Security Agreement
(Equipment)
THIS SECURITY AGREEMENT (this "Agreement"), dated as of this 5th day of
September, 2001, is made by and between ZB COMPANY, INC. (f/k/a ZB Acquisition
Co.) (the "Grantor"), with an address at 00000 Xxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000 and PNC LEASING, LLC (the "Lender"), with an address at c/o
PNC Bank, National Association, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000.
BACKGROUND
The Lender is party to a certain Master Equipment Lease dated as of June
26, 1998 with Zany Brainy, Inc. ("Zany Brainy") (as amended or otherwise
modified from time to time, the "Master Lease"). In conjunction with the Master
Lease, the Lender and Zany Brainy entered into six (6) lease schedules
(collectively, the "Lease Schedules" and, together with the Master Lease, the
"PNC Leases") that each incorporated the terms of the Master Lease. The PNC
Leases provided for the lease of certain equipment, which includes, without
limitation, computer equipment, store furniture and fixtures and various
additions, accessions, accessories, attachments, replacements and substitutions
thereof and thereto (collectively, the "Equipment") by Lender to Zany Brainy.
Pursuant to that certain Stipulation and Order Pursuant to Sections 362,
363 and 365 of the Bankruptcy Code Authorizing Sale of Certain Equipment and
Resolving (1) Motion of PNC Leasing, LLC for an Order (A) Granting PNC Leasing,
LLC Relief from the Automatic Stay in respect of Certain Equipment Leases
pursuant to 11 U.S.C. ss. 362(d)(1) and (2), or, in the alternative, (B)
Compelling Zany Brainy, Inc. to Assume or Reject Certain Unexpired Equipment
Leases pursuant to 11 U.S.C. ss. 365(d)(2), and (2) Debtors' Motion to enter
into a Lease of Certain Fixtures, Furniture and Equipment, executed on August
31, 2001 (the "Stipulation"), Zany Brainy and the other Debtors (as defined in
the Stipulation) were authorized to sell the Equipment to the Grantor and
Grantor agreed to assume the PNC Allowed Secured Claim (as defined in the
Stipulation).
Pursuant to an a certain asset purchase agreement, the Grantor has so
purchased the Equipment, and pursuant to documentation evidencing part of the
Obligations (as defined herein), the Grantor has so assumed the PNC Allowed
Secured Claim. Under the terms hereof, the Lender desires to obtain and the
Grantor desires to grant the Lender security for all of the Obligations.
NOW, THEREFORE, the Grantor and the Lender, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) "Collateral" shall include the Equipment, all goods and general
intangibles relating to, arising from or embedded in the Equipment, all books
and records pertaining to the Equipment and such general intangibles, all cash
and non-cash proceeds (including insurance proceeds) of the Equipment, and all
additions and accessions thereto, substitutions therefor and replacements
thereof, in each case whether now owned or hereafter acquired or arising.
(b) "Obligations" shall include all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Grantor to the Lender or to any
other direct or indirect subsidiary of The PNC Financial Services Group, Inc.,
of any kind or nature, present or future (including any interest accruing
thereon after maturity, or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding relating
to the Grantor, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether direct or indirect (including those
acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, whether or not
(i) evidenced by any note, guaranty or other instrument, including, without
limitation, a certain Equipment Loan Promissory Note of even date herewith by
the Grantor in favor of the Lender, and a certain Letter Agreement of even date
herewith between the Grantor and the Lender (together with all related
agreements, instruments, certificates and documents, whether entered into on the
date hereof or subsequent to the date hereof, in each case, as amended, restate,
supplemented or otherwise modified from time to time, the "Loan Documents") (ii)
arising under any agreement, instrument or document, (iii) for the payment of
money to the Lender or any other direct or indirect subsidiary of The PNC
Financial Services Group, Inc., (iv) arising by reason of an extension of
credit, opening of a letter of credit, loan, equipment lease or guarantee to or
with the Lender or any other direct or indirect subsidiary of The PNC Financial
Services Group, Inc., (v) under any interest or currency swap, future, option or
other interest rate protection or similar agreement with the Lender or any other
direct or indirect subsidiary of The PNC Financial Services Group, Inc., (vi)
under or by reason of any foreign currency transaction, forward, option or other
similar transaction providing for the purchase of one currency in exchange for
the sale of another currency, or in any other manner, with the Lender or any
other direct or indirect subsidiary of The PNC Financial Services Group, Inc.
(vii) arising out of overdrafts on deposit or other accounts or out of
electronic funds transfers (whether by wire transfer or through automated
clearing houses or otherwise) or out of the return unpaid of, or other failure
of the Lender or any other direct or indirect subsidiary of The PNC Financial
Services Group, Inc. to receive final payment for, any check, item, instrument,
payment order or other deposit or credit to a deposit or other account, or out
of the Lender's or any other direct or indirect subsidiary of The PNC Financial
Services Group, Inc.'s non-receipt of or inability to collect funds or otherwise
not being made whole in connection with depository or other similar
arrangements; and any amendments, extensions, renewals and increases of or to
any of the foregoing, and all costs and expenses of the Lender incurred in the
documentation, negotiation, modification, enforcement, collection and otherwise
in connection with any of the foregoing (other than in connection with the
negotiation and documentation of this Agreement and related documentation
executed on the date hereof), including reasonable attorneys' fees and expenses.
(c) "UCC" means the Uniform Commercial Code, as adopted and enacted and as
in effect from time to time in the State whose law governs pursuant to the
Section of this Agreement entitled "Governing Law and Jurisdiction." Terms used
herein which are defined in the UCC and not otherwise defined herein shall have
the respective meanings ascribed to such terms in the UCC. To the extent the
definition of any category or type of collateral is modified by any amendment,
modification or revision to the UCC, such modified definition will apply
automatically as of the date of such amendment, modification or revision.
2. Grant of Security Interest. To secure the Obligations, the Grantor, as
debtor, hereby assigns and grants to the Lender, as secured party, a continuing
lien on and security interest in the Collateral.
3. Change in Name or Locations. The Grantor hereby agrees that if the
location of the Collateral changes from the locations listed on Exhibit "A"
hereto and made part hereof, or if the Grantor changes its name, its type of
organization, its state of organization or establishes a name in which it may do
business that is not listed as a tradename on Exhibit "A" hereto, the Grantor
will promptly notify the Lender in writing of the additions or changes but in
any event within 20 days of the occurrence of any such event. The Grantor shall
deliver to Lender an amended and restated Exhibit "A" within 30 days of the date
hereof, which the Grantor shall certify on the date of delivery as being true,
correct and complete.
4. Representations and Warranties. The Grantor represents, warrants and
covenants to the Lender that: (a) all information, including its type of
organization, jurisdiction of organization and chief executive office are as set
forth on Exhibit "A" hereto and are true and correct on the date hereof; (b) the
Grantor has good and valid title to the Collateral, has not made any prior sale,
pledge, encumbrance, assignment or other disposition of any of the Collateral,
and the Collateral is free from all encumbrances and rights of setoff of any
kind except the lien in favor of the Lender created by this Agreement and
Permitted Liens (as defined in the Loan Agreement); (c) except as expressly
provided in Section 6 herein, the Grantor will not hereafter without the
Lender's prior written consent sell, pledge, encumber, assign or otherwise
dispose of any of the Collateral or permit any right of setoff, lien or security
interest to exist thereon except to the Lender; (d) the Grantor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein; and (e) each general intangible relating to
the Equipment is genuine and enforceable in accordance with its terms and the
Grantor will defend the same against all claims, demands, setoffs and
counterclaims at any time asserted.
5. Grantor's Covenants. The Grantor covenants that it shall from time to
time and at all reasonable times allow the Lender, by or through any of its
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officers, agents, attorneys, or accountants, to examine or inspect the
Collateral, and obtain valuations and audits of the Collateral, at the Grantor's
expense, wherever located. The Grantor shall do, obtain, make, execute and
deliver all such additional and further acts, things, deeds, assurances and
instruments as the Lender may reasonably require to vest in and assure to the
Lender its rights hereunder and in or to the Collateral, and the proceeds
thereof, including waivers from landlords, warehousemen and mortgagees;
provided, however, that prior to the occurrence of an Event of Default, the
Grantor shall not be required to reimburse the Lender for fees and expenses
incurred by the Lender in connection with such actions. The Grantor agrees that
the Lender has full power and authority to collect, compromise, endorse, sell or
otherwise deal with the Collateral in its own name or that of the Grantor at any
time upon an Event of Default.
6. Negative Pledge; No Transfer. The Grantor will not sell or offer to sell
or otherwise transfer or grant or allow the imposition of a lien or security
interest upon the Collateral other than in favor of Lender and Permitted Liens,
will not allow any third party to gain control of all or any part of the
Collateral, and will not use any portion thereof in any manner inconsistent with
this Agreement or with the terms and conditions of any policy of insurance
thereon.
7. Further Assurances. By its signature hereon, the Grantor hereby
irrevocably authorizes the Lender to execute (on behalf of the Grantor) and file
against the Grantor one or more financing, continuation or amendment statements
pursuant to the UCC in form satisfactory to the Lender, and the Grantor will pay
the cost of preparing and filing the same in all jurisdictions in which such
filing is deemed by the Lender to be necessary or desirable in order to perfect,
preserve and protect its security interests. If required by the Lender, the
Grantor will execute all documentation necessary for the Lender to obtain and
maintain perfection of its security interests in the Collateral.
8. Events of Default. The Grantor shall, at the Lender's option, be in
default under this Agreement upon the happening of any of the following events
or conditions (each, an "Event of Default"): (a) any Event of Default (as
defined in the Loan Documents or any other agreements, instruments or documents
evidencing any of the Obligations); (b) any default under any of the Obligations
that does not have a defined set of "Events of Default" and the lapse of any
notice or cure period provided in such Obligations with respect to such default;
(c) demand by the Lender under any of the Obligations that have a demand
feature; (d) falsity, or inaccuracy in any material respect, by the Grantor of
any written warranty, representation or statement made or furnished to the
Lender by or on behalf of the Grantor; (e) an uninsured material loss, theft,
damage, or destruction to any of the Collateral, or the making of any levy,
seizure or attachment of or on the Collateral; (f) the failure of the Lender to
have a perfected first priority security interest in the Collateral (other than
as a result of the Lender's failure to file and continue a financing statement
against the Grantor in the State of Delaware describing the Collateral); (g) any
indication or evidence received by the Lender that the Grantor may have directly
or indirectly been engaged in any type of activity which, in the Lender's
reasonable discretion, is reasonably likely to result in the forfeiture of any
Collateral to any governmental entity, federal, state or local; or (h) the
failure by the Grantor to perform any of its obligations under this Agreement;
provided, however, that no Event of Default under this clause (h) shall have
occurred if the Grantor cures such failure with 20 days of the occurrence
thereof; provided, further, however, that the foregoing cure period shall not
apply to any failure of the Grantor to comply with Sections 3, 5 or 6, or the
last sentence of Section 7, of this Agreement.
9. Remedies. Upon the occurrence of any such Event of Default and at any
time thereafter, the Lender may declare all Obligations secured hereby
immediately due and payable and shall have, in addition to any remedies provided
herein or by any applicable law or in equity, all the remedies of a secured
party under the UCC. The Lender's remedies include, but are not limited to, the
right to (a) peaceably by its own means or with judicial assistance enter the
Grantor's premises and take possession of the Collateral without prior notice to
the Grantor or the opportunity for a hearing, (b) render the Collateral
unusable, (c) dispose of the Collateral on the Grantor's premises, and (d)
require the Grantor to assemble the Collateral and make it available to the
Lender at a place designated by the Lender. Unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Lender will give the Grantor reasonable notice of the
time and place of any public sale thereof or of the time after which any private
sale or any other intended disposition thereof is to be made. The requirements
of commercially reasonable notice shall be met if such notice is sent to the
Grantor at least ten (10) days before the time of the intended sale or
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disposition. Expenses of retaking, holding, preparing for disposition, disposing
or the like shall include the Lender's reasonable attorneys' fees and legal
expenses, incurred or expended by the Lender to enforce any payment due it under
this Agreement either as against the Grantor, or in the prosecution or defense
of any action, or concerning any matter growing out of or connection with the
subject matter of this Agreement and the Collateral pledged hereunder. The
Grantor waives all relief from all appraisement or exemption laws now in force
or hereafter enacted.
10. Power of Attorney. The Grantor does hereby make, constitute and appoint
any officer or agent of the Lender as the Grantor's true and lawful
attorney-in-fact, with power to (a) endorse the name of the Grantor or any of
the Grantor's officers or agents upon any notes, checks, drafts, money orders,
or other instruments of payment representing proceeds of Collateral that may
come into the Lender's possession in full or part payment of any Obligations;
(b) xxx for, compromise, settle and release all claims and disputes with respect
to, the Collateral (provided, however, that Lender may not exercise the power of
attorney granted under this clause (b) unless an Event of Default has occurred
and is continuing); and (c) sign, for the Grantor, such documentation required
by the UCC, or supplemental intellectual property security agreements; granting
to the Grantor's said attorney full power to do any and all things necessary to
be done in and about the premises as fully and effectually as the Grantor might
or could do. The Grantor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is coupled with
an interest, and is irrevocable.
11. Payment of Expenses. At its option, the Lender may discharge taxes, liens,
security interests or such other encumbrances as may attach to the Collateral,
may pay for required insurance on the Collateral and may pay for the maintenance
and preservation of the Collateral, as reasonably determined by the Lender to be
necessary. The Grantor will reimburse the Lender on demand for any payment so
made or any expense incurred by the Lender pursuant to the foregoing
authorization, and the Collateral also will secure any advances or payments so
made or expenses so incurred by the Lender. In addition to the foregoing, the
Lender may conduct any appraisal or reappraisal of the Collateral and the
Grantor will reimburse the Lender on demand for any payment so made or any
expense incurred by the Lender pursuant to this authorization; provided,
however, that, so long as no Event of Default has occurred and is continuing,
the Grantor shall only be required to reimburse the Lender for 1 appraisal of
the Collateral and such reimbursement obligation shall in no event exceed
$5,000.
12. Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder ("Notices") must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree in writing, including electronic mail. Without
limiting the foregoing, first-class mail, facsimile transmission and commercial
courier service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party's
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.
13. Preservation of Rights. No delay or omission on the Lender's part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the
Lender's action or inaction impair any such right or power. The Lender's rights
and remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Lender may have under other agreements, at law or in equity.
14. Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.
15. Changes in Writing. No modification, amendment or waiver of, or consent
to any departure by the Grantor from, any provision of this Agreement will be
effective unless made in a writing signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on the Grantor will entitle the Grantor to
any other or further notice or demand in the same, similar or other
circumstance.
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16. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
17. Counterparts. This Agreement may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument. Delivery of an executed
counterpart of signature page to this Agreement by facsimile transmission shall
be effective as delivery of a manually executed counterpart. Any party so
executing this Agreement by facsimile transmission shall promptly deliver a
manually executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart executed by facsimile transmission.
18. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the Grantor and the Lender and their respective heirs,
executors, administrators, successors and assigns; provided, however, that the
Grantor may not assign this Agreement in whole or in part without the Lender's
prior written consent and the Lender at any time may assign this Agreement in
whole or in part.
19. Interpretation. In this Agreement, unless the Lender and the Grantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement. Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose. Unless
otherwise specified in this Agreement, all accounting terms shall be interpreted
and all accounting determinations shall be made in accordance with GAAP. If this
Agreement is executed by more than one Grantor, the obligations of such persons
or entities will be joint and several.
20. Indemnity. The Grantor agrees to indemnify each of the Lender, each
legal entity, if any, who controls the Lender and each of their respective
directors, officers and employees (the "Indemnified Parties") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all fees and charges of internal or external
counsel with whom any Indemnified Party may consult and all expenses of
litigation and preparation therefor) which any Indemnified Party may incur or
which may be asserted against any Indemnified Party by any person, entity or
governmental authority (including any person or entity claiming derivatively on
behalf of the Grantor), in connection with or arising out of or relating to the
matters referred to in this Agreement or the Obligations, whether (a) arising
from or incurred in connection with any breach of a representation, warranty or
covenant by the Grantor, or (b) arising out of or resulting from any suit,
action, claim, proceeding or governmental investigation, pending or threatened,
whether based on statute, regulation or order, or tort, or contract or
otherwise, before any court or governmental authority; provided, however, that
the foregoing indemnity agreement shall not apply to any claims, damages,
losses, liabilities and expenses solely attributable to an Indemnified Party's
gross negligence or willful misconduct. The indemnity agreement contained in
this Section shall survive the termination of this Agreement, payment of the
Obligations and assignment of any rights hereunder. The Grantor may participate
at its expense in the defense of any such claim.
21. Governing Law and Jurisdiction. This Agreement has been delivered to
and accepted by the Lender and will be deemed to be made in the State where the
Lender's office indicated above is located. THIS AGREEMENT WILL BE INTERPRETED
AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE
WITH THE LAWS OF THE STATE WHERE THE LENDER'S OFFICE INDICATED ABOVE IS LOCATED,
EXCEPT THAT THE LAWS OF THE STATE WHERE ANY COLLATERAL IS LOCATED (IF DIFFERENT
FROM THE STATE WHERE SUCH OFFICE OF THE LENDER IS LOCATED) SHALL GOVERN THE
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CREATION, PERFECTION AND FORECLOSURE OF THE LIENS CREATED HEREUNDER ON SUCH
PROPERTY OR ANY INTEREST THEREIN. The Grantor hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court in the county or judicial
district where the Lender's office indicated above is located; provided that
nothing contained in this Agreement will prevent the Lender from bringing any
action, enforcing any award or judgment or exercising any rights against the
Grantor individually, against any security or against any property of the
Grantor within any other county, state or other foreign or domestic
jurisdiction. The Lender and the Grantor agree that the venue provided above is
the most convenient forum for both the Lender and the Grantor. The Grantor
waives any objection to venue and any objection based on a more convenient forum
in any action instituted under this Agreement.
22. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE LENDER IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE GRANTOR AND THE LENDER ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
The Grantor acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
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WITNESS the due execution hereof as a document under seal, as of the date first
written above.
WITNESS / ATTEST: ZB COMPANY, INC.
/s/ Xxxxxxxx X. Xxxxx By:/s/ Xxxxxxx X. Xxxxxxxx
(SEAL)
Print Name: Xxxxxxxx X. Xxxxx Print Name: Xxxxxxx X. Xxxxxxxx
Title: Senior VP and General Counsel Title: EVP, Treasurer and
(Include title only if an officer Secretary
of entity signing to the right)
PNC LEASING, LLC
By: /s/ Xxxxxxx X. Xxxxxxx, Jr.
Print Name: Xxxxxxx X. Xxxxxxx, Jr.
Title: Vice President
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EXHIBIT "A"
TO SECURITY AGREEMENT
1. Grantor's form of organization (i.e., corporation, partnership, limited
liability company): Corporation.
2. Grantor's State of organization, if a registered organization (i.e.,
corporation, limited partnership or limited liability company): Delaware.
3. Address of Grantor's chief executive office, including the County: 00000
Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (Los Angeles county).
4. Grantor's EIN, if not a natural person:
5. Grantor's organization ID# (if any exists):
6. Address for books and records, if different:
7. Addresses of other Equipment locations, including Counties and name and
address of landlord or owner if location is not owned by the Grantor:
8. Other names or tradenames now or formerly used by the Grantor:
