EXHIBIT 10.32
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of June 3, 1999 (this
"Agreement"), among EACH OF THE UNDERSIGNED, whether as an original signatory
hereto or as an Additional Grantor (as herein defined) (each, a "Grantor"), and
Xxxxxxx Xxxxx Credit Partners, L.P., as agent (in such capacity, "Secured
Party") for Lenders and Lender Counterparties (as each such term is defined in
the Credit Agreement referred to below and, collectively with Lenders and
Secured Party, the "Secured Parties").
RECITALS:
WHEREAS, each Grantor is a party to the Credit and Guaranty Agreement of
even date herewith (as it may be from time to time amended, supplemented or
otherwise modified, the "Credit Agreement") among Grantors, Lenders, and
Xxxxxxx Sachs Credit Partners L.P., as Administrative Agent; and
WHEREAS, in consideration of the extensions of credit and other accommoda
tions of Lenders as set forth in the Credit Agreement, each Grantor has agreed,
subject to the terms and conditions hereof, and of each other Credit Document,
to secure such Grantor's Obligations under the Credit Documents as set forth
herein; and
WHEREAS, capitalized terms used herein (including the recitals hereto) not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, each Grantor and Secured Party agree
as follows:
SECTION 1. GRANT OF SECURITY
Each Grantor hereby grants to Secured Party for its benefit and the ratable
benefit of the other Secured Parties a security interest in all of Grantor's
right, title and interest in and to the following, in each case whether now or
hereafter existing or in which Grantor now has or hereafter acquires an interest
and wherever the same may be located (collectively, the "Collateral"):
a. all "Investment Property", which term means:
(i) all right, title and interest of such Grantor, whether now owned
or hereafter acquired, in all shares of capital stock owned by such
Grantor, including without limitation, all shares of capital stock
described on Schedule 1(a), and the certificates representing such shares
and any interest of such Grantor in the entries on the books of any
financial intermediary pertaining to such shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distrib uted in respect of or in
exchange for any or all of such shares (all of the foregoing being referred
to herein collectively as the "Pledged Stock"); provided, only the
outstanding capital stock of a controlled foreign corporation possessing up
to but not exceeding 65% of the voting power of all classes of capital
stock of such controlled foreign corporation entitled to vote shall be
deemed to be pledged hereunder;
(ii) all right, title and interest of such Grantor, whether now owned
or hereafter acquired, of all Indebtedness owed to such Grantor, including,
without limitation, all Indebtedness described on Schedule 1(a), issued by
the obligors named therein, the instruments evidencing such Indebtedness,
and all interest, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such Indebtedness (all of the foregoing being
referred to herein collectively as the "Pledged Debt");
(iii) all of such Grantor's right, title and interest as a limited
and/or general partner in all partnerships, including, without limitation,
the partnerships described on Schedule 1(a) (the "Partnerships"), whether
now owned or hereafter acquired, including, without limitation, all of such
Grantor's right, title and interest in, to and under the partnership
agreements described on Schedule 1(a) (as such agreements have heretofore
been and may hereafter be amended, restated, supplemented or otherwise
modified from time to time, collectively, the "Partnership Agreements") to
which it is a party (including, if such Grantor is a general partner of any
Partnership, the right to vote with respect to and to manage and administer
the business of such Partnership) together with all other rights,
interests, claims and other property of such Grantor in any manner arising
out of or relating to its limited and/or general partnership interest in
the Partnerships, whatever their respective kind or character, whether they
are tangible or intangible property, and wheresoever they may exist or be
located, and further including, without limitation, all of the rights of
such Grantor as a limited and/or general partner: to receive money due
and to become due (including without limitation dividends, distributions,
interest, income from partnership properties and operations, proceeds of
sale of partnership assets and
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returns of capital) under or pursuant to the Partnership Agreements, to
receive payments upon termination of the Partnership Agreements, and to
receive any other payments or distributions, whether cash or noncash, in
respect of such Grantor's limited and/or general partnership interest
evidenced by the Partner ship Agreements; in and with respect to claims and
causes of action rising out of or relating to the Partnerships; and to have
the access to the Partnerships' books and records and to other information
concerning or affecting the Partnerships; and any "certificate of
interest" or "certificates of interest" (or other certificates or
instruments however designated or titled) issued by the Partnerships and
evidencing such Grantor's interest as a limited and/or general partner in
the Partnerships (collectively, the "Certificates" and any interest of
such Grantor in the entries on the books of any financial intermediary
pertaining to such Grantor's interest as a limited and/or general partner
in the Partnership (all of the foregoing being referred to herein
collectively as the "Partnership Interests");
(iv) all of such Grantor's right, title and interest as a member of
all limited liability companies (the "LLCs"), including, without
limitation, all of such Grantor's right, title and interest in, to and
under the limited liability company interests set forth on Schedule 1(a),
whether now owned or hereafter acquired, including, without limitation, all
of such Grantor's right, title and interest in, to and under the operating
agreements with respect to any such LLC (as such agreements have heretofore
been and may hereafter be amended, restated, supplemented or otherwise
modified from time to time, collectively, each, an "LLC Agreement") to
which it is a party, regardless of whether such right, title and interest
arises under such LLC Agreement, including all rights of such Grantor to
receive distributions of any kind, in cash or otherwise, due or to become
due under or pursuant to each such LLC Agreement or otherwise in respect of
such Person, all rights of such Grantor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to each such
Person, all claims of such Grantor for damages arising out of, or for the
breach of, or for a default under, each such LLC Agreement, any
certificated or uncertificated security evidencing any of the foregoing
issued by such Person to such Grantor and to the extent not included in
the foregoing, all proceeds of any and all of the foregoing (all of the
foregoing being referred to herein collectively as the "LLC Interests";
the Pledged Stock, the Pledged Debt, the Partnership Interests and the LLC
Interests being herein collectively referred to as the "Pledged
Securities";
(v) all additional shares of, limited and/or general partnership
interests in and limited liability company interests in, and all securities
convertible into and warrants, options and other rights to purchase or
otherwise
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acquire, stock of any issuer of the Pledged Stock, limited and/or general
partnership interests in the Partnerships, and limited liability company
interests in the LLCs, from time to time acquired by such Grantor in any
manner (which shares or interests shall be deemed to be part of the Pledged
Securities), the certificates or other instruments representing such
additional shares or interests, securities, warrants, options or other
rights and any interest of such Grantor in the entries on the books of any
financial intermediary pertaining to such additional shares or interests,
and all additional indebtedness from time to time owed to such Grantor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness; (all of the
foregoing being referred to herein collectively as the "Additional Pledged
Securities"), and all dividends, distributions, cash, warrants, rights,
instruments, payments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Additional Securities; and
(vi) all shares of, limited and/or general partnership interests in,
and limited liability company interests in, and all securities convertible
into and warrants, options and other rights to purchase or otherwise
acquire, stock of, limited and/or general partnership interests in, or
limited liability company interests in any Person that, after the date of
this Agreement, becomes, as a result of any occurrence, a direct Subsidiary
of such Grantor (which shares or interests shall be deemed to be part of
the Pledged Securities), the certificates or other instruments representing
such shares, interests, securities, warrants, options or other rights and
any interest of such Grantor in the entries on the books of any financial
intermediary pertaining to such shares or interests and all dividends,
distributions, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, interests,
securities, warrants, options or other rights, and all Indebtedness from
time to time owed to such Grantor by any Person that, after the date of
this Agreement, becomes, as a result of any occurrence, a Subsidiary of
such Grantor, and the instruments evidencing such Indebtedness, and all
interest, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Indebtedness;
(b) all interest, cash, instruments, securities and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing;
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(c) all "Intellectual Property", which term means:
(i) all trademarks, service marks, designs, logos, indicia,
tradenames, corporate names, company names, business names, fictitious
business names, trade styles and/or other source and/or business
identifiers and applications pertaining thereto, owned or used by such
Grantor in its business, or hereafter adopted and used, including, without
limitation, the Trademarks specifically identified in Schedule 1(c) (all of
the foregoing being referred to herein collectively as the "Trademarks"),
all registrations that have been or may hereaf ter be issued or applied for
thereon in the United States and any state thereof and in certain foreign
countries, including, without limitation, the registrations specifically
identified in Schedule 1(c) (all of the foregoing being referred to herein
collectively as the "Trademark Registrations"), all common law and other
rights (but in no event any of the obligations) in and to the Trademarks in
the United States and any state thereof and in certain foreign countries
(all of the foregoing being referred to herein collectively as the
"Trademark Rights"), and all goodwill of such Grantor's business
symbolized by the Trademarks and associated therewith (all of the foregoing
being referred to herein collectively as the "Associated Goodwill");
(ii) all patents and patent applications and rights and interests in
patents and patent applications under any domestic law that are presently,
or in the future may be, owned by such Grantor and all patents and patent
applications and rights and interests in patents and patent applications
under any domestic law that are presently, or in the future may be, held or
used by such Grantor in whole or in part, including, without limitation,
the patents and patent applica tions listed in Schedule 1(c), all rights
(but not obligations corresponding thereto), including, without limitation,
the right (but not the obligation, and exercisable only upon the occurrence
and continuation of an Event of Default) to xxx for past, present and
future infringements in the name of such Grantor or in the name of Secured
Party or Secured Parties, and all re-issues, divisions, continuations,
renewals, extensions and continuations-in-part thereof (all of the
foregoing being collectively referred to as the "Patents"); it being
understood that the rights and interest included herein hereby shall
include, without limitation, all rights and interests pursuant to licensing
or other contracts in favor of such Grantor pertaining to patent
applications and patents presently or in the future owned or used by third
parties but, in the case of third parties which are not Affiliates of
Grantor, only to the extent permitted by such licensing or other contracts
and, if not so permitted, only with the consent of such third parties; and
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(iii) various published and unpublished works of authorship
including, without limitation, computer programs, computer data bases,
other computer software, including without limitation, object code and
source code, mask works, semiconductor chips, masks, cell libraries,
layouts, trade secrets, trade secret rights, trade dress rights, ideas,
drawings, designs, schematics, algorithms, writings, techniques, processes
and formulas, including, without limitation, the works listed on Schedule
1(c) (all of the foregoing being referred to herein collectively as the
"Copyrights"), all copyright registrations issued to such Grantor and
applications for copyright registration that have been or may hereafter be
issued or applied for thereon in the United States and any state thereof
and in certain foreign countries, including, without limitation, the
registrations listed on Schedule 1(c) (all of the foregoing being referred
to herein collectively as the "Copyright Registrations"), all common law
and other rights in and to the Copyrights in the United States and any
state thereof and in certain foreign countries including all copyright
licenses (but with respect to such copyright licenses, only to the extent
permitted by such licensing arrangements) (all of the foregoing being
referred to herein collectively as the "Copyright Rights"), including,
without limitation, each of the Copyrights, rights, titles and interests in
and to the Copyrights and works protectable by copyright, which are
presently, or in the future may be, owned, created (as a work for hire for
the benefit of such Grantor), authored (as a work for hire for the benefit
of such Grantor), acquired or used (whether pursuant to a license or
otherwise but only to the extent permitted by agreements governing such
license or other use) by such Grantor, in whole or in part, and all
Copyright Rights with respect thereto and all Copyright Registrations
therefor, heretofore or hereafter granted or applied for, and all renewals
and extensions thereof, throughout the world, including all proceeds
thereof (such as, by way of example and not by limitation, license
royalties and proceeds of infringement suits), the right (but not the
obligation) to renew and extend such Copyrights, Registrations and
Copyright Rights and to register works protectable by copyright and the
right (but not the obligation and exercisable only upon the occurrence and
continuation of an Event of Default) to xxx or bring opposition or
cancellation proceedings in the name of such Grantor or in the name of
Secured Party or Secured Parties for past, present and future infringements
of the Copyrights and Copyright Rights;
(d) all of such Grantor's right, title and interest in, to and under any
inventory in all of its forms, including, but not limited to, all goods held by
such Grantor for sale or lease or to be furnished under contracts of service or
so leased or furnished, all raw materials, work in process, finished goods, and
materials used or consumed in the manufacture, packing, shipping, advertising,
selling, leasing, furnishing or production of such inventory or otherwise used
or consumed in such Grantor's business, all goods
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in which such Grantor has an interest in mass or a joint or other interest or
right of any kind, all goods which are returned to or repossessed by such
Grantor, and all accessions thereto and products thereof (all of the foregoing
being referred to herein collectively as the "Inventory"), and all negotiable
and non-negotiable documents of title, including, without limitation, warehouse
receipts, dock receipts and bills of lading issued by any Person covering any
Inventory; provided that Inventory shall not include any property or rights
included in Excluded Collateral (as defined below);
(e) all of such Grantor's right, title and interest in, to and under any
accounts, contract rights, chattel paper, documents, instruments, general
intangibles and other rights and obligations of any kind (all of the foregoing
being referred to herein collectively as the "Accounts") and all of such
Grantor's rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any Accounts (all of the foregoing
being referred to herein collectively as the "Related Contracts"); provided
that, Accounts and Related Contracts shall not include any property or rights
included in Excluded Collateral (as defined below);
(f) all of such Grantor's right, title and interest in, to and under all
agreements and contracts to which such Grantor is a party as of the date hereof,
including, without limitation, each Material Contract, or to which such Grantor
becomes a party after the date hereof, as each such agreement may be amended,
supplemented or otherwise modified from time to time (all of the foregoing being
referred to herein collectively as the "Assigned Agreements"), including all
rights of such Grantor to receive moneys due or to become due under or pursuant
to the Assigned Agreements, all rights of such Grantor to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, all claims of such Grantor for damages arising out of any breach of
or default under the Assigned Agreements, and all rights of such Grantor to
terminate, amend, supplement, modify or exercise rights or options under the
Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder; provided that Assigned Agreements
shall not include any property or rights included in Excluded Collateral (as
defined below);
(g) to the extent not otherwise included in any other paragraph of this
Section 1, all other general intangibles, including tax refunds, rights to
payment or performance, choses in action and judgments taken on any rights or
claims included in the Collateral;
(h) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or
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contain information relating to any of the Collateral or are otherwise necessary
or helpful in the collection thereof or realization thereupon; and
(i) to the extent not covered by Sections 1(a) through 1(k), all other
personal property of such Grantor (other than Excluded Collateral, equipment and
fixtures), all proceeds, products, rents and profits of or from any and all of
the foregoing Collateral and, to the extent not otherwise included, all payments
under insurance (whether or not Secured Party is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of this
Agreement, the term "proceeds" includes whatever is receivable or received when
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary.
Excluded Collateral is defined to include (i) any of such Grantor's rights
or interests in any license, contract or agreement to which such Grantor is a
party or any of its rights or interests thereunder to the extent, but only to
the extent, that such a grant would, under the terms of such license, contract
or agreement or otherwise, result in a breach of the terms of, or constitute a
default under any license, contract or agreement to which such Grantor is a
party (other than to the extent that any such term would be rendered ineffective
pursuant to Section 9-318(4) of the Uniform Commercial Code of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code) or
principles of equity); provided, immediately upon the ineffectiveness, lapse or
termination of any such provision, the Collateral shall include, and such
Grantor shall be deemed to have granted a security interest in, all such rights
and interests as if such provision had never been in effect (ii) any Inventory
held for lease or made available for use by customers or clients of a Grantor
under a lease, service contract or similar arrangement and (iii) Inventory
subject to a Lien or security interest securing Purchase Money Indebtedness and
Accounts and Related Contracts relating to such Inventory.
SECTION 2. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE
This Agreement secures, and the Collateral is collateral security for,
the prompt payment or performance in full when due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
(S)362(a)), of all Obligations with respect to each Grantor (the "Secured
Obligations"). Anything contained herein to the contrary notwithstanding, (a)
each Grantor shall remain liable under any Partnership Agreement, LLC Agreement
or any other contracts and agreements included in the Collateral, to the extent
set forth therein, to perform all of its duties and obligations
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thereunder to the same extent as if this Agreement had not been executed; (b)
the exercise by Secured Party of any of its rights hereunder shall not release
any Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral; and (c) Secured Party shall not have any
obligation or liability under any Partnership Agreement, LLC Agreement or any
other contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder. Notwithstanding any of the
foregoing, this Agreement shall not in any way be deemed to obligate Secured
Party, any Lender or any purchaser at a foreclosure sale under this Agreement to
assume any of any Grantor's obligations, duties, expenses or liabilities under
any LLC Agreement or Partnership Agreement (including any Grantor's obligations
as a general partner for the debts and obligations of a Partnership) and to
manage the business and affairs of any Partnership or any of such Grantor's
obligations for the debts and obligations of an LLC, or under any and all other
agreements now existing or hereafter drafted or executed (collectively, the
"Grantor Obligations") unless Secured Party, any Lender or any such purchaser
otherwise expressly agrees in writing to assume any or all of said Grantor
Obligations. In the event of foreclosure by Secured Party, each Grantor shall
remain bound and obligated to perform its Grantor Obligations arising during or
otherwise related to its ownership of the Collateral, and neither Secured Party
nor any Lender shall be deemed to have assumed any of such Grantor Obligations
except as provided in the preceding sentence. Without limiting the generality of
the foregoing, neither the grant of the security interest in the Collateral in
favor of Secured Party as provided herein nor the exercise by Secured Party of
any of its rights hereunder nor any action by the Secured party in connection
with a foreclosure on the Collateral shall be deemed to constitute Secured Party
or any Lender a partner of any Partnership or a member of any LLC; provided, in
the event Secured Party or any purchaser of Collateral at a foreclosure sale
elects to become a substituted general partner of any Partnership or manager of
any LLC in place of any Grantor, Secured Party or such purchaser, as the case
may, shall adopt in writing the applicable Partnership Agreement or LLC
Agreement, as the case may be, and agree to be bound by the terms and provisions
thereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1. Generally. Each Grantor represents and warrants that each of the
representations and warranties set forth in Section 4.10 of the Credit Agreement
is true and correct with respect to each item of Collateral applicable thereto
owned by such Grantor as if fully set forth herein.
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3.2. Investment Property. In addition to any other representation made
thereby in any other Credit Document, each Grantor represents and warrants that
all of the Pledged Stock has been duly authorized and validly issued and are
fully paid and non-assessable; the Pledged Securities constitute all of the
issued and outstanding equity Securities of each issuer thereof that are owned
by such Grantor, and there are no outstanding warrants, options or other rights
to purchase, or other agreements outstanding with respect to, or property that
is now or hereafter convertible into, or that requires the issuance or sale of,
any of the Pledged Securities; all of the Pledged Debt constitutes all of the
issued and outstanding inter company Indebtedness evidenced by a promissory note
of the respective issuers thereof owing to such Grantor; the security interest
of Secured Party hereunder has been registered on the books and records of any
issuer of "uncertificated securities" (as such term is defined in the UCC)
included in the Collateral; and with respect to any Investment Property, no
consent of any Person, including any other limited or general partner of the
Partnerships, any other member of any LLC, or any creditor of any Grantor, and
no authorization, approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for either the grant
by any Grantor of the security interests granted hereby, the execution,
delivery or performance of this Agreement by any Grantor, or the perfection of
or the exercise by Secured Party of its rights and remedies hereunder (except as
may have been taken by or at the direction of any Grantor and except for filings
and notices that may be required under federal and state securities laws in
connection with the exercise by Secured Party of its rights and remedies
hereunder).
3.3. Intellectual Property Collateral. In addition to any other
representation made thereby in any other Credit Document, each Grantor
represents and warrants that a true and complete list of all Trademark
Registrations and Trademark applications owned, held (whether pursuant to a
license or otherwise) or used by such Grantor, in whole or in part, as of the
date of this Agreement is set forth in Schedule 1(c); a true and complete list
of all Patents owned, held (whether pursuant to a license or otherwise) or used
by such Grantor, in whole or in part, as of the date of this Agreement is set
forth in Schedule 1(c); a true and complete list of all Copyright Registrations
and applica tions for Copyright Registrations held (whether pursuant to a
license or otherwise) or used by such Grantor, in whole or in part, as of the
date of this Agreement is set forth in Schedule 1(c); except as set forth on
Schedule 3.1, Grantor is not aware of any pending or threatened claim by any
third party that any of the Intellectual Property owned, held or used by such
Grantor is invalid or unenforceable; and no effective security interest or
other Lien covering all or any part of the Intellectual Property Collateral is
on file in the United States Patent and Trademark Office or the United States
Copyright Office.
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3.4. Location of Inventory. In addition to the representations and
warranties made thereby in any other Credit Document, each Grantor represents
and warrants that all of the Inventory included in the Collateral (other than
Inventory located in any state the aggregate value of which does not exceed
$100,000 in such state) is, as of the date hereof, located in the jurisdictions
specified in Schedule 3.4.
3.5. Office Locations; Other Names. In addition to the representations
and warranties made thereby in any other Credit Document, each Grantor
represents and warrants that as of the date hereof the chief place of business,
the chief executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that evidence
Accounts is, and has been for the four month period preceding the date hereof,
located at the places indicated on Schedule 3.5, and no Grantor has in the past
twelve months, and does not now do, business under any other name (including any
trade-name or fictitious business name) except for those names set forth on
Schedule 3.5.
SECTION 4. FURTHER ASSURANCES; ADDITIONAL GRANTORS
4.1. Generally. Each Grantor agrees that from time to time, at the
expense of Grantor, each Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, each Grantor will execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary, or as Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby;
at any reasonable time, upon request by Secured Party, exhibit the Collateral to
and allow inspection of the Collateral by Secured Party, or persons designated
by Secured Party; and at Secured Party's request, appear in and defend any
action or proceeding that may affect Grantor's title to or Secured Party's
security interest in all or any part of the Collateral. Each Grantor hereby
authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of Grantor. Each Grantor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
signed by Grantor shall be sufficient as a financing statement and may be filed
as a financing statement in any and all jurisdictions. Each Grantor will
furnish to Secured Party from time to time statements and schedules further
identifying and describing the Collateral
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and such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
4.2. Investment Property. (a) Each Grantor agrees that it will, upon
obtaining any additional shares of stock or other securities required to be
pledged hereunder, promptly (and in any event within five Business Days) deliver
to Secured Party a Pledge Supplement, duly executed by Grantor, in substantially
the form of Exhibit A (a "Pledge Supplement"), in respect of the additional
Pledged Shares to be pledged pursuant to this Agreement. Each Grantor hereby
authorizes Secured Party to attach each Pledge Supplement to this Agreement and
agrees that all Pledged Shares of Grantor listed on any Pledge Supplement shall
for all purposes hereunder be considered Collateral of Grantor; provided, the
failure of any Grantor to execute a Pledge Supplement with respect to any
additional Pledged Shares pledged pursuant to this Agreement shall not impair
the security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect thereto.
(b) Upon request Secured Party, each Grantor shall cause each Person which
is an issuer of an uncertificated security included in the Collateral to execute
and deliver all instruments and documents, and take all further action Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted in such uncertificated securities,
to establish "control" (as such term is defined in the UCC) by Secured Party
over such Collateral or to enable Secured Party to exercise and enforce its
rights and remedies hereunder with respect to such Collateral, including, and as
applicable, register the security interest granted hereby upon the books of
such Person in accordance with Article 8 of the UCC, and deliver to Secured
Party an Acknowledgment of Pledge, duly executed by such the issuer of the
applicable uncertificated security, in substantially the form of Exhibit B (an
"Acknowledgment of Pledge").
4.3. Intellectual Property Collateral. If any Grantor shall hereafter
obtain rights to any new Intellectual Property Collateral or become entitled to
the benefit of any patent application or patent or any reissue, division,
continuation, renewal, extension or continuation-in-part of any Patent or any
improvement of any Patent; or any Copyright Registration, application for
Registration or renewals or extension of any Copyright, then in any such case,
the provisions of this Agreement shall automatically apply thereto. Each
Grantor shall promptly notify Secured Party in writing of any of the foregoing
rights acquired by Grantor after the date hereof that are registered (or subject
to an application for registration) in the name of Grantor and of any Trademark
Registrations issued or applications for Trademark Registration or applications
for Patents made, and any Copyright Registrations issued or applications for
Copyright Registration made, in any such case, after the date hereof. Promptly
after the filing of
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an application for any Trademark Registration; Patent; and Copyright
Registration, each Grantor shall execute and deliver to Secured Party and record
in all places where this Agreement is recorded a Pledge Supplement, pursuant to
which Grantor shall grant to Secured Party a security interest to the extent of
its interest in such Intellectual Property Collateral; provided, if, in the
reasonable judgment of Grantor, after due inquiry, granting such interest would
result in the grant of a Trademark Registration or Copyright Registration in the
name of Secured Party, in which event Grantor shall give written notice to
Secured Party as soon as reasonably practicable and the filing shall instead be
undertaken as soon as practicable but in no case later than immediately
following the grant of the applicable Trademark Registration or Copyright
Registration, as the case may be. In addition to the foregoing, each Grantor
hereby authorizes Secured Party to modify this Agreement without obtaining
Grantor's approval of or signature to such modification by amending Schedule
1(c), as applicable, to include reference to any right, title or interest in any
existing Intellectual Property Collateral or any Intellectual Property
Collateral acquired or developed by Grantor after the execution hereof or to
delete any reference to any right, title or interest in any Intellectual
Property Collateral in which Grantor no longer has or claims any right, title or
interest.
4.4. Accounts. Each Grantor shall, at the reasonable request of Secured
Party, xxxx conspicuously each item of chattel paper included in the Accounts,
with a legend, in form and substance reasonably satisfactory to Secured Party,
indicating that such Collateral is subject to the security interest granted
hereby, and at the reasonable request of Secured Party, deliver and pledge to
Secured Party hereunder all promissory notes and other instruments (excluding
checks) and all original counterparts of chattel paper constituting Collateral,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance reasonably satisfactory to Secured Party.
4.5. Additional Grantors. From time to time subsequent to the date
hereof, additional Persons may become parties hereto as additional Grantors
(each, an "Additional Grantor"), by executing a Pledge Supplement. Upon
delivery of any such Counterpart Agreement to Secured Party, notice of which is
hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall
be as fully a party hereto as if Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its obligations arising hereunder
shall not be affected or diminished by the addition or release of any other
Grantor hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
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SECTION 5. COVENANTS OF GRANTORS
5.1. Generally. Each Grantor shall except for the security interest
created by this Agreement, not create or suffer to exist any Lien upon or with
respect to any of the Collateral, except Permitted Liens; not use or permit any
Collateral to be used unlawfully or in violation of any provision of this
Agreement or any applicable statute, regulation or ordinance or any policy of
insurance covering the Collateral; notify Secured Party of any change in
Grantor's name, identity or corporate structure within 15 days of such change;
diligently keep reasonable records respecting the Intellectual Property
Collateral and at all times keep at least one complete set of its records
concerning such Collateral at its chief executive office or principal place of
business; if Secured Party gives value to enable Grantor to acquire rights in or
the use of any Collateral, use such value for such purposes; pay promptly when
due all property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Collateral, except to the extent the validity thereof is
being contested in good faith; provided, Grantor shall in any event pay such
taxes, assessments, charges, levies or claims not later than five days prior to
the date of any proposed sale under any judgement, writ or warrant of attachment
entered or filed against Grantor or any of the Collateral as a result of the
failure to make such payment; and upon any Authorized Officer of such Grantor
obtaining knowledge thereof, promptly notify Secured Party in writing of any
event that may materially and adversely affect the value of the Collateral or
any portion thereof, the ability of Grantor or Secured Party to dispose of the
Collateral or any portion thereof, or the rights and remedies of Secured Party
in relation thereto, including, without limitation, the levy of any legal
process against the Collateral or any portion thereof. No Grantor shall sell,
transfer or assign (by operation of law or otherwise) any Collateral except
Asset Sales permitted by the Credit Agreement, sales or other dispositions of
assets that do not constitute Asset Sales, leases or subleases to other Persons
of assets in the ordinary course of business and licenses to other Persons of
Intellectual Property Collateral in the ordinary course of business (a
"Permitted Sale"). So long as no Event of Default shall have occurred and is
then continuing or would occur after giving effect to a Permitted Sale
constituting an Asset Sale, and to the extent required under the Credit
Agreement the Net Asset Sale Proceeds with respect to such Permitted Sale are
delivered to Secured Party contemporaneously with such Permitted Sale, the Lien
hereof encumbering the Collateral that is the subject of such Permitted Sale
shall be released. Secured Party shall execute each and every appropriate
filing statement and/or recording document reasonably requested by any Grantor
is connection with the foregoing. Any reasonable expense or cost incurred by
Secured Party in connection with any such release shall be for the account of
the applicable Grantor.
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5.2. Investment Property.
(a) Delivery. (i) All certificates or instruments representing or
evidencing the Investment Property shall be delivered to and held by or on
behalf of Secured Party pursuant hereto and shall be in suitable form for
transfer by delivery or, as applicable, shall be accompanied by Grantor's
endorsement, where necessary, or duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured Party.
Upon the occurrence and during the continuation of an Event of Default, Secured
Party shall have the right, without notice to any Grantor, to transfer to or to
register in the name of Secured Party or any of its nominees any or all of the
Investment Property, subject only to the revocable rights specified herein. In
addition, upon the occurrence and during the existence of an Event of Default,
Secured Party shall have the right at any time to exchange certificates or
instruments representing or evidencing Investment Property for certificates or
instruments of smaller or larger denominations.
(ii) Each Grantor hereby consents to the pledge of the Partnership
Interests by each other Grantor in each Partnership pursuant to the terms
hereof, and, subject to Section 7, to the transfer of such Partnership Interests
to Secured Party or its nominee and to the substitution of Secured Party or its
nominee as a substituted Partner or each such Partnership with all the rights,
powers and duties of a general partner or a limited partners, as the case may
be.
(iii) Each Grantor hereby consents to the pledge of the LLC Interests
by each other Grantor in each LLC pursuant to the terms hereof, and, subject to
Section 7, to the transfer of such LLC Interests to Secured Party or its nominee
and to the substitution of Secured Party or its nominee as a substituted member
of the LLC with all the rights, powers and duties of a member of the LLC in
question.
(b) Covenants. Each Grantor shall not permit any issuer of Pledged Shares
to merge or consolidate unless all the outstanding capital stock of the
surviving or resulting corporation is, upon such merger or consolidation,
pledged hereunder (except in connection with a merger or consolidation
constituting a Permitted Sale) and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided, if the surviving or resulting corporation upon any such
merger or consolidation involving an issuer of Pledged Shares which is a
controlled foreign corporation is a controlled foreign corporation, then such
Grantor shall only be required to pledge outstanding capital stock of such
surviving or resulting corporation possessing up to but not exceeding 65% of the
voting power of all classes of capital stock of such issuer entitled to vote;
cause each issuer of Pledged Shares not to issue any stock or other securities
in addition to or in substitution for the Pledged Shares issued by such issuer,
except to Grantor; promptly deliver to Secured Party
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notice of the conversion of any partnership interests in a Partnership Agreement
or any membership interests in a LLC to certificated form; not cancel or
terminate any of the Partnership Agreements or LLC Agreements or consent to or
accept any cancellation or termination thereof, sell, assign (by operation of
law or otherwise) or otherwise dispose of any part of its limited or general
partnership interest in any of the Partnerships or its membership interest in
any of the LLCs (except for Permitted Sale), amend, supplement or otherwise
modify any of the Partnership Agreements or any of the LLC Agreements (as in
effect on the date hereof that could reasonably be expected to have Material
Adverse Effect), waive, fail to enforce, forgive or release any right, interest
or entitlement of any kind, howsoever arising, under or in respect of any of the
Partnership Agreements or any of the LLC Agreements or vary or agree to the
variation in any respect of any of the provisions of any of the Partnership
Agreements or any of the LLC Agreements or the performance of any Other Person
under any of the Partnership Agreements or any of the LLC Agreements, or
petition, request or take any other legal or administrative action which seeks,
or may reasonably be expected, to rescind, to terminate or to suspend any of the
Partnership Agreements or any of the LLC Agreements or to amend or modify any of
the Partnership Agreements or any of the LLC Agreements, in each case if such
action could reasonably be expected to have a Material Adverse Effect; at its
expense perform and comply in all material respects with all terms and
provisions of the Partnership Agreements and the LLC Agreements required to be
performed or complied with by it, maintain the Partnership Agreements and the
LLC Agreements to which it is a party in full force and effect, and enforce each
of the Partnership Agreements and each of the LLC Agreements to which it is a
party in accordance with its terms; not vote to permit the Partnerships or the
LLCs to enter into any transaction of merger or consolidation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution except for
Permitted Sales); and pledge hereun der, immediately upon its acquisition
(directly or indirectly) thereof, any and all shares of stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of any Grantor; provided, notwithstanding anything contained
in this clause (ix) to the contrary, such Grantor shall only be required to
pledge the outstanding capital stock of a controlled foreign corporation
possessing up to but not exceeding 65% of the voting power of all classes of
capital stock of such controlled foreign corporation entitled to vote.
(c) Voting and Distributions. (i) So long as no Event of Default shall
have occurred and be continuing, each Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Investment Property
or any part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, no Grantor shall exercise or
refrain from exercising any such right if Secured Party shall have notified
Grantor that, in Secured Party's reasonable judgment, such action would have a
material adverse effect on the value of the Investment Property or
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any part thereof; and provided further, Grantor shall give Secured Party at
least two Business Days' prior written notice of the manner in which it intends
to exercise, or the reasons for refraining from exercising, any such right (it
being understood, however, that neither the voting by Grantor of any Pledged
Shares for or Grantor's consent to the election of directors at a regularly
scheduled annual or other meeting of stockholders or with respect to incidental
matters at any such meeting, nor Grantor's consent to or approval of any action
otherwise permitted under this Agreement and the Credit Agreement shall be
deemed inconsistent with the terms of this Agreement or the Credit Agreement
within the meaning of this Section, and no notice of any such voting or consent
need be given to Secured Party); Grantor shall be entitled to receive and
retain, and to utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Investment Property; provided, any
and all dividends and interest paid or payable other than in cash in respect of,
and instruments and other property received, receivable or otherwise distributed
in respect of, or in exchange for, any Investment Property, dividends and other
distributions paid or payable in cash in respect of any Investment Property in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in-surplus, and cash paid,
payable or otherwise distributed in respect of principal or in redemption of or
in exchange for any Investment Property, shall be, and shall forthwith be
delivered to Secured Party to hold as, Investment Property and shall, if
received by Grantor, be received in trust for the benefit of Secured Party, be
segregated from the other property or funds of Grantor and be forthwith
delivered to Secured Party as Investment Property in the same form as so
received (with all necessary endorsements); and Secured Party shall promptly
execute and deliver (or cause to be executed and delivered) to Grantor all such
proxies, dividend payment orders and other instruments as Grantor may from time
to time reasonably request for the purpose of enabling Grantor to exercise the
voting and other consensual rights when and to the extent which it is entitled
to exercise pursuant to clause (1) above and to receive the dividends, principal
or interest payments which it is authorized to receive and retain pursuant to
clause (2) above.
(ii) Upon the occurrence and during the continuation of an Event of
Default, upon written notice from Secured Party to any Grantor, all rights of
Grantor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant hereto shall cease at the election of
Secured Party, and all such rights shall thereupon become vested in Secured
Party who shall thereupon have the sole right to exercise such voting and other
consensual rights; all rights of Grantor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain pursuant
hereto shall cease at the election of Secured Party, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the sole right
to receive and hold as Investment Property such dividends and interest payments;
and
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all payments which are received by Grantor contrary to the provisions of
clause (2) above shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Grantor and shall forthwith be paid over
to Secured Party as Investment Property in the same form as so received (with
any necessary endorsements); and (4) all rights of such Grantor or receive any
and all payments under or in connection with the Partnership Agreements and/or
the LLC Agreements, including but not limited to the profits, dividends, and
other distributions which it would otherwise be authorized to receive and retain
pursuant hereto, shall cease at the election of Secured Party, and all such
rights shall thereupon become vested in Secured Party who shall thereupon have
the sole right to receive and hold such payments as collateral.
(iii) IN ORDER TO PERMIT SECURED PARTY TO EXERCISE THE VOTING AND OTHER
CONSENSUAL RIGHTS WHICH IT MAY BE ENTITLED TO EXERCISE PURSUANT HERETO AND TO
RECEIVE ALL DIVIDENDS AND OTHER DISTRIBUTIONS WHICH IT MAY BE ENTITLED TO
RECEIVE HEREUNDER, GRANTOR SHALL PROMPTLY EXECUTE AND DELIVER (OR CAUSE TO BE
EXECUTED AND DELIVERED) TO SECURED PARTY ALL SUCH PROXIES, DIVIDEND PAYMENT
ORDERS AND OTHER INSTRUMENTS AS SECURED PARTY MAY FROM TIME TO TIME REASONABLY
REQUEST, AND WITHOUT LIMITING THE EFFECT OF CLAUSE (1) ABOVE, GRANTOR HEREBY
GRANTS TO SECURED PARTY AN IRREVOCABLE PROXY TO VOTE THE PLEDGED SHARES AND TO
EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF
THE PLEDGED SHARES WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN
CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT
SUCH MEETINGS), WHICH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE
NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED SHARES ON THE
RECORD BOOKS OF THE ISSUER THEREOF) BY ANY OTHER PERSON (INCLUDING THE ISSUER OF
THE PLEDGED SHARES OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE AND
DURING THE CONTINUATION OF AN EVENT OF DEFAULT, AND WHICH PROXY SHALL ONLY
TERMINATE UPON THE PAYMENT IN FULL OF THE SECURED OBLIGATIONS.
5.3. Intellectual Property Collateral.
(a) Covenants. Each Grantor shall hereafter use commercially reasonable
efforts so as not to permit the inclusion in any contract to which it hereafter
becomes a party of any provision that could or might in any way materially
impair or prevent the creation of a security interest in, or the assignment of,
Grantor's rights and interests in
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any property included within the definitions of any Intellectual Property
Collateral acquired under such contracts; take all steps reasonably necessary to
protect the secrecy of all trade secrets relating to the products and services
sold or delivered under or in connection with the Intellectual Property
Collateral, including, without limitation, entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents; use proper statutory notice in connection with its
use of any of the Intellectual Property Collateral; use consistent standards of
high quality (which may be consistent with Grantor's past practices) in the
manufacture, sale and delivery of products and services sold or delivered under
or in connection with the Intellectual Property Collateral; and furnish to
Secured Party from time to time statements and schedules further identifying and
describing any Intellectual Property Collateral and such other reports in
connection with such Collateral as Secured Party may reasonably request, all in
reasonable detail.
(b) Collections. Except as otherwise provided in this Section 5.3, each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to Grantor in respect of the Intellectual Property Collateral or any
portion thereof. In connection with such collections, each Grantor may take
(and, at Secured Party's reasonable direction if an Event of Default shall have
occurred and be continuing, shall take) such action as Grantor or Secured Party
may deem reasonably necessary or advisable to enforce collection of such
amounts; provided, Secured Party shall have the right at any time, upon the
occurrence and during the continuation of an Event of Default and upon written
notice to Grantor of its intention to do so, to notify the obligors with respect
to any such amounts of the existence of the security interest created hereby and
to direct such obligors to make payment of all such amounts directly to Secured
Party, and, upon such notification and at the expense of Grantor, to enforce
collection of any such amounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as Grantor might have
done. After receipt by any Grantor of the notice from Secured Party referred to
in the proviso to the preceding sentence and during the continuation of any
Event of Default, (i) all amounts and proceeds (including checks and other
instruments) received by Grantor in respect of amounts due to Grantor in respect
of the Collateral or any portion thereof shall be received in trust for the
benefit of Secured Party hereunder, shall be segregated from other funds of
Grantor and shall be forthwith paid over or delivered to Secured Party in the
same form as so received (with any necessary endorsement) to be held as cash
Collateral and applied first, to the payment of any amounts payable to Secured
Party pursuant to Section 9 of the Credit Agreement, second, to the extent of
any excess, to the payment of any other outstanding Secured Obligations in such
order as Secured Party shall elect, and third, to the extent of any further
excess, to the payment to whomsoever shall be lawfully entitled to receive such
funds.
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(c) Applications and Registrations. Each Grantor shall have the duty,
subject to the exercise of its commercially reasonable judgment, to prosecute,
file and/or make, unless and until Grantor, in its commercially reasonable
judgment, decides otherwise, (i) any application relating to any of the
Intellectual Property Collateral owned, held or used by Grantor and identified
on Schedule 1(c), that is pending as of the date of this Agreement, (ii) any
Registration on any existing or future unregistered but copyrightable works
(except for works of nominal commercial value or with respect to which Grantor
has determined in the exercise of its commercially reasonable judgment that it
shall not seek registration), (iii) application on any existing patent or future
patentable but unpatented invention comprising Intellectual Property Collateral,
and (iv) any Trademark opposition and cancellation proceedings, renew Trademark
Registrations and Copyright Registrations and do any and all acts which are
necessary or desirable, as determined in such Grantor's commercially reasonable
judgment, to preserve and maintain all rights in all Intellectual Property
Collateral. Any expenses incurred in connection therewith shall be borne solely
by Grantor. Subject to the foregoing, Grantor shall give Secured Party prior
written notice of any abandonment of any Intellectual Property Collateral or any
right to file a patent application or any pending patent application or any
Patent that could reasonably be expected to have Material Adverse Effect.
(d) Litigation. Except as provided herein, each Grantor shall have the
right to commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or other actions
for infringement, unfair competition, dilution, misappropriation or other
damage, or reexamination or reissue proceedings as are in its commercially
reasonable judgment necessary to protect the Intellectual Property Collateral.
Secured Party shall provide, at Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action including,
without limitation, joining as a necessary party. Each Grantor shall promptly,
following its becoming aware thereof, notify Secured Party of the institution
of, or of any adverse determination in, any proceeding (whether in the United
States Patent and Trademark Office, the United States Copyright Office or any
federal, state, local or foreign court) or regarding Grantor's ownership, right
to use, or interest in any Intellectual Property Collateral that could
reasonably be expected to have a Material Adverse Effect. Grantor shall provide
to Secured Party any information with respect thereto requested by Secured
Party.
In addition, each Grantor hereby grants to Secured Party and its
employees, representatives and agents the right to visit Grantor's and any of
its Affiliate's or subcontractor's plants, facilities and other places of
business that are utilized in connection with the manufacture, production,
inspection, storage or sale of products and services sold or delivered under any
of the Intellectual Property Collateral
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(or which were so utilized during the prior six month period), and to inspect
the quality control and all other records relating thereto upon reasonable
advance written notice to Grantor and at reasonable dates and times and as often
as may be reasonably requested. If and to the extent that any Grantor is
permitted to license the Intellectual Property Collateral, Secured Party shall
promptly enter into a non-disturbance agreement or other similar arrangement, at
Grantor's request and expense, with Grantor and any licensee of any Intellectual
Property Collateral permitted hereunder in form and substance reasonably
satisfactory to Secured Party pursuant to which (i) Secured Party shall agree
not to disturb or interfere with such licensee's rights under its license
agreement with Grantor so long as such licensee is not in default thereunder,
and (ii) such licensee shall acknowledge and agree that the Intellectual
Property Collateral licensed to it is subject to the security interest created
in favor of Secured Party and the other terms of this Agreement.
5.4 Inventory. Each Grantor shall, with respect to Inventory included in
the Collateral:
(a) keep the Inventory in the jurisdictions specified on Schedule 3.4 or
upon 30 days' written notice to Secured Party, in such other jurisdictions where
all action that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby, or to
enable Secured Party to exercise and enforce its rights and remedies hereunder,
with respect to such Inventory shall have been taken; provided that the
foregoing requirement shall not apply to Inventory located in any state the
aggregate value of which does not exceed $100,000 in such state.
5.5. Accounts and Related Contracts. Each Grantor shall:
(a) keep its chief place of business and chief executive office and the
office where it keeps its records concerning the Accounts and Related Contracts,
and all originals of all chattel paper that evidence Accounts, at the location
therefor specified on Schedule 5.5 or, upon 30 days' written notice to Secured
Party following any change in location, at such other location in a jurisdiction
where all action that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Promptly
upon the reasonable request of Secured Party, such Grantor shall deliver to
Secured Party complete and correct copies of each Related Contract;
(b) maintain complete records of all Accounts, including records of all
payments received, credits granted and merchandise returned, and all
documentation relating thereto in accordance with prudent business practices;
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(c) except as otherwise provided in this subsection (c), continue to
collect, at its own expense, all amounts due or to become due to such Grantor
under the Accounts and Related Contracts, and in connection with such
collections, such Grantor shall take such action as such Grantor or Secured
Party may reasonably deem necessary or advisable to enforce collection of
amounts due or to become due under the Accounts; provided, Secured Party shall
have the right at any time, upon the occurrence and during the continuation of
an Event of Default and upon written notice to such Grantor of its intention to
do so, to notify the account debtors or obligors under any Accounts of the
assignment of such Accounts to Secured Party and to direct such account debtors
or obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to Secured Party, to notify each Person maintaining a
lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Secured Party and,
upon such notification and at the expense of such Grantor, to enforce collection
of any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by any Grantor of the notice from Secured Party referred to
in the proviso to the preceding sentence, any payments of Accounts, received by
such Grantor shall be forthwith (and in any event within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Secured Party if required, in a Collateral Account maintained
under the sole dominion and control of the Secured Party, subject to withdrawal
by the Secured Party for the account of the Secured Parties only as provided in
Section 10.3, until so turned over in accordance with the preceding subsection
(i), all amounts and proceeds (including checks and other instruments) received
by such Grantor in respect of the Accounts and the Related Contracts shall be
received in trust for the benefit of Secured Party hereunder and shall be
segregated from other funds of such Grantor and such Grantor shall not adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon.
SECTION 6. SECURED PARTY APPOINTED ATTORNEY-IN-FACT
Each Grantor hereby irrevocably appoints Secured Party as Grantor's
attorney-in-fact, with full authority in the place and stead of Grantor and in
the name of Grantor, Secured Party or otherwise, from time to time in Secured
Party's discretion to take any action and to execute any instrument that Secured
Party may deem reasonably necessary or advisable to accomplish the purposes of
this Agreement, at any time upon the occurrence and during the continuance of an
Event of Default including (a) to obtain
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and adjust insurance required to be maintained by Grantor or paid to Secured
Party pursuant to the Credit Agreement; (b) upon the occurrence and during the
continuation of any Event of Default, to ask for, demand, collect, xxx for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (c) upon the
occurrence and during the continuation of any Event of Default, to receive,
endorse and collect any drafts or other instruments, documents and chattel paper
in connection with clause (b) above; (d) to file any claims or take any action
or institute any proceedings that Secured Party may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Collateral; (e) to pay or discharge
taxes or Liens (other than Liens permitted under this Agreement or the Credit
Agreement) levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of Grantor to Secured Party, due and payable
immediately without demand; and (f) upon the occurrence and during the
continuation of an Event of Default, generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though Secured Party were the absolute owner thereof for
all purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from time to time, all acts and things that Secured Party deems
reasonably necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
SECTION 7. REMEDIES
7.1. Generally. If any Event of Default shall have occurred and be
continuing, Secured Party may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Collateral), and also may require any
Grantor to, and each Grantor hereby agrees that it will at its expense and upon
request of Secured Party forthwith, assemble all or part of the Collateral as
directed by Secured Party and make it available to Secured Party at a place to
be designated by Secured Party that is reasonably convenient to both parties;
enter onto the property where any Collateral is located and take possession
thereof with or without judicial process; prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Secured Party
deems appropriate; without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public
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or private sale, at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, at such time or times and at such price or prices
and upon such other terms as Secured Party may deem commercially reasonable; and
exercise dominion and control over, and refuse to permit further withdrawals
(whether of money, securities, instruments or other property) from any deposit
account maintained with Secured Party constituting part of the Collateral.
Secured Party or any Lender or Lender Counterparty may be the purchaser of any
or all of the Collateral at any such sale and Secured Party, as agent for and
representative of Lenders and Lender Counterparties (but not any Lender or
Lenders or Lender Counterparties in its or their respective individual
capacities unless Requisite Lender shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by applicable law) all rights of redemption,
stay and/or appraisal which it now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted. Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announce ment at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which any Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Collateral to
more than one offeree, as long as such sale is otherwise made in a commercially
reasonable manner. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, Grantors shall
be liable for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency. Each Grantor further agrees that a breach of
any of the covenants contained in this Section will cause irreparable injury to
Secured Party, that Secured Party has no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section shall be specifically enforceable against Grantor, and Grantor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that no default has
occurred giving rise to the Secured Obligations becoming due and payable prior
to their stated maturities. Nothing in this Section shall in any way alter the
rights of Secured Party hereunder.
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7.2. Investment Property. Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, Secured Party may be compelled, with respect to any sale of all
or any part of the Investment Property conducted without prior registration or
qualification of such Investment Property under the Securities Act and/or such
state securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Investment Property for their own account, for investment
and not with a view to the distribution or resale thereof. Each Grantor
acknowledges that any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such restrictions
(including a public offering made pursuant to a registration statement under the
Securities Act) and, notwithstanding such circumstances each Grantor agrees that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Secured Party shall have no obligation to engage in
public sales and no obligation to delay the sale of any Investment Property for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it. If Secured Party determines to exercise its right to sell any
or all of the Investment Property, upon written request, each Grantor shall and
shall cause each issuer of any Pledged Shares to be sold hereunder, each
Partnership and each LLC from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the number and
nature of interest, shares or other instruments included in the Investment
Property which may be sold by Secured Party in exempt transactions under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.
7.3. Intellectual Property Collateral. (a) Anything contained herein to
the contrary notwithstanding, upon the occurrence and during the continuation of
an Event of Default, (i) Secured Party shall have the right (but not the
obligation) to bring suit, in the name of any Grantor, Secured Party or
otherwise, to enforce any Intellectual Property Collateral, in which event
Grantor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party as provided in Section 10.2 of the Credit Agreement in connection
with the exercise of its rights under this Section, and, to the extent that
Secured Party shall elect not to bring suit to enforce any Intellectual Property
Collateral as provided in this Section, each Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement of any of the Intellectual Property Collateral by
others and for that purpose agrees to diligently maintain any action, suit or
proceeding against any Person so infringing necessary to prevent such
infringement; (ii) upon written demand from Secured Party, each Grantor
25
shall execute and deliver to Secured Party an assignment or assignments of the
Intellectual Property Collateral and such other documents as are necessary or
appropriate to carry out the intent and purposes of this Agreement; (iii) each
Grantor agrees that such an assignment and/or recording shall be applied to
reduce the Secured Obligations outstanding only to the extent that Secured Party
(or any Lender) receives cash proceeds in respect of the sale of, or other
realization upon, the Intellectual Property Collateral; and (iv) within five
Business Days after written notice from Secured Party, Grantor shall make
available to Secured Party, to the extent within Grantor's power and authority,
such personnel in Grantor's employ on the date of such Event of Default as
Secured Party may reasonably designate, by name, title or job responsibility, to
permit Grantor to continue, directly or indirectly, to produce, advertise and
sell the products and services sold or delivered by Grantor under or in
connection with the Trademarks, Trademark Registrations and Trademark Rights,
such persons to be available to perform their prior functions on Secured Party's
behalf and to be compensated by Secured Party at Grantor's expense on a per
diem, pro-rata basis consistent with the salary and benefit structure applicable
to each as of the date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing, (ii) no
other Event of Default shall have occurred and be continuing, (iii) an
assignment to Secured Party of any rights, title and interests in and to the
Intellectual Property Collateral shall have been previously made and shall have
become absolute and effective, and (iv) the Secured Obligations shall not have
become immediately due and payable, upon the written request of Grantor, Secured
Party shall promptly execute and deliver to Grantor such assignments as may be
necessary to reassign to Grantor any such rights, title and interests as may
have been assigned to Secured Party as aforesaid, subject to any disposition
thereof that may have been made by Secured Party; provided, after giving effect
to such reassignment, Secured Party's security interest granted pursuant hereto,
as well as all other rights and remedies of Secured Party granted hereunder,
shall continue to be in full force and effect; and provided further, the rights,
title and interests so reassigned shall be free and clear of all Liens other
than Liens (if any) encumbering such rights, title and interest at the time of
their assignment to Secured Party and Permitted Liens.
7.4. Accounts. In addition to the rights of the Secured Party and the
Secured Parties specified in Section 10 with respect to payments of Accounts, if
an Event of Default shall occur and be continuing, upon request of the Secured
Party, all proceeds received by any Grantor consisting of cash, checks and other
near-cash items shall be held by such Grantor in trust for the Secured Party and
the Secured Parties, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be
26
turned over to the Secured Party in the exact form received by such Grantor
(duly indorsed by such Grantor to the Secured Party, if required) and held by
the Secured Party in the Collateral Account. All proceeds while held by the
Secured Party in the Collateral Account (or by the Borrower in trust for the
Secured Party and the Secured Parties) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 7.5.
7.5. Application of Proceeds. Except as expressly provided elsewhere in
this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
shall be applied as provided in the Credit Agreement.
SECTION 8. SECURED PARTY AS AGENT
Secured Party has been appointed to act as Secured Party hereunder by
Lenders. Secured Party shall be obligated, and shall have the right hereunder,
to make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including the release or
substitution of Collateral), solely in accordance with this Agreement and the
Credit Agreement. All rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders in accordance with the Terms of this
Section. Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to terms of the Credit Agreement shall also
constitute notice of resignation as Secured Party under this Agreement; removal
of Administrative Agent pursuant to the terms of the Credit Agreement shall also
constitute removal as Secured Party under this Agreement; and appointment of a
successor Administrative Agent pursuant to the terms of the Credit Agreement
shall also constitute appointment of a successor Secured Party under this
Agreement. Upon the acceptance of any appointment as Administrative Agent under
the terms of the Credit Agreement by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party
27
shall be discharged from its duties and obligations under this Agreement. After
any retiring or removed Administrative Agent 's resignation or removal hereunder
as Secured Party, the provisions of this Agreement shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Agreement while it
was Secured Party hereunder.
SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, and the cancellation or termination of the
Commitments, (b) be binding upon each Grantor, its successors and assigns, and
(c) inure, together with the rights and remedies of Secured Party hereunder, to
the benefit of Secured Parties and their successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to the
terms of the Credit Agreement, any Lender may assign or otherwise transfer any
Loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Lenders herein
or otherwise. Upon the payment in full of all Secured Obligations and the
cancellation or termination of the Commitments, the security interest granted
hereby shall terminate hereunder and of record and all rights to the Collateral
shall revert to Grantor. Upon any such termination Secured Party will, at
Grantors' expense, execute and deliver to Grantors such documents as Grantors
shall reasonably request to evidence such termination.
SECTION 10. STANDARD OF CARE; SECURED PARTY MAY PERFORM.
The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Secured Party shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Secured Party accords its own property. If any Grantor fails to perform
any agreement contained herein and an Event of Default has occurred and is
continuing, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by each Grantor under Section 10.2 of the Credit Agreement.
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SECTION 11. INDEMNITY AND EXPENSES
(a) Each Grantor agrees:
(i) to indemnify Secured Party and each Secured Party from and
against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including without limitation enforcement of this
Agreement), except to the extent such claims, losses or liabilities result from
Secured Party's or such Secured Party's gross negligence, bad faith, or willful
misconduct as determined by a court of competent jurisdiction; and
(ii) to pay to Secured Party promptly following written demand the
amount of any and all reasonable costs and reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents in
accordance with the terms and conditions of the Credit Agreement.
(b) The obligations of each Grantor in this Section 11 shall survive the
termination of this Agreement and the discharge of such Grantor's other
obligations under this Agreement, the Credit Agreement and any other Credit
Documents.
SECTION 12. MISCELLANEOUS
Any notice required or permitted to be given under this Agreement shall be
given in accordance with Section 10.1 of the Credit Agreement. No failure or
delay on the part of Secured Party in the exercise of any power, right or
privilege hereunder or under any other Credit Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement and
the other Credit Documents are cumulative to, and not exclusive of, any rights
or remedies otherwise available. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provi sion or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby. All covenants hereunder
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted by
an exception to, or would otherwise be within the limitations of, another
covenant shall not avoid the occurrence of a Default or an Event of Default if
such action is taken or condition exists. This Agreement shall be binding upon
and inure to
29
the benefit of Secured Party and Grantors and their respective successors and
assigns. No Grantor shall, without the prior written consent of Secured Party or
except as permitted under the Credit Agreement, assign any right, duty or
obligation hereunder. This Agreement and the other Credit Documents embody the
entire agreement and understanding between Grantors and Secured Party and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof. Accordingly, the Credit Documents may
not be contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties. This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
THE PROVISIONS OF THIS AGREEMENT REGARDING THE PERFEC TION OF THE LIENS AND
SECURITY INTERESTS HEREIN GRANTED SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE UNIFORM COMMERCIAL CODE OF THE STATE IN WHICH THE COLLATERAL OR
DEBTOR IS LOCATED, AS APPLICABLE. ALL OTHER PROVISIONS OF THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF EACH GRANTOR AND SECURED PARTY SHALL BE GOVERNED
BY, AND SHALL BE CON STRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, each Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
CONVERGENT COMMUNICATIONS, INC.,
as a Grantor
By: /s/ XXXX X. XXXXX
______________________________________
Name: Xxxx X. Xxxxx
Title: CEO
CONVERGENT COMMUNICATIONS
SERVICES, INC.,
as a Grantor
By: /s/ XXXX X. XXXXX
______________________________________
Name: Xxxx X. Xxxxx
Title: CEO
CONVERGENT CAPITAL CORPORATION,
as a Grantor
By: /s/ XXXX X. XXXXX
______________________________________
Name: Xxxx X. Xxxxx
Title: CEO
XXXXXXX XXXXX CREDIT PARTNERS L.P.,
as Agent
By: /s/ XXXXXXX XXXX
______________________________________
Name: Xxxxxxx Xxxx
Title: VICE PRESIDENT
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