PLEDGE AND SECURITY AGREEMENT
Dated as of August 18, 2003
among
Foamex L.P. and Each Other Grantor
From Time to Time Party Hereto
and
SILVER POINT FINANCE, LLC
as Administrative Agent
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of August 18, 2003, by Foamex L.P.
("Foamex"), each of the other entities listed on the signature pages hereof and
each entity that, after the date hereof, becomes a party hereto by executing a
joinder agreement in substantially the form of Annex 4 (a "Joinder Agreement")
(each of the foregoing, including Foamex, a "Grantor" and, collectively, the
"Grantors") in favor of Silver Point Finance, LLC, as administrative agent (in
such capacity, the "Administrative Agent") for the lenders (the "Lenders") from
time to time party to the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as from time to time amended, amended and restated, supplemented or
otherwise modified, the "Credit Agreement"), by and among the Grantors, the
Lenders and the Administrative Agent, the Lenders have agreed to make Loans on
behalf of the Borrowers;
NOW, THEREFORE, in consideration of the premises and to induce the Lenders
and the Administrative Agent to enter into the Credit Agreement and the other
Loan Documents and to induce the Lenders to make Loans as provided in the Credit
Agreement, each Grantor hereby agrees with the Administrative Agent as follows:
Article I
Defined Terms
Section 1.1 Definitions.
(a) Unless otherwise defined herein, terms have the meanings given to
them in the Credit Agreement or in Annex A thereto. All other undefined terms
contained herein, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
(b) Terms used herein that are defined in the UCC have the meanings
given to them in the UCC, including the following which are capitalized herein:
"Account Debtor"
"Chattel Paper"
"Commercial Tort Claim"
"Commodity Account"
"Commodity Intermediary"
"Deposit Account"
"Documents"
"Entitlement Holder"
"Entitlement Order"
"Financial Asset"
"Instruments"
"Investment Property"
"Letter of Credit Right"
"Proceeds"
"Securities Account"
"Securities Intermediary"
"Security"
"Security Entitlement"
(c) The following terms shall have the following meanings:
"Additional Pledged Collateral" means 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, either (i) any Person that, after the date of
this Agreement, as a result of any occurrence, becomes a direct Subsidiary of
any Grantor or (ii) any issuer of Pledged Stock, any Partnership or any LLC that
are acquired by any Grantor after the date hereof; all certificates or other
instruments representing any of the foregoing; all Security Entitlements of any
Grantor in respect of any of the foregoing; all additional indebtedness from
time to time owed to any Grantor by any obligor on the Pledged Notes 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 the
foregoing, provided, that, in no event shall Additional Collateral include any
Excluded Equity. Additional Pledged Collateral may be General Intangibles or
Investment Property.
"Agreement" means this Pledge and Security Agreement, as amended, amended
and restated, supplemented or otherwise modified from time to time.
"Approved Securities Intermediary" means a Securities Intermediary or
Commodity Intermediary selected or approved by the Administrative Agent and with
respect to which a Grantor has delivered to the Administrative Agent an executed
Control Account Agreement.
"Collateral" has the meaning specified in Section 2.1.
"Control Account" means a Securities Account or Commodity Account
maintained by any Grantor with an Approved Securities Intermediary, which
account is the subject of an effective Control Account Agreement, and includes
all Financial Assets held therein and all certificates and instruments, if any,
representing or evidencing the Financial Assets contained therein.
"Control Account Agreement" means a letter agreement, substantially in the
form of Annex 2 (with such changes as may be agreed to by the Administrative
Agent), or in such other form as is reasonably acceptable to the Administrative
Agent, executed by the relevant Grantor, the Administrative Agent and the
relevant Approved Securities Intermediary.
"Copyright Licenses" means any written agreement naming any Grantor as
licensor or licensee granting any right under any Copyright, including the grant
of rights to copy,
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publicly perform, create derivative works, manufacture, distribute, exploit and
sell materials derived from any Copyright.
"Copyrights" means (a) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any foreign counterparts thereof and (b)
the right to obtain all renewals thereof.
"Excluded Equity" means, collectively, (i) any Voting Stock or similar
equity interest of any direct Subsidiary of any Grantor, which Subsidiary is not
organized under the laws of a State within the United States, in excess of 65%
of the total outstanding Voting Stock or similar equity interest of such
Subsidiary and (ii) any stock or similar equity interest of any indirect
Subsidiary of any Grantor, which Subsidiary is not organized under the laws of a
State within the United States; provided, that, notwithstanding the foregoing,
the Voting Stock or similar equity interest of Foamex Canada or any other
Canadian Subsidiary shall not constitute "Excluded Equity". For the purposes of
this definition "Voting Stock" means, as to any issuer, the issued and
outstanding shares of each class of capital stock or other ownership interests
of such issuer entitled to vote (within the meaning of Treasury Regulations ss.
1.956-2(c)(2)).
"Excluded Property" means Special Property except and to the extent such
property is of a type described in Section 9-407(a) or 9-408(a) of the UCC, and
except for any Proceeds, substitutions or replacements of any Special Property
(unless such Proceeds, substitutions or replacements would constitute Special
Property).
"Foamex International" means Foamex International Inc., a Delaware
corporation.
"FMXI" means FMXI, Inc., a Delaware corporation.
"Intellectual Property" means, collectively, all rights, priorities and
privileges of any Grantor relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark
Licenses and trade secrets, and all rights to xxx at law or in equity for any
infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.
"Intercompany Note" means any promissory note evidencing loans made by any
Grantor to any of its Subsidiaries or another Grantor.
"Intercreditor Agreements" means, collectively, the Senior Lenders
Intercreditor Agreement and the Senior Secured Note Intercreditor Agreement.
"Lockbox Agreement" means a lockbox agreement substantially in the form of
Annex 1 attached hereto (with such changes as may be agreed to by the
Administrative Agent) or in such other form as is reasonably acceptable to the
Administrative Agent.
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"Lockbox Bank" means each bank selected or approved by the Administrative
Agent and with respect to which a Grantor has delivered to the Administrative
Agent an executed Lockbox Agreement.
"LLC" means each limited liability company in which a Grantor has an
interest, including those set forth on Schedule 2.
"LLC Agreement" means each operating agreement with respect to an LLC, as
each agreement has heretofore been and may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Partnership" means each partnership in which a Grantor has an interest,
including those set forth on Schedule 2.
"Partnership Agreement" means each partnership agreement governing a
Partnership, as each such agreement has heretofore been and may hereafter be
amended, restated, supplemented or otherwise modified.
"Patents" means (a) all letters patent of the United States, any other
country or region of the world or any political subdivision thereof and all
reissues and extensions thereof, (b) all applications for letters patent of the
United States or any other country or region of the world and all divisions,
continuations and continuations-in-part thereof, and (c) all rights to obtain
any reissues or extensions of the foregoing.
"Patent Licenses" means all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, have made, use,
import, sell or offer for sale any invention covered in whole or in part by a
Patent.
"Payment Account" means each bank account established pursuant to this
Agreement to which the proceeds of Accounts and other Collateral are deposited
or credited and which is maintained in the name of the Administrative Agent or
the applicable Grantor, as the Administrative Agent may determine, on terms
acceptable to the Administrative Agent, which account (if not a Working Fund
Account) shall be subject to an effective Lockbox Agreement.
"Pledged Collateral" means, collectively, the Pledged Notes, the Pledged
Stock, the Pledged Partnership Interests, the Pledged LLC Interests, any other
Investment Property (other than Excluded Equity) of any Grantor having a market
value in excess of $100,000, all certificates or other instruments representing
any of the foregoing and all Security Entitlements of any Grantor in respect of
any of the foregoing. Pledged Collateral may be General Intangibles or
Investment Property.
"Pledged LLC Interests" means all right, title and interest of any Grantor
as a member of any LLC and all right, title and interest of any Grantor in, to
and under any LLC Agreement to which it is a party.
"Pledged Notes" means all right, title and interest of any Grantor in any
Instruments evidencing Indebtedness owed to such Grantor, including all
Indebtedness described on Schedule 2 issued by the obligors named therein.
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"Pledged Partnership Interests" means all right, title and interest of any
Grantor as a limited and/or general partner in all Partnerships and all right,
title and interest of any Grantor in, to and under any Partnership Agreements to
which it is a party.
"Pledged Stock" means the shares of capital stock owned by each Grantor,
including all shares of capital stock listed on Schedule 2; provided, however,
that Pledged Stock shall not include any Excluded Equity.
"Secured Parties" means the Lenders, the Administrative Agent and any other
holder of any of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Intellectual Property" means each item of Intellectual
Property owned by or licensed to a Grantor that is most significant to such
Grantor's business.
"Special Property" means:
(a) any permit, lease, license, contract or other agreement held by any
Grantor that validly prohibits the creation by such Grantor of a security
interest therein;
(b) any permit, lease, license contract or other agreement held by any
Grantor to the extent that any Requirement of Law applicable thereto prohibits
the creation of a security interest therein; and
(c) Equipment owned by any Grantor that is subject to a purchase money Lien
or a Capital Lease if the contract or other agreement in which such Lien is
granted (or in the documentation providing for such Capital Lease) validly
prohibits the creation of any other Lien on such Equipment;
in each case only to the extent, and for so long as, such permit, lease,
license, contract or other agreement, or Requirement of Law applicable thereto,
validly prohibits the creation of a Lien in such property in favor of the
Administrative Agent (and upon the termination of such prohibition (howsoever
occurring) such permit, lease, license, contract or other agreement or equipment
shall cease to be "Special Property").
"Trademark License" means any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark.
"Trademarks" means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, and (b) the right to obtain all renewals thereof.
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"UCC" means the Uniform Commercial Code as from time to time in effect in
the State of New York; provided, however, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of the Administrative Agent's and the Secured Parties' security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Vehicles" means all vehicles covered by a certificate of title law of any
state.
"Working Fund Accounts" means those Deposit Accounts identified as "Working
Fund Accounts" on Schedule 6 hereto.
Section 1.2 Certain Other Terms.
(a) The words "herein," "hereof," "hereto" and "hereunder" and similar
words refer to this Agreement as a whole and not to any particular Article,
Section, subsection or clause in this Agreement.
(b) References herein to an Annex, Schedule, Article, Section,
subsection or clause refer to the appropriate Annex or Schedule to, or Article,
Section, subsection or clause in this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, provisions relating to the Collateral
or any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
(e) Any reference in this Agreement to a Loan Document shall include
all appendices, exhibits and schedules thereto, and, unless specifically stated
otherwise, all amendments, restatements, supplements or other modifications
thereto, and as the same may be in effect at any and all times such reference
becomes operative.
(f) The term "including" means "including without limitation" except
when used in the computation of time periods.
(g) The terms "Lender," "Administrative Agent," and "Secured Party"
include their respective successors and assigns, so long as such succession or
assignment does not violate any provision of the Credit Agreement.
(h) References in this Agreement to any statute shall be to such
statute as amended or modified and in effect from time to time.
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Article II
Grant of Security Interest
Section 2.1 Collateral. For the purposes of this Agreement, all of the
following property now owned or at any time hereafter acquired by a Grantor or
in which a Grantor now has or at any time in the future may acquire any right,
title or interests is collectively referred to as the "Collateral":
(a) all Accounts;
(b) all Chattel Paper;
(c) all money, cash, cash equivalents, securities and other property
of any kind of such Grantor held directly or indirectly by the Administrative
Agent or any Lender;
(d) all Deposit Accounts;
(e) all Documents;
(f) all Equipment;
(g) all General Intangibles, including, without limitation, all
Intellectual Property;
(h) all Instruments;
(i) all Inventory;
(j) all Investment Property;
(k) all Letter of Credit Rights;
(l) all of such Grantor's deposit accounts, credits and balances with
and other claims against the Administrative Agent or any Lender or any of their
Affiliates or any other financial institution with which such Grantor maintains
deposits, including any Payment Accounts;
(m) all Vehicles;
(n) all Supporting Obligations;
(o) the Commercial Tort Claims described on Schedule 7 (Commercial
Tort Claims) and on any supplement thereto received by the Administrative Agent
pursuant to Section 4.12 (Notice of Commercial Tort Claims);
(p) all books, records and other property pertaining to or referring
to any of the other property described in this Section 2.1, including books,
records, account ledgers,
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data processing records, computer software and other property at any time
evidencing or related to any of the foregoing;
(q) all other goods and personal property of such Grantor whether
tangible or intangible wherever located;
(r) all property of any Grantor held by the Administrative Agent or
any other Secured Party, including all property of every description, in the
possession or custody of or in transit to the Administrative Agent or such
Secured Party for any purpose, including safekeeping, collection or pledge, for
the account of such Grantor or as to which such Grantor may have any right or
power; and
(s) to the extent not otherwise included, all accessions to,
substitutions for and replacements, products and Proceeds of the foregoing,
including, but not limited to, proceeds of any insurance policies, claims
against third parties, and condemnation or requisition payments with respect to
all or any of the foregoing;
provided, however, that Collateral shall not include any Excluded Equity.
Section 2.2 Grant of Security Interest in Collateral. Each Grantor, as
collateral security for the full, prompt and complete payment and performance
when due (whether at stated maturity, by acceleration or otherwise) of the
Obligations of such Grantor, hereby collaterally assigns, mortgages, pledges and
hypothecates to the Administrative Agent for the benefit of the Secured Parties,
and grants to the Administrative Agent for the benefit of the Secured Parties a
lien on and security interest in, all of its right, title and interest in, to
and under the Collateral of such Grantor; provided, however, that the foregoing
grant of a security interest shall not include a security interest in Excluded
Property and provided, further, that if and when the prohibition which prevents
the granting by such Grantor to the Administrative Agent of a security interest
in such Excluded Property is removed or otherwise terminated, the Administrative
Agent will be deemed to have, and at all times from and after the date hereof to
have had, a security interest in such Excluded Property, as the case may be.
Notwithstanding anything in this Section 2.2 to the contrary, the
Collateral collaterally assigned, mortgaged, pledged and hypothecated by FMXI
and Foamex International to the Administrative Agent for the benefit of the
Secured Parties hereunder shall be limited only to the following:
(a) all Pledged Partnership Interests now owned or hereafter acquired by
FMXI or Foamex International in Foamex as a result of exchange offers, direct
investments or contributions or otherwise;
(b) FMXI's and Foamex International's Accounts, General Intangibles and
other rights to payment or reimbursement, now existing or hereafter arising or
acquired, from its ownership of Pledged Partnership Interests of Foamex;
(c) all Investment Property now owned or hereafter acquired by FMXI or
Foamex International relating to its Pledged Partnership Interests of Foamex;
and
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(d) the Proceeds of and from any and all of the foregoing.
Section 2.3 [Intentionally Omitted].
Article III
Representations and Warranties
To induce the Lenders and the Administrative Agent to enter into the Credit
Agreement, each Grantor hereby represents and warrants to the Administrative
Agent, the Lenders and the other Secured Parties that:
Section 3.1 Title; No Other Liens. Except for the Lien granted to the
Administrative Agent pursuant to this Agreement and the other Liens permitted to
exist on the Collateral under the Credit Agreement, such Grantor has good and
marketable title to all the Collateral pledged by it hereunder, such Grantor is
the record and beneficial owner of the Pledged Collateral pledged by it
hereunder constituting Instruments or certificated securities, is the
entitlement holder of all such Pledged Collateral constituting Investment
Property held in any Securities Account (unless the Administrative Agent has
otherwise been declared the entitlement holder of such Pledged Collateral
pursuant to the terms of this Agreement) and owns and has rights in or the power
to transfer each other item of Collateral in which a Lien is granted by it
hereunder, free and clear of any and all Liens.
Section 3.2 Perfection and Priority. The security interest granted pursuant
to this Agreement (other than in (x) Proceeds, to the extent such a security
interest may be perfected under the UCC only by possession and (y) Vehicles)
will constitute a valid and continuing perfected security interest in favor of
the Administrative Agent in the Collateral for which perfection is governed by
the UCC or achieved by filing with the United States Copyright Office or the
United States Patent and Trademark Office upon (i) the completion of the filings
and other actions specified on Schedule 3 (which, in the case of all filings and
other documents referred to on such schedule, have been delivered to the
Administrative Agent in completed and duly executed form), (ii) the delivery to
the Administrative Agent of all Collateral consisting of Instruments and
certificated securities, in each case properly endorsed for transfer to the
Administrative Agent or in blank, (iii) the execution of Control Account
Agreements substantially in the form of Annex 2 (with such changes as may be
agreed to by the Administrative Agent) with respect to Investment Property not
in certificated form, (iv) the execution of Lockbox Agreements with respect to
all Deposit Accounts, (v) all appropriate filings having been made with the
United States Copyright Office and the United States Patent and Trademark
Office, (vi) compliance with applicable perfection requirements, if any, of the
laws of jurisdictions other than the United States or Canada and (vii) with
respect to any Letter of Credit Rights, the consent to the assignment of
proceeds of the relevant letter of credit by the issuer or any nominated person
in respect thereof, except to the extent that such Letter of Credit Right is a
Supporting Obligation for any Collateral. Such security interest will be prior
to all other Liens on the Collateral except as permitted under the Credit
Agreement.
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Section 3.3 Jurisdiction of Organization; Chief Executive Office.
On the date hereof such Grantor's jurisdiction of organization,
organizational identification number, if any, and the location of such Grantor's
chief executive office or sole place of business are specified on Schedule 1.
Section 3.4 Inventory and Equipment.(a) On the date hereof, such Grantor's
Inventory and Equipment (other than mobile goods and Inventory or Equipment in
transit) are kept at the locations listed on Schedule 4.
(b) All of the Inventory owned by such Grantor is and will be held for
sale or lease, or to be furnished in connection with the rendition of services
or constitute raw materials, work-in-process or materials used or consumed in
the ordinary course of such Grantor's business, and is and will be fit for such
purposes.
(c) All of the Equipment owned by such Grantor is and will be used or
held for use in such Grantor's business, and is and will be fit for such
purposes, other than Equipment that is obsolete or no longer necessary to such
Grantor's business. Section
3.5 Pledged Collateral.
(a) The Pledged Stock, Pledged Partnership Interests and Pledged LLC
Interests pledged hereunder by such Grantor are listed on Schedule 2 and
constitute that percentage of the issued and outstanding equity of all classes
of each issuer thereof as set forth on Schedule 2. The Pledged Collateral
constitutes all of the equity interests owned by such Grantor in any of the
issuers listed on Schedule 2 or, in the case of Voting Stock or similar equity
interests held by such Grantor in a Subsidiary not organized under the laws of a
State within the United States (other than Foamex Canada), 65% of such Voting
Stock or similar equity interests.
(b) All of the Pledged Stock, Pledged Partnership Interests and
Pledged LLC Interests have been duly and validly issued and, in the case of
Pledged Stock, are fully paid and nonassessable.
(c) Each of the Intercompany Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(d) All Pledged Collateral and, if applicable, any Additional Pledged
Collateral, consisting of certificated securities or Instruments has been
delivered to the Administrative Agent in accordance with Section 4.4(a).
(e) All Pledged Collateral held by a Securities Intermediary in a
Securities Account is in a Control Account. On the date hereof no Grantor is the
Entitlement Holder with respect to any Securities Account.
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(f) Other than the Pledged Partnership Interests and the Pledged LLC
Interests that constitute General Intangibles, there is no Pledged Collateral
other than that represented by certificated securities or Instruments in the
possession of the Administrative Agent or that consisting of Financial Assets
held in a Control Account.
Section 3.6 Accounts.
(a) No amount payable to such Grantor under or in connection with any
Account is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent, properly endorsed for transfer, to the
extent delivery is required by Section 4.4.
(b) With respect to such Grantor's Accounts, that: (i) each existing
Account represents, and each future Account will represent, a bona fide sale or
lease and delivery of goods by such Grantor, or rendition of services by such
Grantor, in the ordinary course of such Grantor's business; (ii) each existing
Account is, and each future Account will be, for a liquidated amount payable by
the Account Debtor thereon on the terms set forth in the invoice therefor or in
the schedule thereof delivered to the Administrative Agent, without any
discount, offset, deduction, defense or counterclaim except those arising in the
ordinary course of such Grantor's business and as reported to the Administrative
Agent and the Lenders in Borrowing Base Certificates delivered in accordance
with the Credit Agreement; and (iii) no payment will be received with respect to
any Account of such Grantor, and no credit, discount or extension or agreement
therefor will be granted on any Account of such Grantor, except those arising in
the ordinary course of such Grantor's business and as reported to the
Administrative Agent and the Lenders in Borrowing Base Certificates delivered in
accordance with the Credit Agreement. For the purposes of the foregoing
representations and warranties, "Accounts" shall have the meaning ascribed
thereto in clauses (i) and (ii) of Section 9-102(a)(2) of the UCC.
Section 3.7 No Other Names. Except as set forth on Schedule 1, within the
five-year period preceding the date hereof such Grantor has not had, or operated
in any jurisdiction, under any trade name, fictitious name or other name other
than its legal name.
Section 3.8 Intellectual Property.
(a) (i) Schedule 5 lists all Intellectual Property of such Grantor for
which registrations have issued and/or applications for registration or issuance
have been filed by such Grantor as of the date hereof, separately identifying
that owned by such Grantor and that licensed to such Grantor; (ii) Schedule 5(a)
lists all Significant Intellectual Property of such Grantor for which
registrations have issued and/or applications for registration or issuance have
been filed by such Grantor as of the date hereof, separately identifying that
owned by such Grantor and that licensed to such Grantor.
(b) On the date hereof, (i) to the knowledge of such Grantor, all
Significant Intellectual Property owned by such Grantor that has been registered
in or filed with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, is valid, subsisting, unexpired and
enforceable, (ii) no Significant Intellectual Property owned by such Grantor has
been adjudged invalid or has been adjudged abandoned and;
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(iii) to the knowledge of such Grantor, the use of its Significant Intellectual
Property in the business of such Grantor does not infringe the intellectual
property rights of any other Person.
(c) Except as set forth in Schedule 5(a), on the date hereof, none of
the Significant Intellectual Property owned by such Grantor is the subject of
any licensing or franchise agreement pursuant to which such Grantor is the
licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority that would limit, cancel or question the validity of, or
such Grantor's rights in, any Significant Intellectual Property.
(e) Except as set forth on Schedule 5(a), no action or proceeding
seeking to limit, cancel or question the validity of any Significant
Intellectual Property owned by such Grantor or such Grantor's ownership interest
therein is on the date hereof pending and, to the knowledge of such Grantor, no
action or proceeding seeking to limit, cancel or question the validity of any
Intellectual Property is threatened. Except as set forth on Schedule 5(a), there
are no claims, judgments or settlements to be paid by such Grantor relating to
the Significant Intellectual Property.
Section 3.9 Deposit Accounts; Securities Accounts. The only Deposit
Accounts or Securities Accounts maintained by any Grantor on the date hereof are
those listed on Schedule 6, which sets forth such information separately for
each Grantor.
Section 3.10 Commercial Tort Claims. The only existing Commercial Tort
Claims of any Grantor on the date hereof with a claim value of $500,000 or more
are those listed on Schedule 7, which sets forth such information separately for
each Grantor.
Article IV
Covenants
As long as any of the Obligations (other than Contingent Obligations at
Termination) remain outstanding, each Grantor agrees with the Administrative
Agent that:
Section 4.1 Generally. Such Grantor shall (a) 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 Liens permitted under Section
7.20 of the Credit Agreement; (b) not use or permit any Collateral to be used
unlawfully or in violation of any provision of this Agreement, any other Loan
Document, any Requirement of Law or any policy of insurance covering the
Collateral; (c) not sell, transfer or assign (by operation of law or otherwise)
any Collateral except as permitted under the Credit Agreement; (d) except for
the Loan Documents, not enter into any agreement or undertaking restricting the
right or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Collateral if such restriction would have a Material Adverse
Effect; and (e) promptly notify the Administrative Agent of its entry into any
agreement or assumption of undertaking that restricts the ability to sell,
assign or transfer any of the Collateral regardless of whether or not it has a
Material Adverse Effect. Notwithstanding clause (d) above, no item of Collateral
consisting of Eligible Accounts or Eligible Inventory (each term
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as defined in the Working Capital Agreement) shall be subject to any agreement
or assumption of undertaking that restricts the ability to sell, assign or
transfer such Collateral.
Section 4.2 Maintenance of Perfected Security Interest; Further
Documentation.
(a) Such Grantor will maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in Section 3.2 and shall defend such security interest against the
claims and demands of all Persons.
(b) Such Grantor will furnish to the Administrative Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Administrative
Agent may reasonably request, all in reasonable detail.
(c) Each Grantor shall, at its expense, perform all steps requested by
the Administrative Agent at any time to perfect, maintain, protect and enforce
the Agent's Liens, including: (i) executing, delivering and/or filing and
recording of the Mortgage(s), short form copyright security agreements, short
form trademark security agreements, and short form patent security agreements
and filing or authorizing the Administrative Agent to file financing or
continuation statements, and amendments thereof, in form and substance
reasonably satisfactory to the Administrative Agent; (ii) delivering to the
Administrative Agent the originals of all Instruments, Documents and Chattel
Paper of such Grantor, and all other Collateral which the Administrative Agent
determines the Administrative Agent should have physical possession in order to
perfect and protect the Administrative Agent's security interest therein, duly
pledged, endorsed or assigned to the Administrative Agent without restriction;
(iii) delivering to the Administrative Agent warehouse receipts covering any
portion of the Collateral located in warehouses and for which warehouse receipts
are issued and certificates of title covering any portion of the Collateral for
which certificates of title have been issued; (iv) when an Event of Default has
occurred and is continuing, transferring its Inventory to warehouses or other
locations designated by the Administrative Agent; (v) placing notations on such
Grantor's books of account to disclose the Administrative Agent's security
interest; (vi) obtaining Lockbox Agreements and Control Account Agreements, in
form and substance reasonably satisfactory to the Administrative Agent; (vii)
assigning and delivering to the Administrative Agent all Supporting Obligations,
including letters of credit on which such Grantor is named beneficiary with the
written consent of the issuer thereof and (viii) taking such other steps as are
deemed necessary or desirable by the Administrative Agent to maintain and
protect the Agent's Liens. To the extent permitted by applicable law, the
Administrative Agent may (and each Grantor hereby authorizes the Administrative
Agent to) file, without the applicable Grantor's signature, one or more
financing statements, continuation statements or other documents and amendments
thereto for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Agent's Liens. Each Grantor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.
(d) From time to time, each Grantor shall, upon the request of the
Administrative Agent, execute and deliver confirmatory written instruments
pledging to the Administrative Agent the Collateral in which such Grantor has an
interest, but a Grantor's failure
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to do so shall not affect or limit any security interest or any other rights of
the Administrative Agent, or any Lender in and to the Collateral with respect to
such Grantor. So long as the Credit Agreement is in effect and until all
Obligations have been fully satisfied, the Agent's Liens shall continue in full
force and effect in all Collateral.
Section 4.3 Changes in Locations, Name, Etc.
(a) Except upon 15 days' prior written notice to the Administrative
Agent (other than for sub-clause (i) below, which sub-clause shall only require
written notice any time prior to the change in location contemplated thereby)
and delivery to the Administrative Agent of (i) all additional financing
statements and other documents reasonably requested by the Administrative Agent
to maintain the validity, perfection and priority of the security interests
provided for herein and (ii) if applicable, a written supplement to Schedule 4
showing any additional location at which Inventory or Equipment shall be kept,
such Grantor will not:
(i) permit any of the Inventory or Equipment (other than
Inventory or Equipment in transit) to be kept at a location other than those
listed on Schedule 4;
(ii) change its jurisdiction of organization or the location of
its chief executive office or sole place of business from that referred to in
Section 3.3;
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed in connection with this Agreement
would become misleading; or
(iv) operate in any jurisdiction under any trade name, fictitious
or other trade name other than its legal name or any of such names listed in
Schedule 1.
(b) Such Grantor will keep and maintain at its own cost and expense
satisfactory and complete records of the Collateral, including a record of all
payments received and all credits granted with respect to the Collateral and all
other dealings with the Collateral consistent with past practice.
(c) Without duplication of the requirements set forth in Section
5.2(o) and 5.2(p) of the Credit Agreement, whenever an Event of Default exists,
each Grantor shall, at its expense and upon the request of the Administrative
Agent, provide the Administrative Agent with appraisals or updates thereof of
any or all of the Collateral in which such Grantor has an interest from an
appraiser, and prepared on a basis, satisfactory to the Administrative Agent,
such appraisals and updates to include, without limitation, information required
by applicable law and regulation and by the internal policies of the
Administrative Agent and the Lenders.
Section 4.4 Pledged Collateral.
(a) Such Grantor will (i) deliver to the Administrative Agent, all
certificates and Instruments representing or evidencing any Pledged Collateral
(including Additional Pledged Collateral but excluding any Instrument or Chattel
Paper that is excluded from the delivery requirements of Section 4.7), whether
now existing or hereafter acquired, in
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suitable form for transfer by delivery or, as applicable, accompanied by such
Grantor's endorsement, where necessary, or duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to the
Administrative Agent, together, in respect of any Additional Pledged Collateral,
with a Pledge Amendment, duly executed by the Grantor, in substantially the form
of Annex 3 (a "Pledge Amendment") or such other documentation reasonably
acceptable to the Administrative Agent and (ii) maintain all other Pledged
Collateral constituting Investment Property in a Control Account. Such Grantor
authorizes the Administrative Agent to attach each Pledge Amendment to this
Agreement. During the continuance of a Default, the Administrative Agent shall
have the right, at any time in its discretion and without notice to the Grantor,
to transfer to or to register in its name or in the name of its nominees any or
all of the Pledged Collateral. The Administrative Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing any
of the Pledged Collateral for certificates or instruments of smaller or larger
denominations.
(b) Except as provided in Article V, such Grantor shall be entitled to
receive all cash dividends paid in respect of the Pledged Collateral (other than
liquidating or distributing dividends or distributions in connection with a
recapitalization or reclassification of capital) with respect to the Pledged
Collateral. Any sums paid upon or in respect of any of the Pledged Collateral
upon the liquidation or dissolution of any issuer of any of the Pledged
Collateral, any distribution of capital made on or in respect of any of the
Pledged Collateral or any property distributed upon or with respect to any of
the Pledged Collateral pursuant to the recapitalization or reclassification of
the capital of any issuer of Pledged Collateral or pursuant to the
reorganization thereof shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional security for the
Obligations. If any sums of money or property so paid or distributed in respect
of any of the Pledged Collateral shall be received by such Grantor, such Grantor
shall, until such money or property is paid or delivered to the Administrative
Agent, hold such money or property in trust for the Administrative Agent,
segregated from other funds of such Grantor, as additional security for the
Obligations.
(c) Except as provided in Article V, such Grantor will be entitled to
exercise all voting, consent and corporate, partnership or limited liability
company rights with respect to the Pledged Collateral; provided, however, that
no vote shall be cast, consent given or right exercised or other action taken by
such Grantor which would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, this
Agreement or any other Loan Document or which would, without prior notice to the
Administrative Agent, enable or permit any issuer of Pledged Collateral to issue
any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any issuer of Pledged
Collateral.
(d) Such Grantor shall not grant control over any Investment Property
to any Person other than the Administrative Agent and, subject to the terms of
the Senior Lenders Intercreditor Agreement, the Working Capital Agent and
subject to the terms of the Senior Secured Note Intercreditor Agreement, the
collateral agent under the Senior Secured Note Indenture.
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(e) In the case of each Grantor which is an issuer of Pledged Collateral,
such Grantor agrees to be bound by the terms of this Agreement relating to the
Pledged Collateral issued by it and will comply with such terms insofar as such
terms are applicable to it. In the case of each Grantor which is a partner in a
Partnership, such Grantor hereby consents to the extent required by the
applicable Partnership Agreement to the pledge by each other Grantor, pursuant
to the terms hereof, of the Pledged Partnership Interests in such Partnership
and, during the continuance of a Default, to the transfer of such Pledged
Partnership Interests to the Administrative Agent or its nominee and to the
substitution of the Administrative Agent or its nominee as a substituted partner
in such Partnership with all the rights, powers and duties of a general partner
or a limited partner, as the case may be. In the case of each Grantor which is a
member of an LLC, such Grantor hereby consents to the extent required by the
applicable LLC Agreement to the pledge by each other Grantor, pursuant to the
terms hereof, of the Pledged LLC Interests in such LLC and to the transfer of
such Pledged LLC Interests to the Administrative Agent or its nominee and to the
substitution of the Administrative Agent 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.
(f) Such Grantor will not agree to any amendment of an LLC Agreement
or Partnership Agreement that in any way adversely affects the perfection of the
security interest of the Administrative Agent in the Pledged Partnership
Interests or Pledged LLC Interests pledged by such Grantor hereunder, including
any amendment electing to treat the membership interest or partnership interest
of such Grantor as a security under Section 8-103 of the UCC.
Section 4.5 Control Accounts; Payment Accounts.
(a) On or prior to the date hereof, each Grantor that has Accounts
shall establish a lock-box service for collections of its Accounts at a Lockbox
Bank acceptable to the Administrative Agent and subject to a Lockbox Agreement
and other documentation acceptable to the Administrative Agent. Each Grantor's
invoices shall instruct all Account Debtors to make all payments directly to the
address established for such service. If, notwithstanding such instructions, a
Grantor receives any proceeds of Accounts, it shall receive such payments as the
Administrative Agent's trustee, and shall promptly (but in no event later than
two (2) Business Days after receipt) deliver such payments to the Administrative
Agent in their original form duly endorsed in blank or deposit them into a
Payment Account, as the Administrative Agent may direct. All collections
received in any lock-box or Payment Account or directly by a Grantor or the
Administrative Agent, and all funds in any Payment Account or other account to
which such collections are deposited shall be subject to the Administrative
Agent's sole control and withdrawals by the applicable Grantor shall not be
permitted. Either the Administrative Agent or the Administrative Agent's
designee may, at any time after the occurrence of an Event of Default, notify
Account Debtors of a Grantor that such Grantor's Accounts have been assigned to
the Administrative Agent and of the Administrative Agent's security interest
therein, and may collect them directly and the Administrative Agent shall charge
the collection costs and expenses to such Grantor. So long as an Event of
Default has occurred and is continuing, each Grantor, at the request of the
Administrative Agent, shall execute and deliver to the Administrative Agent such
documents as the Administrative Agent shall require to grant the Administrative
Agent access to any post office box in which collections of Accounts of such
Grantor are received.
(b) If sales of Inventory of a Grantor are made or services are rendered
for cash, the applicable Grantor shall immediately deliver to the Administrative
Agent or deposit into a Payment Account the cash which such Grantor receives;
provided, that cash arising from sales to employees may be deposited into a
Working Fund Account.
Section 4.6 Accounts.
(a) Such Grantor will not, other than in the ordinary course of
business when no Event of Default exists, (i) grant any extension of the time of
payment of any Account, (ii) compromise or settle any Account for less than the
full amount thereof, (iii) release, wholly or partially, any Person liable for
the payment of any Account, (iv) allow any credit or discount on any Account,
(v) redate any invoice or sale or make sales on extended dating, or (vi) amend,
supplement or modify any Account in any manner that could materially adversely
affect the value thereof.
(b) The Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and such Grantor shall furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection therewith.
(c) No Grantor shall, except to the extent done in the ordinary course
of its business and in accordance with sound business judgment (and provided
that, if an Event of Default has occurred and be continuing, the Administrative
Agent has not instructed such Grantor otherwise), accept any note or other
instrument (except a check or other instrument for the immediate payment of
money) with respect to any of its Accounts without the Administrative Agent's
written consent. If the Administrative Agent consents to the acceptance of any
such instrument, it shall be considered as evidence of the Account and not
payment thereof and the Grantor will promptly deliver such instrument to the
Administrative Agent endorsed by such Grantor to the Administrative Agent in a
manner satisfactory in form and substance to the Administrative Agent.
Regardless of the form of presentment, demand or notice of protest with respect
thereto, the applicable Grantor shall remain liable thereon until such
instrument is paid in full.
(d) Upon the request of the Administrative Agent, each Grantor shall
notify the Agent promptly of all disputes and claims in excess of $500,000 with
any Account Debtor, and agrees to settle, contest or adjust such dispute or
claim at no expense to the Administrative Agent or any Lender. Upon the request
of the Administrative Agent, each Grantor shall send the Administrative Agent a
copy of each credit memorandum in excess of $500,000 issued outside of the
ordinary course of such Grantor's business as soon as issued, and such Grantor
shall promptly report that credit on Borrowing Base Certificates submitted by
it. The Administrative Agent may, at all times when an Event of Default exists
hereunder, settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which the Administrative Agent shall consider
advisable and, in all cases, the Administrative Agent will credit the applicable
Grantor with the net amounts received by the Administrative Agent in payment of
any such Grantor's Accounts.
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(e) If an Account Debtor returns any Inventory to a Grantor when no Event
of Default exists, then such Grantor shall promptly determine the reason for
such return and shall issue a credit memorandum to the Account Debtor in the
appropriate amount. Upon the request of the Administrative Agent, each Grantor
shall immediately report to the Administrative Agent any return involving an
amount in excess of $500,000. Each such report shall indicate the reasons for
the returns and the locations and condition of the returned Inventory. In the
event any Account Debtor returns Inventory to a Grantor when an Event of Default
exists, such Grantor, upon the request of the Administrative Agent, shall: (i)
hold the returned Inventory in trust for the Administrative Agent; (ii)
segregate all returned Inventory from all of its other property; (iii) dispose
of the returned Inventory in the ordinary course of such Grantor's business or
otherwise according to Administrative Agent's written instructions; and (iv) not
issue any credits or allowances with respect thereto without the Administrative
Agent's prior written consent. All returned Inventory shall be subject to the
Agent's Liens thereon.
Section 4.7 Delivery of Instruments and Chattel Paper. If any amount in
excess of $500,000 payable under or in connection with any of the Collateral
owned by such Grantor shall be or become evidenced by an Instrument or Chattel
Paper, such Grantor shall immediately deliver such Instrument or Chattel Paper
to the Administrative Agent duly indorsed in a manner satisfactory to the
Administrative Agent, or, if consented to by the Administrative Agent, shall
xxxx all such Instruments and Chattel Paper with legend reasonably acceptable
the Administrative Agent.
Section 4.8 Intellectual Property.
(a) Such Grantor (either itself or through licensees) will (i)
continue to use each Trademark that is Significant Intellectual Property in
order to maintain such Trademark in full force and effect with respect to each
class of goods for which such Trademark is currently used, free from any claim
of abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) if required by applicable
Requirements of Law, use such Trademark with notices of registration and all
other notices and legends, (iv) not adopt or use any xxxx which is confusingly
similar or a colorable imitation of such Trademark unless the Administrative
Agent shall obtain a perfected security interest in such xxxx pursuant to this
Agreement and (v) not (and not permit any licensee or sublicensee thereof to) do
any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way or to destroy or otherwise tarnish the
goodwill associated with any Trademark. Notwithstanding the foregoing, nothing
herein contained shall prohibit such Grantor from causing or permitting
expiration, abandonment or invalidation of any of the Intellectual Property or
failing to renew, abandoning or permitting to expire any applications or
registrations for any of the Intellectual Property, if, in such Grantor's
reasonable good faith judgment, there is a reasonable and valid business reason
for taking or omitting to take such action; provided, however, in the case of
Significant Intellectual Property, the prior consent of the Administrative Agent
shall be obtained prior to taking or omitting to take such action, and such
consent shall not be unreasonably delayed or withheld.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act whereby any Patent which is Significant Intellectual
Property may
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become forfeited, abandoned or dedicated to the public, without the prior
consent of the Administrative Agent, which consent shall not be unreasonably
delayed or withheld.
(c) Such Grantor (either itself or through licensees) (i) will not
(and will not permit any licensee or sublicensee thereof to) do any act, or omit
to do any act, whereby any portion of the Copyrights which is Significant
Intellectual Property may become invalidated or otherwise impaired and (ii) will
not (either itself or through licensees) do any act whereby any portion of the
Copyrights which is Significant Intellectual Property may fall into the public
domain, without the prior consent of the Administrative Agent, which consent
shall not be unreasonably delayed or withheld.
(d) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any trade secret which is Significant
Intellectual Property may become publicly available or otherwise unprotectable,
without the prior consent of the Administrative Agent, which consent shall not
be unreasonably delayed or withheld.
(e) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any Significant Intellectual Property to infringe the
intellectual property rights of any other Person, without the prior consent of
the Administrative Agent, which consent shall not be unreasonably delayed or
withheld.
(f) Such Grantor will notify the Administrative Agent immediately if
it knows, or has reason to know, that any application or registration relating
to any Significant Intellectual Property may become forfeited, abandoned 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, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, right to use, interest in, or the validity of, any
Significant Intellectual Property or such Grantor's right to register the same
or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or outside
the United States or files a statement of use with respect to any
"intent-to-use" based application for a Trademark, such Grantor shall report
such filing to the Administrative Agent within five Business Days of such
filing. Upon request of the Administrative Agent, such Grantor shall execute and
deliver, and have recorded, any and all agreements, instruments, documents, and
papers as the Administrative Agent may request to evidence the Administrative
Agent's security interest in any United States Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(h) Such Grantor will take all reasonable actions necessary or
requested by the Administrative Agent, including in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency, to maintain and pursue each application (and to
obtain the relevant registration) and to maintain each registration of any
Copyright, Trademark or Patent that is Significant Intellectual Property,
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including filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition and interference and cancellation proceedings
unless such Grantor obtains the prior consent of the Administrative Agent to not
take such actions, such consent not to be unreasonably withheld.
(i) In the event that such Grantor has knowledge that any Significant
Intellectual Property is infringed upon or misappropriated or diluted by a third
party, such Grantor shall notify the Administrative Agent promptly after such
Grantor learns thereof. Such Grantor shall take appropriate action in response
to such infringement, misappropriation or dilution, including promptly bringing
suit for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation of dilution, and shall take such
other actions ad may be appropriate in its reasonable judgment under the
circumstances to protect such Significant Intellectual Property.
(j) Unless otherwise agreed to by the Administrative Agent, such
Grantor will execute and deliver to the Administrative Agent for filing in (i)
the United States Copyright Office a short-form copyright security agreement in
the form attached hereto as Annex 5, (ii) in the United States Patent and
Trademark Office a short-form patent security agreement in the form attached
hereto as Annex 6 and (iii) the United States Patent and Trademark Office a
short-form trademark security agreement in form attached hereto as Annex 7.
Section 4.9 Vehicles. Upon the reasonable request of the Administrative
Agent, within 45 days after the date of such request and, with respect to any
Vehicles acquired by such Grantor subsequent to the date of any such request,
within 45 days after the date of acquisition thereof, such Grantor shall file
all applications for certificates of title/ownership indicating the
Administrative Agent's security interest in the Vehicle covered by such
certificate, and any other necessary documentation, in each office in each
jurisdiction which the Administrative Agent shall deem advisable to perfect its
security interests in the Vehicles.
Section 4.10 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies (other
than maintenance payments for Patents, to the extent that such Grantor is
permitted to abandon such Patent in accordance with the terms of the Loan
Documents) imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including claims for labor,
materials and supplies) against or with respect to the Collateral, except that,
so long as such Grantor has notified the Administrative Agent in writing, no
such tax, assessment, charge or levy need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
diligently pursued, reserves in conformity with GAAP with respect thereto have
been provided on the books of such Grantor and the nonpayment of which does not
result in the imposition of a lien (other than Permitted Liens).
Section 4.11 Special Property. Each Grantor shall from time to time at the
request of the Administrative Agent give written notice to the Administrative
Agent identifying in reasonable detail the Special Property (and stating in such
notice that such Special Property constitutes "Excluded Property") and shall
provide to the Administrative Agent such other information regarding the Special
Property as the Administrative Agent may reasonably request
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and, from and after the Closing Date, no Grantor shall permit to become
effective in any document creating, governing or providing for any permit, lease
or license, a provision that would prohibit the creation of a Lien on such
permit, lease, license or equipment in favor of the Administrative Agent unless
such Grantor believes, in its reasonable judgment, that such prohibition is
usual and customary in transactions of such type.
Section 4.12 Commercial Tort Claims. Such Grantor agrees that, if it shall
acquire any interest in any Commercial Tort Claim with a claim value of
[$500,000] or more (whether from another Person or because such Commercial Tort
Claim shall have come into existence), (i) such Grantor shall promptly deliver
to the Administrative Agent, in each case in form and substance reasonably
satisfactory to the Administrative Agent, a notice of the existence and nature
of such Commercial Tort Claim and deliver a supplement to Schedule 7 containing
a specific description of such Commercial Tort Claim, (ii) the provision of
Section 2.1 (Collateral) shall apply to such Commercial Tort Claim and (iii)
such Grantor shall execute and deliver to the Administrative Agent, in each case
in form and substance reasonably satisfactory to the Administrative Agent, any
certificate, agreement and other document, and take all other action, deemed by
the Administrative Agent to be necessary or appropriate for the Administrative
Agent to obtain, on behalf of the Secured Parties, a perfected security interest
in all such Commercial Tort Claims. Any supplement to Schedule 7 delivered
pursuant to this Section 4.12 shall become part of Schedule 7 for all purposes
hereunder.
Section 4.13 Inventory; Perpetual Inventory. Each Grantor will keep its
Inventory in good and marketable condition, except for damaged or defective
goods arising in the ordinary course of such Grantor's business. Each Grantor
will not, without the prior written consent of the Administrative Agent, acquire
or accept any Inventory on consignment, other than in the ordinary course of its
business, or approval. Each Grantor agrees that all Inventory accepted on
consignment (i) will be segregated from Inventory owned by such Grantor and (ii)
will not be included as Inventory in such Grantor's books and records. Each
Grantor agrees that all Inventory produced by such Grantor in the United States
of America will be produced in accordance with the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations, and orders thereunder. Each
Grantor will conduct a physical count of its Inventory no less frequently than
once each fiscal month if such Inventory is located at a site at which such
Grantor has not implemented a perpetual Inventory system that is satisfactory to
the Administrative Agent in its reasonable discretion. Each Grantor will not,
without the Administrative Agent's written consent, sell any of its Inventory on
a xxxx-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or other repurchase or return basis.
Section 4.14 Equipment.
(a) Each Grantor shall keep and maintain in all material respects all
of its Equipment necessary and useful in the conduct of its business in good
operating condition and repair (ordinary wear and tear excepted) and shall make
all necessary replacements thereof.
(b) Each Grantor shall promptly inform the Administrative Agent of (i)
any material additions to its Equipment having a book value in excess of
$1,000,000 and (ii) any material deletions from its Equipment having a book
value in excess of $500,000. No Grantor shall permit any of its Equipment to
become a fixture with respect to real property or to
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become an accession with respect to other personal property with respect to
which real or personal property the Administrative Agent does not have a Lien
(other than in connection with the maintenance or repair of such property in the
ordinary course of such Grantor's business). No Grantor will, without the
Administrative Agent's prior written consent, willingly alter or remove any
identifying symbol or number on any of such Grantor's Equipment constituting
Collateral.
(c) Except as permitted by the Credit Agreement, no Grantor shall,
without the Administrative Agent's prior written consent, sell, lease as a
lessor, or otherwise dispose of any of such Grantor's Equipment.
Article V
Remedial Provisions
Section 5.1 Code and Other Remedies.
(a) During the continuance of an Event of Default, the Administrative
Agent may exercise, in addition to all other rights and remedies granted to it
in this Agreement and in any other instrument or agreement securing, evidencing
or relating to the Obligations, all rights and remedies of a secured party under
the UCC or any other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived to the extent permitted by applicable law), may forthwith enter
upon the premises of such Grantor where any Collateral is located through self
help, without judicial process, without first obtaining a final judgment or
giving such Grantor or any other Person notice and opportunity for a hearing on
the Administrative Agent's claim or action and may collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase for the benefit of the
Administrative Agent and the Lenders the whole or any part of the Collateral so
sold, free of any right or equity of redemption in any Grantor, which right or
equity is hereby waived and released. Such sales may be adjourned and continued
from time to time with or without notice. The Administrative Agent shall have
the right to conduct such sales on any Grantor's premises or elsewhere and shall
have the right to use any Grantor's premises without charge for such time or
times as the Administrative Agent deems necessary or advisable.
(b) Each Grantor further agrees, at the Administrative Agent's request
during an Event of Default, to assemble the Collateral and make it available to
the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether
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at such Grantor's premises or elsewhere. Until the Administrative Agent is able
to effect a sale, lease or other disposition of the Collateral, the
Administrative Agent shall have the right to hold or use the Collateral, or any
part thereof, to the extent that it deems appropriate for the purpose of
preserving the Collateral or its value or for any other purpose deemed
appropriate by the Administrative Agent. The Administrative Agent shall have no
obligation to any Grantor to maintain or preserve the rights of such Grantor as
against third parties with respect to the Collateral in which it granted a
security interest hereunder to the Administrative Agent while such Collateral is
in the possession of the Administrative Agent. The Administrative Agent may, if
it so elects, seek the appointment of a receiver or keeper to take possession of
any of the Collateral and to enforce any of the Administrative Agent's remedies
(for the benefit of the Secured Parties), with respect to such appointment
without prior notice or hearing as to such appointment. The Administrative Agent
shall, to the extent consistent with the terms of the Intercreditor Agreements,
apply the net proceeds of any action taken by it pursuant to this Section 5.1,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and any other Secured Parties hereunder, including
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Credit Agreement shall prescribe, and
only after such application and after the payment by the Administrative Agent of
any other amount required by any provision of law, need the Administrative Agent
account for the surplus, if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Administrative Agent or any other Secured Party arising out
of the exercise by them of any rights hereunder, except to the extent arising
out of the gross negligence or willful misconduct of the Administrative Agent or
such other Secured Party. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition.
(c) Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Agreement or
any Collateral. Without limiting any of the foregoing, each Grantor, to the
maximum extent not prohibited by applicable law, hereby (i) agrees that it will
not invoke, claim or assert the benefit of any rule of law or statute now or
hereafter in effect (including, without limitation, any right to prior notice or
judicial hearing in connection with the Administrative Agent's possession,
custody or disposition of any Collateral or any appraisal, valuation, stay,
extension, moratorium or redemption law), or take or omit to take any other
action that would or could reasonably be expected to have the effect of
delaying, impeding or preventing the exercise of any rights and remedies in
respect of the Collateral, the absolute sale of any of the Collateral or the
possession thereof by any purchaser at any sale thereof, and waives the benefit
of all such laws and further agrees that it will not hinder, delay or impede the
execution of any power granted hereunder to the Administrative Agent, but that
it will permit the execution of every such power as though no such laws were in
effect, (ii) waives all rights that it has or may have under any rule of law or
statute now existing or hereafter adopted to require the Administrative Agent to
marshal any Collateral or other assets in favor of such Grantor or any other
party or against or in payment of any or all of the Obligations, and (iii)
waives all rights that it has or may have under any rule of
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law or statute now existing or hereafter adopted to require the Administrative
Agent to pursue any third party for any of the Obligations.
(d) For the sole purpose of enabling the Administrative Agent to
exercise rights and remedies under Article V hereof (including, without limiting
the terms of Article V hereof, in order to take possession of, hold, preserve,
process, assemble, prepare for sale, market for sale, sell or otherwise dispose
of Collateral) at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, each Grantor hereby grants to the
Administrative Agent, for the benefit of the Secured Parties, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same
may be located, and including in such license 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.
Section 5.2 The Administrative Agent's and Lenders' Rights, Duties and
Liabilities.
(a) Each Grantor assumes all responsibility and liability arising from
or relating to the use, sale or other disposition of the Collateral. The
Obligations shall not be affected by any failure of the Administrative Agent or
any Lender to take any steps to perfect the Agent's Liens or to collect or
realize upon any of the Collateral, nor shall loss of or damage to any of the
Collateral release any Grantor from any of the Obligations. Following the
occurrence and during the continuation of an Event of Default, the
Administrative Agent may (but shall not be required to), and at the direction of
the Required Lenders shall, without notice to or consent from any of the
Grantors, xxx upon or otherwise collect, extend the time for payment of, modify
or amend the terms of, compromise or settle for cash, credit, or otherwise upon
any terms, grant other indulgences, extensions, renewals, compositions or
releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any insurance
applicable thereto, or any Person liable directly or indirectly in connection
with any of the foregoing, without discharging or otherwise affecting the
liability of the Grantors for the Obligations or under the Credit Agreement or
any other agreement now or hereafter existing between the Administrative Agent
and/or any Lender and any Grantor.
(b) At the Administrative Agent's request, during the continuance of
an Event of Default, each Grantor shall deliver to the Administrative Agent all
original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Accounts or payments in respect of General
Intangibles, including all original orders, invoices and shipping receipts.
(c) The Administrative Agent may, without notice, at any time during
the continuance of an Event of Default, limit or terminate the authority of a
Grantor to collect its Accounts or amounts due under General Intangibles or any
thereof.
(d) The Administrative Agent may at any time (whether or not an Event
of Default has occurred), verify, to the Administrative Agent's satisfaction,
the existence, amount and terms of any Accounts, Contracts, Instruments or
Chattel Paper of a Grantor, by
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mail, telephone or otherwise, in the name of a nominee of the Administrative
Agent or, during the continuance of an Event of Default, in the Administrative
Agent's own name; provided, however, prior to making any telephonic
verifications, the Administrative Agent shall give notice thereof to the
applicable Grantor and such Grantor, at its option, may participate in such
telephonic verifications. If an Event of Default shall have occurred and be
continuing, each Grantor, at its own expense, shall cause the independent
certified public accountants then engaged by such Grantor or such other Person
acceptable to the Administrative Agent to prepare and deliver to the
Administrative Agent at any time and from time to time promptly upon the request
of the Administrative Agent the following reports with respect to such Grantor:
(i) a reconciliation of all Accounts of such Grantor; (ii) an aging of all
Accounts of such Grantor; (iii) trial balances; and (iv) a test verification of
such Accounts of such Grantor as the Administrative Agent's may request. Each
Grantor, at its own expense, shall deliver to the Administrative Agent the
results of each physical verification, if any, which such Grantor may in its
discretion have made, or caused any other Person to have made on its behalf, of
all or any portion of its Inventory.
(e) The Administrative Agent may at any time after an Event of Default
shall have occurred and be continuing, without prior notice to the applicable
Grantor, notify Account Debtors, parties to the Contracts of such Grantor and
obligors in respect of Instruments and Chattel Paper of such Grantor, that the
Accounts of such Grantor and the right, title and interest of such Grantor in
and under such Contracts, Instruments and Chattel Paper have been assigned to
the Administrative Agent, and that payments shall be made directly to the
Administrative Agent, for the benefit of the Secured Parties. Upon the request
of the Administrative Agent while an Event of Default has occurred and is
continuing, a Grantor shall so notify Account Debtors, parties to Contracts of
such Grantor and obligors in respect of Instruments and Chattel Paper of such
Grantor.
(f) It is expressly agreed by each Grantor that, anything herein to
the contrary notwithstanding, such Grantor shall remain liable under each of its
leases, agreements, contracts and licenses (each a "Contract" and collectively,
the "Contracts") to observe and perform all the conditions and obligations to be
observed and performed by it thereunder. Each Grantor further agrees to enforce
the terms and provisions of its Contracts in accordance with their terms, and
not to waive, amend or modify any provision thereof in any manner other than in
the ordinary course of business of such Grantor in accordance with past
practices and for a valid economic reason benefitting such Grantor (provided
that in no event may any waiver, amendment or modification be made that could
reasonably be expected to have a Material Adverse Effect). At the request of the
Administrative Agent, a Grantor will make available for the Administrative
Agent's review copies of each material Contract to which it is a party and each
material amendment or modification thereof to the Administrative Agent promptly
upon the execution and delivery thereof. None of the Administrative Agent or any
Lender shall have any obligation or liability under any Contract by reason of or
arising out of this Agreement or the granting herein of a Lien thereon or the
receipt by the Administrative Agent or any Lender of any payment relating to any
Contract pursuant hereto. None of the Administrative Agent or any Lender shall
be required or obligated in any manner to perform or fulfill any of the
obligations of a Grantor under or pursuant to any Contract, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Contract, or to present or file any claims, or to take any
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action to collect or enforce any performance or the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
Section 5.3 Pledged Collateral.
(a) During the continuance of an Event of Default, upon notice by the
Administrative Agent to the relevant Grantor or Grantors, (i) the Administrative
Agent shall have the right to receive any and all Proceeds of the Pledged
Collateral and make application thereof to the Obligations in the order set
forth in the Credit Agreement and in accordance with the terms of the
Intercreditor Agreements, and (ii) to the extent applicable with respect to the
particular Pledged Collateral, the Administrative Agent or its nominee may
exercise (A) all voting, consent, corporate and other rights pertaining to the
Pledged Collateral at any meeting of shareholders, partners or members, as the
case may be, of the relevant issuer or issuers of Pledged Collateral or
otherwise and (B) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to the Pledged Collateral
as if it were the absolute owner thereof (including the right to exchange at its
discretion any and all of the Pledged Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate,
partnership or limited liability company structure of any issuer of Pledged
Collateral, the right to deposit and deliver any and all of the Pledged
Collateral with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to any Grantor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(b) In order to permit the Administrative Agent 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, (i) each Grantor shall promptly execute and deliver (or cause
to be executed and delivered) to the Administrative Agent all such proxies,
dividend payment orders and other instruments as the Administrative Agent may
from time to time reasonably request and (ii) without limiting the effect of
clause (i) above, such Grantor hereby grants to the Administrative Agent an
irrevocable proxy to vote all or any part of such Pledged Collateral and to
exercise all other rights, powers, privileges and remedies to which a holder of
such Pledged Collateral would be entitled (including giving or withholding
written consents of shareholders, partners or members, as the case may be,
calling special meetings of shareholders, partners or members, as the case may
be, and voting at such meetings), which proxy shall be effective, automatically
and without the necessity of any action (including any transfer of any such
Pledged Collateral on the record books of the issuer thereof) by any other
person (including the issuer of such Pledged Collateral or any officer or agent
thereof) during the continuance of an Event of Default and which proxy shall
only terminate upon the payment in full of the Obligations.
(c) Each Grantor hereby expressly authorizes and instructs each issuer
of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with
any instruction received by it from the Administrative Agent in writing that (A)
states that an Event of Default has occurred and is continuing and (B) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees
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that such issuer shall be fully protected in so complying and (ii) unless
otherwise expressly permitted hereby, pay any dividends or other payments with
respect to the Pledged Collateral directly to the Administrative Agent.
Section 5.4 Proceeds to be Turned Over To Administrative Agent. All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in any deposit account as the Administrative Agent shall
reasonably deem necessary to establish. All Proceeds while held by the
Administrative Agent in (or by such Grantor in trust for the Administrative
Agent) shall continue to be held as collateral security for the Obligations and
shall not constitute payment thereof until applied as provided in the Credit
Agreement and in accordance with the Intercreditor Agreements.
Section 5.5 Registration Rights.
(a) If the Administrative Agent shall determine to exercise its right
to sell any or all of the Pledged Collateral, other than the Pledged Notes,
pursuant to Section 5.1, and if in the opinion of the Administrative Agent it is
necessary or advisable to have such Pledged Collateral, or any portion thereof
to be registered under the provisions of the Securities Act, the relevant
Grantor will cause the issuer thereof to (i) execute and deliver, and cause the
directors and officers of such issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Collateral, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
such Pledged Collateral, or that portion thereof to be sold and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall
reasonably designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all such Pledged Collateral by reason
of certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise or may determine that a public sale is
impracticable or not commercially reasonable and, accordingly, may resort to one
or more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of such
Pledged Collateral for the period of time necessary to permit the issuer thereof
to register such
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securities for public sale under the Securities Act, or under applicable state
securities laws, even if such issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of such Pledged Collateral pursuant to this Section 5.5 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 5.5 will cause irreparable injury to the Administrative Agent and
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 5.5 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants (to the extent permitted by applicable law) except for a
defense that no Event of Default has occurred under the Credit Agreement or that
the Obligations have been paid in full.
Section 5.6 Deficiency. Each Grantor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Administrative Agent or any other Secured Party to
collect such deficiency.
Article VI
The Administrative Agent
Section 6.1 Administrative Agent's Appointment as Attorney-in-Fact.
(a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
(i) in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account or General Intangible or with respect to
any other Collateral and so long as any Event of Default has occurred
and is continuing, file any claim or take any other action or
proceeding in any court of law or equity or otherwise reasonably
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or General
Intangible or with respect to any other Collateral whenever payable;
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(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Administrative Agent may request to
evidence the Administrative Agent's security interest in such
Intellectual Property and the goodwill and General Intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all or any
part of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 5.1 or 5.5, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(v) (A) so long as any Event of Default has occurred and is
continuing, direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) so long as any Event of Default
has occurred and is continuing, ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (D) so
long as any Event of Default has occurred and is continuing, commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (E) so long as any Event of Default has occurred and is
continuing, defend any suit, action or proceeding brought against such
Grantor with respect to any Collateral; (F) so long as any Event of
Default has occurred and is continuing, settle, compromise or adjust
any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Administrative Agent may deem
appropriate; (G) so long as any Event of Default has occurred and is
continuing, assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Trademark pertains),
throughout the world for such term or terms, on such conditions, and
in such manner, as the Administrative Agent shall in its sole
discretion determine, including without limitation the execution and
filing of any documents necessary to effectuate and/or record such
assignment; (H) so long as any Event of Default has occurred and is
continuing, to notify the post-office authorities to change the
address for delivery of such Grantor's mail to an address designated
by the Administrative Agent and to receive and open all mail addressed
to such Grantor and deal with any such mail relating to Collateral in
a manner that the Administrative Agent deems appropriate (and, upon
the written request of such Grantor, the Administrative Agent shall
provide to such Grantor copies of any material mail relating to the
Collateral) and return other mail to such Grantor; and (I) so long as
any Event of Default has occurred and is continuing, generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though
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the Administrative Agent were the absolute owner thereof for all
purposes, and do, at the Administrative Agent's option and such
Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems necessary to protect,
preserve or realize upon the Collateral and the Administrative Agent's
and the other Secured Parties' security interests therein and to
effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
(b) The Administrative Agent may, in the discretion of the
Administrative Agent, and shall, at the direction of the Required Lenders, pay
any amount or do any act required of a Grantor hereunder or under any other Loan
Document in order to preserve, protect, maintain or enforce the Obligations, the
Collateral or the Agent's Liens therein, and which a Grantor fails to pay or do,
including payment of any judgment against a Grantor, any insurance premium, any
warehouse charge, any finishing or processing charge, any landlord's or bailee's
claim and any other Lien upon or with respect to any of the Collateral. Any
payment made or other action taken by the Administrative Agent under this
Section 6.1 shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed thereafter as herein provided.
(c) The reasonable expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 6.1, shall be
charged to the Grantors.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
Section 6.2 Duty of Administrative Agent. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent hereunder are solely to protect the
Administrative Agent's interest in the Collateral and shall not impose any duty
upon the Administrative Agent or any other Secured Party to exercise any such
powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
Section 6.3 Financing Statements. Each Grantor authorizes the
Administrative Agent to file or record financing statements (including
continuations thereof and any new financing statement containing a description
of the Collateral granted hereunder as "all assets") and other filing or
recording documents or instruments with respect to the Collateral
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without the signature of such Grantor in such form and in such offices as the
Administrative Agent reasonably determines appropriate to perfect the security
interests of the Administrative Agent under this Agreement. A photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.
Section 6.4 Authority of Administrative Agent. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Grantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
Article VII
Miscellaneous
Section 7.1 Conflicts with Certain Other Agreements Notwithstanding
anything to the contrary in this Agreement, prior to the Working Capital Loan
Termination Date (as defined in the Senior Lenders Intercreditor Agreement) (i)
the rights of the Administrative Agent under this Agreement are subject to the
terms of the Senior Lenders Intercreditor Agreement, (ii) any obligation of the
Grantors in this Agreement that requires delivery of Collateral to, possession
or control of Collateral with, the pledge, assignment, endorsement or transfer
of Collateral to or the registration of Collateral in the name of, the
Administrative Agent shall be deemed complied with and satisfied if such
delivery of Collateral is made to, such possession or control of Collateral is
with, or such Collateral be assigned, endorsed or transferred to or registered
in the name of, the Working Capital Agent, and (iii) in the event of a direct
conflict between the terms and provisions of this Agreement and the terms and
provisions of the U.S. Security Agreement (as defined in the Working Capital
Agreement), it is the intention of the Grantors and the Administrative Agent
that such provisions shall be read together and construed, to the fullest extent
possible, to be in concert with each other; however, in the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the U.S. Security Agreement shall control and, in such case, the
Grantors shall not be in breach of their obligations under this Agreement as a
result of complying with the terms and provisions of the U.S. Security
Agreement; provided that, notwithstanding the foregoing, nothing contained in
this Section 7.1 shall limit or otherwise adversely effect the grant of a lien
on or a security interest in any Collateral under Article II of this Agreement.
Section 7.2 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 11.1 of the Credit Agreement and the Intercreditor
Agreement.
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Section 7.3 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 14.8 of the Credit Agreement; provided, however, that
any such notice, request or demand to or upon any Grantor not party to the
Credit Agreement shall be addressed to such Grantor in care of Foamex at the
address for Foamex referred to in Section 14.8 of the Credit Agreement.
Section 7.4 No Waiver by Course of Conduct; Cumulative Remedies. Neither
the Administrative Agent nor any other Secured Party shall by any act (except by
a written instrument pursuant to Section 7.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any other
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any other Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent or such other Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
Section 7.5 Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and each other Secured Party and their successors and
assigns; provided, however, that no Grantor may assign, transfer or delegate any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.
Section 7.6 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same agreement.
Section 7.7 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.8 Section Headings. The Article and Section titles contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not part of the agreement of the parties hereto.
Section 7.9 Entire Agreement. This Agreement together with the other Loan
Documents represents the entire agreement of the parties and supersedes all
prior agreements and understandings relating to the subject matter hereof.
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Section 7.10 Governing Law; Waiver of Jury Trial. (a) EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. EACH GRANTOR HEREBY CONSENTS AND AGREES THAT THE COURTS OF THE XXXXX
XX XXX XXXX, XX XX XXX XXXXXX XXXXXX FOR THE SOUTHERN DISTRICT OF NEW YORK,
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN ANY GRANTOR, THE ADMINISTRATIVE AGENT AND THE LENDERS PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT
THE ADMINISTRATIVE AGENT, THE LENDERS AND THE GRANTORS ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY OR THE SOUTHERN DISTRICT OF NEW YORK, AND, PROVIDED, FURTHER,
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
ADMINISTRATIVE AGENT. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS SET FORTH
IN SECTION 14.8 OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT DISPUTES ARISING
HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES
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XXXXXX XXXXX ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, AMONG THE ADMINISTRATIVE AGENT, THE LENDERS AND ANY GRANTOR ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO
Section 7.11 Additional Grantors. If, pursuant to Section 7.22 of the
Credit Agreement, the Borrowers shall be required to cause any Subsidiary that
is not a Grantor to become a Grantor hereunder, such Subsidiary shall execute
and deliver to the Administrative Agent a Joinder Agreement in the form of Annex
4 and shall thereafter for all purposes be a party hereto and have the same
rights, benefits and obligations as a Grantor party hereto on the Closing Date.
Section 7.12 Release of Collateral.
(a) At the time provided in Section 12.11(a)(i) of the Credit
Agreement, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral of such
Grantor held by the Administrative Agent hereunder and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
(b) If any of the Collateral shall be sold or disposed of by any
Grantor in a transaction permitted by the Credit Agreement, the Collateral so
sold or disposed of shall be released from the Lien created hereby to the extent
provided in Section 12.11(a)(ii) of the Credit Agreement and, in connection
therewith, the Administrative Agent, at the request and sole expense of the
applicable Grantor, shall execute and deliver to such Grantor all releases or
other documents reasonably necessary or desirable for the release of the Lien
created hereby on such Collateral. At the request and sole expense of the
Borrowers, a Grantor shall be released from its obligations hereunder and the
Lien granted by such Grantor pursuant to the terms of this Agreement on the
Collateral shall be released in the event that all the capital stock of such
Grantor shall be so sold or disposed; provided, however, that the Grantors shall
have delivered to the Administrative Agent, at least ten Business Days prior to
the date of the proposed release, a written request for release identifying the
relevant Grantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by Foamex stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.
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Section 7.13 Reinstatement. Each Grantor further agrees that, if any
payment made by any Loan Party or other Person and applied to the Obligations is
at any time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of Collateral are required to be returned by any Secured Party to
such Loan Party, its estate, trustee, receiver or any other party, including any
Grantor, under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, any Lien or other
Collateral securing such liability shall be and remain in full force and effect,
as fully as if such payment had never been made or, if prior thereto the Lien
granted hereby or other Collateral securing such liability hereunder shall have
been released or terminated by virtue of such cancellation or surrender, such
Lien or other Collateral shall be reinstated in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect any Lien or other Collateral securing the obligations of any
Grantor in respect of the amount of such payment.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the undersigned has caused this Pledge and
Security Agreement to be duly executed and delivered as of the date first above
written.
FOAMEX L.P.
By: FMXI, Inc., its Managing General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FMXI, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FOAMEX INTERNATIONAL INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Senior Vice President
---------------------------
FOAMEX CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FOAMEX LATIN AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FOAMEX MEXICO, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FOAMEX MEXICO II, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
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FOAMEX ASIA, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
FOAMEX CARPET CUSHION LLC
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------
Title: Vice President
---------------------------
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ACCEPTED AND AGREED:
SILVER POINT FINANCE, LLC, as Administrative Agent
By: /s/ Xxxx Xxxxxxx
------------------------------------------
Name: Xxxx Xxxxxxx
Title: Authorized Signatory
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TABLE OF CONTENTS
Page
Article I Defined Terms...........................................................................................1
Section 1.1 Definitions.................................................................................1
Section 1.2 Certain Other Terms.........................................................................6
Article II Grant of Security Interest.............................................................................7
Section 2.1 Collateral..................................................................................7
Section 2.2 Grant of Security Interest in Collateral....................................................8
Section 2.3 Accounts....................................................................................9
Article III Representations and Warranties........................................................................9
Section 3.1 Title; No Other Liens.......................................................................9
Section 3.2 Perfection and Priority.....................................................................9
Section 3.3 Jurisdiction of Organization; Chief Executive Office........................................9
Section 3.4 Inventory and Equipment....................................................................10
Section 3.5 Pledged Collateral.........................................................................10
Section 3.6 Accounts...................................................................................11
Section 3.7 No Other Names.............................................................................11
Section 3.8 Intellectual Property......................................................................11
Section 3.9 Deposit Accounts; Securities Accounts......................................................12
Section 3.10 Commercial Tort Claims.....................................................................12
Article IV Covenants.............................................................................................12
Section 4.1 Generally..................................................................................12
Section 4.2 Maintenance of Perfected Security Interest; Further Documentation..........................13
Section 4.3 Changes in Locations, Name, Etc............................................................14
Section 4.4 Pledged Collateral.........................................................................14
Section 4.5 Control Accounts; Payment Accounts.........................................................16
Section 4.6 Accounts...................................................................................17
Section 4.7 Delivery of Instruments and Chattel Paper..................................................18
Section 4.8 Intellectual Property......................................................................18
Section 4.9 Vehicles...................................................................................20
Section 4.10 Payment of Obligations.....................................................................20
Section 4.11 Special Property...........................................................................20
Section 4.12 Commercial Tort Claims.....................................................................21
Section 4.13 Inventory; Perpetual Inventory.............................................................21
Section 4.14 Equipment..................................................................................21
Article V Remedial Provisions....................................................................................22
Section 5.1 Code and Other Remedies....................................................................22
Section 5.2 The Administrative Agent's and Lenders' Rights, Duties and Liabilities.....................24
Section 5.3 Pledged Collateral.........................................................................25
Section 5.4 Proceeds to be Turned Over To Administrative Agent.........................................27
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Section 5.5 Registration Rights........................................................................27
Section 5.6 Deficiency.................................................................................28
Article VI The Administrative Agent..............................................................................28
Section 6.1 Administrative Agent's Appointment as Attorney-in-Fact.....................................28
Section 6.2 Duty of Administrative Agent...............................................................30
Section 6.3 Financing Statements.......................................................................30
Section 6.4 Authority of Administrative Agent..........................................................30
Article VII Miscellaneous........................................................................................31
Section 7.1 Amendments in Writing......................................................................31
Section 7.2 Notices....................................................................................31
Section 7.3 No Waiver by Course of Conduct; Cumulative Remedies........................................32
Section 7.4 Successors and Assigns.....................................................................32
Section 7.5 Counterparts...............................................................................32
Section 7.6 Severability...............................................................................32
Section 7.7 Section Headings...........................................................................32
Section 7.8 Entire Agreement...........................................................................32
Section 7.9 Governing Law; Waiver of Jury Trial........................................................32
Section 7.10 Additional Grantors........................................................................34
Section 7.11 Release of Collateral......................................................................34
Section 7.12 Reinstatement..............................................................................34
Annexes and Schedules
Annex 1 Lockbox Agreement
Annex 2 Control Account Agreement
Annex 3 Pledge Agreement
Annex 4 Joinder Agreement
Annex 5 Short Form Copyright Security Agreement
Annex 6 Short Form Patent Security Agreement
Annex 7 Short Form Trademark Security Agreement
Schedule 1 State of Incorporation; Principal Executive Office
Schedule 2 Pledged Collateral
Schedule 3 Filings
Schedule 4 Location of Inventory and Equipment
Schedule 5 Intellectual Property
Schedule 6 Bank Accounts; Control Accounts
Schedule 7 Commercial Tort Claims
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