 65% of any series of the outstanding Capital Stock of any Foreign Subsidiary pursuant to this Agreement).


"Pledgor": the Parent (with respect to the Pledged Stock of the Company), the Company (with respect to Pledged Stock of the entities listed on Schedule 2 hereto under the name of the Company and any other Pledged Securities held by the Company) and any other Granting Party (with respect to Pledged Securities held by such Granting Party).


"Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, Proceeds of Pledged Securities shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.


"Secured Parties": means the Investor and each other member of the CD&R Group that is a holder of any of the Notes.


"Securities Act": the Securities Act of 1933, as amended from time to time.


"Security Collateral": with respect to any Granting Party, means, collectively, the Collateral (if any) and the Pledged Collateral (if any) of such Granting Party.


"Trade Secrets": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including, without limitation, (a) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses, non-disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (b) the right to sue or otherwise recover for past, present or future misappropriations thereof.


"Trademark Licenses": with respect to any Grantor, all United States written license agreements of such Grantor with any Person who is not an Affiliate or a


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Subsidiary of the Company or such Grantor in connection with any of the Trademarks of such Grantor or such other Person's names or trademarks, whether such Grantor is a licensor or a licensee under any such agreement, including, without limitation, the license agreements listed on Schedule 4, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.


"Trademarks": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and any renewals thereof, including, without limitation, each registration and application identified in Schedule 4, and including, without limitation, (a) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (b) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (c) all other rights corresponding thereto in the United States and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto in the United States, t ...