EXHIBIT C-2 TO SENIOR
NOTE AND SENIOR
SUBORDINATED NOTE AGREEMENT
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of September 18, 1996, made by
Xxx. Xxxxxx' Original Cookies, Inc., a Delaware corporation (with its
successors, the "Store Company"), and each subsidiary of the Store Company
listed on Schedule A hereto (which Schedule shall be revised from time to time
to reflect the addition of any new subsidiaries of the Store Company) (each
individually a "Grantor" and collectively, the "Grantors") in favor of The Bank
of New York, as collateral agent for the Lenders (the "Collateral Agent"),
pursuant to that certain Collateral Agency Agreement of even date herewith, as
amended and from time to time in effect.
W I T N E S S E T H :
WHEREAS, the Store Company, Chocamerican, Inc., a Delaware
corporation, The Prudential Insurance Company of America, a New Jersey mutual
insurance company, Principal Mutual Life Insurance Company, an Iowa corporation,
Pruco Life Insurance Company, an Arizona corporation, Contrarian Capital
Advisors, L.L.C., a Delaware limited liability company, as agent, and Xxx.
Xxxxxx Inc., a Delaware corporation, are entering into that certain Senior Note
and Senior Subordinated Note Agreement, of even date herewith, (said Agreement,
as it may be amended or otherwise modified from time to time, being the "Note
Agreement"); and
WHEREAS, it is a condition precedent to the closing of the
transactions contemplated by the Note Agreement that the Store Company shall
have entered into this Agreement; and
WHEREAS, the Collateral Agent, acting on behalf of and for the
ratable benefit of the Lenders, is hereby referred to as the "Secured Party";
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to enter into the Note Agreement, each Grantor hereby
agrees with the Secured Party as follows:
i. Defined Terms. For purposes of this Agreement, "Majority
Lenders" means (i) for so long as any Senior Notes remain outstanding, the
Majority Chocamerican Senior Lenders and the Majority MFI Lenders (as each such
term is defined in the Note Agreement) and (ii) if none of the Senior Notes
remain outstanding, the Majority Senior Subordinated Lenders (as such term is
defined in the Note Agreement). Capitalized terms used in this Agreement but not
defined herein have the respective meanings assigned to such terms in the Note
Agreement. In addition, the following terms used in this Agreement have the
meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
ii. "Account" means, with respect to any Grantor, any
"account," as such term is defined in Section 9-106 of the UCC, now
owned or hereafter acquired by such Grantor and, in any event,
includes, without limitation, (i) all accounts receivable, book debts
and other forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now owned or
hereafter received or acquired by or belonging or owing to such Grantor
(including, without limitation, under any trade name, style or division
thereof) whether arising out of goods sold or services rendered by such
Grantor or from any other transaction, whether or not the same involves
the sale of goods or services by such Grantor (including, without
limitation, any such obligation which might be characterized as an
account under the UCC), (ii) all of such Grantor's rights in, to and
under all purchase orders or receipts now owned or hereafter acquired
by it for goods or services, and all of such Grantor's rights to any
goods represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or
repossessed goods), and (iii) all moneys due or to become due to such
Grantor under all contracts for the sale of goods or the performance of
services or both by such Grantor (whether or not yet earned by
performance on the part of the Grantor or in connection with any other
transaction), now in existence or hereafter occurring, including,
without limitation, the right to receive the proceeds of said purchase
orders and contracts, and (iv) all collateral security and guarantees
of any kind given by any Person with respect to any of the foregoing.
"Account Debtor" means any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC.
"Chattel Paper" means, with respect to any Grantor, any
"chattel paper," as such term is defined in Section 9-105(1)(b) of the
UCC, now owned or hereafter acquired by such Grantor.
"Collateral" has the meaning assigned to such term in Section 2 of
this Agreement.
"Contracts" means, with respect to any Grantor, all contracts,
undertakings or other agreements (other than Chattel Paper, Documents
or Instruments) in or under which such Grantor may now or hereafter
have any right, title or interest, including, without limitation, with
respect to an Account, any agreement relating to the terms of payment
or the terms of performance thereof.
"Documents" means, with respect to any Grantor, any
"document," as such term is defined in Section 9-105(1)(f) of the UCC,
now owned or hereafter acquired by such Grantor.
"Equipment" means, with respect to any Grantor, any
"equipment," as such term is defined in Section 9-109(2) of the UCC,
now owned or hereafter acquired by such Grantor and, in any event,
includes, without limitation, all machinery, equipment, furnishings,
fixtures, vehicles, computers and other electronic data processing and
office equipment now owned or hereafter acquired by such Grantor and
any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed thereto.
"General Intangibles" means, with respect to any Grantor, any
"general intangibles," as such term is defined in Section 9-106 of the
UCC, now owned or hereafter acquired by such Grantor and, in any event,
includes, without limitation, all customer lists, Trademarks, patents,
rights in intellectual property, licenses, permits, Copyrights, Trade
Secrets, proprietary or confidential information, inventions (whether
patented or patentable or not) and technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials and
records, goodwill, rights of indemnification and all right, title and
interest which such Grantor may now or hereafter have in or under any
Contract, now owned or hereafter acquired by such Grantor.
"Instrument" means, with respect to any Grantor, any
"instrument," as such term is defined in Section 9-105(1)(i) of the
UCC, now owned or hereafter acquired by such Grantor, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" means the following: (a) trademarks
(including service marks, designs, logos, indicia, trade names,
corporate names, business names, fictitious business names, trade
styles and/or other source and/or business identifiers, whether
registered or at common law), registrations and applications therefor,
including, without limitation, the trademarks and applications listed
on Schedule B hereto, purported to be owned by any of the Grantors and
used in their respective businesses and the goodwill of the business of
any of the Grantors connected therewith and symbolized thereby, along
with any and all (i) renewals thereof, (ii) income, royalties, damages
and payments now and hereafter due and/or payable to any of the
Grantors with respect thereto, including, without limitation, damages
and payments for past or future infringements or misappropriation
thereof, (iii) rights to xxx for past, present and future infringements
or misappropriation thereof, and (iv) all other rights corresponding
thereto throughout the world (all of the foregoing trademarks, trade
names, service marks, registrations and applications thereto, and
goodwill, together with the items described in the foregoing clauses
(i) through (iv) are sometimes hereinafter individually and/or
collectively referred to as the "Trademarks"); (b) trade secrets,
including, without limitation, all techniques, processes, methods of
production and commercialization, training methods, recipes,
formulations, specifications and know-how owned by any Grantor and used
in their respective businesses which pertain to and are necessary or
useful in relation to the composition, production, and sale of products
sold pursuant to the business of any Grantor, along with any and all
(i) income, royalties, damages and payments now and hereafter due
and/or payable to any of the Grantors with respect thereto, including,
without limitation, damages and payments for past or future
infringements and misappropriations thereof, (ii) rights to xxx for
past, present and future infringements or misappropriations thereof,
and (iii) all other rights corresponding thereto throughout the world
(all of the foregoing trade secrets, together with the items described
in the foregoing clauses (i) through (iii) are sometimes hereinafter
individually and/or collectively referred to as the "Trade Secrets");
and (c) copyrights, registrations and applications therefor, including,
without limitation, the copyrights listed on Schedule C hereto, along
with any and all (i) renewals and extensions thereof, (ii) income,
royalties, damages and payments now and hereafter due and/or payable to
any of the Grantors with respect thereto, including, without
limitation, damages and payments for past or future infringements and
misappropriations thereof, (iii) rights to xxx for past, present and
future infringements or misappropriations thereof, and (iv) all other
rights corresponding thereto throughout the world (all of the foregoing
copyrights, registrations and applications, together with the items
described in the foregoing clauses (i) through (iv) are sometimes
hereinafter individually and/or collectively referred to as the
"Copyrights").
"Inventory" means, with respect to any Grantor, any
"inventory," as such term is defined in Section 9-109(4) of the UCC,
now owned or hereafter acquired by such Grantor, and wherever located,
and, in any event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or hereafter
acquired by such Grantor which are held for sale or lease or are
furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed
or to be used or consumed in such Grantor's business, or the
processing, packaging, delivery or shipping of the same, and all
finished goods.
"Permitted Liens" means Liens permitted by Section 9.2 of the
Note Agreement existing as of the date hereof or arising hereafter.
"Proceeds" means, with respect to any Grantor, "proceeds," as
such term is defined in Section 9-306(1) of the UCC, and, in any event,
shall include, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to such Grantor from
time to time with respect to any of the Collateral, (ii) any and all
payments (in any form whatsoever) made or due and payable to such
Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any Governmental Authority (or any Person acting
under color of Governmental Authority), and (iii) any and all other
amounts from time to time paid or payable under or in connection with
any of the Collateral.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the Secured Party's
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
1. Grant of Security Interest.
3. As collateral security for the full and prompt payment when
due (whether at stated maturity, by acceleration or otherwise) of the Notes and
all of the other Obligations, each Grantor hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to the Secured Party, and hereby grants to
the Secured Party a security interest in all of each Grantor's right, title and
interest in, to and under the following, except such of the following as such
Grantor is prohibited by law or by any contract or agreement entered into prior
to the Closing Date from granting a security interest in (all of which being
hereinafter collectively called the "Collateral"):
(i) all Accounts;
(iii) all Chattel Paper;
(v) all Contracts and any and all claims of such Grantor for damages
arising out of or for breach of or a default under any Contract and the
right of such Grantor to perform or to compel performance under any
Contract and to exercise all remedies thereunder;
(i) all Documents;
(iii) all Equipment;
(v) all General Intangibles;
(vii) all Instruments;
(ix) all Inventory;
(xi) all Intellectual Property;
(xiii) all other goods and personal property of such Grantor whether
tangible or intangible or whether now owned or hereafter acquired by
such Grantor and wherever located; and
(i) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of, each of the foregoing;
provided, however, that the security interest in each Grantor's Intellectual
Property and General Intangibles, to the extent that such General Intangibles
contain Intellectual Property, created hereunder shall be subject to the rights
of licensees or franchisees in such Intellectual Property (whether existing as
of the date hereof or arising after the date hereof) to the same extent as each
Grantor's are so subject.
1. Rights of the Secured Party; Limitations on Secured Party's
Obligations.
(a) It is expressly agreed by each Grantor that, anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Contracts and, following the occurrence and during the continuance
of an Event of Default, each Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract. Neither the Secured Party nor any Lender shall
have any obligation or liability under any Contract solely by reason of or
arising out of this Agreement or the granting of a security interest in any
Contract to the Secured Party or the receipt by the Secured Party or any Lender
of any payment relating to any Contract pursuant hereto, nor shall the Secured
Party or any Lender be required or obligated in any manner to perform or fulfill
any of the obligations of any Grantor under or pursuant to any Contract, or to
make any payment, or to make any inquiry as to the nature or the sufficiency of
any payment received by it or the sufficiency of any performance by any party
under any Contract, or to present or file any claim, or to take any action to
collect or enforce any performance or the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
(a) Upon the occurrence and during the continuance of an Event
of Default, the Secured Party shall have the right to collect any Accounts,
Chattel Paper and Instruments of any Grantor. If required by the Secured Party
at any time following the occurrence and during the continuance of any Event of
Default, any Proceeds, when first collected by any Grantor, received in payment
of any Account or in payment for any of its Inventory or on account of any of
its Contracts, shall be promptly deposited by such Grantor in the form received
(without alteration and with all necessary endorsements) in a special bank
account maintained by the Secured Party and subject to withdrawal only by the
Secured Party, as hereinafter provided, and until so turned over shall be deemed
to be held in trust by such Grantor for and as the Secured Party's property and
shall not be commingled with such Grantor's other funds or properties. Such
Proceeds, when deposited, shall continue to be collateral security for the Notes
and all of the other Obligations and shall not constitute payment thereof until
applied as hereinafter provided. The Secured Party shall apply all or a part of
the funds on deposit in said special account to the principal of and/or interest
on the Notes in accordance with the provisions of Section 8(d) hereof and any
part of such funds which the Secured Party elects not so to apply and deems not
required as collateral security for the Notes or any of the other Obligations
shall be paid over from time to time by the Secured Party to each Grantor. At
any time following the occurrence and during the continuance of an Event of
Default, at the request of the Secured Party, each Grantor shall deliver to the
Secured Party any or all original and other documents evidencing, and relating
to, the sale and delivery of Inventory or the performance of labor or service
which created any or all Accounts, including, without limitation, all original
orders, invoices and shipping receipts; and, prior to or following the
occurrence or during the continuance of an Event of Default such Grantor shall
deliver photocopies thereof to the Secured Party at its request.
(c) The Secured Party may, but shall not be obligated to, at
any time following the occurrence and during the continuance of an Event of
Default, after first notifying any Grantor of its intention to do so, notify
Account Debtors of such Grantor, parties to Contracts of such Grantor, obligors
of Instruments of such Grantor and obligors in respect of Chattel Paper of such
Grantor that the Accounts and the right, title and interest of such Grantor in
and under such Contracts, such Instruments and such Chattel Paper have been
assigned to the Secured Party and that payments shall be made directly to the
Secured Party. Upon the request of the Secured Party following the occurrence
and during the continuance of an Event of Default, each Grantor will so notify
such Account Debtors, parties to such Contracts, obligors of such Instruments
and obligors in respect of such Chattel Paper. At any time following the
occurrence and during the continuance of an Event of Default, the Secured Party
may, but shall not be obligated to, in its own name or in the name of others
communicate with such Account Debtors, parties to such Contracts, obligors of
such Instruments and obligors in respect of such Chattel Paper to verify with
such Persons to the Secured Party's satisfaction the existence, amount and terms
of any such Accounts, Contracts, Instruments or Chattel Paper.
(e) Upon prior notice to any Grantor (unless an Event of
Default has occurred and is continuing, in which case no notice is necessary),
the Secured Party shall have the right, but not the obligation, during regular
business hours of Grantor (unless an Event of Default has occurred and is
continuing, in which case such right is exercisable at any time), to make test
verifications of the Accounts and physical verifications of the Inventory in any
manner and through any medium that it reasonably considers advisable, and each
Grantor agrees to furnish all such assistance and information as the Secured
Party may reasonably require in connection therewith. If an Event of Default has
occurred and is continuing, each Grantor shall, at its own expense cause
certified independent public accountants satisfactory to the Secured Party to
prepare and deliver to the Secured Party, at any time and from time to time
promptly upon the Secured Party's request, the following reports: (i) a
reconciliation of all its Accounts, (ii) an aging of all its Accounts, (iii)
trial balances, and (iv) a test verification of such Accounts as the Secured
Party may reasonably request. Each Grantor, at its own expense, will cause
certified independent public accountants satisfactory to the Secured Party to
prepare and deliver to the Secured Party the results of the annual physical
verification of its Inventory made or observed by such accountants.
2. Representations and Warranties.
(a) The Store Company hereby represents and warrants to the
Lenders as follows:
(i) The Store Company is a corporation duly incorporated,
validly existing and in good standing in Delaware. The Store Company's
principal place of business and the place where its records concerning
the Collateral are kept is located in Utah.
(i) The execution, delivery and performance by the Store
Company of this Agreement are within the Store Company's corporate
powers, have been duly authorized by all necessary corporate action and
do not contravene the Store Company's restated certificate of
incorporation or by-laws.
(i) No consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority in the
United States is required for the due execution, delivery and
performance by the Store Company of this Agreement (other than routine
filings of UCC financing and continuation statements and filings with
the U.S.
Patent and Trademark and Copyright Offices).
(i) This Agreement has been duly executed and delivered by the
Store Company and is the legal, valid and binding obligation of the
Store Company, enforceable against the Store Company in accordance with
its terms, but subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and to general principles
of equity.
(a) Each Grantor hereby represents and warrants to the
Lenders as follows:
(i) Assuming each Grantor other than the Store Company is duly
organized and validly existing under the laws of its jurisdiction of
organization, upon the filing of appropriate financing statements or
other documents evidencing the security interest created hereby in the
jurisdictions listed on Schedule D hereto, this Agreement will be
effective to create a valid and continuing Lien on each Grantor's
rights in the Collateral, the perfection of which is governed by the
Uniform Commercial Code as in effect in such jurisdictions, and prior
to all other Liens except Permitted Liens and any other Lien created
prior to the date hereof; provided, however, that each Grantor makes no
representations or warranties with respect to the nature or extent of
its rights in any of the Collateral or the creation of any Lien with
respect to Collateral located outside of the United States including,
without limitation, Intellectual Property.
1. Covenants.
2. Each Grantor covenants and agrees with the Secured Party
and the Lenders that from and after the date of this Agreement and until the
Notes have been paid in full and all of the other Obligations have been fully
satisfied:
(a) Further Documentation; Pledge of Instruments. At any time
and from time to time, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver any and all such further instruments
and documents including, without limitation, the Trademark Security Agreement
and the Copyright Security Agreement, substantially in the form attached hereto
as Exhibit A and Exhibit B, respectively, and take such further action as shall
be necessary or as the Secured Party may reasonably deem desirable to obtain the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, using its best efforts to secure all consents and
approvals necessary or appropriate for the assignment to the Secured Party of
any Contract held by such Grantor or in which such Grantor has any rights not
heretofore assigned, the filing of any financing or continuation statements or
amendments thereto under the UCC in the jurisdictions indicated on Schedule D
hereto with respect to the Liens and security interests granted hereby,
transferring Collateral to the Secured Party's possession (if a security
interest in such Collateral can be perfected by possession) and placing the
interest of the Secured Party as lienholder on the certificate of title of any
vehicle and recording the Secured Party's security interest in any Grantor's
after-acquired Intellectual Property. Such Grantor also hereby authorizes the
Secured Party to file any such financing or continuation statement without the
signature of such Grantor to the extent permitted by applicable law. If any of
the Collateral should be or become evidenced by any Instrument, such Grantor
agrees to pledge such Instrument to the Secured Party and shall duly endorse
such Instrument and deliver the same to the third party, other than checks
processed by such Grantor in the ordinary course of business.
(c) Maintenance of Records. Such Grantor will keep and
maintain at its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral and all other dealings with
the Collateral, consistent with its recordkeeping practices as in effect on the
date hereof. All Chattel Paper will be marked with the following legend: "This
writing and the obligations evidenced or secured hereby are subject to the
security interest of The Bank of New York, as the Collateral Agent." If
requested by the Secured Party, the security interest of the Secured Party shall
be noted on the certificate of title of each vehicle. For the Secured Party's
and the Beneficiaries' further security, such Grantor agrees that the Secured
Party and the Beneficiaries shall have a special property interest in all of
such Grantor's books and records pertaining to the Collateral and, following the
occurrence and during the continuance of any Event of Default, such Grantor
shall deliver and turn over any such books and records to the Secured Party or
to its representatives at any time on demand of the Secured Party. Prior to the
occurrence of an Event of Default and upon reasonable notice from the Secured
Party, such Grantor shall permit any representative of the Secured Party to
inspect such books and records and will provide photocopies thereof to the
Secured Party.
(e) Indemnification. In any suit, proceeding or action brought
by the Secured Party relating to any Account, Chattel Paper, Contract, General
Intangible or Instrument for any sum owing thereunder, or to enforce any
provision of any Account, Chattel Paper, Contract, General Intangible or
Instrument, such Grantor will save, indemnify and keep the Secured Party
harmless from and against all claims, damages, losses, liabilities and expenses
(including, without limitation, fees and disbursements of counsel selected by
the Secured Party, including those incurred upon any appeal) suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder, arising out of a breach by such Grantor of
any obligation thereunder or arising out of any other agreement, Indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from such Grantor, and all such obligations of such Grantor shall be and remain
enforceable against and only against such Grantor and shall not be enforceable
against the Secured Party or the Lenders.
(f) Compliance with Laws, Etc. Such Grantor will comply with
the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority or arbitrator applicable to the Collateral or any part
thereof or to the operation of such Grantor's business, the noncompliance with
which, individually or in the aggregate, would or would be reasonably likely to
materially adversely affect the business, condition (financial or other),
assets, properties or operations of any of the Store Company and the Grantors
taken as a whole; provided, however, that such Grantor may contest the
requirement of any applicable law, rule, regulation or order in any reasonable
manner which shall not, in the sole opinion of the Secured Party, adversely
affect the Secured Party's rights hereunder or adversely affect the first
priority of its Lien on and security interest in the Collateral, subject only to
Permitted Liens.
(h) Payment of Obligations. Such Grantor will pay, before the
same shall become delinquent and before any penalty or interest accrues thereon,
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such item need be paid if (i) such non-payment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein which, individually or in the aggregate, would or would
be reasonably likely to materially adversely affect the business, condition
(financial or other), assets, properties or operations of any of the Store
Company and the Grantors taken as a whole, and (ii) such charge is adequately
reserved against in accordance with and to the extent required by GAAP.
(j) Compliance with Terms of Accounts, Etc. Following the
occurrence and during the continuance of an Event of Default, such Grantor will
comply with and perform all of its obligations, covenants, conditions and
agreements with respect to any Account or Chattel Paper.
(l) Limitation on Liens on Collateral. Such Grantor will not
create, permit or suffer to exist, and will defend the Collateral against and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Liens, and will defend the right, title and interest of the
Secured Party and the Lenders in and to any of such Grantor's rights under the
Chattel Paper, Contracts, Documents, Intellectual Property, General Intangibles
and Instruments and to the Equipment and Inventory and in and to the Proceeds
thereof against the claims and demands of all Persons whomsoever other than
holders of Permitted Liens.
(n) Limitations on Modifications of Accounts. Following the
occurrence and during the continuance of any Event of Default, such Grantor will
not, without the Secured Party's prior written consent, grant any extension of
the time of payment of any of the Accounts, Chattel Paper or Instruments, or
compromise, compound or settle the same for less than the full amount thereof,
or release, wholly or partly, any Person liable for the payment thereof, or
allow any credit or discount whatsoever thereon.
(p) Maintenance of Insurance. Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring its
Inventory and Equipment against casualties and (ii) insuring such Grantor
against liability for personal injury and property damage relating to such
Inventory and Equipment, such policies to be in such amounts and against at
least such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business, naming the Secured Party as
an additional insured. Any amounts payable under any of such Grantor's insurance
policies for any loss shall be paid directly to such Grantor to be used by such
Grantor to repair and restore the property which was the subject of the claim;
provided that, for so long as an Event of Default has occurred and is continuing
any amounts payable under such Grantor's insurance policies shall be paid
directly to the Secured Party to be used by such Grantor to repair and restore
the property which was the subject of the claim. Such Grantor shall, if
requested by the Secured Party, deliver to the Secured Party, as often as the
Secured Party may reasonably request, a report of its insurance broker with
respect to the insurance on its Inventory and Equipment. All insurance with
respect to the Inventory and Equipment shall (i) contain a clause which provides
that the Secured Party's interest under the policy will not be invalidated by
any act or omission of, or any breach of warranty by, the insured, or by any
change in the title, ownership or possession of the insured property, or by the
use of the property for purposes more hazardous than is permitted in the policy,
and (ii) provide that no cancellation, reduction in amount or change in coverage
thereof shall be effective until at least ten days after receipt by the Secured
Party of written notice thereof.
(r) Limitations on Disposition. Such Grantor will not sell,
lease, transfer or otherwise dispose of any of the Collateral, or attempt or
contract to do so, except as permitted by the Note Agreement. In connection with
any franchising or other disposition of a store permitted by the Note Agreement,
the Collateral Agent hereby releases, without any further action, all of its
right, title and interest in and to any portion of the Collateral consisting of
tangible assets then located on the premises of such store effective as of the
effective date of any agreement pursuant to which any such store is sold,
franchised or otherwise disposed of. The Collateral Agent agrees to execute such
documents or instruments (including, without limitation, UCC-3 termination
statements or UCC-3 releases) as a Grantor may request in order to evidence or
effectuate the provisions of this Section 5(j).
(t) Further Identification of Collateral. Such Grantor will,
if so requested by the Secured Party, furnish to the Secured Party, as often as
the Secured Party reasonably requests, statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request (without
imposing any undue burden on such Grantor), all in reasonable detail.
(v) Right of Inspection. Subject to the provisions of Article
V of the Collateral Agency Agreement, upon reasonable notice to such Grantor
(unless an Event of Default has occurred and is continuing, in which case no
notice is necessary), the Secured Party shall at all times have full and free
access during normal business hours to all the books and records and
correspondence of such Grantor, and the Secured Party or its representatives may
examine the same, take extracts therefrom and make photocopies thereof;
provided, however, that the expenses incurred by the Secured Party in connection
with the foregoing shall be borne by the Lenders unless an Event of Default has
occurred and is continuing, in which case such expenses shall be borne by such
Grantor. Upon reasonable notice to such Grantor (unless an Event of Default has
occurred and is continuing, in which case no notice is necessary), the Secured
Party and its representatives shall also have the right to enter into and upon
any premises where any of the Equipment or Inventory is located for the purpose
of inspecting the same, observing its use or otherwise protecting its interests
therein.
(x) Maintenance of Equipment. Such Grantor will, to the extent
reasonably prudent, maintain or cause to be maintained in good repair, working
order and condition the Equipment and from time to time, to the extent
reasonably prudent, will make or cause to be made all appropriate repairs,
renewals, replacements or disposals thereof.
(z) Continuous Perfection. Such Grantor will not change its
name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the UCC (or any other then
applicable provision of the UCC) unless such Grantor shall have given the
Secured Party at least 30 days' prior written notice thereof and shall have
taken all action (or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such action in
advance) necessary or reasonably requested by the Secured Party to amend such
financing statement or continuation statement so that it is not seriously
misleading. Such Grantor will not change its principal place of business or
remove its records unless it gives the Secured Party at least 30 days' prior
written notice thereof and has taken such action as is necessary to cause the
security interest of the Secured Party in the Collateral to continue to be
perfected.
(bb) New Intellectual Property.
(i) If, at any time before the Notes or the other Obligations
shall have been paid in full, such Grantor shall (A) obtain any rights
to or interests in any new inventions whether or not patentable,
patents, patent applications or any reissue, divisions, continuations,
renewal, extension or continuation-in-part of any patent or improvement
of any patent, trademarks, trade names, service marks, and
registrations or applications for registration thereof, trade secrets,
copyrights and registrations or applications for registration thereof,
or licenses, or (B) become entitled to the benefit of any patent or
patent or trademark application, or any reissue, divisions,
continuations, renewal, extension, or continuation-in-part of any
patent or any improvement of any patent, trademark or trademark
registration or renewal, trade secret, license or license renewal,
copyright or copyright registration or renewal (collectively, "New
Intellectual Property"), such Grantor covenants and agrees to prepare,
execute and record with all appropriate federal, state and/or local
offices and authorities an amendment to this Agreement adding such New
Intellectual Property to the Collateral, in form and substance
reasonably satisfactory to the Majority Lenders and, as soon as
received, deliver to the Secured Party reasonable proof that such
amended Agreement has been duly recorded and that a security interest
in favor of the Secured Party in such New Intellectual Property has
been granted.
(i) Each Grantor covenants and agrees that from and after the
date hereof and until the obligations shall have been paid in full,
such Grantor shall promptly amend this Agreement by amending Schedule B
or C, as applicable, to include such New Intellectual Property.
(a) No Material Adverse Action. No Grantor shall take or fail
to take any action which would have a material adverse effect on the
enforceability of the Secured Party's interest in the Intellectual Property, or
the value, in the aggregate, of the Intellectual Property.
(c) New Subsidiaries. The Store Company agrees that if it
shall, in the future, form or acquire, directly or indirectly, any Subsidiaries
that are formed in the United States, such Subsidiaries shall become parties to
this Agreement, and the Store Company shall cause such Subsidiary to execute and
deliver to the Secured Party any documents that the Secured Party requests,
evidencing such Subsidiary's agreement to be bound by the terms and conditions
of this Agreement.
2. The Secured Party's Appointment as Attorney-in-Fact.
(a) Each Grantor hereby irrevocably constitutes and appoints
the Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute and deliver any and all documents
and instruments which the Secured Party may deem necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Secured Party the power and right, on behalf
of such Grantor, without notice to or assent by such Grantor to do the
following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of such Grantor or in its own name or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other Instruments for the payment of
moneys due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting
any and all such moneys due under any Collateral whenever payable and
to file any claim or to take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the Secured
Party for the purpose of collecting any and all such moneys due under
any Collateral whenever payable;
(i) to pay or discharge taxes, Liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof; and
(i) (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to the Secured Party or as the Secured
Party shall direct; (B) to receive payment of and receipt for any and
all moneys, claims and other amounts due, and to become due at any
time, in respect of or arising out of any Collateral; (C) to sign and
indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other
Documents constituting or relating to the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described above
and, in connection therewith, to give such discharges or releases as
the Secured Party may deem appropriate; (G) to license or, to the
extent permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any patent or trademark, throughout the world for such term or
terms, on such conditions, and in such manner, as the Secured Party
shall in its sole discretion determine; and (H) generally to sell,
transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the
Secured Party were the absolute owner thereof for all purposes, and to
do, at the Secured Party's option and such Grantor's expense, at any
time, or from time to time, all acts and things which the Secured Party
reasonably deems necessary to protect, preserve or realize upon the
Collateral and the Secured Party's and the Lenders' Lien therein, in
order to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
(a) The Secured Party agrees that, unless it receives actual
notice that an Event of Default has occurred and is continuing, it will forbear
from exercising the power of attorney or any rights granted to the Secured Party
pursuant to this Section 6. Each Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do or cause to be
done by virtue hereof. The power of attorney granted pursuant to this Section 6,
being coupled with an interest, shall be irrevocable until the Notes and the
other Obligations are indefeasibly paid in full.
(c) The powers conferred on the Secured Party hereunder are
solely to protect the Secured Party's and the Lenders' interests in the
Collateral and shall not impose any duty upon it to exercise any such powers.
The Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to such
Grantor for any act or failure to act, except for the gross negligence or
willful misconduct of it or of such officers, directors, employees or agents.
(e) Such Grantor also authorizes the Secured Party, at any
time and from time to time following the occurrence and during the continuance
of an Event of Default, (i) to communicate in such Grantor's own name with any
party to any Contract with regard to the assignment of the right, title and
interest of such Grantor in and under the Contracts hereunder and other matters
relating thereto and (ii) to execute, in connection with the sale provided for
in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
2. Performance by the Secured Party of Such Grantor's Obligations.
3. If any Grantor fails to perform or comply with any of its agreements
contained herein and the Secured Party, as provided for by the terms of this
Agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of the Secured Party
and its agents incurred in connection with such performance or compliance,
together with interest thereon at the highest rate then in effect in respect of
the Notes, shall be payable by such Grantor to the Secured Party on demand and
shall constitute Obligations secured hereby.
1. Remedies, Rights Upon an Event of Default.
(a) If any Event of Default shall occur and be continuing, the
Secured Party shall, at the request of the Majority Lenders, or may with the
consent of the Majority Lenders, exercise in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Notes or the other
Obligations, all rights and remedies of a secured party under the UCC. Without
limiting the generality of the foregoing, each Grantor expressly agrees that in
any such event the Secured Party, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon such Grantor or any other Person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
an option or options to purchase or sell, or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
any of the Secured Party's offices or elsewhere at such prices as it may in its
sole discretion elect, for cash or on credit or for future delivery without
assumption of any credit risk. The Secured Party or any Lender shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase, by bidding in its debt or
otherwise, the whole or any part of said Collateral so sold, free of any right
or equity of redemption, which equity of redemption such Grantor hereby
releases. Each Grantor further agrees, at the Secured Party's request to
assemble the Collateral and make it available to the Secured Party at places
which the Secured Party shall reasonably select, whether at such Grantor's
premises or elsewhere. The Secured Party shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale as
provided in Section 8(d) hereof, with such Grantor remaining liable for any
deficiency remaining unpaid after such application, and only after so paying
over such net proceeds and after the payment by the Secured Party of any other
amount required by any provision of law, including Section 9-504(1)(c) of the
UCC, need the Secured Party account for the surplus, if any, such Grantor. To
the maximum extent permitted by applicable law, such Grantor waives all claims,
damages, and demands against the Secured Party or the Lenders arising out of the
repossession, retention or sale of the Collateral. Each Grantor agrees that the
Secured Party need not give more than ten days' notice of the time and place of
any public sale or of the time after which a private sale may take place and
that such notice is reasonable notification of such matters. Such Grantor shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all amounts to which the Secured Party is
entitled, such Grantor also being liable for the fees and expenses of any
attorneys employed by the Secured Party or the Lenders to collect such
deficiency.
(a) Each Grantor also agrees to pay all costs of the Secured
Party and the Lenders including, without limitation, attorneys' fees and
disbursements, incurred in connection with the enforcement of any of its rights
and remedies hereunder.
(c) Each Grantor hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(e) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by the Secured Party
as provided in Section 4.2 of the Collateral Agency Agreement.
2. Limitation on the Secured Party's Duty in Respect of
Collateral.
4. Other than as may be specifically provided in the
Collateral Agency Agreement, the Secured Party shall not have any duty as to any
Collateral in its possession or control or in the possession or control of its
agents or nominees or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto, except that the
Secured Party shall use reasonable care with respect to the Collateral in its
possession or under its control. Upon request of any Grantor, the Secured Party
shall account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
6. Notices.
8. All notices and other communications provided for hereunder
shall be given or made by telecopy, first class mail, overnight delivery, or
personal delivery, if to any Grantor, addressed to it at c/o Capricorn Investors
II, L.P., 00 Xxxx Xxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxxxx
X. Xxxxxxx, Xx., with a copy to Xxxxxxx X. Xxxx, Esq., Skadden, Arps, Slate,
Xxxxxxx & Xxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and if to the
Secured Party, addressed to it at The Bank of New York, 000 Xxxxxxx Xxxxxx,
Xxxxx 00 Xxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Corporate Trust Trustee
Administration, or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party given in
accordance with this Section 10. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telecopy, subject to telephone confirmation of receipt and the provision
immediately thereafter of a copy by first class mail, overnight delivery or
personal delivery or, in the case of a mailed notice, when duly deposited in the
U.S. mails, first class postage prepaid, in each case given or addressed as
aforesaid.
10. Amendments, Etc.
12. No amendment or waiver of any provision of this Agreement
nor consent to any departure by any Grantor therefrom shall in any event be
effective unless the same shall be in writing, approved by the Majority Lenders
and signed by the Secured Party, and then any such waiver or consent shall only
be effective in the specific instance and for the specific purpose for which
given.
14. No Waiver; Remedies.
16. (a) No failure on the part of the Secured Party to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative, may be exercised singly or
concurrently, and are not exclusive of any remedies provided by law, any of the
other Security Documents or the Note Agreement.
18. (b) Failure by the Secured Party at any time or times
hereafter to require strict performance by any Grantor or any other Person of
any of the provisions, warranties, terms or conditions contained in any of the
Security Documents now or at any time or times hereafter executed by any Grantor
or any such other Person and delivered to any of the Secured Party shall not
waive, affect or diminish any right of the Secured Party at any time or times
hereafter to demand strict performance thereof, and such right shall not be
deemed to have been modified or waived by any course of conduct or knowledge of
the Secured Party, or any agent, officer or employee of such Secured Party.
1. Successors and Assigns.
2. This Agreement and all obligations of each Grantor
hereunder shall be binding upon the successors and assigns of each Grantor, and
shall, together with the rights and remedies of the Secured Party hereunder,
inure to the benefit of the Secured Party, the Lenders and their respective
successors and assigns.
1. Governing Law.
3. This Agreement shall be governed by, and be construed and
interpreted in accordance with, the law of the State of New York, without regard
to principles of conflicts of laws. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity and without invalidating the remaining
provisions of this Agreement.
5. Consent to Jurisdiction.
7. Courts within the State of New York shall, to the extent
permitted by applicable law, have nonexclusive jurisdiction over any and all
disputes arising under or pertaining to this Agreement and all obligations of
each Grantor hereunder. In any and all such disputes, the Store Company and each
Grantor, hereby irrevocably consent to the nonexclusive jurisdiction of all
courts within the State of New York and the service of process of any of the
aforesaid courts by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Store Company or such Grantor at its address
provided herein, and venue in any such dispute shall, to the extent permitted by
applicable law, be proper in New York County or the Southern District of New
York.
9. Section Titles.
11. The Section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of this Agreement.
IN WITNESS WHEREOF, Each Grantor has caused this Agreement to
be executed and delivered by its duly authorized officer on the date first above
written.
XXX. XXXXXX' ORIGINAL COOKIES, INC.
By:/s/Xxxxxxx X. Xxxxxxx
Name:Xxxxxxx X. Xxxxxxx
Title:President
XXX. XXXXXX COOKIES AUSTRALIA
By:/s/Xxxxxxx X. Xxxxxxx
Name:Xxxxxxx X. Xxxxxxx
Title:President
FAIRFIELD FOODS INC.
By:/s/Xxxxxxx X. Winour
Name:Xxxxxxx X. Xxxxxxx
Title:President
Accepted and acknowledged by:
THE BANK OF NEW YORK,
AS COLLATERAL AGENT
By:/s/Xxxxx Xxxxxx
Name:Xxxxx Xxxxxx
Title:Assistant Treasurer
SCHEDULE A
TO SECURITY AGREEMENT
GRANTORS
Xxx. Xxxxxx' Original Cookies, Inc.
Xxx. Xxxxxx Cookies Australia
Fairfield Foods Inc.
SCHEDULE C
TO
SECURITY AGREEMENT
COPYRIGHTS
None
SCHEDULE D
TO SECURITY AGREEMENT
FILINGS
