Exhibit 10.43
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Execution Version
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered
into as of October 31, 2005 by MAIN STREET RESTAURANT GROUP, INC., a Delaware
corporation (the "Borrower" and a "Grantor"), EACH OF THE UNDERSIGNED
SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY
HERETO BY EXECUTION OF A SECURITY JOINDER AGREEMENT (each a "Guarantor" and a
"Grantor", and collectively with the Borrower, the "Grantors"), and BANK OF
AMERICA, N.A., a national banking association, as Administrative Agent (the
"Administrative Agent") for each of the Lenders now or hereafter party to the
Credit Agreement defined below (collectively with the Administrative Agent, and
certain other Persons parties to Related Credit Arrangements as more
particularly described in Section 21 hereof, the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used but not otherwise defined herein or pursuant to Section 1 hereof
shall have the respective meanings assigned thereto in the Credit Agreement (as
defined below).
W I T N E S S E T H:
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WHEREAS, the Secured Parties have agreed to provide to the Borrower a
certain term loan facility and revolving credit facility with a letter of credit
sublimit pursuant to the Credit Agreement dated as of October 31, 2005 by and
among the Borrower, the Administrative Agent and the Lenders (as from time to
time amended, revised, modified, supplemented or amended and restated, the
"Credit Agreement"); and
WHEREAS, as collateral security for payment and performance of the
Obligations and the obligations and liabilities of any Loan Party now existing
or hereafter arising under Related Credit Arrangements, the Borrower is willing
to grant to the Administrative Agent for the benefit of the Secured Parties a
security interest in all of its personal property and assets pursuant to the
terms of this Security Agreement; and
WHEREAS, each Guarantor will materially benefit from the Loans to be made,
and the Letters of Credit to be issued, under the Credit Agreement and each
Guarantor is a party (as signatory or by joinder) to a Guaranty pursuant to
which each Guarantor guarantees the Obligations of the Borrower; and
WHEREAS, as collateral security for payment and performance by each
Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which
such Guarantor is a party), and the payment and performance of its obligations
and liabilities (whether now existing or hereafter arising) hereunder or under
any of the other Loan Documents to which it is now or hereafter becomes a party,
each Guarantor is willing to grant to the Administrative Agent for the benefit
of the Secured Parties a security interest in certain of its personal property
and assets pursuant to the terms of this Security Agreement; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Borrower and the Guarantors enters into this Security Agreement;
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NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit, and in further
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. Certain Definitions. Terms used in this Security Agreement, not
otherwise expressly defined herein or in the Credit Agreement, and for which
meanings are provided in the Uniform Commercial Code of the State of New York
(the "UCC"), shall have such meanings. The term "Qualifying Control Agreement"
shall have the meaning set forth on Schedule 1 hereto. The term "Excluded
Property" shall have the meaning set forth in Section 2.
2. Grant of Security Interest. The Borrower hereby grants as collateral
security for the payment, performance and satisfaction of all of the Obligations
and the obligations and liabilities of any Loan Party now existing or hereafter
arising under Related Credit Arrangements, and each Guarantor hereby grants as
collateral security for the payment, performance and satisfaction of all of its
Guarantor's Obligations (as defined in its Guaranty) and the payment and
performance of its obligations and liabilities (whether now existing or
hereafter arising) hereunder or under any of the other Loan Documents or Related
Credit Arrangements to which it is now or hereafter becomes a party (such
obligations and liabilities of the Borrower and the other Grantors referred to
collectively as the "Secured Obligations"), to the Administrative Agent for the
benefit of the Secured Parties a continuing first priority security interest in
and to, and other than as to any Grantor's rights in and to copyrights
collaterally assigns to the Administrative Agent for the benefit of the Secured
Parties, all of the personal property and fixtures (other than Excluded
Property) of such Grantor or in which such Grantor has or may have or acquire an
interest or the power to transfer rights therein, whether now owned or existing
or hereafter created, acquired or arising and wheresoever located, including the
following:
(a) All accounts, and including accounts receivable, contracts,
bills, acceptances, choses in action, and other forms of monetary
obligations at any time owing to such Grantor arising out of property sold,
leased, licensed, assigned or otherwise disposed of or for services
rendered or to be rendered by such Grantor, and all of such Grantor's
rights with respect to any property represented thereby, whether or not
delivered, property returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of recovering
possession by proceedings including replevin and reclamation (collectively
referred to hereinafter as "Accounts");
(b) All inventory, including all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in process and
finished merchandise, component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items
used or consumed in the operation of the business of such Grantor or which
may contribute to the finished product or to the sale, promotion and
shipment thereof, in which such Grantor now or at any time hereafter may
have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of such Grantor
or is held by such Grantor or by others for such Grantor's account
(collectively referred to hereinafter as "Inventory");
(c) All goods, including all machinery, equipment, motor vehicles,
parts, supplies, apparatus, appliances, tools, patterns, molds, dies,
blueprints, fittings, furniture, furnishings, fixtures and articles of
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tangible personal property of every description, and all computer programs
embedded in any of the foregoing and all supporting information relating to
such computer programs (collectively referred to hereinafter as
"Equipment");
(d) All general intangibles, including all rights now or hereafter
accruing to such Grantor under contracts, leases, agreements or other
instruments, including all contracts or contract rights to perform or
receive services, to purchase or sell goods, or to hold or use land or
facilities, and to enforce all rights thereunder, all causes of action,
corporate or business records, inventions, patents and patent rights,
rights in mask works, designs, trade names and trademarks and all goodwill
associated therewith, trade secrets, trade processes, copyrights, licenses,
permits, franchises, customer lists, computer programs and software, all
internet domain names and registration rights thereto, all internet
websites and the content thereof, all payment intangibles, all claims under
guaranties, tax refund claims, all rights and claims against carriers and
shippers, leases, all claims under insurance policies, all interests in
general and limited partnerships, limited liability companies, and other
Persons not constituting Investment Property (as defined below), all rights
to indemnification and all other intangible personal property and
intellectual property of every kind and nature (collectively referred to
hereinafter as "General Intangibles");
(e) All deposit accounts, including demand, time, savings, passbook,
or other similar accounts maintained with any bank by or for the benefit of
such Grantor (collectively referred to hereinafter as "Deposit Accounts");
(f) All chattel paper, including tangible chattel paper, electronic
chattel paper, or any hybrid thereof (collectively referred to hereinafter
as "Chattel Paper");
(g) (i) 65% of the Voting Securities (or if any Grantor shall own
less than 65% of such Voting Securities, then 100% of the Voting Securities
owned by such Grantor) and 100% of the other Subsidiary Securities of each
of its Direct Foreign Subsidiaries, and (ii) all of the Subsidiary
Securities of all of its Domestic Subsidiaries, in each case, whether now
existing or hereafter created or acquired (collectively, the "Pledged
Interests"), including without limitation the Pledged Interests more
particularly described on Schedule 9(e)-1 hereto;
(h) All investment property, including all securities, security
entitlements, securities accounts, commodity contracts and commodity
accounts of or maintained for the benefit of such Grantor, in each case
other than Subsidiary Securities owned by such Grantor, (collectively
referred to hereinafter as "Other Investment Property", and the Pledged
Interests and the Other Investment Property being referred to collectively
as "Investment Property");
(i) All instruments, including all promissory notes (collectively
referred to hereinafter as "Instruments");
(j) All documents, including warehouse receipts, bills of lading and
other documents of title (collectively referred to hereinafter as
"Documents");
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(k) All rights to payment or performance under letters of credit
including rights to proceeds of letters of credit ("Letter-of-Credit
Rights"), and all guaranties, endorsements, Liens, other Guarantee
obligations or supporting obligations of any Person securing or supporting
the payment, performance, value or liquidation of any of the foregoing
(collectively, with Letter-of-Credit Rights, referred to hereinafter as
"Supporting Obligations");
(l) The commercial tort claims identified on Schedule 9(i) hereto, as
such Schedule may be supplemented from time to time in accordance with the
terms hereof (collectively referred to hereinafter as "Commercial Tort
Claims");
(m) All books and records relating to any of the foregoing (including
customer data, credit files, ledgers, computer programs, printouts, and
other computer materials and records (and all media on which such data,
files, programs, materials and records are or may be stored)); and
(n) All proceeds, products and replacements of, accessions to, and
substitutions for, any of the foregoing, including without limitation
proceeds of insurance policies insuring any of the foregoing.
All of the property and interests in property described in subsections (a)
through (n) are herein collectively referred to as the "Collateral."
Notwithstanding the foregoing, the term "Collateral" shall not include, and the
Administrative shall not have any security interest in, any Excluded Property.
"Excluded Property" means, collectively:
(a) with respect to each Excluded CNL Restaurant, all of the applicable
Grantor's leasehold estate pursuant to those Ground Leases of such Excluded CNL
Restaurant, more particularly described in the relevant exhibits to the
applicable Commercial Deed of Trust, Assignment of Rents and Security Agreement
and Fixture Filing among the applicable Grantor, the trustee thereto and CNL
Financial I, Inc. (in each case, the "Applicable CNL Deed"), and evidenced by
those certain Memoranda of Lease more particularly described on such exhibits
and to certain real property described in such Applicable CNL Deed, together
with all such Grantor's buildings, improvements, and tenements now or hereafter
erected on the property related to such Excluded CNL Restaurant and all
heretofore or hereafter vacated alleys and streets abutting such property, and
all easements, rights, appurtenances, rents, royalties, mineral, oil and gas
rights and profits, water, water rights, and water stock appurtenant to such
property, and all of such Grantor's Equipment, including all fixtures,
machinery, equipment, engines, boilers, incinerators, building materials,
appliances and goods of every nature whatsoever now or hereafter located in, or
on, or used, or intended to be used in connection with such property, including,
but not limited to, those for the purposes of supplying or distributing heating,
cooling, electricity, gas, water, air and light; and all elevators, and related
machinery and equipment, fire prevention and extinguishing apparatus, security
and access control apparatus, plumbing, bath tubs, water heaters, water closets,
sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers,
awnings, storm windows, storm doors, screens, blinds, shades, curtains and
curtain rods, mirrors, cabinets, paneling, rugs, attached floor coverings,
furniture, pictures, antennas, trees and plants, and all tax refunds,
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Trademarks, trade names, Contracts, Documents, Receivables, Licenses, permits,
Inventory, Copyrights, Patents, insurance proceeds (except as provided to the
contrary in the Applicable CNL Deed), unearned insurance premiums, choses in
action and other General Intangibles relating (in each case) to such property;
including replacements and additions thereto and any and all proceeds of any and
all of the foregoing (For purposes of this clause (a), "Ground Leases,"
"Equipment", "Trademarks", "Contracts", "Documents", "Receivables", "Licenses",
"Inventory", "Copyrights" and "Patents" shall have the meaning set forth for
such term in the Applicable CNL Deed as of the date hereof.);
(b) with respect to each Excluded GMAC Restaurant, all Goods (including
Inventory and Equipment), General Intangibles (other than the Franchise
Agreement and License), accounts, certificates of title, fixtures, money,
instruments, securities, documents, chattel paper, deposits, credits, claims,
demands and other personal property, now or hereafter owned, acquired, held,
used, sold or consumed (in each case) in connection with the applicable
Grantor's Business of operating such Excluded GMAC Restaurant and any other
property, rights and interests of the applicable Grantor which at any time
relate to, arise out of or in connection with the foregoing or which shall come
into the possession or custody or under the control of Secured Party or any of
its agents, representatives, associates or correspondents, for any purpose, all
additions thereto, substitutions therefor and replacements thereof, all
interest, income, dividends, distributions and earnings thereon or other monies
or revenues derived therefrom, including any such property received in
connection with any disposition of the Franchise Agreement and all moneys which
may become payable under any policy insuring the property described in this
clause (b) or otherwise required to be maintained under the applicable Pledge
and Security Agreement between Main St. California, Inc., and Franchise Mortgage
Acceptance Company (the "Applicable FMAC Security Agreement") (including return
of unearned premium); and all income, products and proceeds of the foregoing
(For purposes of this clause (b), "Goods", Inventory", "Equipment", "General
Intangibles", "Franchise Agreement", "License", "Business", and "Secured Party",
shall have the meaning set forth for such term in the Applicable FMAC Security
Agreement as of the date hereof); and
(c) with respect to the Pledged Interests described in clause (g) in
Section 2, all of the Subsidiary Securities evidencing ownership interests in
Main St. California, Inc., Main St. Midwest, Inc. or Cornerstone Productions,
Inc.;
provided that, if (i) a Restaurant ceases to be an Excluded CNL Restaurant or
(ii) the CNL Facility has terminated, the property described in clauses (a) of
the definition of Excluded Collateral shall immediately (x) cease to be Excluded
Property, (y) become additional Collateral and (z) be subject to the security
interest granted hereby;
provided further that, if (i) a Restaurant ceases to be an Excluded GMAC
Restaurant or (ii) the Indebtedness owing in connection with the Applicable FMAC
Security Agreement and other transaction documents related to such Excluded GMAC
Restaurant has terminated, the property described in clauses (b) of the
definition of Excluded Collateral shall immediately (x) cease to be Excluded
Property, (y) become additional Collateral and (z) be subject to the security
interest granted hereby;
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provided further that, if the Indebtedness owed by Main St. California, Inc.,
Main St. Midwest, Inc or Cornerstone Productions, Inc. under the CNL Facility
has terminated, the property described in clauses (c) of the definition of
Excluded Collateral related to such Subsidiary shall immediately (x) cease to be
Excluded Property, (y) become additional Collateral and (z) be subject to the
security interest granted hereby.
3. Perfection. As of the date of execution of this Security Agreement or
Security Joinder Agreement by each Grantor, as applicable (with respect to each
Grantor, its "Applicable Date"), such Grantor shall have:
(a) furnished the Administrative Agent with duly authorized financing
statements in form, number and substance suitable for filing, sufficient
under applicable law, and satisfactory to the Administrative Agent in order
that upon the filing of the same the Administrative Agent, for the benefit
of the Secured Parties, shall have a duly perfected security interest in
all Collateral in which a security interest can be perfected by the filing
of financing statements;
(b) to the extent expressly required by the terms hereof or of the
Credit Agreement, or otherwise as the Administrative Agent may request,
furnished the Administrative Agent with properly executed Qualifying
Control Agreements, issuer acknowledgments of the Administrative Agent's
interest in Letter-of-Credit Rights, and evidence of the placement of a
restrictive legend on tangible chattel paper (and the tangible components
of electronic Chattel Paper), and taken appropriate action acceptable to
the Administrative Agent sufficient to establish the Administrative Agent's
control of electronic Chattel Paper (and the electronic components of
hybrid Chattel Paper), as appropriate, with respect to Collateral in which
either (i) a security interest can be perfected only by control or such
restrictive legending, or (ii) a security interest perfected by control or
accompanied by such restrictive legending shall have priority as against a
lien creditor, a purchaser of such Collateral from the applicable Grantor,
or a security interest perfected by Persons not having control or not
accompanied by such restrictive legending, in each case in form and
substance acceptable to the Administrative Agent and sufficient under
applicable law so that the Administrative Agent, for the benefit of the
Secured Parties, shall have a security interest in all such Collateral
perfected by control; and
(c) to the extent expressly required by the terms hereof or of the
Credit Agreement, or otherwise as the Administrative Agent may request,
delivered to the Administrative Agent or, if the Administrative Agent shall
specifically consent in each instance, an agent or bailee of the
Administrative Agent who has acknowledged such status in a properly
executed Qualifying Control Agreement possession of all Collateral with
respect to which either a security interest can be perfected only by
possession or a security interest perfected by possession shall have
priority as against Persons not having possession, and including in the
case of Instruments, Documents, and Investment Property in the form of
certificated securities, duly executed endorsements or stock powers in
blank, as the case may be, affixed thereto in form and substance acceptable
to the Administrative Agent and sufficient under applicable law so that the
Administrative Agent, for the benefit of the Secured Parties, shall have a
security interest in all such Collateral perfected by possession;
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with the effect that the Liens conferred in favor of the Administrative Agent
shall be and remain duly perfected and of first priority subject only, to the
extent applicable, to Liens allowed to exist and have priority under Section
7.01 of the Credit Agreement ("Permitted Liens"). All financing statements
(including all amendments thereto and continuations thereof), control
agreements, certificates, acknowledgments, stock powers and other documents,
electronic identification, restrictive legends, and instruments furnished in
connection with the creation, enforcement, protection, perfection or priority of
the Administrative Agent's security interest in Collateral, including such items
as are described above in this Section 3, are sometimes referred to herein as
"Perfection Documents". The delivery of possession of items of or evidencing
Collateral, causing other Persons to execute and deliver Perfection Documents as
appropriate, the filing or recordation of Perfection Documents, the
establishment of control over items of Collateral, and the taking of such other
actions as may be necessary or advisable in the determination of the
Administrative Agent to create, enforce, protect, perfect, or establish or
maintain the priority of, the security interest of the Administrative Agent for
the benefit of the Secured Parties in the Collateral is sometimes referred to
herein as "Perfection Action".
Without limiting the generality of the foregoing, subject to Section
9(e)(iii), each Grantor agrees to deliver all certificates, instruments or other
documents representing any Pledged Interest to the Administrative Agent at such
location as the Administrative Agent shall from time to time designate by
written notice pursuant to Section 22 for its custody at all times until
termination of this Security Agreement, together with such instruments of
assignment and transfer as requested by the Administrative Agent. In addition,
each Pledgor agrees to register and cause to be registered the interest of the
Administrative Agent, for the benefit of the Secured Parties, in the Pledged
Interests on its own books and records and the registration books of each of the
Subsidiaries.
4. Maintenance of Security Interest; Further Assurances.
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(a) Each Grantor will from time to time at its own expense, deliver
specific assignments of Collateral or such other Perfection Documents, and
take such other or additional Perfection Action, as may be required by the
terms of the Loan Documents or as the Administrative Agent may reasonably
request in connection with the administration or enforcement of this
Security Agreement or related to the Collateral or any part thereof in
order to carry out the terms of this Security Agreement, to perfect,
protect, maintain the priority of or enforce the Administrative Agent's
security interest in the Collateral, subject only to Permitted Liens, or
otherwise to better assure and confirm unto the Administrative Agent its
rights, powers and remedies for the benefit of the Secured Parties
hereunder. Without limiting the foregoing, each Grantor hereby irrevocably
authorizes the Administrative Agent to file (with, or to the extent
permitted by applicable law, without the signature of the Grantor appearing
thereon) financing statements (including amendments thereto and initial
financing statements in lieu of continuation statements) or other
Perfection Documents (including copies thereof) showing such Grantor as
"debtor" at such time or times and in all filing offices as the
Administrative Agent may from time to time determine to be necessary or
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advisable to perfect or protect the rights of the Administrative Agent and
the Secured Parties hereunder, or otherwise to give effect to the
transactions herein contemplated. Each Grantor hereby irrevocably ratifies
and acknowledges the Administrative Agent's authority to have effected
filings of Perfection Documents made by the Administrative Agent prior to
its Applicable Date.
(b) With respect to any and all Collateral, each Grantor agrees to do
and cause to be done all things necessary to perfect, maintain the priority
of and keep in full force the security interest granted in favor of the
Administrative Agent for the benefit of the Secured Parties, including, but
not limited to, the prompt payment upon demand therefor by the
Administrative Agent of all fees and expenses (including documentary stamp,
excise or intangibles taxes) incurred in connection with the preparation,
delivery, or filing of any Perfection Document or the taking of any
Perfection Action to perfect, protect or enforce a security interest in
Collateral in favor of the Administrative Agent for the benefit of the
Secured Parties, subject only to Permitted Liens. All amounts not so paid
when due shall constitute additional Secured Obligations and (in addition
to other rights and remedies resulting from such nonpayment) shall bear
interest from the date of demand until paid in full at the Default Rate.
(c) Each Grantor agrees to maintain among its books and records
appropriate notations or evidence of, and to make or cause to be made
appropriate disclosure upon its financial statements of, the security
interest granted hereunder to the Administrative Agent for the benefit of
the Secured Parties.
(d) Each Grantor agrees that, in the event any proceeds (other than
goods) of Collateral shall be or become commingled with other property not
constituting Collateral, then such proceeds may, to the extent permitted by
law, be identified by application of the lowest intermediate balance rule
to such commingled property.
5. Receipt of Payment. In the event an Event of Default shall occur and
be continuing and a Grantor (or any of its Affiliates, subsidiaries,
stockholders, directors, officers, employees or agents) shall receive any
proceeds of Collateral, including without limitation monies, checks, notes,
drafts or any other items of payment, each Grantor shall hold all such items of
payment in trust for the Administrative Agent for the benefit of the Secured
Parties, and as the property of the Administrative Agent for the benefit of the
Secured Parties, separate from the funds and other property of such Grantor, and
no later than the first Business Day following the receipt thereof, at the
election of the Administrative Agent, such Grantor shall cause such Collateral
to be forwarded to the Administrative Agent for its custody, possession and
disposition on behalf of the Secured Parties in accordance with the terms hereof
and of the other Loan Documents.
6. Preservation and Protection of Collateral.
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(a) The Administrative Agent shall be under no duty or liability with
respect to the collection, protection or preservation of the Collateral, or
otherwise. Each Grantor shall be responsible for the safekeeping of its
Collateral, and in no event shall the Administrative Agent have any
responsibility for (i) any loss or damage thereto or destruction thereof
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occurring or arising in any manner or fashion from any cause, (ii) any
diminution in the value thereof, or (iii) any act or default of any
carrier, warehouseman, bailee or forwarding agency thereof or other Person
in any way dealing with or handling such Collateral.
(b) Each Grantor shall keep and maintain its tangible personal
property Collateral in good operating condition and repair, ordinary wear
and tear excepted. No Grantor shall permit any such items to become a
fixture to real property (unless such Grantor has granted the
Administrative Agent for the benefit of the Secured Parties a Lien on such
real property having a priority acceptable to the Administrative Agent) or
accessions to other personal property.
(c) Each Grantor agrees (i) to pay when due all taxes, charges and
assessments against the Collateral in which it has any interest, unless
being contested in good faith by appropriate proceedings diligently
conducted and against which adequate reserves have been established in
accordance with GAAP applied on a basis consistent with the application of
GAAP in the Audited Financial Statements and evidenced to the satisfaction
of the Administrative Agent and provided that all enforcement proceedings
in the nature of levy or foreclosure are effectively stayed, and (ii) to
cause to be terminated and released all Liens (other than Permitted Liens)
on the Collateral. Upon the failure of any Grantor to so pay or contest
such taxes, charges, or assessments, or cause such Liens to be terminated,
the Administrative Agent at its option may pay or contest any of them or
amounts relating thereto (the Administrative Agent having the sole right to
determine the legality or validity and the amount necessary to discharge
such taxes, charges, Liens or assessments) but shall not have any
obligation to make any such payment or contest. All sums so disbursed by
the Administrative Agent, including reasonable Attorneys' Costs, court
costs, expenses and other charges related thereto, shall be payable on
demand by the applicable Grantor to the Administrative Agent and shall be
additional Secured Obligations secured by the Collateral, and any amounts
not so paid on demand (in addition to other rights and remedies resulting
from such nonpayment) shall bear interest from the date of demand until
paid in full at the Default Rate.
7. Status of Grantors and Collateral Generally. Each Grantor represents
and warrants to, and covenants with, the Administrative Agent for the benefit of
the Secured Parties, with respect to itself and the Collateral as to which it
has or acquires any interest, that:
(a) It is at its Applicable Date (or as to Collateral acquired after
its Applicable Date will be upon the acquisition of the same) and, except
as permitted by the Credit Agreement and subsection (b) of this Section 7,
will continue to be, the owner of the Collateral, free and clear of all
Liens, other than the security interest hereunder in favor of the
Administrative Agent for the benefit of the Secured Parties and Permitted
Liens, and that it will at its own cost and expense defend such Collateral
and any products and proceeds thereof against all claims and demands of all
Persons (other than holders of Permitted Liens) to the extent of their
claims permitted under the Credit Agreement at any time claiming the same
or any interest therein adverse to the Secured Parties. Upon the failure of
any Grantor to so defend, the Administrative Agent may do so at its option
but shall not have any obligation to do so. All sums so disbursed by the
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Administrative Agent, including reasonable Attorneys' Costs, court costs,
expenses and other charges related thereto, shall be payable on demand by
the applicable Grantor to the Administrative Agent and shall be additional
Secured Obligations secured by the Collateral, and any amounts not so paid
on demand (in addition to other rights and remedies resulting from such
nonpayment) shall bear interest from the date of demand until paid in full
at the Default Rate.
(b) It shall not (i) sell, assign, transfer, lease, license or
otherwise dispose of any of, or grant any option with respect to, the
Collateral, except for Dispositions permitted under the Credit Agreement,
(ii) create or suffer to exist any Lien upon or with respect to any of the
Collateral except for the security interests created by this Security
Agreement and Permitted Liens, or (iii) take any other action in connection
with any of the Collateral that would materially impair the value of the
interest or rights of such Grantor in the Collateral taken as a whole or
that would materially impair the interest or rights of the Administrative
Agent for the benefit of the Secured Parties.
(c) It has full power, legal right and lawful authority to enter into
this Security Agreement (and any Security Joinder Agreement applicable to
it) and to perform its terms, including the grant of the security interests
in the Collateral herein provided for.
(d) No authorization, consent, approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person
which has not been given or obtained, as the case may be, is required
either (i) for the grant by such Grantor of the security interests granted
hereby or for the execution, delivery or performance of this Security
Agreement (or any Security Joinder Agreement) by such Grantor, or (ii) for
the perfection of or the exercise by the Administrative Agent, on behalf of
the Secured Parties, of its rights and remedies hereunder, except for
action required by the Uniform Commercial Code to perfect and exercise
remedies with respect to the security interest conferred hereunder.
(e) No effective financing statement or other Perfection Document
similar in effect, nor any other Perfection Action, covering all or any
part of the Collateral purported to be granted or taken by or on behalf of
such Grantor (or by or on behalf of any other Person and which remains
effective as against all or any part of the Collateral) has been filed in
any recording office, delivered to another Person for filing (whether upon
the occurrence of a contingency or otherwise), or otherwise taken, as the
case may be, except such as pertain to Permitted Liens and such as may have
been filed for the benefit of, delivered to, or taken in favor of, the
Administrative Agent for the benefit of the Secured Parties in connection
with the security interests conferred hereunder.
(f) Schedule 7(f) attached hereto contains true and complete
information as to each of the following: (i) the exact legal name of each
Grantor as it appears in its Organizational Documents as of its Applicable
Date and at any time during the five (5) year period ending as of its
Applicable Date (the "Covered Period"), (ii) the jurisdiction of formation
and form of organization of each Grantor, and the identification number of
such Grantor in its jurisdiction of formation (if any), (iii) each address
of the chief executive office of each Grantor as of its Applicable Date and
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at any time during the Covered Period, (iv) all trade names or trade styles
used by such Grantor as of its Applicable Date and at any time during the
Covered Period, (v) the address of each location of such Grantor at which
any tangible personal property Collateral (including Account Records and
Account Documents) is located at its Applicable Date or has been located at
any time during the Covered Period, (vi) with respect to each location
described in clause (v) that is not owned beneficially and of record by
such Grantor, the name and address of the owner thereof; and (vii) the name
of each Person other than such Grantor and the address of such Person at
which any tangible personal property Collateral of such Grantor is held
under any warehouse, consignment, bailment or other arrangement as of its
Applicable Date. No Grantor shall change its name, change its jurisdiction
of formation (whether by reincorporation, merger or otherwise), change the
location of its chief executive office, or utilize any additional location
where tangible personal property Collateral (including Account Records and
Account Documents) may be located, except in each case upon giving not less
than thirty (30) days' prior written notice to the Administrative Agent and
taking or causing to be taken at such Grantor's expense all such Perfection
Action, including the delivery of such Perfection Documents, as may be
reasonably requested by the Administrative Agent to perfect or protect, or
maintain the perfection and priority of, the Lien of the Administrative
Agent for the benefit of the Secured Parties in Collateral contemplated
hereunder.
(g) No Grantor shall engage in any consignment transaction in respect
of any of the Collateral, whether as consignee or consignor.
(h) No Grantor shall cause, suffer or permit any of the tangible
personal property Collateral (i) to be evidenced by any document of title
(except for shipping documents as necessary or customary to effect the
receipt of raw materials or components or the delivery of inventory to
customers, in each case in the ordinary course of business) or (ii) to be
in the possession, custody or control of any warehouseman or other bailee
without the prior written consent of the Administrative Agent in each
instance.
(i) No tangible personal property Collateral is or shall be located
at any location that is leased by such Grantor from any other Person,
unless (x) such location and lessor is set forth on Schedule 7(f) attached
hereto or such Grantor provides not less than thirty (30) days' prior
written notice thereof to the Administrative Agent, (y) unless otherwise
permitted by the Administrative Agent, such lessor acknowledges the Lien in
favor of the Administrative Agent for the benefit of the Secured Parties
conferred hereunder and waives its statutory and consensual liens and
rights with respect to such Collateral in form and substance acceptable to
the Administrative Agent and delivered in writing to the Administrative
Agent prior to any Collateral being located at any such location, and (z)
the Grantor shall have caused at its expense to be prepared and executed
such additional Perfection Documents and to be taken such other Perfection
Action as the Administrative Agent may deem necessary or advisable to carry
out the transactions contemplated by this Security Agreement.
8. Inspection. The Administrative Agent (by any of its officers,
employees and agents), on behalf of the Secured Parties, shall have the right
upon prior notice to an executive officer of any Grantor, and at any reasonable
times during such Grantor's usual business hours, to inspect (i) the Collateral,
11
(ii) all records related thereto located at the Borrower's chief executive
office (and to make extracts or copies from such records), and (iii) the
premises upon which any of the Collateral is located, to discuss such Grantor's
affairs and finances with any Person (other than Persons obligated on any
Accounts ("Account Debtors") except as expressly otherwise permitted in the Loan
Documents) and to verify with any Person other than (except as expressly
otherwise permitted in the Loan Documents) Account Debtors the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral and, if an Event of Default has occurred and is continuing, to
discuss such Grantor's affairs and finances with such Grantor's Account Debtors
and to verify the amount, quality, value and condition of, or any other matter
relating to, the Collateral with such Account Debtors. Upon or after the
occurrence and during the continuation of an Event of Default, (i) the
Administrative Agent or any Lender may visit the premises upon which any of the
Collateral is located to inspect any and all records related thereto, and (ii)
the Administrative Agent may at any time and from time to time employ and
maintain on such Grantor's premises a custodian selected by the Administrative
Agent who shall have full authority to do all acts necessary to protect the
Administrative Agent's (for the benefit of the Secured Parties) interest. All
expenses incurred by the Administrative Agent, on behalf of the Secured Parties,
by reason of the employment of such custodian shall be paid by such Grantor on
demand from time to time and shall be added to the Secured Obligations secured
by the Collateral, and any amounts not so paid on demand (in addition to other
rights and remedies resulting from such nonpayment) shall bear interest from the
date of demand until paid in full at the Default Rate.
9. Specific Collateral.
(a) Accounts. With respect to its Accounts whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) Each Grantor shall keep accurate and complete records of its
Accounts ("Account Records") and from time to time at intervals
designated by the Administrative Agent such Grantor shall provide the
Administrative Agent with a schedule of Accounts in form and substance
acceptable to the Administrative Agent describing all Accounts created
or acquired by such Grantor with amounts greater than $200,000 in the
aggregate, or greater than $100,000 individually ("Schedule of
Accounts"); provided, however, that such Grantor's failure to execute
and deliver any such Schedule of Accounts shall not affect or limit
the Administrative Agent's security interest or other rights in and to
any Accounts for the benefit of the Secured Parties. If requested by
the Administrative Agent, each Grantor shall furnish the
Administrative Agent with copies of proof of delivery and other
documents relating to the Accounts so scheduled, including without
limitation repayment histories and present status reports
(collectively, "Account Documents") and such other matter and
information relating to the status of then existing Accounts as the
Administrative Agent shall request.
(ii) All Account Records and Account Documents are and shall at
all times be located only at such Grantor's current chief executive
office as set forth on Schedule 7(f) attached hereto, such other
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locations as are specifically identified on Schedule 7(f) attached
hereto as an "Account Documents location," or as to which the Grantor
has complied with Section 7(f) hereof.
(iii) The Accounts are genuine, are in all respects what they
purport to be, are not evidenced by an instrument or document or, if
evidenced by an instrument or document, are only evidenced by one
original instrument or document.
(iv) The Accounts cover bona fide sales, leases, licenses or
other dispositions of property usually dealt in by such Grantor, or
the rendition by such Grantor of services, to an Account Debtor in the
ordinary course of business.
(v) The amounts of the face value of any Account shown or
reflected on any Schedule of Accounts, invoice statement, or
certificate delivered to the Administrative Agent, are actually owing
to such Grantor and are not contingent for any reason; and there are
no setoffs, discounts, allowances, claims, counterclaims or disputes
of any kind or description in an amount greater than $200,000 in the
aggregate, or greater than $100,000 individually, existing or asserted
with respect thereto and such Grantor has not made any agreement with
any Account Debtor thereunder for any deduction therefrom, except as
may be stated in the Schedule of Accounts and reflected in the
calculation of the face value of each respective invoice related
thereto.
(vi) Except for conditions generally applicable to such Grantor's
industry and markets, there are no facts, events, or occurrences known
to such Grantor pertaining particularly to any Accounts which are
reasonably expected to materially impair in any way the validity,
collectibility or enforcement of Accounts that would reasonably be
likely, in the aggregate, to be of material economic value, or in the
aggregate materially reduce the amount payable thereunder from the
amount of the invoice face value shown on any Schedule of Accounts, or
on any certificate, contract, invoice or statement delivered to the
Administrative Agent with respect thereto.
(vii) The property or services giving rise thereto are not, and
were not at the time of the sale or performance thereof, subject to
any Lien, claim, encumbrance or security interest, except those of the
Administrative Agent for the benefit of Secured Parties and Permitted
Liens.
(viii) In the event any amounts due and owing in excess of
$100,000 individually, or $200,000 in the aggregate amount, are in
dispute between any Account Debtor and a Grantor (which shall include
without limitation any dispute in which an offset claim or
counterclaim may result), such Grantor shall provide the
Administrative Agent with written notice thereof as soon as
practicable, explaining in detail the reason for the dispute, all
claims related thereto and the amount in controversy.
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(b) Inventory. With respect to its Inventory whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) All Inventory is and shall at all times be located only at
such Grantor's locations as set forth on Schedule 7(f) attached hereto
or at such other locations as to which such Grantor has complied with
Section 7(f) hereof. No Grantor shall, other than in the ordinary
course of business in connection with its sale, lease, license or
other permitted Disposition, remove any Inventory having an aggregate
value in excess of that stated in the preceding sentence from such
locations.
(ii) If any Account Debtor returns any Inventory to a Grantor
after shipment thereof, and such return generates a credit in excess
of $50,000 on any individual Account or $200,000 in the aggregate on
any Accounts of such Account Debtor, such Grantor shall notify the
Administrative Agent in writing of the same as soon as practicable.
(c) Equipment. With respect to its Equipment whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) The Grantors, as soon as practicable following a request
therefor by the Administrative Agent, shall deliver to the
Administrative Agent any and all evidence of ownership of any of the
Equipment (including without limitation certificates of title and
applications for title).
(ii) The Grantors shall maintain accurate, itemized records
describing the kind, type, quality, quantity and value of its
Equipment and shall furnish the Administrative Agent upon request with
a current schedule containing the foregoing information, but, other
than during the continuance of an Event of Default, not more often
than once per fiscal quarter.
(iii) All Equipment is and shall at all times be located only at
such Grantor's locations as set forth on Schedule 7(f) attached hereto
or at such other locations as to which such Grantor has complied with
Section 7(f) hereof. No Grantor shall, other than as expressly
permitted under the Credit Agreement, sell, lease, transfer, dispose
of or remove any Equipment from such locations.
(d) Supporting Obligations. With respect to its Supporting
Obligations whether now existing or hereafter created or acquired and
wheresoever located, each Grantor represents, warrants and covenants to the
Administrative Agent for the benefit of the Secured Parties that:
(i) Each Grantor shall (i) maintain at all times, and furnish to
the Administrative Agent from time to time at the Administrative
Agent's request, a current list identifying in reasonable detail each
Supporting Obligation relating to any Collateral from a single obligor
in excess of $100,000, and (ii) upon the request of the Administrative
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Agent from time to time following the occurrence and during the
continuance of any Default or Event of Default, deliver to the
Administrative Agent the originals of all documents evidencing or
constituting Supporting Obligations, together with such other
documentation (executed as appropriate by the Grantor) and information
as may be necessary to enable the Administrative Agent to realize upon
the Supporting Obligations in accordance with their respective terms
or transfer the Supporting Obligations as may be permitted under the
Loan Documents or by applicable law.
(ii) With respect to each letter of credit giving rise to
Letter-of-Credit Rights that has an aggregate stated amount available
to be drawn in excess of $100,000, each Grantor shall, at the request
of the Administrative Agent, cause the issuer thereof to execute and
deliver to the Administrative Agent a Qualifying Control Agreement.
(iii) With respect to each transferable letter of credit giving
rise to Letter-of-Credit Rights that has an aggregate stated amount
available to be drawn in excess of $100,000, each Grantor shall, at
the Administrative Agent's request upon and during the continuance of
any Default or Event of Default, deliver to the Administrative Agent a
duly executed, undated transfer form in blank sufficient in form and
substance under the terms of the related letter of credit to effect,
upon completion and delivery to the letter of credit issuer together
with any required fee, the transfer of such letter of credit to the
transferee identified in such form. Each Grantor hereby expressly
authorizes the Administrative Agent following the occurrence and
during the continuance of any Event of Default to complete and tender
each such transfer form as transferor in its own name or in the name,
place and stead of the Grantor in order to effect any such transfer,
either to the Administrative Agent or to another transferee, as the
case may be, in connection with any sale or other disposition of
Collateral or for any other purpose permitted under the Loan Documents
or by applicable law.
(e) Investment Property. With respect to its Investment Property
whether now existing or hereafter created or acquired and wheresoever
located, each Grantor represents, warrants and covenants to the
Administrative Agent for the benefit of the Secured Parties that:
(i) All of the Pledged Interests are, as of the date of
execution of this Security Agreement or a Security Joinder Agreement
by each Grantor pledging such Pledged Interests (such date as
applicable with respect to each Grantor, its "Applicable Date"), and
shall at all times thereafter be validly issued and outstanding, fully
paid and non-assessable and constitute (i) 65% of the issued and
outstanding Voting Securities (or if any Grantor shall own less than
65% of such Voting Securities, then 100% of the Voting Securities
owned by such Grantor) and 100% of the other issued and outstanding
Subsidiary Securities of each Direct Foreign Subsidiary and (ii) all
of the issued and outstanding Subsidiary Securities of all Domestic
Subsidiaries, and are accurately described on Schedule 9(e)-1.
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(ii) The Grantor is as at its Applicable Date and shall at all
times thereafter (subject to dispositions permitted by the Credit
Agreement) be the sole registered and record and beneficial owner of
the Pledged Interests, free and clear of all Liens, charges, equities,
options, hypothecations, encumbrances and restrictions on pledge or
transfer, including transfer of voting rights (other than the pledge
hereunder and applicable restrictions pursuant to federal and state
and applicable foreign securities laws). Without limiting the
foregoing, the Pledged Interests are not and will not be subject to
any voting trust, shareholders agreement, right of first refusal,
voting proxy, power of attorney or other similar arrangement (other
than the rights hereunder in favor of the Administrative Agent).
(iii) At no time shall any Pledged Interests (i) be held or
maintained in the form of a security entitlement or credited to any
securities account and (ii) which constitute a "security" (or as to
which the related Pledged Subsidiary has elected to have treated as a
"security") under Article 8 of the Uniform Commercial Code of the
State of New York or of any other jurisdiction whose laws may govern
(the "UCC") be maintained in the form of uncertificated securities.
With respect to Pledged Interests that are "securities" under the UCC,
or as to which the issuer has elected at any time to have such
interests treated as "securities" under the UCC, such Pledged
Interests are, and shall at all times be, represented by the share
certificates listed on Schedule 9(e)-1 hereto, which share
certificates, with stock powers duly executed in blank by the Grantor,
have been delivered to the Administrative Agent or are being delivered
to the Administrative Agent simultaneously herewith or, in the case of
Additional Interests as defined in Section 21, shall be delivered
pursuant to Section 21. Without limiting the foregoing provisions of
this Section 2(c), with respect to any Pledged Interests issued by any
Direct Foreign Subsidiary, Grantor shall deliver or cause to be
delivered, in addition to or in substitution for all or any of the
foregoing items, as the Administrative Agent may elect, such other
instruments, certificates, agreements, notices, filings, and other
documents, and take or cause to be taken such other action, as the
Administrative Agent may determine to be necessary or advisable under
the laws of the jurisdiction of formation of such Direct Foreign
Subsidiary, to grant, perfect and protect as a first priority lien in
such Collateral in favor of the Administrative Agent for the benefit
of the Secured Parties.
(iv) Except as otherwise expressly provided herein or pursuant to
dispositions permitted under the Credit Agreement, none of the Pledged
Interests (nor any interest therein or thereto) shall be sold,
transferred or assigned without the Administrative Agent's prior
written consent, which may be withheld for any reason.
(v) It shall at all times cause the Pledged Interests of such
Grantor that constitute "securities" (or which the issuer elects to
have treated as "securities") under the UCC to be represented by the
certificates now and hereafter delivered to the Administrative Agent
in accordance with the terms hereof and that it shall cause each of
the Subsidiaries as to which it is the Grantor not to issue any
16
Subsidiary Securities, or securities convertible into, or exchangeable
or exercisable for, Subsidiary Securities, at any time during the term
of this Security Agreement unless the Pledged Interests of such
Subsidiary are issued solely to either (y) such Grantor who shall
immediately comply with this Section 9(e) with respect to such
property or (z) the Borrower or a Guarantor who shall immediately
pledge such additional Subsidiary Securities to the Administrative
Agent for the benefit of the Secured Parties pursuant to the terms
hereof, as applicable, on substantially identical terms as are
contained herein and deliver or cause to be delivered the appropriate
documents described herein to the Administrative Agent and take such
further actions as the Administrative Agent may deem necessary in
order to perfect a first priority security interest in such Subsidiary
Securities.
(vi) Schedule 9(e)-2 attached hereto contains a true and complete
description of (x) the name and address of each securities
intermediary with which such Grantor maintains a securities account in
which Other Investment Property is or may at any time be credited or
maintained, and (y) all other Other Investment Property of such
Grantor.
(vii) Except with the express prior written consent of the
Administrative Agent in each instance, all Other Investment Property
shall be maintained at all times in the form of (a) certificated
securities, which certificates shall have been delivered to the
Administrative Agent together with duly executed undated stock powers
endorsed in blank pertaining thereto, or (b) security entitlements
credited to one or more securities accounts as to each of which the
Administrative Agent has received (1) copies of the account agreement
between the applicable securities intermediary and the Grantor and the
most recent statement of account pertaining to such securities account
(each certified to be true and correct by an officer of the Grantor)
and (2) a Qualifying Control Agreement from the applicable securities
intermediary which remains in full force and effect and as to which
the Administrative Agent has not received any notice of termination.
Without limiting the generality of the foregoing, no Grantor shall
cause, suffer or permit any Investment Property to be credited to or
maintained in any securities account not listed on Schedule 9(e)-2
attached hereto except in each case upon giving not less than thirty
(30) days' prior written notice to the Administrative Agent and taking
or causing to be taken at such Grantor's expense all such Perfection
Action, including the delivery of such Perfection Documents, as may be
reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in
Collateral contemplated hereunder.
(viii) All dividends and other distributions with respect to any
of the Investment Property shall be subject to the security interest
conferred hereunder, provided, however, that cash dividends paid to a
Grantor as record owner of the Investment Property may be disbursed to
and retained by such Grantor so long as no Default or Event of Default
shall have occurred and be continuing, free from any Lien hereunder.
17
(ix) So long as no Default or Event of Default shall have
occurred and be continuing, the registration of Investment Property in
the name of a Grantor as record and beneficial owner shall not be
changed and such Grantor shall be entitled to exercise all voting and
other rights and powers pertaining to Investment Property for all
purposes not inconsistent with the terms hereof or of any Qualifying
Control Agreement relating thereto.
(x) Upon the occurrence and during the continuance of any
Default or Event of Default, at the option of the Administrative
Agent, all rights of the Grantors to exercise the voting or consensual
rights and powers which it is authorized to exercise pursuant to
clause (iv) immediately above shall cease and the Administrative Agent
may thereupon (but shall not be obligated to), at its request, cause
such Collateral to be registered in the name of the Administrative
Agent or its nominee or agent for the benefit of the Secured Parties
and/or exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end each
Grantor hereby appoints the Administrative Agent as its proxy, with
full power of substitution, to vote and exercise all other rights as a
shareholder with respect to such Investment Property upon the
occurrence and during the continuance of any Default or Event of
Default, which proxy is coupled with an interest and is irrevocable
until the Facility Termination Date, and each Grantor hereby agrees to
provide such further proxies as the Administrative Agent may request;
provided, however, that the Administrative Agent in its discretion may
from time to time refrain from exercising, and shall not be obligated
to exercise, any such voting or consensual rights or such proxy.
(xi) Upon the occurrence and during the continuance of any
Default or Event of Default, all rights of the Grantors to receive and
retain cash dividends and other distributions upon or in respect to
Investment Property pursuant to clause (iii) above shall cease and
shall thereupon be vested in the Administrative Agent for the benefit
of the Secured Parties, and each Grantor shall, or shall cause, all
such cash dividends and other distributions with respect to the
Investment Property to be promptly delivered to the Administrative
Agent (together, if the Administrative Agent shall request, with any
documents related thereto) to be held, released or disposed of by it
hereunder or, at the option of the Administrative Agent, to be applied
to the Secured Obligations.
(f) Deposit Accounts. With respect to its Deposit Accounts whether
now existing or hereafter created or acquired and wheresoever located, each
Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
(i) Schedule 9(f) attached hereto contains a true and complete
description of (x) the name and address of each depositary institution
with which such Grantor maintains a Deposit Account in which collected
balances or deposits in excess of $50,000 are or may at any time be
credited or maintained.
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(ii) Except with the express prior written consent of the
Administrative Agent in each instance, all Deposit Accounts in which
collected balances or deposits in excess of $50,000 are or may at any
time be credited or maintained shall be maintained at all times with
depositary institutions as to which the Administrative Agent shall
have received a Qualifying Control Agreement. Without limiting the
generality of the foregoing, no Grantor shall cause, suffer or permit
(x) any deposit to be evidenced by a certificate of deposit unless
such certificate of deposit is a negotiable instrument and immediately
upon receipt thereof such certificate shall have been delivered to the
Administrative Agent, together with a duly executed undated assignment
in blank affixed thereto, or (y) any Deposit Account not listed on
Schedule 9(f) attached hereto to be opened or maintained except in
each case upon giving not less than thirty (30) days' prior written
notice to the Administrative Agent and taking or causing to be taken
at such Grantor's expense all such Perfection Action, including the
delivery of such Perfection Documents, as may be reasonably requested
by the Administrative Agent to perfect or protect, or maintain the
perfection and priority of, the Lien of the Administrative Agent for
the benefit of the Secured Parties in Collateral contemplated
hereunder.
(g) Chattel Paper. With respect to its Chattel Paper whether now
existing or hereafter created or acquired and wheresoever located, each
Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
(i) Each Grantor shall at all times retain sole physical
possession of the originals of all Chattel Paper (other than
electronic Chattel Paper and the electronic components of hybrid
Chattel Paper); provided, however, that (x) upon the request of the
Administrative Agent from time to time, such Grantor shall immediately
deliver physical possession of such Chattel Paper to the
Administrative Agent or its designee, and (y) in the event that there
shall be created more than one original counterpart of any physical
document that alone or in conjunction with any other physical or
electronic document constitutes Chattel Paper, then such counterparts
shall be numbered consecutively starting with "1" and such Grantor
shall retain the counterpart numbered "1".
(ii) All counterparts of all tangible Chattel Paper (and the
tangible components of hybrid Chattel Paper) shall immediately upon
the creation or acquisition thereof by any Grantor be conspicuously
legended as follows: "A FIRST PRIORITY SECURITY INTEREST IN THIS
CHATTEL PAPER HAS BEEN GRANTED TO BANK OF AMERICA, N.A., FOR ITSELF
AND AS ADMINISTRATIVE AGENT FOR CERTAIN LENDERS PURSUANT TO A SECURITY
AGREEMENT DATED AS OF OCTOBER 31, 2005, AS AMENDED FROM TIME TO TIME.
NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF ANY OTHER PERSON
MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS CHATTEL
PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE CONSENT OF
THE AFORESAID ADMINISTRATIVE AGENT AS PROVIDED IN SUCH SECURITY
AGREEMENT." In the case of electronic Chattel Paper (including the
19
electronic components of hybrid Chattel Paper), no Grantor shall
create or acquire any such Chattel Paper unless, prior to such
acquisition or creation, it shall have taken such Perfection Action as
the Administrative Agent may require to perfect by control the
security interest of the Administrative Agent for the benefit of the
Secured Parties in such Collateral.
(iii) Other than in the ordinary course of business and in
keeping with reasonable and customary practice, no Grantor shall
amend, modify, waive or terminate any provision of, or fail to
exercise promptly and diligently each material right or remedy
conferred under or in connection with, any Chattel Paper, in any case
in such a manner as could reasonably be expected to materially
adversely affect the value of affected Chattel Paper as collateral.
(h) Instruments. With respect to its Instruments whether now existing
or hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) Each Grantor shall (i) maintain at all times, and furnish to
the Administrative Agent from time to time at the Administrative
Agent's request, a current list identifying in reasonable detail
Instruments of which such Grantor is the payee or holder and having a
face amount payable in excess of $100,000, and (ii) upon the request
of the Administrative Agent from time to time, deliver to the
Administrative Agent the originals of all such Instruments, together
with duly executed undated endorsements in blank affixed thereto and
such other documentation and information as may be necessary to enable
the Administrative Agent to realize upon the Instruments in accordance
with their respective terms or transfer the Instruments as may be
permitted under the Loan Documents or by applicable law.
(ii) Other than in the ordinary course of business and in keeping
with reasonable and customary practice, no Grantor shall amend,
modify, waive or terminate any provision of, or fail to exercise
promptly and diligently each material right or remedy conferred under
or in connection with, any Instrument, in any case in such a manner as
could reasonably be expected to materially adversely affect the value
of affected Instrument as collateral.
(i) Commercial Tort Claims. With respect to its Commercial Tort
Claims whether now existing or hereafter created or acquired and
wheresoever located, each Grantor represents, warrants and covenants to the
Administrative Agent for the benefit of the Secured Parties that:
(i) Schedule 9(i) attached hereto contains a true and complete
list of all Commercial Tort Claims in which any Grantor has an
interest and which have been identified by a Grantor as of its
Applicable Date, and as to which the Pledgor believes in good faith
there exists the possibility of recovery (including by way of
settlement) of monetary relief in excess of $100,000 ("Grantor
Claims"). Each Grantor shall furnish to the Administrative Agent from
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time to time upon its request a certificate of an officer of such
Grantor referring to this Section 9(i) and (x) identifying all Grantor
Claims that are not then described on Schedule 9(i) attached hereto
and stating that each of such additional Grantor Claims shall be
deemed added to such Schedule 9(i) and shall constitute a Commercial
Tort Claim, a Grantor Claim, and additional Collateral hereunder, and
(y) summarizing the status or disposition of any Grantor Claims that
have been settled, or have been made the subject of any binding
mediation, judicial or arbitral proceeding, or any judicial or
arbitral order on the merits, or that have been abandoned. With
respect to each such additional Grantor Claim, such Grantor Claim
shall be and become part of the Collateral hereunder from the date
such claim is identified to the Administrative Agent as provided above
without further action, and (ii) the Administrative Agent is hereby
authorized at the expense of the applicable Grantor to execute and
file such additional financing statements or amendments to previously
filed financing statements, and take such other action as it may deem
necessary or advisable, to perfect the Lien on such additional Grantor
Claims conferred hereunder, and the Grantor shall, if required by
applicable law or otherwise at the request of the Administrative
Agent, execute and deliver such Perfection Documents and take such
other Perfection Action as the Administrative Agent may determine to
be necessary or advisable to perfect or protect the Lien of the
Administrative Agent for the benefit of the Secured Parties in such
additional Grantor Claims conferred hereunder.
(j) Internet Property Rights. With respect to its rights, titles and
interests in and to any internet domain names or registration rights
relating thereto, and any internet websites or the content thereof
(collectively, "Internet Property Rights") whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) Schedule 9(j) attached hereto contains a true and complete
description of (t) each internet domain name registered to such
Grantor or in which such Grantor has ownership, operating or
registration rights, (u) the name and address of the registrar for
such internet domain name, (v) the registration identification
information for such internet domain name, (w) the name of each
internet website operated (whether individually or jointly with
others) by such Grantor, (x) the name and address of each internet
service provider through whom each such website is operated, (y) the
name and address of each operator of each other internet site,
internet search engine, internet directory or Web browser with whom
such Grantor maintains any advertising or linking relationship which
is material to the operation of or flow of internet traffic to such
Grantor's website, and (z) each technology licensing and other
agreement that is material either to the operation of such Grantor's
website or to the advertising and linking relationships described in
clause (y), and the name and address of each other party to such
agreement.
(ii) Such Grantor shall cause to be delivered to the
Administrative Agent at or prior to the Closing Date with respect to
each internet domain name registered to such Grantor an undated
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transfer document, duly executed in blank by such Grantor and in the
form required by the applicable internet domain name registrar,
sufficient to effect the transfer of each internet domain name to the
transferee thereof named in such transfer form upon delivery to such
registrar. Without limiting the generality of the foregoing, no
Grantor shall acquire any rights to any internet domain name not
listed on Schedule 9(j) attached hereto except in each case upon
giving not less than thirty (30) days' prior written notice thereof to
the Administrative Agent, which notice shall be accompanied by an
appropriate supplement to Schedule 9(j) reflecting such additional
name, the delivery of additional executed internet domain name
transfer documents executed in blank with respect thereto, and taking
or causing to be taken at such Grantor's expense all such Perfection
Action, including the delivery of such Perfection Documents, as may be
reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in
Collateral contemplated hereunder. Without limiting the foregoing,
each Grantor shall furnish to the Administrative Agent and the Lenders
such supplements to Schedule 9(j) from time to time as shall be
necessary to keep such Schedule true and complete at all times.
(iii) So long as no Default or Event of Default shall have
occurred and be continuing, the registration of Internet Property
Rights in the name of a Grantor shall not be changed and such Grantor
shall be entitled to exercise all rights and powers with respect
thereto not inconsistent with the terms hereof .
(iv) Each Grantor hereby expressly authorizes the Administrative
Agent following the occurrence and during the continuance of any Event
of Default to (i) complete and tender each internet domain name
transfer document in its own name or in the name, place and stead of
the Grantor in order to effect the transfer of any internet domain
name registration, either to the Administrative Agent or to another
transferee, as the case may be, and (ii) maintain, obtain access to,
and continue to operate, in its own name or in the name, place and
stead of such Grantor, such Grantor's internet website and the
contents thereof, and all related advertising, linking and technology
licensing and other contractual relationships, in each case in
connection with the maintenance, preservation, operation, sale or
other disposition of Collateral or for any other purpose permitted
under the Loan Documents or by applicable law.
10. Casualty and Liability Insurance Required.
------------------------------------------
(a) Each Grantor will keep the Collateral continuously insured
against such risks as are customarily insured against by businesses of like
size and type engaged in the same or similar operations including:
(i) casualty insurance on the Inventory and the Equipment in an
amount not less than the full insurable value thereof, against loss or
damage by theft, fire, lightning and other hazards ordinarily included
under uniform broad form standard extended coverage policies, limited
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only as may be provided in the standard broad form of extended
coverage endorsement at the time in use in the states in which the
Collateral is located;
(ii) comprehensive general liability insurance against claims for
bodily injury, death or property damage occurring with or about such
Collateral (such coverage to include provisions waiving subrogation
against the Secured Parties), with the Administrative Agent and the
Lenders as additional insureds thereunder, in amounts as shall be
reasonably satisfactory to Administrative Agent;
(iii) liability insurance with respect to the operation of its
facilities under the workers' compensation laws of the states in which
such Collateral is located, in amounts as shall be reasonably
satisfactory to Administrative Agent; and
(iv) business interruption insurance in amounts as shall be
reasonably satisfactory to Administrative Agent.
(b) Each insurance policy obtained in satisfaction of the
requirements of Section 10(a):
(i) may be provided by blanket policies now or hereafter
maintained by each or any Grantor or by the Borrower;
(ii) shall be issued by such insurer (or insurers) as shall be
financially responsible, of recognized standing and reasonably
acceptable to the Administrative Agent;
(iii) shall be in such form and have such provisions (including
without limitation the loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee
endorsement clause) as are generally considered standard provisions
for the type of insurance involved and are reasonably acceptable in
all respects to the Administrative Agent;
(iv) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least
thirty (30) days' prior written notice to the Administrative Agent,
except for non-payment of premium, as to which such policies shall
provide for at least ten (10) days' prior written notice to the
Administrative Agent;
(v) without limiting the generality of the foregoing, all
insurance policies where applicable under Section 10(a)(i) carried on
the Collateral shall name the Administrative Agent, for the benefit of
the Secured Parties, as loss payee and the Administrative Agent and
Lenders as parties insured thereunder in respect of any claim for
payment.
(c) Prior to expiration of any such policy, such Grantor shall
furnish the Administrative Agent with evidence satisfactory to the
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Administrative Agent that the policy or certificate has been renewed or
replaced or is no longer required by this Security Agreement.
(d) Each Grantor hereby makes, constitutes and appoints the
Administrative Agent (and all officers, employees or agents designated by
the Administrative Agent), for the benefit of the Secured Parties, as such
Grantor's true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims under such policies of insurance,
endorsing the name of such Grantor on any check, draft, instrument or other
item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance, which appointment is coupled with an interest and is
irrevocable; provided, however, that the powers pursuant to such
appointment shall be exercisable only upon the occurrence and during the
continuation of an Event of Default.
(e) In the event such Grantor shall fail to maintain, or fail to
cause to be maintained, the full insurance coverage required hereunder or
shall fail to keep any of its Collateral in good repair and good operating
condition, the Administrative Agent may (but shall be under no obligation
to), without waiving or releasing any Secured Obligation or Default or
Event of Default by such Grantor hereunder, contract for the required
policies of insurance and pay the premiums on the same or make any required
repairs, renewals and replacements; and all sums so disbursed by
Administrative Agent, including reasonable Attorneys' Costs, court costs,
expenses and other charges related thereto, shall be payable on demand by
such Grantor to the Administrative Agent, shall be additional Secured
Obligations secured by the Collateral, and (in addition to other rights and
remedies resulting from such nonpayment) shall bear interest from the date
of demand until paid in full at the Default Rate.
(f) Each Grantor agrees that to the extent that it shall fail to
maintain, or fail to cause to be maintained, the full insurance coverage
required by Section 10(a), it shall in the event of any loss or casualty
pay promptly to the Administrative Agent, for the benefit of the Secured
Parties, to be held in a separate account for application in accordance
with the provisions of Sections 10(h), such amount as would have been
received as Net Proceeds (as hereinafter defined) by the Administrative
Agent, for the benefit of the Secured Parties, under the provisions of
Section 10(h) had such insurance been carried to the extent required.
(g) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 10(a)(ii) and 10(a)(iii) shall be applied by such
Grantor toward satisfaction of the claim or liability with respect to which
such insurance proceeds may be paid.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be
paid to such Grantor and held by such Grantor in a separate account and
applied, as long as no Event of Default shall have occurred and be
continuing, as follows: after any loss under any such insurance and payment
of the proceeds of such insurance, each Grantor shall have a period of
thirty (30) days after payment of the insurance proceeds with respect to
such loss to elect to either (x) repair or replace the Collateral so
damaged, (y) deliver such Net Proceeds to the Administrative Agent, for the
24
benefit of the Secured Parties, as additional Collateral or (z) apply such
Net Proceeds to the acquisition of tangible assets constituting Collateral
used or useful in the conduct of the business of such Grantor, subject to
the provisions of this Security Agreement. If such Grantor elects to repair
or replace the Collateral so damaged, such Grantor agrees the Collateral
shall be repaired to a condition substantially similar to or of better
quality or higher value than its condition prior to damage or replaced with
Collateral in a condition substantially similar to or of better quality or
higher value than the condition of the Collateral so replaced prior to
damage. At all times during which an Event of Default shall have occurred
and be continuing, the Administrative Agent shall be entitled to receive
direct and immediate payment of the proceeds of such insurance and such
Grantor shall take all action as the Administrative Agent may reasonably
request to accomplish such payment. Notwithstanding the foregoing, in the
event such Grantor shall receive any such proceeds, such Grantor shall
immediately deliver such proceeds to such Administrative Agent for the
benefit of the Secured Parties as additional Collateral, and pending such
delivery shall hold such proceeds in trust for the benefit of the Secured
Parties and keep the same segregated from its other funds.
(i) "Net Proceeds" when used with respect to any insurance proceeds
shall mean the gross proceeds from such proceeds, award or other amount,
less all taxes, fees and expenses (including Attorneys' Costs) incurred in
the realization thereof.
(j) In case of any material damage to, destruction or loss of, or
claim or proceeding against, all or any material part of the Collateral
pledged hereunder by a Grantor, such Grantor shall give prompt notice
thereof to the Administrative Agent. Each such notice shall describe
generally the nature and extent of such damage, destruction, loss, claim or
proceeding. Subject to Section 10(d), each Grantor is hereby authorized and
empowered to adjust or compromise any loss under any such insurance other
than losses relating to claims made directly against any Secured Party as
to which the insurance described in Section 10(a)(ii) or (iii) is
applicable.
(k) The provisions contained in this Security Agreement pertaining to
insurance shall be cumulative with any additional provisions imposing
additional insurance requirements with respect to the Collateral or any
other property on which a Lien is conferred under any Security Instrument.
11. Rights and Remedies Upon Event of Default. Upon and after an Event of
Default, the Administrative Agent shall have the following rights and remedies
on behalf of the Secured Parties in addition to any rights and remedies set
forth elsewhere in this Security Agreement or the other Loan Documents, all of
which may be exercised with or, if allowed by law, without notice to a Grantor:
(a) All of the rights and remedies of a secured party under the UCC
or under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted
by law, in addition to any other rights and remedies contained in this
Security Agreement or any other Loan Document;
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(b) The right to foreclose the Liens and security interests created
under this Security Agreement by any available judicial procedure or
without judicial process;
(c) The right to (i) enter upon the premises of a Grantor through
self-help and without judicial process, without first obtaining a final
judgment or giving such Grantor notice or opportunity for a hearing on the
validity of the Administrative Agent's claim and without any obligation to
pay rent to such Grantor, or any other place or places where any Collateral
is located and kept, and remove the Collateral therefrom to the premises of
the Administrative Agent or any agent of the Administrative Agent, for such
time as the Administrative Agent may desire, in order effectively to
collect or liquidate the Collateral, (ii) require such Grantor or any
bailee or other agent of such Grantor to assemble the Collateral and make
it available to the Administrative Agent at a place to be designated by the
Administrative Agent that is reasonably convenient to both parties, and
(iii) notify any or all Persons party to a Qualifying Control Agreement or
who otherwise have possession of or control over any Collateral of the
occurrence of an Event of Default and other appropriate circumstances, and
exercise control over and take possession or custody of any or all
Collateral in the possession, custody or control of such other Persons;
(d) The right to (i) exercise all of a Grantor's rights and remedies
with respect to the collection of Accounts, Chattel Paper, Instruments,
Supporting Obligations and General Intangibles (collectively, "Payment
Collateral"), including the right to demand payment thereof and enforce
payment, by legal proceedings or otherwise; (ii) settle, adjust,
compromise, extend or renew all or any Payment Collateral or any legal
proceedings pertaining thereto; (iii) discharge and release all or any
Payment Collateral; (iv) take control, in any manner, of any item of
payment or proceeds referred to in Section 5 above; (v) prepare, file and
sign a Grantor's name on any Proof of Claim in bankruptcy, notice of Lien,
assignment or satisfaction of Lien or similar document in any action or
proceeding adverse to any obligor under any Payment Collateral or otherwise
in connection with any Payment Collateral; (vi) endorse the name of a
Grantor upon any chattel paper, document, instrument, invoice, freight
xxxx, xxxx of lading or similar document or agreement relating to any
Collateral; (vii) use the information recorded on or contained on a
Grantor's internet website or otherwise in any data processing equipment
and computer hardware and software relating to any Collateral to which a
Grantor has access; (viii) open such Grantor's mail and collect any and all
amounts due to such Grantor from any Account Debtors or other obligor in
respect of Payment Collateral; (ix) take over such Grantor's post office
boxes or make other arrangements as the Administrative Agent, on behalf of
the Secured Parties, deems necessary to receive such Grantor's mail,
including notifying the post office authorities to change the address for
delivery of such Grantor's mail to such address as the Administrative
Agent, on behalf of the Secured Parties, may designate; (x) notify any or
all Account Debtors or other obligor on any Payment Collateral that such
Payment Collateral has been assigned to the Administrative Agent for the
benefit of the Secured Parties and that Administrative Agent has a security
interest therein for the benefit of the Secured Parties (provided that the
Administrative Agent may at any time give such notice to an Account Debtor
that is a department, agency or authority of the United States government);
each Grantor hereby agrees that any such notice, in the Administrative
26
Agent's sole discretion, may (but need not) be sent on such Grantor's
stationery, in which event such Grantor shall co-sign such notice with the
Administrative Agent if requested to do so by the Administrative Agent; and
(xi) do all acts and things and execute all documents necessary, in
Administrative Agent's sole discretion, to collect the Payment Collateral;
and
(e) The right to sell all or any Collateral in its then existing
condition, or after any further manufacturing or processing thereof, at
such time or times, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, with or
without representations and warranties, all as the Administrative Agent, in
its sole discretion, may deem advisable. The Administrative Agent shall
have the right to conduct such sales on a Grantor's premises or elsewhere
and shall have the right to use a Grantor's premises without charge for
such sales for such time or times as the Administrative Agent may see fit.
The Administrative Agent may, if it deems it reasonable, postpone or
adjourn any sale of the Collateral from time to time by an announcement at
the time and place of such postponed or adjourned sale, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor agrees that the Administrative Agent has no
obligation to preserve rights to the Collateral against prior parties or to
marshal any Collateral for the benefit of any Person. The Administrative
Agent for the benefit of the Secured Parties is hereby granted an
irrevocable fully paid license or other right (including each Grantor's
rights under any license or any franchise agreement), each of which shall
remain in full force and effect until the Facility Termination Date, to
use, without charge, each of the labels, patents, copyrights, names, trade
secrets, trade names, trademarks and advertising matter, or any property of
a similar nature owned or licensed by any Grantor, as it pertains to the
Collateral, in completing production of, advertising for sale and selling
any Collateral. If any of the Collateral shall require repairs,
maintenance, preparation or the like, or is in process or other unfinished
state, the Administrative Agent shall have the right, but shall not be
obligated, to perform such repairs, maintenance, preparation, processing or
completion of manufacturing for the purpose of putting the same in such
saleable form as the Administrative Agent shall deem appropriate, but the
Administrative Agent shall have the right to sell or dispose of the
Collateral without such processing and no Grantor shall have any claim
against the Administrative Agent for the value that may have been added to
such Collateral with such processing. In addition, each Grantor agrees that
in the event notice is necessary under applicable law, written notice
mailed to such Grantor in the manner specified herein ten (10) days prior
to the date of public sale of any of the Collateral or prior to the date
after which any private sale or other disposition of the Collateral will be
made shall constitute commercially reasonable notice to such Grantor. All
notice is hereby waived with respect to any of the Collateral which
threatens to decline speedily in value or is of a type customarily sold on
a recognized market. The Administrative Agent may purchase all or any part
of the Collateral at public or, if permitted by law, private sale, free
from any right of redemption which is hereby expressly waived by such
Grantor and, in lieu of actual payment of such purchase price, may set off
the amount of such price against the Secured Obligations. Each Grantor
recognizes that the Administrative Agent may be unable to effect a public
sale of certain of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state law, and may be otherwise delayed or adversely
affected in effecting any sale by reason of present or future restrictions
27
thereon imposed by governmental authorities ("Affected Collateral"), and
that as a consequence of such prohibitions and restrictions the
Administrative Agent may be compelled (i) to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire Affected Collateral for their own account,
for investment and not with a view to the distribution or resale thereof,
or (ii) to seek regulatory approval of any proposed sale or sales, or (iii)
to limit the amount of Affected Collateral sold to any Person or group.
Each Grantor agrees and acknowledges that private sales so made may be at
prices and upon terms less favorable to such Grantor than if such Affected
Collateral was sold either at public sales or at private sales not subject
to other regulatory restrictions, and that the Administrative Agent has no
obligation to delay the sale of any Affected Collateral for the period of
time necessary to permit the Grantor or any other Person to register or
otherwise qualify them under or exempt them from any applicable
restriction, even if such Grantor or other Person would agree to register
or otherwise qualify or exempt such Affected Collateral so as to permit a
public sale under the Securities Act or applicable state law. Each Grantor
further agrees, to the extent permitted by applicable law, that the use of
private sales made under the foregoing circumstances to dispose of Affected
Collateral shall be deemed to be dispositions in a commercially reasonable
manner. Each Grantor hereby acknowledges that a ready market may not exist
for Affected Collateral that is not traded on a national securities
exchange or quoted on an automated quotation system.
The net cash proceeds resulting from the collection, liquidation, sale, or
other disposition of the Collateral shall be applied first to the expenses
(including all Attorneys' Costs) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Secured Obligations in accordance with the terms of
Section 8.03 of the Credit Agreement. Each Grantor shall be liable to the
Administrative Agent, for the benefit of the Secured Parties, and shall pay to
the Administrative Agent, for the benefit of the Secured Parties, on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral.
12. Attorney-in-Fact. Each Grantor hereby appoints the Administrative
Agent as the Grantor's attorney-in-fact for the purposes of carrying out the
provisions of this Security Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of an Event of Default. Without limiting the generality of the
foregoing, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right and power
(a) to ask, demand, collect, xxx for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
28
(c) to endorse such Grantor's name on any checks, notes, drafts or
any other payment relating to or constituting proceeds of the Collateral
which comes into the Administrative Agent's possession or the
Administrative Agent's control, and deposit the same to the account of the
Administrative Agent, for the benefit of the Secured Parties, on account
and for payment of the Secured Obligations.
(d) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent, for the benefit of the Secured Parties,
with respect to any of the Collateral; and
(e) to execute, in connection with any sale or other disposition of
Collateral provided for herein, any endorsement, assignments, or other
instruments of conveyance or transfer with respect thereto.
13. Reinstatement. The granting of a security interest in the Collateral
and the other provisions hereof shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Secured Obligations
is rescinded or must otherwise be returned by any Secured Party or is repaid by
any Secured Party in whole or in part in good faith settlement of a pending or
threatened avoidance claim, whether upon the insolvency, bankruptcy or
reorganization of any Grantor or any other Loan Party or otherwise, all as
though such payment had not been made. The provisions of this Section 13 shall
survive repayment of all of the Secured Obligations and the termination or
expiration of this Security Agreement in any manner, including but not limited
to termination upon occurrence of the Facility Termination Date.
14. Certain Waivers by the Grantors. Each Grantor waives to the extent
permitted by applicable law (a) any right to require any Secured Party or any
other obligee of the Secured Obligations to (x) proceed against any Person or
entity, including without limitation any Loan Party, (y) proceed against or
exhaust any Collateral or other collateral for the Secured Obligations, or (z)
pursue any other remedy in its power; (b) any defense arising by reason of any
disability or other defense of any other Person, or by reason of the cessation
from any cause whatsoever of the liability of any other Person or entity, (c)
any right of subrogation, and (d) any right to enforce any remedy which any
Secured Party or any other obligee of the Secured Obligations now has or may
hereafter have against any other Person and any benefit of and any right to
participate in any collateral or security whatsoever now or hereafter held by
the Administrative Agent for the benefit of the Secured Parties. Each Grantor
authorizes each Secured Party and each other obligee of the Secured Obligations
without notice (except notice required by applicable law) or demand and without
affecting its liability hereunder or under the Loan Documents from time to time
to: (i) take and hold security, other than the Collateral herein described, for
the payment of such Secured Obligations or any part thereof, and exchange,
enforce, waive and release the Collateral herein described or any part thereof
or any such other security; and (ii) apply such Collateral or other security and
direct the order or manner of sale thereof as such Secured Party or obligee in
its discretion may determine.
The Administrative Agent may at any time deliver (without representation,
recourse or warranty) the Collateral or any part thereof to a Grantor and the
receipt thereof by such Grantor shall be a complete and full acquittance for the
29
Collateral so delivered, and the Administrative Agent shall thereafter be
discharged from any liability or responsibility therefor.
15. Continued Powers. Until the Facility Termination Date shall have
occurred, the power of sale and other rights, powers and remedies granted to the
Administrative Agent for the benefit of the Secured Parties hereunder shall
continue to exist and may be exercised by the Administrative Agent at any time
and from time to time irrespective of the fact that any of the Secured
Obligations or any part thereof may have become barred by any statute of
limitations or that any part of the liability of any Grantor may have ceased.
16. Other Rights. The rights, powers and remedies given to the
Administrative Agent for the benefit of the Secured Parties by this Security
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent or any Secured Party under any other Loan Document or by
virtue of any statute or rule of law. Any forbearance or failure or delay by the
Administrative Agent in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in accordance with the terms of the Credit
Agreement.
17. Anti-Marshaling Provisions. The right is hereby given by each Grantor
to the Administrative Agent, for the benefit of the Secured Parties, to make
releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Administrative Agent without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
Liens and security interests in the remaining Collateral conferred hereunder,
nor release any Grantor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral
held by the Administrative Agent, for the benefit of the Secured Parties, the
Administrative Agent shall have the right to determine the order in which any or
all of the Collateral shall be subjected to the remedies provided in this
Security Agreement. Each Grantor hereby waives any and all right to require the
marshaling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or in any other Loan Document.
18. Entire Agreement. This Security Agreement and each Security Joinder
Agreement, together with the Credit Agreement and other Loan Documents,
constitutes and expresses the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes all prior
negotiations, agreements and understandings, inducements, commitments or
conditions, express or implied, oral or written, except as contained in the Loan
Documents. The express terms hereof and of the Security Joinder Agreements
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof or thereof. Neither this Security
Agreement nor any Security Joinder Agreement nor any portion or provision hereof
or thereof may be changed, altered, modified, supplemented, discharged,
canceled, terminated, or amended orally or in any manner other than as provided
in the Credit Agreement.
30
19. Third Party Reliance. Each Grantor hereby consents and agrees that all
issuers of or obligors in respect of any Collateral, and all securities
intermediaries, warehousemen, bailees, public officials and other Persons having
any interest in, possession of, control over or right, privilege, duty or
discretion in respect of, any Collateral shall be entitled to accept the
provisions hereof and of the Security Joinder Agreements as conclusive evidence
of the right of the Administrative Agent, on behalf of the Secured Parties, to
exercise its rights hereunder or thereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by any Grantor or any other Person to any of such Persons.
20. Binding Agreement; Assignment. This Security Agreement and each
Security Joinder Agreement, and the terms, covenants and conditions hereof and
thereof, shall be binding upon and inure to the benefit of the parties hereto,
and to their respective successors and assigns, except that no Grantor shall be
permitted to assign this Security Agreement, any Security Joinder Agreement or
any interest herein or therein or, except as expressly permitted herein or in
the Credit Agreement, in the Collateral or any part thereof or interest therein.
Without limiting the generality of the foregoing sentence of this Section 20,
any Lender may assign to one or more Persons, or grant to one or more Persons
participations in or to, all or any part of its rights and obligations under the
Credit Agreement (to the extent permitted by the Credit Agreement); and to the
extent of any such assignment or participation such other Person shall, to the
fullest extent permitted by law, thereupon become vested with all the benefits
in respect thereof granted to such Lender herein or otherwise, subject however,
to the provisions of the Credit Agreement, including Article IX thereof
(concerning the Administrative Agent) and Section 10.07 thereof (concerning
assignments and participations). All references herein to the Administrative
Agent and to the Secured Parties shall include any successor thereof or
permitted assignee, and any other obligees from time to time of the Secured
Obligations.
21. Related Credit Arrangements. All obligations of each Grantor under or
in respect of Related Credit Arrangements to which any Lender or its Affiliates
is a party shall be deemed to be Secured Obligations secured hereby, and each
Lender or Affiliate of a Lender party to any such Related Credit Arrangement
shall be deemed to be a Secured Party hereunder with respect to such Secured
Obligations; provided, however, that such obligations shall cease to be Secured
Obligations at such time, prior to the Facility Termination Date, as such Person
(or Affiliate of such Person) shall cease to be a "Lender" under the Credit
Agreement.
No Person who obtains the benefit of any Lien by virtue of the provisions
of this Section shall have any right to notice of any action or to consent to,
direct or object to any action hereunder or under any other Loan Document or
otherwise in respect of the Collateral (including the release or impairment of
any Collateral) other than in its capacity as a Lender and only to the extent
expressly provided in the Loan Documents. Each Secured Party not a party to the
Credit Agreement who obtains the benefit of this Security Agreement by virtue of
the provisions of this Section shall be deemed to have acknowledged and accepted
the appointment of the Administrative Agent pursuant to the terms of the Credit
Agreement, and that with respect to the actions and omissions of the
Administrative Agent hereunder or otherwise relating hereto that do or may
affect such Secured Party, the Administrative Agent and each of its Related
Parties shall be entitled to all the rights, benefits and immunities conferred
under Article IX of the Credit Agreement.
31
22. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. Counterparts. This Security Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart executed by
the Grantor against whom enforcement is sought. Without limiting the foregoing
provisions of this Section 23, the provisions of Section 10.02(b) of the Credit
Agreement shall be applicable to this Security Agreement.
24. Termination. Subject to the provisions of Section 13, this Security
Agreement and each Security Joinder Agreement, and all obligations of the
Grantors hereunder (excluding those obligations and liabilities that expressly
survive such termination) shall terminate without delivery of any instrument or
performance of any act by any party on the Facility Termination Date. Upon such
termination of this Security Agreement, the Administrative Agent shall, at the
request and sole expense of the Grantors, promptly deliver to the Grantors such
termination statements and take such further actions as the Grantors may
reasonably request to terminate of record, or otherwise to give appropriate
notice of the termination of, any Lien conferred hereunder.
25. Notices. Any notice required or permitted hereunder shall be given (a)
with respect to the Borrower, at the address for the giving of notice then in
effect under the Credit Agreement, (b) with respect to any Grantor, at the
address then in effect for the giving of notices to such Grantor under the
Guaranty to which it is a party, and (c) with respect to the Administrative
Agent or a Lender, at the Administrative Agent's address indicated in Schedule
10.02 of the Credit Agreement. All such addresses may be modified, and all such
notices shall be given and shall be effective, as provided in Schedule 10.02 of
the Credit Agreement for the giving and effectiveness of notices and
modifications of addresses thereunder.
26. Joinder. Each Person who shall at any time execute and deliver to the
Administrative Agent a Security Joinder Agreement substantially in the form
attached as Exhibit A hereto shall thereupon irrevocably, absolutely and
unconditionally become a party hereto and obligated hereunder as a Grantor and
shall have thereupon pursuant to Section 2 hereof granted a security interest in
and collaterally assigned to the Administrative Agent for the benefit of the
Secured Parties all Collateral in which it has at its Applicable Date or
thereafter acquires any interest or the power to transfer, and all references
herein and in the other Loan Documents to the Grantors or to the parties to this
Security Agreement shall be deemed to include such Person as a Grantor
hereunder. Each Security Joinder Agreement shall be accompanied by the
Supplemental Schedules referred to therein, appropriately completed with
information relating to the Grantor executing such Security Joinder Agreement
and its property. Each of the applicable Schedules attached hereto shall be
deemed amended and supplemented without further action by such information
reflected on the Supplemental Schedules.
32
27. Rules of Interpretation. The rules of interpretation contained in
Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this
Security Agreement and each Security Joinder Agreement and are hereby
incorporated by reference. All representations and warranties contained herein
shall survive the delivery of documents and any Credit Extensions referred to
herein or secured hereby.
28. Governing Law; Waivers.
(a) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN
SUCH STATE; PROVIDED THAT (i) WITH RESPECT TO THOSE INSTANCES IN WHICH THE
APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF
THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN
SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION
OR THE RULES GOVERNING PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY
THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION
SHALL GOVERN SUCH MATTERS, (ii) EACH CONTROL AGREEMENT (INCLUDING EACH
QUALIFYING CONTROL AGREEMENT) APPLICABLE TO ANY SECURITIES ACCOUNT OR
DEPOSIT ACCOUNT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED
IN SUCH CONTROL AGREEMENT, OR OTHERWISE BY THE LAWS OF THE JURISDICTION
THAT GOVERN THE SECURITIES ACCOUNT OR DEPOSIT ACCOUNT TO WHICH SUCH CONTROL
AGREEMENT RELATES, AND (iii) IN THOSE INSTANCES IN WHICH THE LAWS OF THE
JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO
THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN
EFFECT WITH RESPECT TO SUCH MATTERS.
(b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE XXXXXX XX XXX XXXX, XXXXX XX XXX XXXX, XXXXXX XXXXXX
OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT OR
A SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY
HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF
ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
33
(c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING OR BY ANY OTHER METHOD OF
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY
JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE
WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY
SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH
SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS
WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR
OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY
JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE
FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
(f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS
HEREOF IS AN INCONVENIENT FORUM.
[Signature pages follow.]
34
IN WITNESS WHEREOF, the parties have duly executed this Security
Agreement on the day and year first written above.
GRANTORS:
MAIN STREET RESTAURANT GROUP, INC.
CORNERSTONE PRODUCTIONS, INC.
MAIN ST. MIDWEST, INC.
MAIN ST. CALIFORNIA, INC.
BAMBOO CLUB, INC.
REDFISH CLEVELAND, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
By: /s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Executive Vice President and Assistant
Secretary
REDFISH AMERICA, L.L.C.
By: Main Street Restaurant Group, Inc.,
It's Manager
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
By: /s/ Xxxxxxx Xxxxxxxxxx
---------------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Executive Vice President and Assistant
Secretary
SECURITY AGREEMENT
Signature Page
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxx X. Zeeschke
-------------------------------------------
Title: Assistant Vice President
-------------------------------------------
SECURITY AGREEMENT
Signature Page
