EXHIBIT 99.9
SECOND-LIEN PLEDGE AND SECURITY AGREEMENT
SECOND-LIEN PLEDGE AND SECURITY AGREEMENT, dated as of
September 29, 2003, between Levi Xxxxxxx & Co., a Delaware corporation (the
"BORROWER"), each of the undersigned direct and indirect Subsidiaries of the
Borrower (each of such undersigned Subsidiaries being a "SUBSIDIARY GRANTOR" and
collectively the "SUBSIDIARY GRANTORS") and each additional GRANTOR that may
become a party hereto after the date hereof in accordance with SECTION 32(I)
hereof (the Borrower, each Subsidiary Grantor and each Additional Grantor being
a "GRANTOR" and collectively the "GRANTORS") and BANK OF AMERICA, N.A., in its
capacity as the Administrative Agent (the "AGENT") for the several financial
institutions (the "LENDERS") from time to time party to the Credit Agreement
referred to below.
W I T N E S S E T H:
WHEREAS, the Borrower has entered into that certain Credit
Agreement dated as of September 29, 2003, among the Borrower, the Lenders and
the Agent (as such agreement may be amended, restated, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, all obligations of the Borrower under the Credit
Agreement and the other Loan Documents are secured under that certain
Intellectual Property Security Agreement dated as of the date hereof, among the
Borrower, certain of its Subsidiaries and the Agent (the "INTELLECTUAL PROPERTY
SECURITY AGREEMENT"), and it is desired that such obligations also be secured
hereunder in accordance with the terms hereof;
WHEREAS, the Domestic Subsidiaries of the Borrower have
entered into that certain Guaranty dated as of September 29, 2003 (as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time, the "GUARANTY"), in favor of and for the benefit of the Agent, as agent
for and representative of the Lenders;
WHEREAS, the Agent and Bank of America, N.A., in its capacity
as agent (in such capacity, the "ABL AGENT") for the several financial
institutions party from time to time to that certain Credit Agreement dated as
of September 29, 2003, (as such agreement may be amended, restated, supplemented
or otherwise modified from time to time, the "ABL CREDIT AGREEMENT"), have
entered into that certain Intercreditor Agreement dated as of September 29, 2003
(as such agreement may be amended, restated, supplemented or otherwise modified
from time to time, the "INTERCREDITOR AGREEMENT");
WHEREAS, the Borrower, certain direct and direct subsidiaries
of the Borrower and the ABL Agent have entered into that certain Pledge and
Security Agreement dated as of even date with the ABL Credit Agreement (as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time, the "ABL PLEDGE AND SECURITY AGREEMENT");
WHEREAS, in order to induce the Agent and the Lenders to enter
into the Credit Agreement and the other Loan Documents and to induce the Lenders
to make the Loans and issue Letters of Credit as provided for in the Credit
Agreement, the Grantors have agreed to grant a continuing Lien on the Collateral
(as hereinafter defined) to secure the Secured Obligations;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING RESPECTIVE
MEANINGS:
"ACCOUNT DEBTOR" means each Person obligated in any way on or
in connection with an Account.
"ACCOUNTS" means all now owned or hereafter acquired or
arising accounts of any Grantor, as defined in the UCC, including any rights to
payment for the sale of goods, whether or not they have been earned by
performance.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, ten percent
(10%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
"BENEFICIARIES" means the Agent and the Lenders.
"CHATTEL PAPER" means all now owned or hereafter acquired
chattel paper of any Grantor, as defined in the UCC, including electronic
chattel paper.
"DEPOSIT ACCOUNTS" means all "deposit accounts" as such term
is defined in the UCC, now or hereafter held in the name of any Grantor.
"DOCUMENTS" means all documents as such term is defined in the
UCC, including bills of lading, warehouse receipts or other documents of title,
now owned or hereafter acquired by any Grantor.
"EQUIPMENT" means all now owned or hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory) of any Grantor, including embedded
software, dies, tools, jigs, molds and office equipment, as well as all of such
types of property leased by any Grantor and all of such Grantor's rights and
interests with respect thereto under such leases (including, without limitation,
options to purchase); together with all present and future additions and
accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located.
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"GENERAL INTANGIBLES" means all now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of any Grantor of every kind and nature
(other than Accounts), including, without limitation, all contract rights,
payment intangibles, IP Collateral, corporate or other business records,
inventions, designs, blueprints, plans, specifications, patents, patent
applications, trade secrets, computer software, customer lists, registrations,
licenses, franchises, tax refund claims, any funds which may become due to such
Grantor in connection with the termination of any Plan or other employee benefit
plan or any rights thereto and any other amounts payable to such Grantor from
any Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and any
proceeds thereof, property, casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the lives of key employees on
which such Grantor is beneficiary, rights to receive dividends, distributions,
cash, Instruments and other property in respect of or in exchange for pledged
equity interests or Investment Property and any letter of credit, guarantee,
claim, security interest or other security held by or granted to such Grantor;
PROVIDED, HOWEVER, that General Intangibles shall not include the Intellectual
Property Assets.
"GOODS" means all "goods", as defined in the UCC, now owned or
hereafter acquired by any Grantor, wherever located, including embedded software
to the extent included in "goods" as defined in the UCC.
"INSTRUMENTS" means all instruments as such term is defined in
the UCC, now owned or hereafter acquired by any Grantor.
"INTELLECTUAL PROPERTY ASSETS" has the meaning assigned to
that term in the Intercreditor Agreement.
"INVENTORY" means all now owned or hereafter acquired
inventory, goods and merchandise of any Grantor, wherever located, to be
furnished under any contract of service or held for sale or lease, all returned
goods, raw materials, work-in-process, finished goods (including embedded
software), other materials and supplies of any kind, nature or description which
are used or consumed in such Grantor's business or used in connection with the
packing, shipping, advertising, selling or finishing of such goods and
merchandise, and all documents of title or other Documents representing them.
"INVESTMENT PROPERTY" means all right, title and interest of
any Grantor in and to any and all: (a) securities whether certificated or
uncertificated; (b) securities entitlements; (c) securities accounts; (d)
commodity contracts; or (e) commodity accounts.
"IP COLLATERAL" means all rights, title and interest
(including rights acquired pursuant to a license or otherwise) in and to all
patents and patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in the
future may be, owned or held by any Grantor and all patents and patent
applications and rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in the future may be,
owned by such Grantor in whole or in part (including the patents and patent
applications set forth on SCHEDULE 1 attached hereto, as the same may be amended
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pursuant hereto from time to time), all rights (but not obligations)
corresponding thereto (including the right, exercisable only upon the occurrence
and during the continuation of an Event of Default, to xxx for past, present and
future infringements in the name of such Grantor or in the name of the Agent or
the Lenders), and all re-issues, divisions, continuations, renewals, extensions
and continuations-in-part thereof (all of the foregoing being collectively
referred to as the "PATENTS"), it being understood that the rights and interests
included in the IP Collateral hereby shall include, without limitation, all
rights and interests pursuant to licensing or other contracts in favor of such
Grantor pertaining to Patent applications and Patents presently or in the future
owned or used by third parties but, in the case of third parties which are not
Affiliates of such Grantor, only to the extent permitted by such licensing or
other contracts and, if not so permitted, only with the consent of such third
parties.
"LETTER-OF-CREDIT RIGHTS" means "letter-of-credit rights" as
such term is defined in the UCC, now owned or hereafter acquired by any Grantor,
including rights to payment or performance under a letter of credit, whether or
not any Grantor, as beneficiary, has demanded or is entitled to demand payment
or performance.
"LOAN ACCOUNT" means the loan account of the Borrower, which
account shall be maintained by the Applicable Agent.
"PAYMENT ACCOUNT" means each bank account established pursuant
to this Agreement, to which the proceeds of Accounts and other Collateral are
deposited or credited, and which is maintained in the name of the Agent or any
Grantor, as the Agent may determine, on terms acceptable to the Agent.
"PLEDGED COLLATERAL" means Pledged Debt, Pledged Interests and
all proceeds thereof.
"PLEDGED DEBT" means all indebtedness from time to time owed
to any Grantor by any obligor that is, or becomes, a direct or indirect
Subsidiary of such Grantor, or by any obligor of which such Grantor is a direct
or indirect Subsidiary, including the indebtedness set forth in SCHEDULE 2(B)
attached hereto, as SCHEDULE 2(B) may be updated upon the execution of this
Agreement by an Additional Grantor, and issued by the obligors named therein,
and the instruments evidencing such indebtedness.
"PLEDGED INTERESTS" means all shares of stock, partnership
interests, interests in joint ventures, limited liability company interests and
all other equity interests now or hereafter owned by any Grantor in any Person
that is, or becomes, a direct Domestic Subsidiary or Material Foreign Subsidiary
of such Grantor, including all securities convertible into, and rights,
warrants, options and other rights to purchase or otherwise acquire, any of the
foregoing now or hereafter owned by such Grantor, including those set forth in
SCHEDULE 2(A) attached hereto, as SCHEDULE 2(A) may be updated upon the
execution of this Agreement by an Additional Grantor, and the certificates or
other instruments representing any of the foregoing and any interest of such
Grantor in the entries on the books of any securities intermediary pertaining
thereto.
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"SOFTWARE" means all "software" as such term is defined in the
UCC, now owned or hereafter acquired by any Grantor, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"SUPPORTING OBLIGATIONS" means all supporting obligations as
such term is defined in the UCC.
"UCC" means the Uniform Commercial Code, as in effect from
time to time, of the State of California or of any other state the laws of which
are required as a result thereof to be applied in connection with the issue of
perfection of security interests.
"UNIFORM COMMERCIAL CODE JURISDICTION" means any jurisdiction
that has adopted "Revised Article 9" of the UCC on or after July 1, 2001.
All other capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement. All other
undefined terms contained in this Agreement, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are
used or defined therein.
2. GRANT OF LIEN.
(a) As security for all Secured Obligations (as defined in Section 3), each
Grantor hereby grants to the Agent, for the benefit of the Agent and the
Lenders, a continuing security interest in, lien on, assignment of and right of
set-off against, all of the following property and assets of such Grantor,
whether now owned or existing or hereafter acquired or arising, regardless of
where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights;
(iv) all Chattel Paper;
(v) all Documents;
(vi) all Instruments;
(vii) all Supporting Obligations and Letter-of-Credit Rights;
(viii) all General Intangibles (including payment intangibles and
Software);
(ix) all Goods;
(x) all Equipment;
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(xi) all Investment Property;
(xii) all IP Collateral;
(xiii) all Pledged Interests and all dividends, distributions, returns
of capital, cash, warrants, options, rights, instruments, rights to vote or
manage the business of any Person that is, or becomes, a direct Domestic
Subsidiary or Material Foreign Subsidiary of such Grantor pursuant to
organizational documents governing the rights and obligations of the
stockholders, partners, members or other owners thereof and other property
or proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Pledged Interests;
PROVIDED, that if the issuer of any of such Pledged Interests is a Material
Foreign Subsidiary, the Pledged Interests shall not include any shares of
stock of such issuer in excess of the number of shares of such issuer
possessing up to but not exceeding 65% of the voting power of all classes
of capital stock entitled to vote of such issuer, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Interests;
(xiv) all Pledged Debt and all interest, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Debt;
(xv) all money, cash, cash equivalents, securities and other property
of any kind of any Grantor held directly or indirectly by the Agent or any
Lender;
(xvi) all Deposit Accounts, credits, and balances with and other
claims against the Agent or any Lender or any of their Affiliates or any
other financial institution with which any Grantor maintains deposits,
including any Payment Accounts;
(xvii) all books, records and other property related to or referring
to any of the foregoing, including books, records, account ledgers, data
processing records, computer software and other property and General
Intangibles at any time evidencing or relating to any of the foregoing; and
(xviii) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not limited
to, proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing.
All of the foregoing, together with the Real Estate covered by the Mortgage(s),
all equity interests in Subsidiaries pledged to the Agent and all other property
of the Grantors in which the Agent or any Lender may at any time be granted a
Lien as collateral for the Secured Obligations is herein collectively referred
to as the "COLLATERAL".
Notwithstanding anything herein to the contrary, in no event
shall the Collateral include, and no Grantor shall be deemed to have granted a
security interest in any of such Grantor's rights or interests in any license,
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contract or agreement to which such Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under, any license,
contract or agreement to which such Grantor is a party (other than to the extent
that any such term would be rendered ineffective pursuant to the UCC or any
other applicable law (including the Bankruptcy Code) or principles of equity);
PROVIDED, that immediately upon the ineffectiveness, lapse or termination of any
such provision, the Collateral shall include, and such Grantor shall be deemed
to have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
Each item of Collateral listed in this SECTION 2 that is
defined in Articles 8 or 9 of the UCC shall have the meaning set forth in the
UCC, as it exists on the date of this Agreement or as it may hereafter be
amended, it being the intention of the Grantors that the description of the
Collateral set forth above be construed to include the broadest possible range
of assets, except for assets expressly excluded as set forth herein.
Notwithstanding anything herein to the contrary, neither the
Borrower nor any Grantor shall be deemed to have granted a security interest in
(i) any Principal Property, (ii) any capital stock of any Restricted Subsidiary,
(iii) any Pledged Debt of or issued by any Restricted Subsidiary, (iv) any
Intellectual Property Assets, (v) any shares of stock of any Material Foreign
Subsidiary in excess of the number of shares of such Material Foreign Subsidiary
possessing up to but not exceeding 65% of the voting power of all classes of
capital stock entitled to vote of such issuer, or (vi) Equipment subject to an
Equipment Financing Transaction permitted under the Credit Agreement.
(b) All of the Secured Obligations shall be secured by all of the Collateral.
3. SECURITY FOR OBLIGATIONS.
This Agreement secures, and the Collateral assigned by each
Grantor is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code), of all Secured Obligations of such Grantor. "SECURED
OBLIGATIONS" means:
(a) with respect to the Borrower, all Obligations and liabilities of
every nature of the Borrower now or hereafter existing under or arising out
of or in connection with the Credit Agreement and the other Loan Documents;
and
(b) with respect to each Subsidiary Grantor and Additional Grantor,
all obligations and liabilities of every nature of such Grantor now or
hereafter existing under or arising out of or in connection with the
Guaranty;
in each case together with all extensions or renewals thereof, whether for
principal, interest (including interest that, but for the filing of a
petition in bankruptcy with respect to the Borrower or any other Grantor,
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would accrue on such obligations, whether or not a claim is allowed against
the Borrower or such Grantor for such interest in the related bankruptcy
proceeding), fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations or liabilities that
are paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from the Agent or any Lender as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of the Grantors now or hereafter existing under this Agreement.
4. PERFECTION AND PROTECTION OF SECURITY INTEREST.
(a) Each Grantor shall, at its expense, perform all reasonable steps
requested by the Agent at any time to perfect, maintain, protect, and
enforce the Agent's Liens, including: (i) executing, delivering and/or
filing and recording of the Mortgage(s) and executing and filing financing
or continuation statements, and amendments thereof, in form and substance
reasonably satisfactory to the Agent; (ii) whenever an Event of Default has
occurred and is continuing, transferring Inventory to warehouses or other
locations designated by the Agent; (iii) placing notations on such
Grantor's books of account to disclose the Agent's security interest; and
(iv) taking such other steps as are deemed necessary or reasonably
desirable by the Agent to maintain and protect the Agent's Liens. Each
Grantor agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as
a financing statement.
(b) At the reasonable request of the Agent, each Grantor shall deliver
to the Agent all Collateral consisting of a reasonable sample of negotiable
Documents and all material negotiable Documents, certificated securities
(accompanied by stock papers executed in blank), Chattel Paper and
Instruments evidencing, comprising or representing the Collateral
(including the Pledged Collateral), promptly after such Grantor receives
the same, duly endorsed or accompanied by duly executed instruments of
transfer or assignment in blank. Upon the occurrence and during the
continuation of an Event of Default, the Agent shall have the right,
without notice to the Grantors, to transfer to or to register in the name
of the Agent or any of its nominees any or all of the Pledged Collateral,
subject to the revocable rights specified in SECTION 21(A) hereof. In
addition, the Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral
for certificates or instruments of smaller or larger denominations.
(c) Each Grantor shall, in accordance with the terms of the Credit
Agreement, obtain or use its commercially reasonable efforts to obtain
waivers or subordinations of Liens from landlords and mortgagees, and such
Grantor shall in all instances (other than as otherwise agreed between the
Borrower and the Agent) obtain signed acknowledgements of the Agent's Liens
from bailees having possession of any Collateral that they hold for the
benefit of the Agent.
(d) If required by the terms of the Credit Agreement and not waived by
the Agent in writing (which waiver may be revoked), each Grantor shall
obtain authenticated control agreements from each issuer of uncertificated
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securities, securities intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for such Grantor.
(e) If any Grantor is or becomes the beneficiary of a letter of credit
in respect of an amount exceeding $5,000,000, such Grantor shall promptly
notify the Agent thereof and, upon the request of the Agent, enter into a
tri-party agreement with the Agent and the issuer and/or confirmation bank
with respect to Letter-of-Credit Rights assigning such Letter-of-Credit
Rights to the Agent and directing all payments thereunder to the Payment
Account, all in form and substance reasonably satisfactory to the Agent.
(f) Upon the request of the Agent, each Grantor shall take all
reasonable steps necessary to grant the Agent control of all electronic
chattel paper in accordance with the Code and all "transferable records" as
defined in the Uniform Electronic Transactions Act.
(g) Each Grantor hereby irrevocably authorizes the Agent at any time
and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets of
such Grantor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of
Article 9 of the UCC of the State of California or such jurisdiction, or
(ii) as being of an equal or lesser scope or with greater detail, and (b)
contain any other information required by part 5 of Article 9 of the UCC of
the State of California for the sufficiency or filing office acceptance of
any financing statement or amendment, including (i) whether such Grantor is
an organization, the type of organization and any organization
identification number issued to such Grantor, and (ii) in the case of a
financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of
real property to which the Collateral relates. Each Grantor agrees to
furnish any such information to the Agent promptly upon request. Each
Grantor also ratifies its authorization for the Agent to have filed in any
Uniform Commercial Code jurisdiction any like initial financing statements
or amendments thereto if filed prior to the date hereof.
(h) Each Grantor shall promptly notify the Agent of any material
commercial tort claim (as defined in the UCC) acquired by it and unless
otherwise consented to by the Agent, such Grantor shall enter into a
supplement to this Agreement, granting to the Agent a Lien in such
commercial tort claim.
(i) From time to time, any Grantor shall, upon the Agent's request,
execute and deliver confirmatory written instruments pledging to the Agent,
for the ratable benefit of the Agent and the Lenders, the Collateral, but
such Grantor's failure to do so shall not affect or limit any security
interest or any other rights of the Agent or any Lender in and to the
Collateral with respect to such Grantor. So long as the Credit Agreement is
in effect and until all Secured Obligations (other than in respect of
inchoate indemnity obligations) have been fully satisfied, the Agent's
Liens shall continue in full force and effect in all Collateral.
(j) NO REINCORPORATION. Except as permitted under the Credit
Agreement, no Grantor shall reincorporate or reorganize itself under the
laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof or change its type of
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entity as identified on SCHEDULE 3 attached hereto unless it provides
notice to the Agent of such reincorporation or reorganization at least
thirty (30) days before such reincorporation or reorganization.
(k) TERMINATIONS, AMENDMENTS NOT AUTHORIZED. Each Grantor acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the
prior written consent of the Agent and agrees that it will not do so
without the prior written consent of the Agent, subject to such Grantor's
rights under Section 9-509(d)(2) of the UCC of the State of California.
(l) NO RESTRICTION ON PAYMENTS TO THE AGENT. Except as permitted under
the Credit Agreement, the Grantors shall not enter into any Contract that
restricts or prohibits the grant of a security interest in Accounts,
Chattel Paper, Instruments or payment intangibles or the proceeds of the
foregoing to the Agent.
5. LOCATION OF COLLATERAL.
(a) Each Grantor represents and warrants to the Agent and the Lenders
that: (i) SCHEDULE 4 attached hereto is a correct and complete list of the
location of such Grantor's chief executive office, the location of its
books and records, the locations of the Collateral (other than (A)
in-transit Inventory, (B) any location at which Inventory excluded from the
Eligible Collateral (as defined in the ABL Credit Agreement) in the most
recent borrowing base certificate delivered to the ABL Agent under the ABL
Credit Agreement is located and (C) locations of Inventory in the form of
raw materials, PROVIDED, that the aggregate amount of all Eligible
Inventory in the form of raw materials does not exceed $10,000,000); and
(ii) SCHEDULE 4 correctly identifies (A) any of such facilities and
locations that are not owned by such Grantor and (B) any of such facilities
and locations in which such Grantor is not a tenant and sets forth the
names of the owners, the lessors or the operators of such facilities and
locations. Each Grantor covenants and agrees that it will not (x) maintain
any Collateral (other than (I) in-transit Inventory, (II) Inventory that
was excluded from the Eligible Collateral in the most recent borrowing base
certificate delivered to the ABL Agent under the ABL Credit Agreement and
(III) Inventory in the form of raw materials, PROVIDED, that the aggregate
amount of all Eligible Inventory in the form of raw materials does not
exceed $10,000,000) at any location other than those locations listed for
such Grantor on SCHEDULE 4, (y) otherwise change or add to any of such
locations, or (z) change the location of its chief executive office from
the location identified in SCHEDULE 4, unless it gives the Agent at least
thirty (30) days' prior written notice thereof and executes any and all
financing statements and other documents that the Agent reasonably requests
in connection therewith. Without limiting the foregoing, each Grantor
represents that all of its Inventory (other than Inventory located at
contractors' premises or xxxxx, in-transit Inventory and xxxx and hold
Inventory) is, and covenants that all of its Inventory (other than
Inventory located at contractors' premises or xxxxx, in-transit Inventory
and xxxx and hold Inventory) will be, located either (1) on premises owned
by such Grantor, (2) on premises leased by such Grantor, PROVIDED that the
Agent has received an executed landlord waiver from the landlord of such
premises in form and substance satisfactory to the Agent, or (3) in a
warehouse or with a bailee, PROVIDED that the Agent has received an
executed bailee letter from the applicable Person in form and substance
satisfactory to the Agent; PROVIDED, HOWEVER, that in each case the Agent
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may in its sole discretion waive such requirement in writing to such extent
and under such conditions as the Agent may from time to time in its sole
discretion determine.
6. OFFICE LOCATIONS; JURISDICTION OF ORGANIZATION; NAMES.
(a) SCHEDULE 3 attached hereto identifies each Grantor's name as of
the Closing Date as it appears in official filings in the state of its
incorporation or other organization, the type of entity of such Grantor
(including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by such
Grantor's state of incorporation or organization or a statement that no
such number has been issued and the jurisdiction in which such Grantor is
incorporated or organized. Each Grantor has only one state of incorporation
or organization.
(b) No Grantor (or predecessor by merger or otherwise of such Grantor)
has, within the one year period preceding the date hereof, or, in the case
of an Additional Grantor, the date of the applicable Counterpart (as
defined in SECTION 32(I) hereof), had a different name from the name of
such Grantor listed on the signature pages hereof, except the names set
forth on SCHEDULE 5 attached hereto, as SCHEDULE 5 may be updated upon the
execution of this Agreement by an Additional Grantor.
7. TITLE TO, LIENS ON, AND SALE AND USE OF COLLATERAL. Each Grantor
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) such Grantor has rights in and the power to transfer
all of the Collateral free and clear of all Liens whatsoever, except for Liens
permitted under Section 7.01 of the Credit Agreement; (b) the Agent's Liens in
the Collateral will not be subject to any prior Lien except for those Liens
identified in clauses (b), (e), (f), (g) and (h) of Section 7.01 of the Credit
Agreement; and (c) such Grantor will use, store, and maintain the Collateral
with all reasonable care and will use such Collateral for lawful purposes only.
8. APPRAISALS.
(a) Once every Fiscal Quarter, the Agent shall, at each Grantor's
expense, arrange for appraisals or updates thereof of all of the Inventory
constituting finished goods from an appraiser, and prepared on a basis,
satisfactory to the Agent, such appraisals and updates to include, without
limitation, information required by applicable law and regulation and by
the internal policies of the Lenders.
(b) Whenever a Default or Event of Default exists, the Agent
shall, at each Grantor's expense and at the Agent's discretion,
arrange for appraisals or updates thereof of any or all of the
Collateral from an appraiser, and prepared on a basis, satisfactory to
the Agent, such appraisals and updates to include, without limitation,
information required by applicable law and regulation and by the
internal policies of the Lenders.
9. ACCESS AND EXAMINATION. Not less frequently than three times per year
nor more frequently than four times per year, and upon ten (10) days notice to
the relevant Grantor, or at any time with or without notice whenever a Default
or Event of Default exists and is continuing, the Agent, accompanied by any
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Lender which so elects, may at all reasonable times during regular business
hours have access to, examine, audit, make extracts from or copies of and
inspect any or all of each Grantor's records, files, and books of account and
the Collateral, and discuss such Grantor's affairs with such Grantor's officers
and management. Each Grantor will deliver to the Agent any instrument necessary
for the Agent to obtain records from any service bureau maintaining records for
such Grantor. The Agent may, and at the direction of the Required Lenders shall,
at any time whenever a Default or Event of Default exists, and at such Grantor's
expense, make copies of all of such Grantor's books and records, or require such
Grantor to deliver such copies to the Agent. The Agent may, without expense to
the Agent, use such of such Grantor's respective personnel, supplies, and Real
Estate as may be reasonably necessary for maintaining or enforcing the Agent's
Liens. The Agent shall have the right, at any time, in the Agent's name or in
the name of a nominee of the Agent, to verify the validity, amount or any other
matter relating to the Accounts, Inventory, or other Collateral, by mail,
telephone, or otherwise.
10. CERTAIN COVENANTS OF THE GRANTORS.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or
in violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral,
except where such violation would not have a Material Adverse Effect; and
(b) if the Agent gives value to enable such Grantor to acquire
rights in or the use of any Collateral, use such value for such purposes.
11. SPECIAL COVENANTS WITH RESPECT TO THE IP COLLATERAL.
(a) Each Grantor shall:
(i) diligently keep reasonable records respecting the
IP Collateral and at all times keep at least one complete
set of its records concerning such Collateral at its chief
executive office or principal place of business; and
(ii) furnish to the Agent from time to time at the
Agent's reasonable request statements and schedules further
identifying and describing any IP Collateral and such other
reports in connection with such Collateral, all in
reasonable detail.
(b) In addition to the filing of UCC financing statements,
the filing of a Grant of Patent Security Interest, substantially in the form of
EXHIBIT I attached hereto, with the United States Patent and Trademark Office
(such Grant of Patent Security Interest being referred to herein as a "GRANT"),
the security interests in the Collateral granted to the Agent for the ratable
benefit of the Lenders will constitute perfected security interests therein, to
the extent such security interests may be perfected by filing in the United
States, prior to all other Liens (except for Liens expressly permitted by the
Credit Agreement and Liens on software licensed from a third party), and all
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filings and other actions necessary or desirable to perfect and protect such
security interest have been duly made or taken.
(c) Except as otherwise provided in this SECTION 11, each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor in respect of the IP Collateral or any portion
thereof. In connection with such collections, each Grantor may take (and, after
the occurrence and during the continuance of any Event of Default at the Agent's
reasonable direction, shall take) such action as such Grantor or the Agent may
deem reasonably necessary or advisable to enforce collection of such amounts;
PROVIDED, the Agent shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice to such
Grantor of its intention to do so, to notify the obligors with respect to any
such amounts of the existence of the security interest created hereby and to
direct such obligors to make payment of all such amounts directly to the Agent,
and, upon such notification and at the expense of such Grantor, to enforce
collection of any such amounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such Grantor might
have done. After receipt by any Grantor of the notice from the Agent referred to
in the proviso to the preceding sentence and during the continuation of any
Event of Default, (i) all amounts and proceeds (including checks and other
instruments) received by each Grantor in respect of amounts due to such Grantor
in respect of the IP Collateral or any portion thereof shall be received in
trust for the benefit of the Agent hereunder, shall be segregated from other
funds of such Grantor and shall be forthwith paid over or delivered to the Agent
in the same form as so received (with any necessary endorsement) to be held as
cash Collateral and applied as provided by SECTION 32(T) hereof, and (ii) such
Grantor shall not adjust, settle or compromise the amount or payment of any such
amount or release wholly or partly any obligor with respect thereto or allow any
credit or discount thereon.
(d) Except as provided herein, each Grantor shall have the
right to commence and prosecute in its own name, as real party in interest, for
its own benefit and at its own expense, such suits, proceedings or other actions
for infringement, unfair competition, dilution, misappropriation or other
damage, or reexamination or reissue proceedings as are necessary to protect the
IP Collateral. The Agent shall provide, at such Grantor's expense, all
reasonable and necessary cooperation in connection with any such suit,
proceeding or action including joining as a necessary party.
(e) In addition to, and not by way of limitation of, the
granting of a security interest in the Collateral pursuant hereto, each Grantor,
hereby grants to the Agent, for use upon the occurrence and during the
continuation of an Event of Default, the irrevocable, nonexclusive right and
license to use all present and future trademarks, trade names, trade dress,
copyrights, patents or technical processes (including the IP Collateral and
Intellectual Property Assets) owned or used by such Grantor that relate to the
Collateral and any other collateral granted by such Grantor as security for the
Secured Obligations, together with any goodwill associated therewith, all to the
extent necessary to enable the Agent to realize on, and exercise all rights of
the Agent and the Lenders in relation to, the Collateral in accordance with this
Agreement (including without limitation advertising in all media as the Agent
deems appropriate in connection with marketing and sales of the Collateral) and
to enable any transferee or assignee of the Collateral to enjoy the benefits of
the Collateral, and including in such license access to all media in which any
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of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof; PROVIDED, HOWEVER, the
license granted under this SECTION 11(E) shall not be construed to limit such
Grantor's ability to take reasonable steps, in accordance with its then current
business practices, to protect and preserve such trademarks and trade names (and
all registrations and applications applicable thereto and all other rights
therein, including the goodwill associated therewith). This right shall inure to
the benefit of all successors, assigns and transferees of the Agent and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license shall be granted free of charge, without
requirement that any monetary payment whatsoever be made to such Grantor. In
addition, each Grantor hereby grants to the Agent and its employees,
representatives and agents the right to visit such Grantor's and any of its
Affiliate's or subcontractor's plants, facilities and other places of business
that are utilized in connection with the manufacture, production, inspection,
storage or sale of products and services sold or delivered under any of the IP
Collateral (or which were so utilized during the prior six month period), and to
inspect the quality control and all other records relating thereto upon
reasonable advance written notice to such Grantor and at reasonable dates and
times and as often as may be reasonably requested. If and to the extent that any
Grantor is permitted to license the IP Collateral, the Agent shall promptly
enter into a non-disturbance agreement or other similar arrangement, at such
Grantor's request and expense, with such Grantor and any licensee of any IP
Collateral permitted hereunder in form and substance reasonably satisfactory to
the Agent pursuant to which (i) the Agent shall agree not to disturb or
interfere with such licensee's rights under its license agreement with such
Grantor so long as such licensee is not in default thereunder, and (ii) such
licensee shall acknowledge and agree that the IP Collateral licensed to it is
subject to the security interest created in favor of the Agent and the other
terms of this Agreement.
12. SPECIAL COVENANTS WITH RESPECT TO THE PLEDGED COLLATERAL.
Except as otherwise not prohibited by the Credit Agreement,
each Grantor shall:
(a) not (i) sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral, (ii) create or suffer to exist any Lien upon or with respect to any
of the Pledged Collateral, except for Permitted Liens, or (iii) permit any
issuer of Pledged Interests to merge or consolidate unless all the outstanding
Equity Interests of the surviving or resulting Person is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
Person; PROVIDED, if the surviving or resulting Person upon any such merger or
consolidation involving an issuer of Pledged Interests is a Material Foreign
Subsidiary, then such Grantor shall only be required to pledge outstanding
Equity Interests of such surviving or resulting Person possessing up to but not
exceeding 65% of the voting power of all classes of Equity Interests of such
issuer entitled to vote;
(b) (i) cause each issuer of Pledged Interests not to issue
any Equity Interests in addition to or in substitution for the Pledged Interests
issued by such issuer, except to such Grantor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
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additional Equity Interests of each issuer of Pledged Interests, and (iii)
pledge hereunder, immeFdiately upon its acquisition (directly or indirectly)
thereof, any and all Equity Interests of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Subsidiary of such
Grantor; PROVIDED, notwithstanding anything contained in this clause (iii) to
the contrary, such Grantor shall only be required to pledge the outstanding
Equity Interests of a direct Material Foreign Subsidiary possessing up to but
not exceeding 65% of the voting power of all classes of Equity Interests of such
Material Foreign Subsidiary entitled to vote and any such Grantor shall not be
required to pledge Equity Interests of any Restricted Subsidiary;
(c) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of additional indebtedness from time to
time owed to such Grantor by any obligor on the Pledged Debt; PROVIDED,
notwithstanding anything contained in this clause (c) to the contrary, any such
Grantor shall not be required to pledge any such instruments or other evidences
of additional indebtedness owed to such Grantor by any Restricted Subsidiary;
(d) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of indebtedness from time to time owed to
such Grantor by any Person that after the date of this Agreement becomes, as a
result of any occurrence, a direct or indirect Subsidiary of such Grantor;
PROVIDED, notwithstanding anything contained in this clause (d) to the contrary,
any such Grantor shall not be required to pledge any such instruments or other
evidences of indebtedness owed to such Grantor by any Restricted Subsidiary;
(e) at its expense (i) perform and comply in all material
respects with all terms and provisions of any agreement related to the Pledged
Collateral required to be performed or complied with by it, (ii) maintain all
such agreements in full force and effect, and (iii) enforce all such agreements
in accordance with their terms;
(f) deliver to the Agent, immediately upon their issuance,
any and all Instruments or other evidences of additional Debt from time to time
owed to such Grantor (i) by any obligor on the Pledged Debt, and (ii) by any
Person that after the date of this Agreement becomes, as a result of any
occurrence, a direct or indirect Subsidiary of such Grantor; and
(g) cause the terms of any partnership or limited liability
company agreement governing Equity Interests included in the Pledged Collateral
to provide that such interests are securities governed by Division 8 of the UCC.
13. COLLATERAL REPORTING. Upon the request of the Agent, the Borrower shall
provide the Agent with the following documents at the following times in form
satisfactory to the Agent:
(i) copies of invoices in connection with the Borrower's Accounts,
customer statements, credit memos, remittance advices and reports, deposit
slips, shipping documents in connection with the Borrower's Accounts and
for Inventory and Equipment acquired by the Borrower, purchase orders and
invoices;
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(ii) a statement of the balance of each of the intercompany Accounts;
and
(iii) such other reports as to the Collateral of the Borrower as the
Agent shall reasonably request from time to time.
If any of the Borrower's records or reports of the Collateral are prepared by an
accounting service or other agent, the Borrower hereby authorizes such service
or agent to deliver such records, reports, and related documents to the Agent,
for distribution to the Lenders.
14. ACCOUNTS.
(a) Each Grantor hereby represents and warrants to the Agent and the
Lenders, with respect to such Grantor's Accounts, that:
(i) each existing Account represents, and each future Account will
represent, a BONA FIDE sale and delivery of goods by such Grantor, in the
ordinary course of such Grantor's business;
(ii) each existing Account is, and each future Account will be, for a
liquidated amount payable by the Account Debtor thereon on the terms set
forth in the invoice therefor or in the schedule thereof delivered to the
Agent, without any offset, deduction, defense, or counterclaim except those
known to such Grantor and disclosed to the Agent and the Lenders pursuant
to this Agreement;
(iii) no payment will be received with respect to any Account, and no
credit, discount, or extension, or agreement therefor will be granted on
any Account, except as reported to the ABL Agent;
(iv) each copy of an invoice delivered to the Agent by such Grantor
will be a genuine copy of the original invoice sent to the Account Debtor
named therein; and
(v) all goods described in any invoice representing a sale of goods
will have been shipped to the Account Debtor.
(b) No Grantor shall re-date any invoice or sale or make sales on extended
dating beyond that customary in such Grantor's business or extend or modify any
Account. If any Grantor becomes aware of any matter adversely affecting the
collectibility of any Account or the Account Debtor therefor involving an amount
greater than $5,000,000, including information regarding the Account Debtor's
creditworthiness, such Grantor will promptly so advise the Agent.
(c) If the Agent consents to the acceptance of any note or other instrument
(except a check, letters of credit as customary to such Grantor's business
practices or other instrument for the immediate payment of money) with respect
to any Account, it shall be considered as evidence of the Account and not
payment thereof and, in respect of any instrument for an amount in excess of
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$5,000,000, such Grantor will, upon the request of the Agent, promptly deliver
such instrument to the Agent, endorsed by such Grantor to the Agent in a manner
satisfactory in form and substance to the Agent. Regardless of the form of
presentment, demand, notice of protest with respect thereto, such Grantor shall
remain liable thereon until such instrument is paid in full.
(d) Each Grantor shall notify the Agent promptly of all disputes and claims
in excess of $5,000,000 with any Account Debtor, and agrees to settle, contest,
or adjust such dispute or claim at no expense to the Agent or any Lender. Upon
the occurrence of and during the continuance of an Event of Default, no
discount, credit or allowance shall be granted to any such Account Debtor
without the Agent's prior written consent, except for discounts, credits and
allowances made or given in the ordinary course of such Grantor's business. Upon
the request of the Agent, such Grantor shall send the Agent a copy of each
credit memorandum in excess of $5,000,000 as soon as issued. Upon the occurrence
of and during the continuance of an Event of Default, the Agent may settle or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which the Agent or the Required Lenders, as applicable, shall consider
advisable and, in all cases, the Agent will credit such Grantor's Loan Account
with the net amounts received by the Agent in payment of any Accounts.
(e) If an 8Account Debtor returns any Inventory to any Grantor when no
Event of Default exists, then such Grantor shall, upon the request of the Agent,
determine the reason for such return and issue a credit memorandum to the
Account Debtor in the appropriate amount. Such Grantor shall deliver a monthly
report to the Agent setting forth all returns involving an amount in excess of
$5,000,000. Each such report shall indicate the reasons for the returns and the
locations and condition of the returned Inventory. In the event any Account
Debtor returns Inventory to any Grantor, upon the occurrence of and during the
continuance of an Event of Default, such Grantor shall, upon the request of the
Agent: (i) hold the returned Inventory in trust for the Agent; (ii) dispose of
the returned Inventory solely according to the Agent's written instructions; and
(iii) not issue any credits or allowances with respect thereto without the
Agent's prior written consent. All returned Inventory shall be subject to the
Agent's Liens thereon.
15. COLLECTION OF ACCOUNTS; PAYMENTS.
(a) Until the Agent notifies the Grantors to the contrary, each Grantor
shall make collection of all Accounts and other Collateral for the Agent, shall
receive all payments as the Agent's trustee, and shall immediately deliver all
payments in their original form duly endorsed in blank into a lock-box service
or Payment Account established for the account of the Grantors at a Clearing
Bank acceptable to the Agent, subject to a blocked account agreement. Within
thirty (30) days after the Closing Date, the Grantors shall establish a lock-box
service for collections of Accounts at a Clearing Bank acceptable to the Agent
and subject to a blocked account agreement and other documentation acceptable to
the Agent. The Grantors shall instruct all Account Debtors to make all payments
directly to the address established for such service. If, notwithstanding such
instructions, any Grantor receives any proceeds of Accounts, it shall receive
such payments as the Agent's trustee, and shall immediately deliver such
payments to the Agent in their original form duly endorsed in blank or deposit
them into a Payment Account, as the Agent may direct. All collections received
in any lock-box service or Payment Account or directly by any Grantor or the
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Agent, and all funds in any Payment Account or other account to which such
collections are deposited shall be subject to the Agent's sole control and
withdrawals by the Grantors shall not be permitted. The Agent or the Agent's
designee may, at any time after the occurrence of an Event of Default, notify
Account Debtors that the Accounts have been assigned to the Agent and of the
Agent's security interest therein, and may collect them directly and charge the
collection costs and expenses to the Loan Account as a Loan. So long as an Event
of Default has occurred and is continuing, each Grantor, at the Agent's request,
shall execute and deliver to the Agent such documents as the Agent shall require
to grant the Agent access to any post office box in which collections of
Accounts are received.
(b) If sales of Inventory are made or services are rendered for cash, each
Grantor shall immediately deliver to the Agent or deposit into a Payment Account
the cash which such Grantor receives.
(c) All payments including immediately available funds received by the
Agent at a bank account designated by it, will be the Agent's sole property for
its benefit and the benefit of the Lenders and will be credited to the Loan
Account (conditioned upon final collection).
(d) In the event any Grantor repays all of the Secured Obligations upon the
termination of the Credit Agreement or upon acceleration of the Secured
Obligations, other than through the Agent's receipt of payments on account of
the Accounts or proceeds of the other Collateral, such payment will be credited
(conditioned upon final collection) to the Grantors' Loan Account upon the
Agent's receipt of immediately available funds.
16. INVENTORY; PERPETUAL INVENTORY.
(a) Each Grantor represents and warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders that all of the Inventory owned by such
Grantor is and will be held for sale or use in production, in the ordinary
course of such Grantor's business, and is and will be fit for such purposes.
Each Grantor will keep its Inventory in good and marketable condition, except
for damaged or defective goods arising in the ordinary course of such Grantor's
business. Each Grantor will notify the Agent upon such Grantor's acquisition or
acceptance of any Inventory on consignment or approval. Each Grantor agrees that
all Inventory produced by such Grantor in the United States of America will be
produced in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations, and orders thereunder. Each Grantor will
conduct a cycle count of the Inventory at least once per Fiscal Year, and after
and during the continuance of an Event of Default, at such other times as the
Agent requests. Each Grantor will maintain a perpetual inventory reporting
system at all times. No Grantor will, without the Agent's written consent not to
be unreasonably withheld, sell any Inventory on a xxxx and hold, guaranteed
sale, sale and return, sale on approval, consignment, or other repurchase or
return basis.
(b) Each Grantor shall, upon the occurrence and during the continuance of
an Event of Default and at the Agent's request, instruct all agents or
processors of such Grantor possessing or controlling any Inventory and all
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public warehouses in which Inventory is maintained to hold all such Inventory
for the account of the Agent and subject to the instructions of the Agent.
(c) Each Grantor shall, at its own expense, maintain insurance with respect
to the Inventory in accordance with the terms of the Credit Agreement.
17. EQUIPMENT.
(a) Each Grantor represents and warrants to the Agent and the Lenders and
agrees with the Agent and the Lenders that all of the Equipment owned by such
Grantor is and will be used or held for use in such Grantor's business, and is
and will be fit for such purposes. Each Grantor shall keep and maintain its
Equipment in good operating condition and repair (ordinary wear and tear
excepted) and shall make all necessary replacements thereof other than to the
extent such Equipment is no longer required in such Grantor's business.
(b) Each Grantor shall promptly notify the Agent in the event that it
enters into or terminates any material Equipment Financing Transaction.
(c) Each Grantor shall, at its own expense, maintain insurance with respect
to the Equipment in accordance with the terms of the Credit Agreement
18. IP COLLATERAL.
Each Grantor represents and warrants as follows:
(a) a true and complete list of all Patents and Patent applications owned
by such Grantor, in whole or in part, that are material to such Grantor's
business is set forth on SCHEDULE 1 attached hereto;
(b) after reasonable inquiry, such Grantor is not aware of any pending or
threatened claim by any third party that any of the IP Collateral owned, held or
used by such Grantor is invalid or unenforceable that is reasonably likely to
have a Material Adverse Effect; and
(c) after giving effect to the releases delivered on the Closing Date in
respect of the Credit Agreement, no effective security interest or other Lien
covering all or any part of the IP Collateral is on file in the United States
Patent and Trademark Office, other than Liens in favor of the Agent.
19. DOCUMENTS, INSTRUMENTS, AND CHATTEL PAPER. Each Grantor represents and
warrants to the Agent and the Lenders that (a) all Documents, Instruments, and
Chattel Paper describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine, and (b) all goods evidenced by such Documents, Instruments, Letter of
Credit Rights and Chattel Paper are and will be owned by such Grantor, free and
clear of all Liens other than Permitted Liens. If any Grantor retains possession
of any Chattel Paper or Instruments with the Agent's consent, such Chattel Paper
and Instruments shall be marked with the following legend: "This writing and the
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obligations evidenced or served hereby are subject to the security interest of
Bank of America, N.A., as the Agent, for the benefit of the Agent and certain
Lenders."
20. REPRESENTATIONS AND WARRANTIES REGARDING THE PLEDGED COLLATERAL.
(a) DUE AUTHORIZATION, ETC. OF PLEDGED COLLATERAL. All of the Pledged
Interests described on SCHEDULE 2(A) attached hereto for each Grantor have been
duly authorized and validly issued and are fully paid and non-assessable. All of
the Pledged Debt described on SCHEDULE 2(B) attached hereto for each Grantor has
been duly authorized, authenticated or issued, and delivered, is the legal,
valid and binding obligation of the issuers thereof and is not in default.
(b) DESCRIPTION OF PLEDGED COLLATERAL. Except as set forth on SCHEDULE
2(A), the Pledged Interests constitute all of the issued and outstanding Equity
Interests of each issuer thereof (subject to the proviso to SECTION 2(A)(XIII)
hereof with respect to Equity Interests of a Material Foreign Subsidiary), and
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged
Interests. The Pledged Debt constitutes all of the issued and outstanding
intercompany indebtedness evidenced by a promissory note of the respective
issuers thereof owing to each Grantor. SCHEDULE 2(A) for each Grantor sets forth
all of the Pledged Interests owned by such Grantor on the date hereof; and
SCHEDULE 2(B) for each Grantor sets forth all of the Pledged Debt in existence
on the date hereof.
(c) OWNERSHIP OF PLEDGED COLLATERAL. Each Grantor is the legal, record and
beneficial owner of the Pledged Collateral and its interests in the Pledged
Collateral are free and clear of any Lien except for Permitted Liens.
(d) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge by each Grantor of the Pledged
Collateral pursuant to this Agreement and the grant by such Grantor of the
security interest granted hereby, (ii) the execution, delivery or performance of
this Agreement by each Grantor, or (iii) the exercise by the Agent of the voting
or other rights, or the remedies in respect of the Pledged Collateral, provided
for in this Agreement (except as may be required in connection with a
disposition of Pledged Collateral by laws affecting the offering and sale of
securities generally).
(e) PERFECTION. Upon (i) the filing of UCC financing statements naming each
Grantor as "debtor", naming the Agent as "secured party" and describing the
Pledged Collateral in the filing offices listed on SCHEDULE 6 attached hereto,
(ii) in the case of Pledged Collateral consisting of certificated securities or
evidenced by Instruments, in addition to filing such financing statements,
delivery of the certificates representing such certificated securities and
delivery of such Instruments to the Agent, in each case duly endorsed or
accompanied by duly executed instruments of assignment or transfer in blank (and
in the case of Pledged Collateral issued by a foreign issuer, any actions
required under foreign law to perfect a security interest in such Pledged
Collateral) and (iii) in the case of any Pledged Collateral constituting a
Security Entitlement or a Securities Account (as such terms are defined in the
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UCC) and assets held in such account, the execution and delivery to the Agent of
an agreement providing for control by the Agent of such Securities Account, the
security interests in the Pledged Collateral, granted to the Agent for the
ratable benefit of the Beneficiaries, will constitute perfected security
interests therein prior to all other Liens, securing the payment of the Secured
Obligations.
(f) MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation T, U or X of the Board of Governors
of the Federal Reserve System.
(g) OTHER INFORMATION. All information heretofore, herein or hereafter
supplied to the Agent by or on behalf of each Grantor with respect to the
Pledged Collateral is accurate and complete in all respects.
21. VOTING RIGHTS; DIVIDENDS.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement; PROVIDED, HOWEVER, that such Grantor shall not
exercise or refrain from exercising any such right if the Agent shall have
notified such Grantor that, in the Agent's judgment, such action would have
a material adverse effect on the value of the Pledged Collateral or any
part thereof; and
(ii) each Grantor shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all
dividends, other distributions and interest paid in respect of the Pledged
Collateral; PROVIDED, HOWEVER, that any and all
(A) dividends, other distributions and interest paid or payable
other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to the Agent to hold as, Pledged
Collateral and shall, if received by such Grantor, be received in trust for
the benefit of the Agent, be segregated from the other property or funds of
such Grantor and be forthwith delivered to the Agent as Pledged
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Collateral in the same form as so received (with all necessary
endorsements).
(b) Upon the occurrence AND during the continuation of an Event of Default:
(i) upon written notice from the Agent to any Grantor, all rights of
such Grantor to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to SECTION 21(A)(I) hereof
shall cease, and all such rights shall thereupon become vested in the Agent
who shall thereupon have the sole right to exercise such voting and other
consensual rights;
(ii) except as otherwise provided in the Credit Agreement, all rights
of Grantors to receive the dividends, other distributions and interest
payments that they would otherwise be authorized to receive and retain
pursuant to SECTION 21(A)(II) hereof shall cease, and all such rights shall
thereupon become vested in the Agent who shall thereupon have the sole
right to receive and hold as Pledged Collateral such dividends, other
distributions and interest payments; and
(iii) all dividends, principal, interest payments and other
distributions that are received by Grantors contrary to the provisions of
paragraph (ii) of this SECTION 21(B) shall be received in trust for the
benefit of the Agent, shall be segregated from other funds of Grantors and
shall forthwith be paid over to the Agent as Pledged Collateral in the same
form as so received (with any necessary endorsements).
(c) In order to permit the Agent to exercise the voting and other
consensual rights that it may be entitled to exercise pursuant to SECTION
21(B)(I) hereof and to receive all dividends and other distributions which it
may be entitled to receive under SECTION 21(A)(II) hereof or SECTION 21(B)(II)
hereof, (i) each Grantor shall, upon the occurrence of and during the
continuance of an Event of Default, promptly execute and deliver (or cause to be
executed and delivered) to the Agent all such proxies, dividend payment orders
and other instruments as the Agent may from time to time reasonably request and
(ii) without limiting the effect of the immediately preceding clause (i), each
Grantor hereby grants to the Agent an irrevocable proxy to vote the Pledged
Interests and to exercise all other rights, powers, privileges and remedies to
which a holder of the Pledged Interests would be entitled (including, without
limitation, giving or withholding written consents of holders of Equity
Interests, calling special meetings of holders of Equity Interests and voting at
such meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Interests on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Interests or any officer or agent thereof), upon the occurrence of
an Event of Default and which proxy shall only terminate upon the payment in
full of the Secured Obligations (other than inchoate indemnity obligations).
22. RIGHT TO CURE. The Agent may, in its discretion, and shall, at the
direction of the Required Lenders, pay any amount or do any act required of any
Grantor hereunder or under any other Loan Document in order to preserve,
protect, maintain or enforce the Secured Obligations, the Collateral or the
22
Agent's Liens therein, and which such Grantor fails to pay or do, including
payment of any judgment against such Grantor, any insurance premium, any
warehouse charge, any finishing or processing charge, any landlord's or bailee's
claim, and any other Lien upon or with respect to the Collateral. All payments
that the Agent makes under this SECTION 22 and all out-of-pocket costs and
expenses that the Agent pays or incurs in connection with any action taken by it
hereunder shall be charged to the Loan Account as a Loan. Any payment made or
other action taken by the Agent under this SECTION 22 shall be without prejudice
to any right to assert an Event of Default hereunder and to proceed thereafter
as herein provided.
23. POWER OF ATTORNEY. Each Grantor hereby appoints the Agent and the
Agent's designee as such Grantor's attorney, with power:
(a) to endorse such Grantor's name on any checks, notes, acceptances, money
orders, or other forms of payment or security that come into the Agent's or any
Lender's possession and, upon the occurrence and during the continuance of an
Event of Default, to receive, endorse and collect any instruments made payable
to such Grantor representing any dividend, principal or interest payment or
other distribution in respect of the Pledged Collateral or any part thereof and
to give full discharge for the same;
(b) to sign such Grantor's name on any invoice, xxxx of lading, warehouse
receipt or other negotiable or non-negotiable Document constituting Collateral,
on drafts against customers, on assignments of Accounts, on notices of
assignment, financing statements and other public records and to file any such
financing statements by electronic means with or without a signature as
authorized or required by applicable law or filing procedure;
(c) to send requests for verification of Accounts to customers or Account
Debtors in accordance with Section 14(d) hereof;
(d) to complete in such Grantor's name or the Agent's name, any order, sale
or transaction, obtain the necessary Documents in connection therewith, and
collect the proceeds thereof;
(e) to clear Inventory through customs in such Grantor's name, the Agent's
name or the name of the Agent's designee, and to sign and deliver to customs
officials powers of attorney in such Grantor's name for such purpose;
(f) to the extent that such Grantor's authorization given in SECTION 4(G)
hereof is not sufficient, to file such financing statements with respect to this
Agreement, with or without such Grantor's signature, or to file a photocopy of
this Agreement in substitution for a financing statement, as the Agent may deem
appropriate and to execute in such Grantor's name such financing statements and
amendments thereto and continuation statements which may require such Grantor's
signature;
(g) except as otherwise permitted by the Credit Agreement, to pay or
discharge taxes or Liens (other than Liens permitted under this Agreement or the
Credit Agreement) levied or placed upon or threatened against the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
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to be determined by the Agent in its sole discretion, any such payments made by
the Agent to become Secured Obligations of such Grantor to the Agent, due and
payable immediately without demand;
(h) upon the occurrence and during the continuance of an Event of Default,
to notify the post office authorities to change the address for delivery of such
Grantor's mail to an address designated by the Agent and to receive, open and
dispose of all mail addressed to such Grantor;
(i) upon the occurrence and during the continuance of an Event of Default,
to obtain and adjust insurance required to be maintained by such Grantor or paid
to the Agent pursuant to the Credit Agreement;
(j) upon the occurrence and during the continuance of an Event of Default,
to ask for, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral;
(k) upon the occurrence and during the continuance of an Event of Default,
to file any claims or take any action or institute any proceedings that the
Agent may deem necessary or desirable for the collection of any of the Pledged
Collateral or otherwise to enforce the rights of the Agent with respect to any
of the Collateral;
(l) upon the occurrence and during the continuance of an Event of Default,
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
Agent were the absolute owner thereof for all purposes, and to do, at the
Agent's option and such Grantor's expense, at any time or from time to time, all
acts and things that the Agent deems necessary to protect, preserve or realize
upon the Collateral and the Agent's security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor might
do; and
(m) to do all things necessary to carry out the Credit Agreement and this
Agreement.
Each Grantor ratifies and approves all acts of such attorney. None of the
Lenders or the Agent nor their attorneys will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law except for
their willful misconduct. This power, being coupled with an interest, is
irrevocable until the Credit Agreement has been terminated and the Obligations
(other than inchoate indemnity obligations) have been fully satisfied.
24. THE AGENT'S AND LENDERS' RIGHTS, DUTIES AND LIABILITIES.
(a) Each Grantor assumes all responsibility and liability arising from or
relating to the use, sale, license or other disposition of the Collateral. The
Secured Obligations shall not be affected by any failure of the Agent or any
Lender to take any steps to perfect the Agent's Liens or to collect or realize
upon the Collateral, nor shall loss of or damage to the Collateral release such
Grantor from any of the Secured Obligations. Following the occurrence and during
the continuation of an Event of Default, the Agent may (but shall not be
required to), and at the direction of the Required Lenders shall, without notice
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to or consent from any Grantor, xxx upon or otherwise collect, extend the time
for payment of, modify or amend the terms of, compromise or settle for cash,
credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of such Grantor for the Secured Obligations or
under the Credit Agreement or any other agreement now or hereafter existing
between the Agent and/or any Lender and such Grantor.
(b) It is expressly agreed by each Grantor that, anything herein to the
contrary notwithstanding, such Grantor shall remain liable under each of its
contracts and each of its licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. Neither the Agent nor
any Lender shall have any obligation or liability under any contract or license
by reason of or arising out of this Agreement or the granting herein of a Lien
thereon or the receipt by the Agent or any Lender of any payment relating to any
contract or license pursuant hereto. Neither the Agent nor any Lender shall be
required or obligated in any manner to perform or fulfill any of the obligations
of such Grantor under or pursuant to any contract or license, 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 license, or to present or file any claims, 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.
(c) The Agent may at any time after an Event of Default has occurred and is
continuing (or if any rights of set-off or contra accounts may be asserted with
respect to the following), without prior notice to such Grantor, notify Account
Debtors, and other Persons obligated on the Collateral that the Agent has a
security interest therein, and that payments shall be made directly to the
Agent, for itself and the benefit of the Lenders. Upon the request of the Agent,
such Grantor shall so notify Account Debtors and other Persons obligated on
Collateral. Once any such notice has been given to any Account Debtor or other
Person obligated on the Collateral, such Grantor shall not give any contrary
instructions to such Account Debtor or other Person without the Agent's prior
written consent.
(d) The Agent may at any time in any Grantor's or an assumed name or, after
the occurrence of and during the continuance of an Event of Default in the
Agent's own name, communicate with Account Debtors, parties to Contracts and
obligors in respect of Instruments to verify with such Persons, to the Agent's
satisfaction, the existence, amount and terms of Accounts, payment intangibles,
Instruments or Chattel Paper. If an Event of Default shall have occurred and be
continuing, each Grantor, at its own expense, shall cause the independent
certified public accountants then engaged by such Grantor (or such other
accounting firm as may be reasonably acceptable to the Agent if applicable law,
in the reasonable opinion of such Grantor, prevents such Grantor's independent
accountant from providing such services) to prepare and deliver to the Agent and
each Lender at any time and from time to time promptly upon the Agent's request
the following reports with respect to such Grantor: (i) a reconciliation of all
Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as the Agent may request. Each Grantor, at its own
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expense, shall deliver to the Agent the results of each physical verification,
if any, which such Grantor may in its discretion have made, or caused any other
Person to have made on its behalf, of all or any portion of its Inventory.
25. INDEMNIFICATION.
(a) In any suit, proceeding or action brought by the Agent or any Lender
relating to any Collateral for any sum owing with respect thereto or to enforce
any rights or claims with respect thereto, each Grantor will save, indemnify and
keep the Agent and the Lenders harmless from and against all expense (including
reasonable attorneys' fees and expenses), loss or damage suffered by reason of
any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the Account Debtor or other Person obligated on the Collateral,
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, except in the
case of the Agent or any Lender, to the extent such expense, loss, or damage is
attributable solely to the gross negligence or willful misconduct of the Agent
or such Lender as finally determined by a court of competent jurisdiction. All
such obligations of such Grantor shall be and remain enforceable against and
only against such Grantor and shall not be enforceable against the Agent or any
Lender.
(b) The Grantors jointly and severally agree to pay to the Agent upon
demand:
(i) prior to an Event of Default, the amount of any and all reasonable
costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, that the Agent may incur in
connection with (A) the administration of this Agreement, (B) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (C) the exercise or
enforcement of any of the rights of the Agent hereunder, or (D) the failure
by any Grantor to perform or observe any of the provisions hereof; and
(ii) upon the occurrence of and during the continuance of an Event of
Default, the amount of any and all costs and expenses, including the fees
and expenses of its counsel and of any experts and agents, that the Agent
may incur in connection with (A) the administration of this Agreement, (B)
the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (C) the exercise or
enforcement of any of the rights of the Agent hereunder, or (D) the failure
by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of the Grantors in this SECTION 25 shall (i) survive
the termination of this Agreement and the discharge of the Grantors' other
Secured Obligations (other than inchoate indemnity obligations) under this
Agreement and (ii), as to any Grantor that is a party to a Guaranty, be subject
to the provisions of Section 1(b) thereof.
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26. LIMITATION ON LIENS ON COLLATERAL. The Grantors will defend the
Collateral against, and take such other action as is necessary to remove, any
Lien on the Collateral except Liens permitted under Section 7.01 of the Credit
Agreement, and will defend the right, title and interest of the Agent and the
Lenders in and to any of the Grantors' rights under the Collateral against the
claims and demands of all Persons whomsoever.
27. NOTICE REGARDING COLLATERAL. Each Grantor will advise the Agent
promptly, in reasonable detail, (i) of any Lien (other than Liens permitted
under Section 7.01 of the Credit Agreement) or claim made or asserted against
any of the Collateral, and (ii) of the occurrence of any other event which would
have a Material Adverse Effect.
28. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it under this
Agreement, the Credit Agreement, the other Loan Documents and under any other
instrument or agreement securing, evidencing or relating to any of the Secured
Obligations, if any Event of Default shall have occurred and be continuing, the
Agent may exercise 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 Agent, 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 notices are hereby expressly
waived to the maximum extent permitted by the UCC and other applicable law), may
forthwith enter upon the premises of such Grantor where any Collateral is
located through self-help, without judicial process, without first obtaining a
final judgment or giving such Grantor or any other Person notice and opportunity
for a hearing on the Agent's claim or action and may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, license, 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 a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. The Agent or any Lender shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase for the benefit of the Agent and the Lenders, 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. Such sales may be adjourned
and continued from time to time with or without notice. The Agent shall have the
right to conduct such sales on such Grantor's premises or elsewhere and shall
have the right to use such Grantor's premises without charge for such time or
times as the Agent deems necessary or advisable.
(b) Each Grantor further agrees, at the Agent's request, to assemble the
Collateral and make it available to the Agent at a place or places designated by
the Agent which are reasonably convenient to the Agent and such Grantor, whether
at such Grantor's premises or elsewhere. Until the Agent is able to effect a
sale, lease, or other disposition of Collateral, the Agent shall have the right
to hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by the Agent. The Agent shall have no
obligation to such Grantor to maintain or preserve the rights of such Grantor as
27
against third parties with respect to Collateral while Collateral is in the
possession of the Agent. The Agent may, if it so elects, seek the appointment of
a receiver or keeper to take possession of Collateral and to enforce any of the
Agent's remedies (for the benefit of the Agent and the Lenders), with respect to
such appointment without prior notice or hearing as to such appointment. The
Agent shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Secured Obligations as provided in the
Credit Agreement, and only after so paying over such net proceeds, and after the
payment by the Agent of any other amount required by any provision of law, need
the Agent account for the surplus, if any, to such Grantor. To the maximum
extent permitted by applicable law, such Grantor waives all claims, damages, and
demands against the Agent or any Lender arising out of the repossession,
retention or sale of the Collateral except such as arise solely out of the gross
negligence or willful misconduct of the Agent or such Lender as finally
determined by a court of competent jurisdiction. Such Grantor agrees that ten
(10) days prior notice by the Agent of the time and place of any public sale or
of the time after which a private sale may take place 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 Secured Obligations, including any attorneys' fees or other expenses
incurred by the Agent or any Lender to collect such deficiency.
(c) Each Grantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, the Agent may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Each Grantor acknowledges that any such private placement may be
at prices and on terms less favorable than those obtainable through a sale
without such restrictions (including, without limitation, an offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances and the registration rights granted to the
Agent by such Grantor pursuant to SECTION 28(D) hereof, such Grantor agrees that
any such private placement shall not be deemed, in and of itself, to be
commercially unreasonable and that the Agent shall have no obligation to delay
the sale of any Pledged Collateral for the period of time necessary to permit
the issuer thereof to register it for a form of sale requiring registration
under the Securities Act or under applicable state securities laws, even if such
issuer would, or should, agree to so register it. If the Agent determines to
exercise its right to sell any or all of the Pledged Collateral, upon written
request, each Grantor shall and shall cause each issuer of any Pledged Interests
to be sold hereunder from time to time to furnish to the Agent all such
information as the Agent may request in order to determine the amount of Pledged
Collateral that may be sold by the Agent in exempt transactions under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.
(d) If the Agent shall determine to exercise its right to sell all or any
of the Pledged Collateral, each Grantor agrees that, upon request of the Agent
(which request may be made by the Agent in its sole discretion), such Grantor
will, at its own expense:
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(i) execute and deliver, and cause each issuer of the Pledged
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver, all such instruments and documents, and do or cause
to be done all such other acts and things, as may be necessary or, in the
opinion of the Agent, advisable to register such Pledged Collateral under
the provisions of the Securities Act and to cause the registration
statement relating thereto to become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(ii) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested
by the Agent;
(iii) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement which will satisfy
the provisions of Section 11(a) of the Securities Act;
(iv) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Pledged Collateral or any part thereof
valid and binding and in compliance with applicable law; and
(v) bear all costs and expenses, including reasonable attorneys' fees,
of carrying out its obligations under this SECTION 28(D).
(e) Except as otherwise specifically provided herein, each Grantor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Agreement or
any Collateral.
(f) To the extent that applicable law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Grantor acknowledges
and agrees that it is not commercially unreasonable for the Agent (a) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against Account Debtors
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral, (d) to exercise collection remedies against Account
Debtors and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as the such Grantor, for
expressions of interest in acquiring all or any portion of such Collateral, (g)
29
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capacity of doing so, or that match buyers and sellers of assets, (i) to dispose
of assets in wholesale rather than retail markets, (j) to disclaim disposition
warranties, such as title, possession or quiet enjoyment, (k) to purchase
insurance or credit enhancements to insure the Agent against risks of loss,
collection or disposition of Collateral or to provide to the Agent a guaranteed
return from the collection or disposition of Collateral, or (l) to the extent
deemed appropriate by the Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Agent in
the collection or disposition of any of the Collateral. Such Grantor
acknowledges that the purpose of this SECTION 28(F) is to provide non-exhaustive
indications of what actions or omissions by the Agent would not be commercially
unreasonable in the Agent's exercise of remedies against the Collateral and that
other actions or omissions by the Agent shall not be deemed commercially
unreasonable solely on account of not being indicated in this SECTION 28(F).
Without limitation upon the foregoing, nothing contained in this SECTION 28(F)
shall be construed to grant any rights to such Grantor or to impose any duties
on the Agent that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this SECTION 28(F).
29. ADDITIONAL REMEDIES FOR IP COLLATERAL.
(a) Anything contained herein to the contrary notwithstanding, upon the
occurrence and during the continuation of an Event of Default, (i) the Agent
shall have the right (but not the obligation) to bring suit, in the name of any
Grantor, the Agent or otherwise, to enforce any IP Collateral, in which event
each Grantor shall, at the request of the Agent, do any and all lawful acts and
execute any and all documents required by the Agent in aid of such enforcement
and each Grantor shall promptly, upon demand, reimburse and indemnify the Agent
as provided in Sections 10.04 and 10.05 of the Credit Agreement and SECTION 25
hereof, as applicable, in connection with the exercise of its rights under this
SECTION 29, and, to the extent that the Agent shall elect not to bring suit to
enforce any IP Collateral as provided in this SECTION 29, each Grantor agrees to
use all reasonable measures, whether by action, suit, proceeding or otherwise,
to prevent the infringement of any of the IP Collateral by others and for that
purpose agrees to use its commercially reasonable judgment in maintaining any
action, suit or proceeding against any Person so infringing reasonably necessary
to prevent such infringement; (ii) upon written demand from the Agent, each
Grantor shall execute and deliver to the Agent an assignment or assignments of
the IP Collateral and such other documents as are necessary or appropriate to
carry out the intent and purposes of this Agreement; (iii) each Grantor agrees
that such an assignment and/or recording shall be applied to reduce the Secured
Obligations outstanding only to the extent that the Agent (or any Lender)
receives cash proceeds in respect of the sale of, or other realization upon, the
IP Collateral; and (iv) within five Business Days after written notice from the
Agent, each Grantor shall make available to the Agent, to the extent within such
Grantor's power and authority, such personnel in such Grantor's employ on the
date of such Event of Default as the Agent may reasonably designate, by name,
title or job responsibility, to permit such Grantor to continue, directly or
indirectly, to produce, advertise and sell the products and services sold or
delivered by such Grantor under or in connection with the trademarks, trademark
registrations and trademark rights, such persons to be available to perform
30
their prior functions on the Agent's behalf and to be compensated by the Agent
at such Grantor's expense on a per diem, pro-rata basis consistent with the
salary and benefit structure applicable to each as of the date of such Event of
Default.
(b) If (i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing, (ii) no
other Event of Default shall have occurred and be continuing, (iii) an
assignment to the Agent of any rights, title and interests in and to the IP
Collateral shall have been previously made, and (iv) the Secured Obligations
shall not have become immediately due and payable, upon the written request of
any Grantor, the Agent shall promptly execute and deliver to such Grantor such
assignments as may be necessary to reassign to such Grantor any such rights,
title and interests as may have been assigned to the Agent as aforesaid, subject
to any disposition thereof that may have been made by the Agent; PROVIDED, after
giving effect to such reassignment, the Agent's security interest granted
pursuant hereto, as well as all other rights and remedies of the Agent granted
hereunder, shall continue to be in full force and effect; and PROVIDED FURTHER,
the rights, title and interests so reassigned shall be free and clear of all
Liens other than Liens (if any) encumbering such rights, title and interest at
the time of their assignment to the Agent and Liens expressly permitted by the
Credit Agreement.
30. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL. The
powers conferred on the Agent hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Agent accords its own property.
31. APPOINTMENT AS COLLATERAL AGENT.
(a) The Agent on behalf of the Lenders hereby appoints Bank of America,
N.A. to serve as collateral agent and representative of the Agent (the
"COLLATERAL AGENT") and authorizes the Collateral Agent to act as agent for the
Agent for the purposes of executing and delivering on its behalf the Collateral
Documents and, subject to the provisions of this Agreement, enforcing the
Agent's rights in respect of the Collateral and the obligations of each Loan
Party under the Collateral Documents.
(b) (i) The Collateral Agent shall have each and every right, power,
privilege or duty expressed or intended by this Agreement or any of the other
Loan Documents to be exercised by or vested in or conveyed to the Agent under
the Collateral Documents, which shall be exercisable by and vest in the
Collateral Agent to the extent necessary or desirable to enable the Collateral
Agent to exercise such rights, powers and privileges and to perform such duties
with respect to such Collateral, and every covenant and obligation contained in
the Loan Documents and necessary to the exercise or performance thereof by the
Collateral Agent shall run to and be enforceable by the Collateral Agent, and
(ii) the provisions of SECTION 25 hereof and of SECTION 9.11 of the Credit
31
Agreement that refer to the Agent shall inure to the benefit of the Collateral
Agent and all references therein to the Agent shall be deemed to be references
to the Agent and/or the Collateral Agent, as the context may require.
32. MISCELLANEOUS.
(a) REINSTATEMENT; INDEMNITY FOR RETURNED PAYMENTS.
(i) This Agreement shall remain in full force and effect and continue
to be effective should any petition be filed by or against any Grantor for
liquidation or reorganization, should such Grantor become insolvent or make
an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of such
Grantor's assets.
(ii) If after receipt of any payment which is applied to the payment
of all or any part of the Secured Obligations, the Agent or any Lender is
for any reason compelled to surrender such payment or proceeds to any
Person because such payment or application of proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Secured Obligations or part thereof intended to be
satisfied shall be revived and continued and this Agreement shall continue
in full force as if such payment or proceeds had not been received by the
Agent or such Lender and the Grantors shall be liable to pay to the Agent
and the Lenders and hereby does indemnify the Agent and the Lenders and
hold the Agent and the Lenders harmless for the amount of such payment or
proceeds surrendered. The provisions of this SECTION 32(A) shall be and
remain effective notwithstanding any contrary action which may have been
taken by the Agent or any Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be
without prejudice to the Agent's and the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions
of this SECTION 32(A) shall survive the termination of this Agreement.
(b) NOTICES. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give and serve upon any
other party any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
given in the manner, and deemed received, as provided for in the Credit
Agreement.
(c) SEVERABILITY. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
This Agreement is to be read, construed and applied together with the Credit
32
Agreement and the other Loan Documents which, taken together, set forth the
complete understanding and agreement of the Agent, the Lenders and the Grantors
with respect to the matters referred to herein and therein.
(d) LIMITATION OF LIABILITY. No claim may be made by the Grantors or any
other person against the Agent or any other Beneficiary, or the Affiliates,
directors, officers, employees, counsel, representatives, agents or
attorneys-in-fact of any of them for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this agreement or any other loan document, or any act, omission or event
occurring in connection therewith, and the Grantors waive, release and agree not
to xxx upon any claim for such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
(e) NO WAIVER; CUMULATIVE REMEDIES. No failure by the Agent or any Lender
to exercise any right, remedy, or option under this Agreement or any present or
future supplement thereto, or in any other agreement between or among any
Borrower and the Agent and/or any Lender, or delay by the Agent or any Lender in
exercising the same, will operate as a waiver thereof. No waiver, alteration,
modification or amendment by the Agent or any Lender will be effective unless it
is in writing and duly executed by the Agent and the Grantors, and then only to
the extent specifically stated. No waiver by the Agent or the Lenders on any
occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Borrower of any provision of
this Agreement. The Agent and the Lenders may proceed directly to collect the
Secured Obligations without any prior recourse to the Collateral. The Agent's
and each Lender's rights under this Agreement will be cumulative and not
exclusive of any other right or remedy which the Agent or any Lender may have.
(f) LIMITATION BY LAW. All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of
law that may be controlling and to be limited to the extent necessary so that
they shall not render this Agreement invalid, unenforceable, in whole or in
part, or not entitled to be recorded, registered or filed under the provisions
of any applicable law.
(g) TERMINATION OF THIS AGREEMENT. Upon the payment in full of all Secured
Obligations (other than inchoate indemnity obligations), the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the applicable Grantors. Upon any such termination the Agent will, at the
Grantors' expense, execute and deliver to the Grantors such documents as the
Grantors shall reasonably request to evidence such termination. In addition, in
connection with the release or subordination of the Agent's security interest
over any Collateral as contemplated by Section 9.11 of the Credit Agreement, the
Agent will, at the reasonable request of the relevant Grantor and at its
expense, execute such documents as are necessary to release or subordinate such
security interest, as applicable, including in connection with any such
subordination, the execution of an intercreditor agreement substantially on the
same terms as the Intercreditor Agreement.
33
(h) SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the
Grantors hereunder shall be binding upon the successors and assigns of each
Grantor (including any debtor-in-possession on behalf of such Grantor) and
shall, together with the rights and remedies of the Agent, for the benefit of
the Agent and the Lenders, hereunder, inure to the benefit of the Agent and the
Lenders, all future holders of any instrument evidencing any of the Secured
Obligations and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion thereof or interest therein shall in any manner affect the Lien granted
to the Agent, for the benefit of the Agent and the Lenders, hereunder. The
Grantors may not assign, sell, hypothecate or otherwise transfer any interest in
or obligation under this Agreement. Without limiting the generality of the
foregoing, subject to the provisions of SECTION 10.07 of the Credit Agreement,
any Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Lenders herein or otherwise.
(i) ADDITIONAL GRANTORS. The initial Subsidiary Grantors hereunder shall be
such of the Subsidiaries of the Borrower as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, additional Domestic
Subsidiaries (other than Restricted Subsidiaries) of the Borrower may become
parties hereto as additional Grantors (each an "ADDITIONAL GRANTOR"), by
executing a counterpart substantially in the form of EXHIBIT II attached hereto
(the "COUNTERPART"). Upon delivery of any such counterpart to the Agent, notice
of which is hereby waived by the Grantors, each such Additional Grantor shall be
a Grantor and shall be as fully a party hereto as if such Additional Grantor
were an original signatory hereto. Each Grantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of the
Agent not to cause any Subsidiary of the Borrower to become an Additional
Grantor hereunder. This Agreement shall be fully effective as to any Grantor
that is or becomes a party hereto regardless of whether any other Person becomes
or fails to become or ceases to be a Grantor hereunder.
(j) IP SUPPLEMENTS. If any Grantor shall hereafter obtain rights to any new
IP Collateral or become entitled to the benefit of any Patent application or
Patent or any reissue, division, continuation, renewal, extension or
continuation-in-part of any Patent or any improvement of any Patent, then in any
such case, the provisions of this Agreement shall automatically apply thereto.
Within 45 days after the end of each Fiscal Quarter of the Borrower during which
any Grantor files an application for any Patent, such Grantor shall execute and
deliver to the Agent an IP Supplement, substantially in the form of EXHIBIT III
attached hereto (an "IP Supplement"), pursuant to which such Grantor shall grant
to the Agent a security interest to the extent of its interest in such IP
Collateral. In addition, such Grantor shall, prior to the end of such 45-day
period, record the IP Supplement with the United States Patent and Trademark
Office. Upon delivery to the Agent of an IP Supplement, SCHEDULE 1 attached
hereto and Schedule A to each Grant, as applicable, shall be deemed modified to
include reference to any right, title or interest in any existing IP Collateral
or any IP Collateral set forth on Schedule A to such IP Supplement. Each Grantor
hereby authorizes the Agent to modify this Agreement without the signature or
consent of any Grantor by attaching SCHEDULE 1, as applicable, that have been
modified to include such IP Collateral or to delete any reference to any right,
title or interest in any IP Collateral in which any Grantor no longer has or
claims any right, title or interest; PROVIDED, the failure of any Grantor to
34
execute an IP Supplement with respect to any additional IP Collateral pledged
pursuant to this AgreemeFnt shall not impair the security interest of the Agent
therein or otherwise adversely affect the rights and remedies of the Agent
hereunder with respect thereto. Notwithstanding the foregoing, no Grantor shall
be required to record the security interest of the Agent in any IP Collateral,
if such recordation would result in the grant of a Patent, or any application
therefor, in the name of the Agent.
(k) PLEDGE AMENDMENTS. Each Grantor agrees that it will, upon obtaining any
additional Equity Interest or Debt, promptly (and in any event within five
Business Days) deliver to the Agent a Pledge Amendment, duly executed by such
Grantor, in substantially the form of EXHIBIT IV attached hereto (a "PLEDGE
AMENDMENT"), in respect of the additional Pledged Interests or Pledged Debt to
be pledged pursuant to this Agreement. Upon each delivery of a Pledge Amendment
to the Agent, the representations and warranties contained in clauses SECTIONS
20(A) and 20(B) hereof shall be deemed to have been made by such Grantor as to
the Pledged Collateral described in such Pledge Amendment as of the date
thereof. Each Grantor hereby authorizes the Agent to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Interests or Pledged
Debt of such Grantor listed on any Pledge Amendment shall for all purposes
hereunder be considered Pledged Collateral of such Grantor; PROVIDED, the
failure of any Grantor to execute a Pledge Amendment with respect to any
additional Pledged Interests or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of the Agent therein or otherwise
adversely affect the rights and remedies of the Agent hereunder with respect
thereto.
(l) AMENDMENTS, ETC. No amendment, modification, termination or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent and, in the case of any such amendment or modification,
by the Grantors; PROVIDED that (i) this Agreement may be modified by the
execution of a counterpart by an Additional Grantor in accordance with SECTION
32(I) hereof and the Grantors hereby waive any requirement of notice of or
consent to any such amendment and (ii) this Agreement may be amended, and
waivers and consents granted hereunder, at any time without the consent of the
Agent, pursuant to and in accordance with the Intercreditor Agreement. Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
(m) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender, each Grantor and the Borrower in
separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement; signature pages may be
detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(n) THE AGENT AS AGENT.
(i) The Agent has been appointed to act as Agent hereunder by the
Lenders. The Agent shall be obligated, and shall have the right hereunder,
to make demands, to give notices, to exercise or refrain from exercising
any rights and to take or refrain from taking any action, solely in
35
accordance with this Agreement and the Credit Agreement.
(ii) The Agent shall at all times be the same Person that is the Agent
under the Credit Agreement. Written notice of resignation by the Agent
pursuant to Section 9.09 of the Credit Agreement shall also constitute
notice of resignation as Agent under this Agreement; and appointment of a
successor agent pursuant to Section 9.09 of the Credit Agreement shall also
constitute appointment of a successor Agent under this Agreement. Upon the
acceptance of any appointment as agent under Section 9.09 of the Credit
Agreement by a successor agent, that successor agent shall thereupon
succeed to become vested with all the rights, powers, privileges and duties
of the retiring Agent under this Agreement, and the retiring Agent under
this Agreement shall promptly (i) transfer to such successor Agent all sums
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the
successor Agent under this Agreement and (ii) take such other actions as
may be necessary or appropriate in connection with the assignment to such
successor Agent of the rights created hereunder, whereupon such retiring
Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Agreement shall inure to its benefits as to any actions
taken or omitted to be taken by it under this Agreement while it was the
Agent hereunder.
(o) GOVERNING LAW.
(i) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES
WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE
OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF
CALIFORNIA; PROVIDED THAT THE AGENT AND THE OTHER BENEFICIARIES SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN LOS ANGELES
COUNTY, CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
OF THE GRANTORS, THE AGENT AND THE OTHER BENEFICIARIES CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF THE GRANTORS, THE AGENT AND THE OTHER BENEFICIARIES
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
36
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE OTHER BENEFICIARIES
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST EACH GRANTOR
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE
OTHER BENEFICIARIES DEEM NECESSARY OR APPROPRIATE IN ORDER TO ENFORCE THIS
AGREEMENT AND (2) EACH OF THE GRANTORS, THE AGENT AND THE OTHER
BENEFICIARIES ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
(iii) EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO EACH GRANTOR AT
ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HEREOF AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE
BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING CONTAINED
HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE OTHER BENEFECIARIES TO
SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
(iv) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE
CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING
OUT OF OR RELATING TO THIS AGREEMENT INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF ANY PARTY HERETO BE
DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining
any claim. Any controversy concerning whether an issue is arbitrable shall
be determined by the arbitrator(s). Judgment upon the arbitration award may
be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuant to a provisional
or ancillary remedy shall not constitute a waiver of the right of either
party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
37
(v) Notwithstanding the provisions of (iv) above, no controversy or
claim shall be submitted to arbitration without the consent of all parties
if, at the time of the proposed submission, such controversy or claim
arises from or related to an obligation to any Beneficiary which is secured
by real estate property collateral (exclusive of real estate space lease
assignments). If all the parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in SECTION 32(O)(VI) hereof.
(vi) At the request of any party a controversy or claim which is not
submitted to arbitration as provided and limited in SECTIONS 32(O)(IV) and
32(O)(V) hereof shall be determined by judicial reference. If such an
election is made, the parties shall designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings. The presiding
referee of the panel, or the referee if there is a single referee, shall be
an active attorney or retired judge. Judgment upon the award rendered by
such referee or referees shall be entered in the court in which such
proceeding was commenced.
(vii) No provision of SECTIONS 32(O)(IV) through 32(O)(VII) hereof
shall limit the right of the Agent or the other Beneficiaries to exercise
self-help remedies such as setoff, foreclosure against or sale of any real
or personal property collateral or security, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The exercise of
a remedy does not waive the right of either party to resort to arbitration
or reference. At the Agent's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the
deed of trust or mortgage or by judicial foreclosure.
(p) WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION 32(O), THE
GRANTORS, THE AGENT AND THE OTHER BENEFICIARIES EACH IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GRANTORS, THE AGENT AND THE
OTHER BENEFICIARIES EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
GRANTORS, THE AGENT AND THE OTHER BENEFICIARIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
38
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
(q) SECTION TITLES. The Section titles contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
(r) NO STRICT CONSTRUCTION. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
(s) ADVICE OF COUNSEL. Each of the parties represents to each other party
hereto that it has discussed this Agreement and, specifically, the provisions of
SECTIONS 32(O) and 32(P) hereof, with its counsel.
(t) BENEFIT OF THE LENDERS. (i) All Liens granted or contemplated hereby
shall be for the benefit of the Agent and the Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Secured Obligations in accordance with the terms of the Credit Agreement; and
(ii) in the event that any Lien hereunder is released by the Agent under the
Credit Agreement for any reason, such release shall be effective to release such
Lien with respect to all Obligations.
(u) JUNIOR LIEN. So long as the Intercreditor Agreement is in effect, the
Lien created by this Agreement shall be junior to the Lien in favor of the ABL
Agent created pursuant to the ABL Pledge and Security Agreement and is subject
to the terms of the Intercreditor Agreement. To the extent there is any conflict
between the terms of this Agreement and the terms of the Intercreditor
Agreement, the Intercreditor Agreement shall govern.
39
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
[GRANTOR]
By:
________________________________________
Name:
______________________________________
Title:
_____________________________________
BANK OF AMERICA, N.A.,
as Agent
By:
________________________________________
Name:
______________________________________
Title:
_____________________________________
S-1
EXHIBIT I TO
PLEDGE AND SECURITY AGREEMENT
[FORM OF] GRANT OF PATENT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a _____________ corporation
("GRANTOR"), owns and uses in its business, and will in the future adopt and so
use, various intangible assets, including the Patent Collateral (as defined
below); and
WHEREAS, Levi Xxxxxxx & Co., a Delaware corporation (the
"BORROWER"), has entered into that certain Credit Agreement dated as of
September 29, 2003 among the Borrower, the several financial institutions from
time to time party thereto (the "LENDERS") and Bank of America, N.A., as
administrative agent (in such capacity, the "AGENT") for the Lenders (as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time, the "CREDIT AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined);
WHEREAS, it is desired that the obligations of the Borrower
under the Credit Agreement and the other Loan Documents be secured until the
payment in full of all Obligations;
WHEREAS, pursuant to the terms of that certain Second-Lien
Pledge and Security Agreement dated of even date with the Credit Agreement,
entered into in connection with the Credit Agreement, by the Borrower, certain
subsidiaries of the Borrower and the Agent for the Lenders (together with the
Agent, the "SECURITY BENEFICIARIES") (as such agreement may be amended,
restated, supplemented or otherwise modified from time to time, the "SECOND-LIEN
PLEDGE AND SECURITY AGREEMENT"), Grantor has agreed to create in favor of the
Agent a priority secured and protected interest in, and the Agent has agreed to
become a secured creditor with respect to, the Patent Collateral; and
WHEREAS, the Agent and Bank of America, N.A., in its capacity
as agent (in such capacity, the "ABL AGENT") for the several financial
institutions party from time to time to the Credit Agreement dated as of
September 29, 2003 (as such agreement may be amended, restated, supplemented or
otherwise modified from time to time, the "ABL CREDIT AGREEMENT"), have entered
into that certain Intercreditor Agreement dated as of September 29, 2003 (as
such agreement may be amended, restated, supplemented or otherwise modified from
time to time, the "INTERCREDITOR AGREEMENT"), pursuant to which the parties have
agreed to the relative priority of their respective security in and Liens on
certain shared collateral, including the Patent Collateral;
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, subject to the terms and
conditions of the Second-Lien Pledge and Security Agreement and the
Intercreditor Agreement, Grantor hereby grants to the Agent a priority security
interest in all of Grantor's right, title and interest in and to the following,
in each case whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located (the "PATENT
COLLATERAL"):
(i) all rights, title and interest (including rights acquired pursuant
to a license or otherwise) in and to all patents and patent
applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or
in the future may be, owned or held by Grantor and all patents and
patent applications and rights, title and interests in patents and
patent applications under any domestic or foreign law that are
presently, or in the future may be, owned by Grantor in whole or in
part (including the patents and patent applications set forth on
Schedule A attached hereto), all rights (but not obligations)
corresponding thereto (including the right, exercisable only upon the
occurrence and during the continuation of an Event of Default, to xxx
for past, present and future infringements in the name of Grantor or in
the name of the Agent or the Lenders), and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof
(all of the foregoing being collectively referred to as the "PATENTS"),
it being understood that the rights and interests included in the
Patent Collateral hereby shall include, without limitation, all rights
and interests pursuant to licensing or other contracts in favor of
Grantor pertaining to patent applications and patents presently or in
the future owned or used by third parties but, in the case of third
parties which are not Affiliates of Grantor, only to the extent
permitted by such licensing or other contracts and, if not so
permitted, only with the consent of such third parties; and
(ii) all proceeds, products, rents and profits of or from any and all
of the foregoing Patent Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not the Agent is the
loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Patent Collateral. For purposes of this Grant of Patent
Security Interest, the term "proceeds" includes whatever is receivable
or received when Patent Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.
Grantor does hereby further acknowledge and affirm that the
rights and remedies of the Agent with respect to the security interest in the
Patent Collateral granted hereby are more fully set forth in the Second-Lien
Pledge and Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
[SIGNATURE APPEARS ON FOLLOWING PAGE]
IN WITNESS WHEREOF, Grantor has caused this Grant of Patent Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the ___ day of __________, ____.
[NAME OF GRANTOR]
By:_____________________________
Name:_________________________
Title:__________________________
STATE OF ____________ )
)
COUNTY OF _____________ )
On ____________________________, 2003, before me,
________________, a Notary Public in and for said State, personally appeared
________________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity on behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature___________________________
SCHEDULE A
TO
GRANT OF PATENT SECURITY INTEREST
PATENTS ISSUED:
PATENT NO. ISSUE DATE INVENTION INVENTOR
PATENTS PENDING:
APPLICANT'S DATE APPLICATION
NAME FILED NUMBER INVENTION INVENTOR
EXHIBIT II TO
PLEDGE AND SECURITY AGREEMENT
[FORM OF] COUNTERPART
COUNTERPART (this "COUNTERPART"), dated as of _______, is delivered
pursuant to SECTION 32(I) of the Second-Lien Pledge and Security Agreement
referred to below. The undersigned hereby agrees that this Counterpart may be
attached to the Second-Lien Pledge and Security Agreement, dated as of September
29, 2003 (said Second-Lien Pledge and Security Agreement, as it may hereafter be
amended, supplemented, restated or otherwise modified from time to time, being
the "SECOND-LIEN PLEDGE AND SECURITY AGREEMENT"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), among Levi
Xxxxxxx & Co., the other Grantors named therein and Bank of America, N.A., as
Agent. The undersigned by executing and delivering this Counterpart hereby
becomes a Grantor under the Second-Lien Pledge and Security Agreement in
accordance with SECTION 32(I) thereof and agrees to be bound by all of the terms
thereof. Without limiting the generality of the foregoing, the undersigned
hereby:
(i) authorizes the Agent to add the information set forth on the Schedules
to this Agreement to the correlative Schedules attached to the Second-Lien
Pledge and Security Agreement(1);
(ii) agrees that all Collateral of the undersigned, including the items of
property set forth on the Schedules hereto, shall become part of the Collateral
and shall secure all Secured Obligations; and
(iii) makes the representations and warranties set forth in the Second-Lien
Pledge and Security Agreement, as amended hereby, to the extent relating to the
undersigned.
[NAME OF ADDITIONAL GRANTOR]
By: ___________________________
Name:
Title:
__________________
(1) The Schedules to the Counterpart should include copies of all Schedules that
identify collateral to be granted by the Additional Grantor.
EXHIBIT III TO
PLEDGE AND SECURITY AGREEMENT
[FORM OF] IP SUPPLEMENT
This IP SUPPLEMENT, dated as of _______, is delivered pursuant
to and supplements (i) the Second-Lien Pledge and Security Agreement, dated as
of September 29, 2003 (said Second-Lien Pledge and Security Agreement, as it may
hereafter be amended, supplemented, restated or otherwise modified from time to
time, being the "SECOND-LIEN PLEDGE AND SECURITY AGREEMENT"), among Levi Xxxxxxx
& Co., the other Grantors named therein and Bank of America, N.A., as Agent, and
(ii) the Grant of Patent Security Interest dated as of September 29, 2003 (said
Grant of Patent Security Interest, as it may hereafter be amended, supplemented,
restated or otherwise modified from time to time, being the "GRANT"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined) executed by the Grantor.
["Grantor"] grants to the Agent a security interest in all of
the Grantor's right, title and interest in and to the Patent Collateral set
forth on Schedule A attached hereto. All such Patent Collateral shall be deemed
to be part of the Patent Collateral and shall be hereafter subject to each of
the terms and conditions of the Second-Lien Pledge and Security Agreement and
the Grant.
IN WITNESS WHEREOF, the Grantor has caused this Supplement to
be duly executed and delivered by its duly authorized officer as of
______________.
[GRANTOR]
By:
________________________________________
Name:
Title:
EXHIBIT IV TO
PLEDGE AND SECURITY AGREEMENT
[FORM OF] PLEDGE AMENDMENT
This Pledge Supplement, dated as of __________________, is
delivered pursuant to the Second-Lien Pledge and Security Agreement, dated as of
September 29, 2003 between ____________________, a _______________ ("GRANTOR"),
the other Grantors named therein and Bank of America, N.A., as Agent (said
Second-Lien Pledge and Security Agreement, as it may hereafter be amended,
supplemented, restated or otherwise modified from time to time, being the
"SECOND-LIEN PLEDGE AND SECURITY AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined).
The Grantor hereby agrees that the [Pledged Interests]
[Pledged Debt] set forth on the schedule attached hereto shall be deemed to be
part of the [Pledged Interests] [Pledged Debt] and shall become part of the
Pledged Collateral and shall secure all Secured Obligations.
IN WITNESS WHEREOF, the Grantor has caused this Supplement to
be duly executed and delivered by its duly authorized officer as of
_______________.
[GRANTOR]
By: ___________________________
Name:
Title:
