PLEDGE AND SECURITY AGREEMENT
DATED AS OF JANUARY 28, 2000
AMONG
PARAGON TRADE BRANDS, INC. AND EACH OTHER GRANTOR
FROM TIME TO TIME PARTY HERETO
AND
CITICORP USA, INC.
AS ADMINISTRATIVE AGENT
WEIL, GOTSHAL & XXXXXX LLP
000 XXXXX XXXXXX
XXX XXXX, XXX XXXX 00000-0000
TABLE OF CONTENTS
PAGE
ARTICLE I.......................................................Defined Terms 1
Section 1.1 ............................................Definitions 1
Section 1.2 ....................................Certain Other Terms 5
ARTICLE II.........................................Grant of Security Interest 5
Section 2.1 .............................................Collateral 5
Section 2.2 ...............Grant of Security Interest in Collateral 7
ARTICLE III....................................Representations And Warranties 7
Section 3.1 ..................................Title; No Other Liens 7
Section 3.2 ................................Perfection and Priority 7
Section 3.3 .........State of Incorporation; Chief Executive Office 7
Section 3.4 ................................Inventory and Equipment 7
Section 3.5 .....................................Pledged Collateral 8
Section 3.6 ...............................................Accounts 8
Section 3.7 .........................................No Other Names 8
Section 3.8 ..................................Intellectual Property 9
ARTICLE IV..........................................................Covenants 9
Section 4.1 ..............................................Generally 9
Section 4.2 Maintenance of Perfected Security Interest; Further
......................................... Documentation 10
Section 4.3 .......................Changes in Locations, Name, Etc. 10
Section 4.4 .............. ......................Pledged Collateral 10
Section 4.5 .....................Control Accounts; Blocked Accounts 12
Section 4.6 ...............................................Accounts 12
Section 4.7 ..............Delivery of Instruments and Chattel Paper 13
Section 4.8 ..................................Intellectual Property 13
Section 4.9 .................................Payment of Obligations 14
ARTICLE V.................................................Remedial Provisions 15
Section 5.1 ................................Code and Other Remedies 15
Section 5.2 .......................Accounts and Payment Intangibles 15
Section 5.3 .....................................Pledged Collateral 16
Section 5.4 .....Proceeds to be Turned Over To Administrative Agent 17
Section 5.5 ....................................Registration Rights 17
Section 5.6 .....................................Waiver; Deficiency 18
ARTICLE VI...........................................The Administrative Agent 18
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TABLE OF CONTENTS
(CONTINUED)
Section 6.1 .Administrative Agent's Appointment as Attorney-in-Fact 18
Section 6.2 ...........................Duty of Administrative Agent 20
Section 6.3 ......................Execution of Financing Statements 20
Section 6.4 ......................Authority of Administrative Agent 20
ARTICLE VII.....................................................Miscellaneous 21
Section 7.1 ..................................Amendments in Writing 21
Section 7.2 ................................................Notices 21
Section 7.3 ....No Waiver by Course of Conduct; Cumulative Remedies 21
Section 7.4 .................................Successors and Assigns 21
Section 7.5 ...........................................Counterparts 21
Section 7.6 ...........................................Severability 21
Section 7.7 .......................................Section Headings 21
Section 7.8 .......................................Entire Agreement 22
Section 7.9 ..........................................Governing Law 22
Section 7.10 ...................................Additional Grantors 22
Section 7.11 .................................Release of Collateral 22
Section 7.12 .........................................Reinstatement 22
ANNEXES AND SCHEDULES
Annex 1 Blocked Account Letter
Annex 2 Control Account Letter
Annex 3 Pledge Amendment
Annex 4 Joinder Agreement
Annex 5 Short Form Copyright Security Agreement
Annex 6 Short Form Patent Security Agreement
Annex 7 Short Form Trademark Security Agreement
Schedule 1 State of Incorporation; Principal Executive Office
Schedule 2 Pledged Collateral
Schedule 3 Filings
Schedule 4 Location of Inventory and Equipment
Schedule 5 Intellectual Property
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PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of January 28, 2000,
by Paragon Trade Brands, Inc., a Delaware corporation (the "BORROWER") PTB
International, Inc., a Delaware corporation, PTB Acquisition Sub, Inc., a
Delaware corporation and PTB Holdings, Inc., an Ohio corporation (each,
including the Borrower, a "GRANTOR" and, collectively, the "GRANTORS"), in favor
of Citicorp USA, Inc. ("CITICORP"), as agent for the Secured Parties (as defined
in the Credit Agreement referred to below) (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of January
28, 2000 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, (the "CREDIT AGREEMENT") among the Borrower, the
Lenders and Issuers party thereto and Citicorp, as agent for the Lenders and
Issuers, the Lenders and the Issuers have severally agreed to make extensions of
credit to the Borrower upon the terms and subject to the conditions set forth
therein; and
WHEREAS, the Grantors other than the Borrower are party to the
Guaranty pursuant to which they have guaranteed the Obligations; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders and the Issuers to make their respective extensions of credit to the
Borrower under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent;
NOW, THEREFORE, in consideration of the premises and to induce
the Lenders, the Issuers and the Administrative Agent to enter into the Credit
Agreement and to induce the Lenders and the Issuers to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby agrees with
the Administrative Agent as follows:
ARTICLE I. DEFINED TERMS
SECTION 1.1 DEFINITIONS.
(a) Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein have the meanings given to them in the Credit
Agreement.
(b) Terms used herein that are defined in the UCC have the meanings
given to them in the UCC, including the following which are capitalized herein:
"ACCOUNT DEBTOR"
"ACCOUNTS"
"CHATTEL PAPER"
"CONTROL"
"DOCUMENTS"
"EQUIPMENT"
"FINANCIAL ASSET"
"GENERAL INTANGIBLES"
"INSTRUMENTS"
"INVENTORY"
"INVESTMENT PROPERTY"
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"PROCEEDS"
"SECURITY"
"SECURITY ENTITLEMENT"
(c) The following terms shall have the following meanings:
"ADDITIONAL PLEDGED COLLATERAL" means all shares of, limited
and/or general partnership interests in, and limited liability company interests
in, and all securities convertible into, and warrants, options and other rights
to purchase or otherwise acquire, stock of, either (i) any Person that, after
the date of this Agreement, as a result of any occurrence, becomes a direct
Subsidiary of any Grantor or (ii) any issuer of Pledged Stock, any Partnership
or any LLC that is acquired by any Grantor after the date hereof; all
certificates or other instruments representing any of the foregoing; all
Security Entitlements of any Grantor in respect of any of the foregoing; all
additional indebtedness from time to time owed to any Grantor by any obligor on
the Pledged Notes and the instruments evidencing such indebtedness; and all
interest, cash, instruments and other property or Proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing. Additional Pledged Collateral may be General
Intangibles or Investment Property.
"AGREEMENT" means this Pledge and Security Agreement.
"APPROVED SECURITIES INTERMEDIARY" means a securities
intermediary or commodity intermediary selected or approved by the
Administrative Agent and with respect to which a Grantor has delivered to the
Administrative Agent an executed Control Account Letter.
"CASH COLLATERAL ACCOUNT" means any deposit account or
securities account established by the Administrative Agent as provided in
SECTION 5.2 or 5.4 in which cash and Cash Equivalents may from time to time be
on deposit or held therein.
"COLLATERAL" has the meaning specified in SECTION 2.1.
"CONTROL ACCOUNT" means a securities account or commodity
account maintained by any Grantor with an Approved Securities Intermediary which
account is the subject of an effective Control Account Letter, and includes all
Financial Assets held therein and all certificates and instruments, if any,
representing or evidencing such Control Account.
"CONTROL ACCOUNT LETTER" means a letter agreement,
substantially in the form of ANNEX 2 (with such changes as may be agreed to by
the Administrative Agent), executed by the Grantor and the Administrative Agent
and acknowledged and agreed to by the relevant Approved Securities Intermediary.
"COPYRIGHTS" means (a) all copyrights arising under the laws
of the United States, any other country or any political subdivision thereof,
whether registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any foreign counterparts thereof and (b)
the right to obtain all renewals and extensions thereof.
"COPYRIGHT LICENSES" means any written agreement naming any
Grantor as licensor or licensee granting any right under any Copyright,
including the grant of rights to copy,
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publicly perform, create derivative works, manufacture, distribute, exploit and
sell materials derived from any Copyright.
"INTELLECTUAL PROPERTY" means, collectively, all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark
Licenses, the entire goodwill of any business connected with use of and
symbolized by the Trademarks and trade secrets, and all rights to xxx at law or
in equity for past, present and future infringement or other misappropriations
thereof, including, without limitation, the right to receive all proceeds,
royalties, income and damages therefrom now or hereafter due and payable or both
with respect thereto including damages and payments for past or future
infringements or misappropriations thereof, and all other rights corresponding
thereto throughout the world.
"INTERCOMPANY NOTE" means any promissory note evidencing loans
made by any Grantor to any of its Subsidiaries or another Grantor.
"LLC" means each limited liability company in which a Grantor
has an interest, including those set forth on SCHEDULE 2.
"LCC AGREEMENT" means each operating agreement with respect to
an LLC, as each agreement has heretofore been and may hereafter be amended,
restated, supplemented or otherwise modified from time to time.
"MATERIAL INTELLECTUAL PROPERTY" means Intellectual Property
owned by or licensed to a Grantor which is material to its business.
"PARTNERSHIP" means each partnership in which a Grantor has an
interest, including those set forth on SCHEDULE 2.
"PARTNERSHIP AGREEMENT" means each partnership agreement
governing a Partnership, as each such agreement has heretofore been and may
hereafter be amended, restated, supplemented or otherwise modified.
"PATENTS" means (a) all letters patent of the United States,
any other country or any political subdivision thereof and all reissues and
extensions thereof, (b) all applications for letters patent of the United States
or any other country and all divisions, continuations and continuations-in-part
or extensions thereof, and (c) all rights to obtain any reissues or extensions
of the foregoing.
"PATENT LICENSE" means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to manufacture,
use, import, sell or offer for sale any invention covered in whole or in part by
one or more Patents or granting any interest in Patents.
"PAYMENT INTANGIBLES" has the meaning specified in SECTION
5.2(A).
"PLEDGED COLLATERAL" means, collectively, the Pledged Notes,
the Pledged Stock, the Pledged Partnership Interests, the Pledged LLC Interests,
all certificates or other instruments representing any of the foregoing, all
Security Entitlements of any Grantor in respect of any of the foregoing, all
dividends, interest distributions, cash, warrants, rights, instruments and other
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property or Proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the foregoing.
Pledged Collateral may be General Intangibles or Investment Property.
"PLEDGED LLC INTERESTS" means all of any Grantor's right,
title and interest as a member of any LLCs and all of such Grantor's right,
title and interest in, to and under any LLC Agreement to which it is a party.
"PLEDGED NOTES" means all right, title and interest of any
Grantor, in the Instruments evidencing all Indebtedness owed to such Grantor,
including all Indebtedness described on SCHEDULE 2, issued by the obligors named
therein, 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 such Indebtedness.
"PLEDGED PARTNERSHIP INTERESTS" shall mean all of any
Grantor's right, title and interest as a limited and/or general partner in all
Partnerships and all of such Grantor's right, title and interest in, to and
under any Partnership Agreements to which it is a party.
"PLEDGED STOCK" means the shares of capital stock owned by
each Grantor, including all shares of capital stock listed on SCHEDULE 2;
PROVIDED, HOWEVER, that only the outstanding capital stock of a subsidiary that
is not a Domestic Subsidiary possessing up to but not exceeding 65% of the
voting power of all classes of capital stock of such controlled foreign
corporation (actually owned by each such Grantor) entitled to vote shall be
deemed to be pledged hereunder.
"RELATED CONTRACT" means each security agreement, lease and
other contract securing or otherwise relating to any Account.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADEMARKS" means (a) all trademarks (whether registered or
at common law), trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and all goodwill associated therewith and in connection
with the business of owner symbolized thereby, now existing or hereafter adopted
or acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common-law rights related thereto, and (b) the right to obtain all renewals
thereof.
"TRADEMARK LICENSE" means any agreement, whether written or
oral, providing for the grant by or to any Grantor of any right to use any
Trademarks.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the State of New York; PROVIDED, HOWEVER, that in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Administrative Agent's and the Secured Parties'
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of
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definitions related to such provisions; PROVIDED, FURTHER, that if the UCC is
amended after the date hereof, such amendment will not be given effect for the
purposes of this Agreement if and to the extent the result of such amendment
would be to limit or eliminate any item of Collateral.
SECTION 1.2 CERTAIN OTHER TERMS.
(a) The words "HEREIN," "HEREOF," "HERETO" and "HEREUNDER" and similar
words refer to this Agreement as a whole and not to any particular Article,
Section, subsection or clause in this Agreement.
(b) References herein to an Annex, Schedule, Article, Section,
subsection or clause refer to the appropriate Annex or Schedule to, or Article,
Section, subsection or clause in this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, provisions relating to the Collateral
or any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
(e) Any reference in this Agreement to a Loan Document shall include
all appendices, exhibits and schedules thereto, and, unless specifically stated
otherwise all amendments, restatements, supplements or other modifications
thereto, and as the same may be in effect at any and all times such reference
becomes operative.
(f) The term "INCLUDING" means "INCLUDING WITHOUT LIMITATION" except
when used in the computation of time periods.
(g) The terms "LENDER," "ISSUER," "ADMINISTRATIVE AGENT" and "SECURED
PARTY" include their respective successors.
(h) References in this Agreement to any statute shall be to such
statute as amended or modified and in effect from time to time.
ARTICLE II. GRANT OF SECURITY INTEREST
SECTION 2.1 COLLATERAL. For the purposes of this Agreement, all of
the following property now owned or at any time hereafter acquired by a Grantor
or in which a Grantor now has or at any time in the future may acquire any
right, title or interests is collectively referred to as the "COLLATERAL":
(a) all Accounts;
(b) all Inventory;
(c) all Equipment;
(d) all General Intangibles, including all Intellectual Property of
any such Grantor and that portion of the Pledged Collateral constituting General
Intangibles;
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(e) all Investment Property, including all Control Accounts and that
portion of the Pledged Collateral constituting Investment Property;
(f) all Documents, Instruments and Chattel Paper;
(g) the Cash Collateral Accounts and all Blocked Accounts and other
deposit accounts;
(h) all books and records pertaining to the Collateral;
(i) all other goods and personal property of such Grantor whether
tangible or intangible wherever located, including money, letters of credit and
all rights of payment or performance under letters of credit;
(j) all property of any Grantor held by Administrative Agent or any
Secured Party, including all property of every description, in the possession or
custody of or in transit to Administrative Agent or such Secured Party for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor, or as to which such Grantor may have any right or power; and
(k) to the extent not otherwise included, all Proceeds and products
of each of the foregoing and all accessions to, substitutions and replacements
for, and rents, profits and products of, each of the foregoing, any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to the
Grantor from time to time with respect to any of the Collateral;
PROVIDED, HOWEVER, that the foregoing grant of a security interest shall not
include a security interest in a contract right, any license agreement, any
lease pertaining to real or personal property or any other General Intangible of
any Grantor or any equity interests of each of the Borrower and PTB
International, Inc. in any Existing Foreign Joint Venture Agreements or any
obligations or property of or contracts with any joint venture resulting
therefrom (each such contract right, license agreement, lease pertaining to real
or personal property, foreign joint venture interests and other General
Intangible of such Grantor discussed in this PROVISO being hereinafter referred
to as "EXCLUDED PROPERTY") if the granting of a security interest therein by
such Grantor to the Administrative Agent is prohibited by any Requirement of Law
or by the terms and provisions of the written agreement, document or instrument
creating or evidencing such Excluded Property or rights related thereto; and
PROVIDED FURTHER that if and when the prohibition which prevents the granting by
such Grantor to the Administrative Agent of a security interest in such Excluded
Property is removed or otherwise terminated, the Administrative Agent will be
deemed to have, and at all times from and after the date hereof to have had, a
security interest in such Excluded Property, as the case may be, and that,
notwithstanding anything set forth herein to the contrary, the Administrative
Agent will be deemed to have, and at all times from and after the date hereof to
have had, a security interest in the proceeds of such Excluded Property.
SECTION 2.2 GRANT OF SECURITY INTEREST IN COLLATERAL. Each Grantor,
as collateral security for the full, prompt and complete payment and performance
when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations of such Grantor, hereby collaterally assigns, conveys,
mortgages, pledges, hypothecates and transfers to the Administrative Agent for
the benefit of the Secured Parties, and grants to the Administrative
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Agent for the benefit of the Secured Parties a lien on and security interest in,
all of its right, title and interest in, to and under the Collateral of such
Grantor.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
To induce the Lenders, the Issuers and the Administrative Agent to
enter into the Credit Agreement, each Grantor hereby represents and warrants to
the Administrative Agent, the Lenders, the Issuers and the other Secured Parties
that:
SECTION 3.1 TITLE; NO OTHER LIENS. Except for the Lien granted
to the Administrative Agent pursuant to this Agreement and the other Liens
permitted to exist on the Collateral under the Credit Agreement, (a) such
Grantor is the record and beneficial owner of the Pledged Collateral pledged by
it hereunder constituting Instruments or certificated securities and is the
entitlement holder of all such Pledged Collateral constituting Investment
Property held in a securities account and owns each other item of Collateral in
which a Lien is granted by it hereunder and (b) all such Collateral is owned
free and clear of any and all Liens.
SECTION 3.2 PERFECTION AND PRIORITY. The security interest granted
pursuant to this Agreement will constitute a valid and continuing perfected
security interest in favor of the Administrative Agent in the Collateral for
which perfection is governed by the UCC or filing with the United States
Copyright Office upon (i) the completion of the filings and other actions
specified on SCHEDULE 3 (which, in the case of all filings and other documents
referred to on such schedule, have been delivered to the Administrative Agent in
completed and duly executed form), (ii) the delivery to the Administrative Agent
of all Collateral consisting of Instruments and certificated securities, in each
case properly endorsed for transfer to the Administrative Agent or in blank, and
(iii) all appropriate filings having been made with the United States Copyright
Office. Such security interest will be prior to all other Liens on the
Collateral except for Customary Permitted Liens which have priority over the
Administrative Agent's Lien by operation of law or otherwise as permitted under
the Credit Agreement.
SECTION 3.3 STATE OF INCORPORATION; CHIEF EXECUTIVE OFFICE. On the
date hereof such Grantor's jurisdiction of organization and the location of such
Grantor's chief executive office or sole place of business is specified on
SCHEDULE 1.
SECTION 3.4 INVENTORY AND EQUIPMENT. On the date hereof, such
Grantor's Inventory and Equipment (other than mobile goods and Inventory or
Equipment in transit) are kept at the locations listed on SCHEDULE 4.
SECTION 3.5 PLEDGED COLLATERAL.
(a) The Pledged Stock, Pledged Partnership Interests and Pledged LLC
Interests pledged hereunder by such Grantor constitutes that percentage of the
issued and outstanding equity of all classes of each issuer thereof as set forth
on SCHEDULE 2.
(b) All of the Pledged Stock, Pledged Partnership Interests and
Pledged LLC Interests have been duly and validly issued and are fully paid and
nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
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laws relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(d) All Pledged Stock, Pledged Partnership Interests and Pledged LLC
Interests of such Grantor as of the date hereof are listed on SCHEDULE 2.
(e) All Pledged Collateral consisting of certificated securities or
Instruments has been delivered to the Administrative Agent in accordance with
SECTION 4.4(A).
(f) All Pledged Collateral held by a securities intermediary in a
securities account is in a Control Account.
(g) Other than the Pledged Partnership Interests and the Pledged LLC
Interests that constitute General Intangibles, there is no Pledged Collateral
other than that represented by certificated securities or Instruments in the
possession of the Administrative Agent or that consisting of Financial Assets
held in a Control Account.
(h) No Person other than the Administrative Agent has Control over any
Investment Property of such Grantor.
(i) As to any Grantor that is an LLC or a Partnership, the LLC
Agreement or Partnership Agreement, as the case may be, provides that, upon the
occurrence and during the continuance of an Event of Default, the Administrative
Agent shall be entitled to exercise all of the rights of the member of such
Grantor and that a transferee or assignee of a membership interest or
partnership interest, as the case may be, of such Grantor shall become a member
or partner, as the case may be, of such Grantor entitled to participate in the
management of such Grantor and, upon the transfer of the entire interest of the
transferor, such transferor ceases to be a member or partner, as the case may
be.
SECTION 3.6 ACCOUNTS. No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent, properly endorsed for
transfer, to the extent delivery is required by SECTION 4.3.
SECTION 3.7 NO OTHER NAMES. Except as set forth on SCHEDULE 1, such
Grantor has no trade names, fictitious names or other names except its legal
name, and does not operate in any jurisdiction under, and has not had or
operated in any jurisdiction within the five-year period preceding the date
hereof under, any trade name, fictitious name or other name other than its legal
name.
SECTION 3.8 INTELLECTUAL PROPERTY.
(a) SCHEDULE 5 lists all Material Intellectual Property of such
Grantor on the date hereof, separately identifying that owned by such Grantor
and that licensed to such Grantor. Each such Grantor has the full right, power
and authority to enter into this Agreement and to grant all the right, title and
interest herein granted. The Material Intellectual Property set forth on
SCHEDULE 5 for such Grantor constitutes all of the intellectual property rights
necessary to conduct its business as currently conducted on the date hereof.
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(b) On the date hereof, all Material Intellectual Property owned by
such Grantor is valid, subsisting, unexpired and enforceable, has not been
adjudged invalid or unenforceable in whole or in part, and has not been
abandoned and the use thereof in the business of such Grantor does not, to the
best knowledge of such Grantor, infringe the Intellectual Property rights, owned
or possessed by any other Person, except where such infringement would not have
a Material Adverse Effect on the Grantors.
(c) Except as set forth in SCHEDULE 5, on the date hereof, none of the
Material Intellectual Property owned by such Grantor is the subject of any
licensing or franchise agreement pursuant to which such Grantor is the licensor
or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of or
enforceability of, or such Grantor's rights in, any Material Intellectual
Property.
(e) Except as set forth on Schedule 5, no action or proceeding seeking
to limit, cancel or question the validity or enforceability of any Material
Intellectual Property owned by such Grantor or such Grantor's ownership interest
therein is on the date hereof pending or, to the knowledge of such Grantor,
threatened. Except as set forth on Schedule 5, there are no claims, judgments or
settlements to be paid by such Grantor relating to the Material Intellectual
Property.
ARTICLE IV. COVENANTS
As long as any of the Obligations or the Commitments remain
outstanding, unless the Requisite Lenders otherwise consent in writing, each
Grantor agrees with the Administrative Agent that:
SECTION 4.1 GENERALLY. Such Grantor shall (a) except for the security
interest created by this Agreement, not create or suffer to exist any Lien upon
or with respect to any of the Collateral, except Liens permitted under Section
8.2 of the Credit Agreement or otherwise as permitted under the Credit
Agreement; (b) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, any other Loan Document, any
Requirement of Law or any policy of insurance covering the Collateral; (c) not
sell, transfer or assign (by operation of law or otherwise) any Collateral
except as permitted under the Credit Agreement; (d) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the
Administrative Agent to sell, assign or transfer any of the Collateral if such
restriction would have a Material Adverse Effect; and (e) promptly notify the
Administrative Agent of its entry into any agreement or assumption of
undertaking that restricts the ability to sell, assign or transfer any of the
Collateral regardless of whether or not it has a Material Adverse Effect.
SECTION 4.2 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTATION.
(a) Such Grantor will maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in SECTION 3.2 and shall defend such security interest against the
claims and demands of all Persons.
(b) Such Grantor will furnish to the Administrative Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports
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in connection with the Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.
(c) At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further action as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including the filing of any financing or continuation statement
under the UCC (or other similar laws) in effect in any jurisdiction with respect
to the security interest created hereby and the execution and delivery of
Blocked Account Letters and Control Account Letters.
SECTION 4.3 CHANGES IN LOCATIONS, NAME, ETC.
(a) Except upon 15 days' prior written notice to the Administrative
Agent and delivery to the Administrative Agent of (i) all additional executed
financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the
security interests provided for herein and (ii) if applicable, a written
supplement to SCHEDULE 4 showing any additional location at which Inventory or
Equipment shall be kept, such Grantor will not:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 4;
(ii) change its state of incorporation or the location of its chief
executive office or sole place of business from that referred to in
SECTION 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent
in connection with this Agreement would become misleading.
(b) Such Grantor will keep and maintain at its own cost and expense
satisfactory and complete records of the Collateral, including a record of
all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral.
SECTION 4.4 PLEDGED COLLATERAL.
(a) Such Grantor will (i) deliver to the Administrative Agent, all
certificates or Instruments representing or evidencing any Pledged Collateral,
whether now arising or hereafter acquired, in suitable form for transfer by
delivery or, as applicable, accompanied by such Grantor's endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Administrative Agent, together with a
Pledge Amendment, duly executed by the Grantor, in substantially the form of
ANNEX 2 (a "PLEDGE AMENDMENT"), in respect of such additional Pledged Collateral
and authorizes the Administrative Agent to attach each Pledge Amendment to this
Pledge Agreement and (ii) maintain all other Pledged Collateral constituting
Investment Property in a Control Account. The Administrative Agent shall have
the right, at any time in its discretion and without notice to the Grantor, to
transfer to or to register in its name or in the name of its nominees any or all
of the Pledged Collateral. The Administrative Agent shall have the right at any
time to exchange
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certificates or instruments representing or evidencing any of the Pledged
Collateral for certificates or instruments of smaller or larger denominations.
(b) Except as provided in ARTICLE V, such Grantor shall be entitled
to receive all cash dividends paid in respect of the Pledged Collateral (other
than liquidating or distributing dividends). Any sums paid upon or in respect of
any of the Pledged Collateral upon the liquidation or dissolution of any issuer
of any of the Pledged Collateral or any property distributed upon or with
respect to any of the Pledged Collateral pursuant to the recapitalization or
reclassification of the capital of any issuer of Pledged Collateral or pursuant
to the reorganization thereof shall, unless otherwise subject to a perfected
security interest in favor of the Administrative Agent, be delivered to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Secured Obligations. If any sums of money or property so paid
or distributed in respect of any of the Pledged Collateral shall be received by
such Grantor, such Grantor shall, until such money or property is paid or
delivered to the Administrative Agent, hold such money or property in trust for
the Administrative Agent, segregated from other funds of such Grantor, as
additional security for the Secured Obligations.
(c) Except as provided in ARTICLE V, such Grantor will be entitled to
exercise all voting, consent and corporate rights with respect to the Pledged
Collateral; PROVIDED, HOWEVER, that no vote shall be cast, consent given or
right exercised or other action taken by such Grantor which would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Credit Agreement, this Agreement or any other Loan Document or,
without prior notice to the Administrative Agent, to enable or take any other
action to permit any issuer of Pledged Collateral to issue any stock or other
equity securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or other equity
securities of any nature of any issuer of Pledged Collateral.
(d) Such Grantor shall not grant Control over any Investment Property
to any Person other than the Administrative Agent.
(e) In the case of each Grantor which is an issuer of Pledged
Collateral, such Grantor agrees to be bound by the terms of this Agreement
relating to the Pledged Collateral issued by it and will comply with such terms
insofar as such terms are applicable to it. In the case of each Grantor which is
a partner in a Partnership, such Grantor hereby consents to the extent required
by the applicable Partnership Agreement to the pledge by each other Grantor,
pursuant to the terms hereof, of the Pledged Partnership Interests in such
Partnership and to the transfer of such Pledged Partnership Interests to the
Administrative Agent or its nominee and to the substitution of the
Administrative Agent or its nominee as a substituted partner in such Partnership
with all the rights, powers and duties of a general partner or a limited
partner, as the case may be. In the case of each Grantor which is a member of an
LLC, such Grantor hereby consents to the extent required by the applicable LLC
Agreement to the pledge by each other Grantor, pursuant to the terms hereof, of
the Pledged LLC Interests in such LLC and to the transfer of such Pledged LLC
Interests to the Administrative Agent or its nominee and to the substitution of
the Administrative Agent or its nominee as a substituted member of the LLC with
all the rights, powers and duties of a member of the LLC in question.
(f) Such Grantor will not agree to any amendment of an LLC Agreement
or Partnership Agreement that in any way adversely affects the perfection of the
security interest of the Administrative Agent in the Pledged Partnership
Interests or Pledged LLC Interests pledged
11
by such Grantor hereunder, including electing to treat the membership interest
or partnership interest of such Grantor as a security under Section 8-103 of the
UCC.
SECTION 4.5 CONTROL ACCOUNTS; BLOCKED ACCOUNTS.
(a) Such Grantor will (i) except
for Investments permitted by the Credit Agreement to be maintained in a Control
Account, deposit all cash and all Proceeds received by such Grantor in a Blocked
Account, (ii) not make or maintain any securities account or commodity account
with any financial or other institution other than an Approved Securities
Intermediary that maintains the same in a Control Account and (iii) not make or
maintain any account in which Proceeds are deposited with any financial or other
institution other than a Blocked Account Bank, a Lender or an Affiliate of a
Lender.
(b) Subject to the terms of the Credit Agreement, such Grantor shall
instruct each Account Debtor or other Person obligated to make a payment to such
Grantor to make payment, or to continue to make payment, as the case may be, to
a Blocked Account and will deposit in a Blocked Account all Proceeds received by
such Grantor from any other Person immediately upon receipt.
(c) In the event such Grantor, to the extent permitted under the
Credit Agreement, or any Approved Securities Intermediary or Blocked Account
Bank shall, after the date hereof, terminate an agreement with respect to the
maintenance of a Control Account or Blocked Account for any reason, or if the
Administrative Agent shall demand such termination as a result of the failure of
an Approved Securities Intermediary or Blocked Account Bank to comply with the
terms of the applicable Control Account Letter or Blocked Account Letter or
there shall be continuing an Event of Default or if the Administrative Agent
determines in its sole discretion that the financial condition of an Approved
Securities Intermediary or Blocked Account Bank, as the case may be, has
materially deteriorated, such Grantor agrees to notify all of its obligors that
were making payments to such terminated Control Account or Blocked Account, as
the case may be, to make all future payments to another Control Account or
Blocked Account, as the case may be.
SECTION 4.6 ACCOUNTS.
(a) Such Grantor will not, other than in the ordinary course of
business, (i) grant any extension of the time of payment of any Account, (ii)
compromise or settle any Account for less than the full amount thereof, (iii)
release, wholly or partially, any Person liable for the payment of any Account,
(iv) allow any credit or discount on any Account, or (v) amend, supplement or
modify any Account in any manner that could adversely affect the value thereof.
(b) The Administrative Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and such Grantor shall furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection therewith. At any time and from time to time, upon the Administrative
Agent's request and at the expense of the relevant Grantor, such Grantor shall
cause independent public accountants or others satisfactory to the
Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts; PROVIDED, HOWEVER, that unless a Default or Event of Default shall be
continuing, the Administrative Agent shall request no more than two such reports
during any calendar year.
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SECTION 4.7 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount
in excess of $250,000 payable under or in connection with any of the Collateral
owned by such Grantor shall be or become evidenced by an Instrument or Chattel
Paper, such Grantor shall immediately deliver such Instrument or Chattel Paper
to the Administrative Agent, duly indorsed in a manner satisfactory to the
Administrative Agent, or, if consented to by the Administrative Agent, shall
xxxx all such Instruments and Chattel Paper with the following legend: "This
writing and the obligations evidenced or secured hereby are subject to the
security interest of Citicorp USA, Inc., as Administrative Agent".
SECTION 4.8 INTELLECTUAL PROPERTY.
(a) Such Grantor (either itself or through licensees) will (i)
continue to use each Trademark that is Material Intellectual Property of such
Grantor in order to maintain such Trademark in full force and effect with
respect to each class of goods for which such Trademark is currently used, free
from any claim of abandonment for non-use, except where such abandonment or
expiration would not have a Material Adverse Effect on the business of such
Grantor, such Grantor may allow a Trademark to expire in the ordinary course of
its business upon prior notice to the Administrative Agent, (ii) maintain as in
the past the quality of products and services offered under such Trademark,
(iii) use such Trademark with the appropriate notice of registration and all
other notices and legends required by applicable Requirements of Law, (iv) not
adopt or use any xxxx which is confusingly similar or a colorable imitation of
such Trademark unless the Administrative Agent shall obtain a perfected security
interest in such xxxx pursuant to this Agreement and (v) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby such Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any Patent which is Material Intellectual
Property of such Grantor may become forfeited, abandoned or dedicated to the
public where such forfeiture, abandonment or dedication would have a Material
Adverse Effect on the business of such Grantor.
(c) Such Grantor (either itself or through licensees) (i) will not
(and will not permit any licensee or sublicensee thereof to) do any act or omit
to do any act whereby any portion of the Copyrights which is Material
Intellectual Property of such Grantor may become invalidated or otherwise
impaired and (ii) will not (either itself or through licensees) do any act
whereby any portion of the Copyrights which is Material Intellectual Property of
such Grantor may fall into the public domain, if in either case such event would
have a Material Adverse Effect on the business of such Grantor.
(d) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any trade secret which is Material
Intellectual Property of such Grantor may become publicly available or otherwise
unprotectable where such forfeiture, abandonment or dedication would have a
Material Adverse Effect on the business of such Grantor unless compelled by
order of a Governmental Authority.
(e) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any Material Intellectual Property to infringe the
intellectual property rights of any other Person where such infringement would
have a Material Adverse Effect on the business of such Grantor.
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(f) Such Grantor will notify the Administrative Agent as soon as
reasonably possible if it knows, or has reason to know, that any application or
registration relating to any Material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court or tribunal in any country)
regarding such Grantor's ownership of, right to use, interest in, or the
validity of, any Material Intellectual Property or such Grantor's right to
register the same or to own and maintain the same.
(g) Whenever such Grantor, either by itself or through any agent,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or outside
the United States, such Grantor shall report such filing to the Administrative
Agent within five Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon the reasonable request of the Administrative
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Administrative Agent may
request to evidence the Administrative Agent's security interest in any
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.
(h) Such Grantor will take all reasonable actions necessary or
requested by the Administrative Agent, including in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency, to maintain and pursue each application (and to
obtain the relevant registration) and to maintain each registration of any
Copyright, Trademark or Patent that is Material Intellectual Property of such
Grantor, including filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, reissue, reexamination,
interference and cancellation proceedings.
(i) In the event that any Material Intellectual Property of such
Grantor is infringed upon or misappropriated or diluted by a third party, such
Grantor shall notify the Administrative Agent promptly after such Grantor learns
thereof. Such Grantor shall take such action as it deems appropriate in its
reasonable business judgement under the circumstances in response to such
infringement, misappropriation or dilution to protect such Material Intellectual
Property of such Grantor if the loss thereof would have a Material Adverse
Effect on the business of the Grantor.
(j) Unless otherwise agreed to by the Administrative Agent, such
Grantor will execute and deliver to the Administrative Agent for filing in (i)
the United States Copyright Office a short-form copyright security agreement in
the form attached hereto as Annex 5, (ii) in the United States Patent and
Trademark Office a short-form patent security agreement in the form attached
hereto as Annex 6 and (iii) the United States Patent and Trademark Office a
short-form trademark security agreement in form attached hereto as Annex 7.
SECTION 4.9 PAYMENT OF OBLIGATIONS. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been
14
provided on the books of such Grantor and such proceedings could not reasonably
be expected to result in the sale, forfeiture or loss of any material portion of
the Collateral or any interest therein.
ARTICLE V. REMEDIAL PROVISIONS
SECTION 5.1 CODE AND OTHER REMEDIES. During the continuance of an
Event of Default, the Administrative Agent may exercise, in addition to all
other rights and remedies granted to them in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent 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 the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor,
which right or equity is hereby waived and released. Each Grantor further
agrees, at the Administrative Agent's request, to assemble the Collateral and
make it available to the Administrative Agent at places which the Administrative
Agent shall reasonably select, whether at such Grantor's premises or elsewhere.
The Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this SECTION 5.1, after deducting all reasonable costs and expenses
actually incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and any other Secured Party hereunder,
including reasonable attorneys' fees and disbursements, to the payment in whole
or in part of the Secured Obligations, in such order as the Credit Agreement
shall proscribe, and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including Section 9-504(1)(c) of the UCC, need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by applicable
law, each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent or any other Secured Party arising out of the exercise
by them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
SECTION 5.2 ACCOUNTS AND PAYMENT INTANGIBLES.
(a) If required by the Administrative Agent at any time during the
continuance of an Event of Default, any payments of Accounts or payments in
respect of General Intangibles ("PAYMENT INTANGIBLES"), when collected by any
Grantor, shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Administrative Agent if required, in a Cash Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent only as provided in SECTION
5.4. Until so turned over, such payments shall
15
be held by such Grantor in trust for the Administrative Agent, segregated from
other funds of such Grantor.
(b) At the Administrative Agent's request, during the continuance of
an Event of Default, each Grantor shall deliver to the Administrative Agent
copies of the material documents evidencing, and relating to, the agreements and
transactions which gave rise to the Accounts or Payment Intangibles, including
copies of all original orders, invoices and shipping receipts.
(c) The Administrative Agent may, without notice, at any time during
the continuance of an Event of Default, limit or terminate the authority of a
Grantor to collect its Accounts or Payment Intangibles or any thereof.
(d) The Administrative Agent in its own name or in the name of others
may at any time during the continuance of an Event of Default communicate with
Account Debtors to verify with them to the Administrative Agent's satisfaction
the existence, amount and terms of any Accounts or amounts due under any General
Intangibles.
(e) Upon the request of the Administrative Agent at any time during
the continuance of an Event of Default, each Grantor shall notify Account
Debtors that the Accounts or Payment Intangibles have been collaterally assigned
to the Administrative Agent and that payments in respect thereof shall be made
directly to the Administrative Agent. In addition, the Administrative Agent may
at any time during the continuance of an Event of Default so notify Account
Debtors.
(f) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts and Payment Intangibles to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise thereto. Neither the Administrative Agent nor any other Secured
Party shall have any obligation or liability under any agreement giving rise to
an Account or a Payment Intangible by reason of or arising out of this Agreement
or the receipt by Administrative Agent nor any other Secured Party of any
payment relating thereto, nor shall Administrative Agent nor any other Secured
Party be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any agreement giving rise to an Account or a
Payment Intangible, to make any payment, to make any inquiry as to the nature or
the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
SECTION 5.3 PLEDGED COLLATERAL.
(a) During the continuance of an Event of Default, if the
Administrative Agent shall give written notice of its intent to exercise such
rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall
have the right to receive any and all cash dividends, payments or other Proceeds
paid in respect of the Pledged Collateral and make application thereof to the
Obligations in the order and manner set forth in the Credit Agreement, and (ii)
the Administrative Agent or its nominee may exercise (A) all voting, consent,
corporate and other rights pertaining to the Pledged Collateral at any meeting
of shareholders, partners or members, as the case may be, of the relevant issuer
or issuers of Pledged Collateral or otherwise and (B) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to
16
the Pledged Collateral as if it were the absolute owner thereof (including the
right to exchange at its discretion any and all of the Pledged Collateral upon
the merger, consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any issuer of Pledged Securities, the right
to deposit and deliver any and all of the Pledged Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
(b) In order to permit the Administrative Agent to exercise the voting
and other consensual rights which it may be entitled to exercise pursuant hereto
and to receive all dividends and other distributions which it may be entitled to
receive hereunder, (i) each Grantor shall promptly execute and deliver (or cause
to be executed and delivered) to the Administrative Agent all such proxies,
dividend payment orders and other instruments as the Administrative Agent may
from time to time reasonably request and (ii) without limiting the effect of
CLAUSE (I) above, such Grantor hereby grants to the Administrative Agent an
irrevocable proxy to vote all or any part of the Pledged Collateral and to
exercise all other rights, powers, privileges and remedies to which a holder of
the Pledged Collateral would be entitled (including giving or withholding
written consents of shareholders, partners or members, as the case may be,
calling special meetings of shareholders, partners or members, as the case may
be, and voting at such meetings), which proxy shall be effective, automatically
and without the necessity of any action (including any transfer of any Pledged
Collateral on the record books of the issuer thereof) by any other person
(including the issuer of such Pledged Collateral or any officer or agent
thereof) during the continuance of an Event of Default and which proxy shall
only terminate upon the payment in full of the Secured Obligations.
(c) Each Grantor hereby expressly authorizes and instructs each issuer
of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with
any instruction received by it from the Administrative Agent in writing that (A)
states that an Event of Default has occurred and is continuing and (B) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that such issuer
shall be fully protected in so complying and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Collateral directly to the Administrative Agent.
SECTION 5.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Cash Collateral Account maintained under its sole
dominion and control. All Proceeds while held by the Administrative Agent in a
Cash Collateral Account (or by such Grantor in trust for the Administrative
Agent) shall continue to be held as collateral security for the Secured
Obligations and shall not constitute payment thereof until applied as provided
in the Credit Agreement.
SECTION 5.5 REGISTRATION RIGHTS.
(a) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Collateral by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise or may determine that a public sale is
impracticable or not commercially reasonable and, accordingly, may resort to one
or
17
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the issuer thereof
to register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
(b) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Collateral pursuant to this SECTION 5.5 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this SECTION 5.5 will cause irreparable injury to the Administrative Agent and
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this SECTION 5.5 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Credit Agreement.
SECTION 5.6 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any
sale or other disposition of the Collateral are insufficient to pay its Secured
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any other Secured Party to collect such deficiency.
ARTICLE VI. THE ADMINISTRATIVE AGENT
SECTION 6.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account or General Intangible or with respect to any other
Collateral and file any claim or take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such
moneys due under
18
any Account or General Intangible or with respect to any other
Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's security interest in such Intellectual Property
and the goodwill and General Intangibles of such Grantor relating
thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral other than Customary Permitted Liens,
effect any repairs or any insurance called for by the terms of this
Agreement and pay all or any part of the premiums therefor and the
costs thereof;
(iv) execute, in connection with any sale provided for in SECTION
5.1 or 5.5, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (A) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (C) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (E) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (F) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent
may deem appropriate; (G) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Trademark
pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Administrative Agent shall in
its sole discretion determine, including without limitation the
execution and filing of any documents necessary to effectuate and/or
record such assignment; and (H) generally, sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent
were the absolute owner thereof for all purposes, and do, at the
Administrative Agent's option and such Grantor's expense, at any time,
or from time to time, all acts and things which the Administrative
Agent deems necessary to protect, preserve or realize upon the
Collateral and the Administrative Agent's and the other Secured
Parties' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this SECTION 6.1(A) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this SECTION 6.1(A) unless an Event of Default shall
be continuing.
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(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent actually incurred in
connection with actions undertaken as provided in this SECTION 6.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Revolving Loans that are Base Rate
Loans under the Credit Agreement, from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
SECTION 6.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession shall be to deal with it in the same manner as
the Administrative Agent deals with similar property for its own account.
Neither the Administrative Agent, any other Secured Party nor any of their
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Grantor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Administrative Agent hereunder are solely to protect the
Administrative Agent's interest in the Collateral and shall not impose any duty
upon the Administrative Agent or any other Secured Party to exercise any such
powers. The Administrative Agent and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
SECTION 6.3 EXECUTION OF FINANCING STATEMENTS. Each Grantor
authorizes the Administrative Agent to file or record financing statements and
other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent reasonably determines appropriate to perfect
the security interests of the Administrative Agent under this Agreement. A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
SECTION 6.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Administrative Agent and the other Secured
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Parties with full and valid authority so to act or refrain from acting, and no
Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
ARTICLE VII. MISCELLANEOUS
SECTION 7.1 AMENDMENTS IN WRITING. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with Section 11.1 of the Credit Agreement.
SECTION 7.2 NOTICES. All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 11.8 of the Credit Agreement; PROVIDED, however,
that any such notice, request or demand to or upon any Grantor shall be
addressed in case of the Borrower at the Borrower's notice address set forth in
such Section 11.8 and to the Grantors at the address of their chief executive
office as noted on Schedule 1 hereto.
SECTION 7.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES.
Neither the Administrative Agent nor any other Secured Party shall by any act
(except by a written instrument pursuant to SECTION 7.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
other Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any other Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent or such other Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
SECTION 7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Administrative Agent and each other Secured Party and their successors
and assigns; PROVIDED, HOWEVER, that no Grantor may assign, transfer or delegate
any of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent.
SECTION 7.5 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same agreement.
SECTION 7.6 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.7 SECTION HEADINGS. The Article and Section titles
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not part of the agreement of the parties
hereto.
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SECTION 7.8 ENTIRE AGREEMENT. This Agreement together with the
other Loan Documents represents the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
SECTION 7.9 GOVERNING LAW. This agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the law of the state of New York.
SECTION 7.10 ADDITIONAL GRANTORS. If, pursuant to Section 7.11(b) of
the Credit Agreement, the Borrower shall be required to cause any Subsidiary
that is not a Grantor to become a Grantor hereunder, such Subsidiary shall
execute and deliver to the Administrative Agent a Joinder Agreement in the form
of ANNEX 4 and shall thereafter for all purposes be a party hereto and have the
same rights, benefits and obligations as a Grantor party hereto on the Closing
Date.
SECTION 7.11 RELEASE OF COLLATERAL.
(a) At the time provided in Section 10.7(b)(i) of the Credit
Agreement, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
sole expense of any Grantor following any such termination, the Administrative
Agent shall deliver to such Grantor any Collateral of such Grantor held by the
Administrative Agent hereunder and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold or disposed of by any
Grantor in a transaction permitted by the Credit Agreement, the Collateral so
sold or disposed of shall be released from the Lien created hereby to the extent
provided in Section 10.7(b)(i) or (ii) of the Credit Agreement and, in
connection therewith, the Administrative Agent, at the sole expense of the
Borrower, shall execute and deliver to the Borrower all releases or other
documents reasonably necessary or desirable for the release of the Lien created
hereby on such Collateral. At the sole expense of the Borrower, a Grantor shall
be released from its obligations hereunder in the event that all the capital
stock of such Grantor shall be so sold or disposed; PROVIDED, HOWEVER, that the
Borrower shall have delivered to the Administrative Agent, at least ten Business
Days prior to the date of the proposed release, a written request for release
identifying the relevant Grantor and the terms of the sale or other disposition
in reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Borrower stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.
SECTION 7.12 REINSTATEMENT. Each Grantor further agrees that, if any
payment made by any Loan Party or other Person and applied to the Obligations is
at any time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of Collateral are required to be returned by any Secured Party to
such Loan Party, its estate, trustee, receiver or any other party, including any
Grantor, under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, any Lien or other
Collateral securing such liability shall be and remain in full force and effect,
as fully as if such payment had never
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been made or, if prior thereto the Lien granted hereby or other Collateral
securing such liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender, such Lien or other Collateral shall be
reinstated in full force and effect, and such prior cancellation or surrender
shall not diminish, release, discharge, impair or otherwise affect any Lien or
other Collateral securing the obligations of any Grantor in respect of the
amount of such payment.
IN WITNESS WHEREOF, each of the undersigned has caused this
Pledge and Security Agreement to be duly executed and delivered as of the date
first above written.
PARAGON TRADE BRANDS, INC., as Borrower
By: /S/ XXXX X. XXXXX
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
PTB INTERNATIONAL, INC., as Grantor
By: /S/ XXXX X. XXXXX
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
PTB ACQUISITION SUB, INC., as Grantor
By: /S/ XXXX X. XXXXX
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
PTB HOLDINGS, INC., as Grantor
By: /S/ XXXX X. XXXXX
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
ACCEPTED AND AGREED:
CITICORP USA, INC., as Administrative Agent
By: /S/ XXXXXXXXX XXXXX
-----------------------
Name: Xxxxxxxxx XXxxx
Title: Managing Director - Global Structured Products
