Exhibit 10.3
SECURITY AGREEMENT dated as of January 25, 2001,
among XXXXXXX & XXXXXX FLOORCOVERINGS, INC., a Delaware
corporation (the "BORROWER"), CAF HOLDINGS, INC., a
Virginia corporation ("HOLDINGS"), each Domestic
Subsidiary of the Borrower listed on Schedule I hereto
(each such Subsidiary individually a "SUBSIDIARY
GUARANTOR" and collectively, the "SUBSIDIARY
GUARANTORS"; the Subsidiary Guarantors, Holdings and the
Borrower are referred to collectively herein as the
"GRANTORS") and CREDIT SUISSE FIRST BOSTON, a bank
organized under the laws of Switzerland, acting through
its New York branch ("CSFB"), as collateral agent (in
such capacity, the "COLLATERAL AGENT") for the Secured
Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of January 25, 2001
(as amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, Holdings, the lenders from time to time party
thereto (the "LENDERS") and CSFB, as administrative agent for the Lenders (in
such capacity, the "ADMINISTRATIVE AGENT") and as Collateral Agent, (b) the
Parent Guarantee Agreement dated as of January 25, 2001 (as amended,
supplemented or otherwise modified from time to time, the "PARENT GUARANTEE
AGREEMENT"), between Holdings and the Collateral Agent and (c) the Subsidiary
Guarantee Agreement dated as of January 25, 2001 (as amended, supplemented or
otherwise modified from time to time, the "SUBSIDIARY GUARANTEE AGREEMENT"),
among the Subsidiary Guarantors and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of Holdings and the Subsidiary Guarantors has agreed to
guarantee, among other things, all the obligations of the Borrower under the
Credit Agreement. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit are conditioned upon, among other
things, the execution and delivery by the Grantors of an agreement in the form
hereof to secure (a) the due and punctual payment of (i) the principal of and
premium, if any, and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (ii) each payment required to be made by the
Borrower under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement of disbursements,
interest thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties under
this Agreement, the Credit Agreement and the other Loan
Documents, (b) the due and punctual payment and performance of all covenants,
agreements, obligations and liabilities of the Borrower under or pursuant to the
Credit Agreement and the other Loan Documents, (c) the due and punctual payment
and performance of all covenants, agreements, obligations and liabilities of
each other Loan Party under or pursuant to the Loan Documents and (d) the due
and punctual payment and performance of all obligations of the Borrower,
monetary or otherwise, under each Hedging Agreement (including, without
limitation, in connection with the early termination thereof) entered into with
a counterparty that was a Lender (or an Affiliate of a Lender) at the time such
Hedging Agreement was entered into (all the monetary and other obligations
referred to in the preceding lettered clauses (a) through (d) being referred to
collectively as the "OBLIGATIONS").
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITION OF TERMS USED HEREIN. Unless the context otherwise
requires, all capitalized terms used but not defined herein shall have the
meanings set forth in the Credit Agreement. Except as otherwise specified
herein, all references to the Uniform Commercial Code shall mean the Uniform
Commercial Code as in effect from time to time in the State of New York.
SECTION 1.02. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein, the
following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall mean any person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"ACCOUNTS" shall mean any and all right, title and interest of any Grantor
to payment for goods and services sold or leased, including any such right
evidenced by Chattel Paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including accounts receivable from Affiliates of the Grantors.
"ACCOUNTS RECEIVABLE" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"CHATTEL PAPER" shall mean (a) a writing or writings which evidence both a
monetary obligation and a security interest in or a lease of specific Equipment
and (b) all other property now or hereafter constituting "chattel paper" under
the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions, in each case that are now or
hereafter owned by any Grantor.
"COLLATERAL" shall mean all (a) Accounts Receivable, (b) Documents,
(c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash
accounts (but excluding deposit accounts maintained in trust by such Grantor or
otherwise segregated from other funds of such Grantor for the benefit of
customers of such Grantor and containing only funds owing to such customers),
(g) Investment Property and (h) Proceeds.
"COMMODITY ACCOUNT" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"COMMODITY CONTRACT" shall mean a commodity futures contract, an option on
a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a Commodity Intermediary for a
Commodity Customer.
"COMMODITY CUSTOMER" shall mean a person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"COMMODITY INTERMEDIARY" shall mean (a) a person who is registered as a
futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"COPYRIGHT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"COPYRIGHTS" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"CREDIT AGREEMENT" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"DOCUMENTS" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.
"ENTITLEMENT HOLDER" shall mean a person identified in the records of a
Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"EQUIPMENT" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"FINANCIAL ASSET" shall mean (a) a Security, (b) an obligation of a person
or a share, participation or other interest in a person or in property or an
enterprise of a person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"FIXTURES" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"GENERAL INTANGIBLES" shall mean all choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by any Grantor, including rights and interests in partnerships, limited
partnerships, limited liability companies and other entities (in each case to
the extent not constituting Securities), corporate or other business records,
indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Hedging Agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor to secure payment by an Account Debtor of any
of the Accounts Receivable.
"INTELLECTUAL PROPERTY" shall mean all intellectual and similar property of
any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including Patents, Copyrights, Licenses, Trademarks, inventions,
designs, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"INVENTORY" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or
consumed in any Grantor's business, including raw materials, intermediates, work
in process, packaging materials, finished goods, semi-finished inventory, scrap
inventory, manufacturing supplies and spare parts, and all such goods that have
been returned to or repossessed by or on behalf of any Grantor.
"INVESTMENT PROPERTY" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
or Commodity Accounts and of any Grantor, whether now owned or hereafter
acquired by any Grantor.
"LICENSE" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense agreement to which any Grantor is a
party, including those listed on Schedule III (other than those Patent Licenses,
Trademark Licenses, Copyright Licenses or other license or sublicense agreements
in existence on the date hereof and listed on Schedule III and those license or
sublicense agreements entered into after the date hereof, which by their terms
prohibit assignment or a grant of a security interest by such Grantor as
licensee thereunder).
"OBLIGATIONS" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"PATENT LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"PATENTS" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"PERFECTION CERTIFICATE" shall mean a certificate substantially in the form
of Annex 1 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer of the Borrower.
"PROCEEDS" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (b) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"SECURED PARTIES" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to a
Hedging Agreement entered into with the Borrower if such counterparty was a
Lender (or an Affiliate of a Lender) at the time the Hedging Agreement was
entered into, (f) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document and (g) the successors and
assigns of each of the foregoing.
"SECURITIES" shall mean any obligation of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"SECURITIES ACCOUNT" shall mean an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"SECURITIES INTERMEDIARY" shall mean (a) a clearing corporation or (b) a
person, including a bank or broker, that in the ordinary course of its business
maintains Securities Accounts for others and is acting in that capacity.
"SECURITY ENTITLEMENTS" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"SECURITY INTEREST" shall have the meaning assigned to such term in
Section 2.01.
"TRADEMARK LICENSE" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"TRADEMARKS" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
SECTION 1.03. RULES OF INTERPRETATION. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
SECURITY INTEREST
SECTION 2.01. SECURITY INTEREST. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
pledges, assigns and grants unto the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties, a security interest in,
all of such Grantor's right, title and interest in, to and under the Collateral
(the "SECURITY INTEREST"). Without limiting the foregoing, the Collateral Agent
is hereby authorized to file one or more financing statements (including fixture
filings), continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office or
any similar office in any other country) or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantor, and
naming the appropriate Grantor or Grantors as debtors and the Collateral Agent
as secured party. Notwithstanding anything herein to the contrary, in no event
shall the Collateral include, and no Grantor shall be deemed to have granted a
security interest in, any of such Grantor's rights or interests in any General
Intangibles, contracts or agreements to which such Grantor is a party on the
date hereof or any of its rights or interests thereunder to the extent, but only
to the extent, that such a grant would, under the terms thereof, result in a
breach of the terms of, or constitute a default thereunder (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, that immediately upon the ineffectiveness, waiver, 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. In addition,
notwithstanding anything herein to the contrary, in no event shall the
Collateral include more than 65% of the issued and outstanding voting Equity
Interests of any Foreign Subsidiary.
SECTION 2.02. NO ASSUMPTION OF LIABILITY. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. TITLE AND AUTHORITY. Except as may be specifically noted on
Schedules II, III, IV and V, each Grantor has good and valid rights in and title
to the Collateral with respect to which it has purported to grant a Security
Interest hereunder and has full power and authority to grant to the Collateral
Agent the Security Interest in such Collateral pursuant hereto and to execute,
deliver and perform its obligations in accordance with the terms of this
Agreement, without the consent or approval of any other person other than any
consent or approval which has been obtained.
SECTION 3.02. FILINGS. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) naming each
Grantor as "debtor", naming the Collateral Agent as "Secured Party" and
containing a description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office specified in
Schedule 6 to the Perfection Certificate, which are all the filings (other than
filings required to be made in the United States Patent and Trademark Office and
the United States Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and Copyrights) that
are necessary to publish notice of and protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral in
which the Security Interest may be perfected by filing Uniform Commercial Code
financing statements in the United States (or any political subdivision thereof)
and its territories and possessions, and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary in
any such jurisdiction, except as provided under applicable law with respect to
the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property with respect to United States Patents,
United States registered Trademarks (and Trademarks for which United States
registration applications are pending) and United States registered Copyrights
have been delivered to the Collateral Agent for recording by the United States
Patent and Trademark Office and the United States Copyright Office pursuant to
applicable federal law, and otherwise as may be required pursuant to the laws of
any other necessary jurisdiction, to protect the validity of and to establish a
legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States
(or any political subdivision thereof) and its territories and possessions, or
in any other necessary jurisdiction, and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary
(other than such actions as are
necessary to perfect the Security Interest with respect to any Collateral
consisting of Patents, Trademarks and Copyrights (or registration or application
for registration thereof) acquired or developed after the date hereof).
SECTION 3.03. VALIDITY OF SECURITY INTEREST. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a Uniform Commercial Code financing statement or analogous document
in the United States (or any political subdivision thereof) and its territories
and possessions pursuant to the Uniform Commercial Code or other applicable law
in such jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable. The Security Interest is
and shall be prior to any other Lien on any of the Collateral, other than Liens
expressly permitted to be prior to the Security Interest pursuant to
Section 6.02 of the Credit Agreement.
SECTION 3.04. ABSENCE OF OTHER LIENS. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
ARTICLE IV
COVENANTS
SECTION 4.01. MAINTAIN RECORDS. Each Grantor agrees to maintain, at its own
cost and expense, such complete and accurate records with respect to the
Collateral owned by it as is consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral, and, at such time
or times as the Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules in form
and detail satisfactory to the Collateral Agent showing the identity, amount and
location of any and all Collateral.
SECTION 4.02. PROTECTION OF SECURITY. Each Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.03. FURTHER ASSURANCES. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better preserve, protect and perfect the
Security Interest and the rights and remedies created hereby, including the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be promptly pledged and
delivered to the Collateral Agent, duly endorsed in a manner reasonably
satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any Collateral that
may constitute Copyrights, Licenses, Patents or Trademarks; PROVIDED, HOWEVER,
that any Grantor shall have the right, exercisable within 10 days after it has
been notified by the Collateral Agent of the specific identification of such
Collateral, to advise the Collateral Agent in writing of any inaccuracy of the
representations and warranties made by such Grantor hereunder with respect to
such Collateral. Each Grantor agrees that it will use its best efforts to take
such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.04. INSPECTION AND VERIFICATION. The Collateral Agent and such
persons as the Collateral Agent may reasonably designate shall have the right,
from time to time, during normal business hours, upon three Business Days' prior
written notice and at the Grantors' own cost and expense, to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantors' affairs with the officers of the Grantors and their
independent accountants (so long as a representative of the Grantors is present)
and to verify under reasonable procedures the validity, amount, quality,
quantity, value, condition and status of, or any other matter relating to, the
Collateral, including, in the case of Accounts or Collateral in the possession
of any third person (only upon the occurrence and during the continuance of a
Default or Event of Default), by contacting Account Debtors or the third person
possessing such Collateral for the purpose of making such a verification. The
Collateral Agent shall have the absolute right to share any information it gains
from such inspection or verification with any Secured Party (it being understood
that any such information provided by any Grantor shall be deemed to be
"Information" subject to the provisions of Section 9.16).
SECTION 4.05. TAXES; ENCUMBRANCES. Upon the occurrence and during the
continuance of the Event of Default, at its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral and not
permitted pursuant to Section 6.02 of the Credit Agreement, and may pay for the
maintenance and preservation, in each case, in accordance with commercially
reasonable standards, of the Collateral to the extent any Grantor fails to do so
as required by the Credit Agreement or this Agreement, and each Grantor jointly
and severally agrees to reimburse the Collateral Agent on written demand for any
payment made or any expense incurred by the Collateral Agent pursuant to the
foregoing authorization; PROVIDED, HOWEVER, that nothing in this Section 4.05
shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
SECTION 4.06. ASSIGNMENT OF SECURITY INTEREST. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.07. CONTINUING OBLIGATIONS OF THE GRANTORS. Each Grantor shall
remain liable to observe and perform in all material respects all the conditions
and obligations to be observed and performed by it in accordance with such
Grantor's reasonable business judgment under each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms and
conditions thereof, and each Grantor jointly and severally agrees to indemnify
and hold harmless the Collateral Agent and the Secured Parties from and against
any and all liability for such performance.
SECTION 4.08. USE AND DISPOSITION OF COLLATERAL. No Grantor shall make or
permit to be made an assignment, pledge or hypothecation of the Collateral or
shall grant any other Lien in respect of the Collateral, except as expressly
permitted by Section 6.02 of the Credit Agreement. No Grantor shall make or
permit to be made any transfer of the Collateral and each Grantor shall remain
at all times in possession of the Collateral owned by it, except that
(a) Inventory may be sold in the ordinary course of business and (b) unless and
until the Collateral Agent shall notify the Grantors that an Event of Default
shall have occurred and be continuing and that during the continuance thereof
the Grantors shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if promptly
confirmed in writing), the Grantors may use, license, sublicense and dispose of
the Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document. Without limiting the
generality of the foregoing, each Grantor agrees that it shall not permit any
Inventory to be in the possession or control of any warehouseman, bailee, agent
or processor at any time unless such warehouseman, bailee, agent or processor
shall have been notified of the Security Interest and shall have agreed in
writing to hold the Inventory
subject to the Security Interest and the instructions of the Collateral Agent
and to waive and release any Lien held by it with respect to such Inventory,
whether arising by operation of law or otherwise.
SECTION 4.09. LIMITATION ON MODIFICATION OF ACCOUNTS. No Grantor will,
without the Collateral Agent's prior written consent, grant any extension of the
time of payment of any of the Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.10. INSURANCE. The Grantors, at their own expense, shall maintain
or cause to be maintained insurance covering physical loss or damage to the
Inventory and Equipment in accordance with Section 5.02 of the Credit Agreement.
Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent
(and all officers, employees or agents designated by the Collateral Agent) as
such Grantor's true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and adjusting
claims in respect of Collateral under policies of insurance, endorsing the name
of such Grantor on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect thereto. In the event that any Grantor at any time or
times shall fail to obtain or maintain any of the policies of insurance required
hereby or to pay any premium in whole or part relating thereto (only upon the
occurrence and during the continuance of the Event of Default), the Collateral
Agent may, without waiving or releasing any obligation or liability of the
Grantors hereunder or any Event of Default, in its sole discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable. All sums
disbursed by the Collateral Agent in connection with this Section 4.10,
including reasonable attorneys' fees, court costs, out-of-pocket expenses and
other charges relating thereto, shall be payable, upon written demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
SECTION 4.11. LEGEND. Each Grantor shall legend, at the request of, and in
form and manner satisfactory to, the Collateral Agent, its Accounts Receivable
and its books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
SECTION 4.12. COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT
COLLATERAL. (a) Each Grantor agrees that it will not, nor will it knowingly
permit any of its licensees to, do any act, or omit to do any act, whereby any
Patent which is material to the conduct of such Grantor's business may become
invalidated or dedicated to the public, and agrees that it shall continue to
xxxx any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under
applicable patent laws. Unless an
Event of Default shall have occurred and be continuing, each Grantor shall
retain the sole right to use, abandon and license its Patents in accordance with
such Grantor's reasonable business judgment to the extent not inconsistent with
or prohibited by the provisions of this Agreement, the Credit Agreement or any
Loan Document.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights. Unless an Event of Default shall have occurred and be
continuing, each Grantor shall retain the sole right to use, abandon and license
its Trademarks in accordance with such Grantor's reasonable business judgment to
the extent not inconsistent with or prohibited by the provisions of this
Agreement, the Credit Agreement or any Loan Document.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws. Unless an Event of Default shall have occurred and be
continuing, each Grantor shall retain the sole right to use, abandon and license
its Copyrights in accordance with such Grantor's reasonable business judgment to
the extent not inconsistent with or prohibited by the provisions of this
Agreement, the Credit Agreement or any Loan Document.
(d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all reasonable and necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(g) In the event that any Grantor believes that any Collateral consisting
of a Patent, Trademark or Copyright material to the conduct of any Grantor's
business has been, is or is about to be infringed, misappropriated or diluted by
a third party, such Grantor promptly shall notify the Collateral Agent and
shall, if consistent with good and reasonable business judgment, promptly xxx
for infringement, misappropriation or dilution and recovery of any and all
damages for such infringement, misappropriation or dilution, and shall take such
other actions that such Grantor deems reasonable and appropriate under the
circumstances to protect such Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
ARTICLE V
POWER OF ATTORNEY
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, upon the occurrence and
during the continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof;
(b) to demand, collect, receive payment of, give receipt for and give discharges
and releases of all or any of the Collateral; (c) to sign the name of any
Grantor on any invoice or xxxx of lading relating to any of the Collateral;
d) to send verifications of Accounts Receivable to any Account Debtor; (e) to
commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction that the Collateral Agent
reasonably deems necessary to collect or otherwise realize on all or any of the
Collateral or to enforce any rights of the Collateral Agent (on behalf of the
Secured Parties) in respect of any Collateral; (f) to settle, compromise,
compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral as the Collateral Agent deems reasonably
necessary to realize upon the Collateral or protect its rights therein; (g) to
notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, as fully and completely as though the Collateral Agent were the
absolute owner of the Collateral for all purposes, and to do all other acts and
things that the Collateral Agent reasonably deems necessary to carry out the
purposes of this Agreement; PROVIDED, HOWEVER, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent or any
Secured Party to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantors for the purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other Loan Document
with respect to the Collateral (other than the exercise of reasonable care in
the custody of any Collateral in its possession and the accounting for moneys
actually received by it) or any part thereof or impose any obligation on the
Collateral Agent or any Secured Party to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Collateral Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own bad faith,
gross negligence or willful misconduct.
ARTICLE VI
REMEDIES
SECTION 6.01. REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral (to the extent commercially practicable) to the Collateral Agent on
written demand, and it is agreed that the Collateral Agent shall have the right
to take any of or all the following actions at the same or different times:
(a) with respect to any Collateral consisting of Intellectual Property, on
written demand, to cause the Security Interest to become an assignment, transfer
and conveyance of any of or all such Collateral by the applicable Grantors to
the Collateral Agent, or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any such
Collateral throughout the world on such terms and conditions and in such manner
as the Collateral Agent shall determine in its reasonable business judgment
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be
obtained), and (b) with or without legal process and with or without prior
notice or demand for performance, to take possession of the Collateral and
without liability to any Grantor for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 Business Days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted
by law), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to such
Secured Party from any Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to any Grantor therefor.
For purposes hereof, a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof; the Collateral Agent shall
be free to carry out such sale pursuant to such agreement and no Grantor shall
be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full. As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose this Agreement and to sell the Collateral
or any portion thereof pursuant to a judgment or decree of a court or courts
having competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6.01 shall be
deemed to conform to the commercially reasonable standards as provided in
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions.
SECTION 6.02. APPLICATION OF PROCEEDS. The Collateral Agent shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document (to the extent permitted herein
or under the Credit Agreement)) in connection with such collection or sale
or otherwise in connection with this Agreement or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Grantor and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article, upon the occurrence and during the continuation of an Event of
Default, each Grantor hereby grants to the Collateral Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Grantors) to use, license or sub-license any of the
Collateral consisting of Intellectual Property now owned or hereafter acquired
by such Grantor, and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised, at the option of the Collateral Agent, upon the occurrence
and during the continuation of an Event of Default; PROVIDED that any license,
sub-license or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. NOTICES. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and notices
hereunder to any Subsidiary Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement (other
than the payment in full of all of the Obligations (other than wholly contingent
indemnification obligations not yet due and payable)).
SECTION 7.03. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any
investigation made by the Lenders or on their behalf, and shall continue in full
force and effect until this Agreement shall terminate in accordance with
Section 7.14.
SECTION 7.04. BINDING EFFECT; SEVERAL AGREEMENT. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This Agreement
shall be construed as a separate agreement with respect to each Grantor and may
be amended, modified, supplemented, waived or released with respect to any
Grantor without the approval of any other Grantor and without affecting the
obligations of any other Grantor hereunder.
SECTION 7.05. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
permitted successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 7.06. COLLATERAL AGENT'S FEES AND EXPENSES; INDEMNIFICATION.
(a) Each Grantor jointly and severally agrees to pay upon written demand to the
Collateral Agent the amount of any and all reasonable out-of-pocket expenses,
including the reasonable fees, disbursements and other charges of not more than
one counsel in each relevant jurisdiction (unless any Indemnitee asserts in good
faith that the nature of its claim requires it to be represented by separate
counsel) and of any experts or agents, which the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all actual losses, claims, damages, liabilities and
related reasonable out-of-pocket expenses, including reasonable fees,
disbursements and other charges of not more than one counsel in each relevant
jurisdiction (unless any Indemnitee asserts in good faith that the nature of its
claim requires it to be represented by separate counsel), incurred by or
asserted against any of them arising out of, in any way connected with, or as a
result of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto; PROVIDED that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
actual losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the bad
faith, gross negligence or willful misconduct of any Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 7.06
shall be payable within two Business Days of written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the Collateral Agent, the Issuing Bank, the Administrative Agent and the Lenders
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provisions
of this Agreement or any other Loan Document or consent to any departure by any
Grantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Grantor in any case shall entitle such Grantor or any
other Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.
SECTION 7.10. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.12. HEADINGS. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.13. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent, the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or the other Loan Documents
against any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 7.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 7.14. TERMINATION. This Agreement and the Security Interest shall
terminate when all the Obligations (other than wholly contingent indemnification
obligations not yet due and payable) have been indefeasibly paid in full, the
Lenders have no further commitment to lend, the L/C Exposure has been reduced to
zero (unless collateralized or backstopped on terms satisfactory to the Issuing
Bank) and the Issuing Bank has no further commitment to issue Letters of Credit
under the Credit Agreement, at which time the Collateral Agent shall execute and
deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code
termination statements and similar documents which the Grantors shall reasonably
request to evidence such termination. Any execution and delivery of termination
statements or documents pursuant to this Section 7.14 shall be without recourse
to or warranty by the Collateral Agent. A Subsidiary Guarantor shall
automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Subsidiary Guarantor shall be automatically
released in the event that all the capital stock of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of to a person that is not an
Affiliate of the Borrower in accordance with the terms of the Credit Agreement;
PROVIDED that the Required Lenders shall have consented to such sale, transfer
or other disposition (to the extent required by the Credit Agreement) and the
terms of such consent did not provide otherwise. Upon any sale or other transfer
by any Grantor of any Collateral that is permitted under the Credit Agreement to
any person that is not a Grantor, or, upon the effectiveness of any written
consent to the release of the security interest granted hereby in any Collateral
pursuant to Section 9.08(b) of the Credit Agreement, the security interest in
such Collateral shall be automatically released.
SECTION 7.15. ADDITIONAL GRANTORS. Upon execution and delivery by the
Collateral Agent and a Domestic Subsidiary of an instrument substantially in the
form of Annex 2 hereto, such Domestic Subsidiary shall become a Grantor
hereunder with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CAF HOLDINGS, INC.,
by: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
XXXXXXX & XXXXXX FLOORCOVERINGS,
INC.,
by: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
THE SUBSIDIARY GUARANTORS LISTED ON
SCHEDULE I HERETO,
by: /s/ Xxxxx X. Xxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Officer
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by: /s/ Xxxxxx Xxxx
--------------------------
Name: Xxxxxx Xxxx
Title: Director
by: /s/ Xxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
