Exhibit 10.4
SECURITY AGREEMENT
Dated as of October ___, 2006
made by
XXXXXXX XXXXXX & XXXXXXXX LLP
as Grantor
in favor of
CONGOLEUM CORPORATION
as Secured Party
TABLE OF CONTENTS
Page
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SECTION 1. DEFINED TERMS.......................................................1
1.1 Definitions..................................................1
1.2 Other Definitional Provisions................................6
SECTION 2. GRANT OF SECURITY INTEREST AND LIEN.................................7
2.1 Grant........................................................7
2.2 Transfer of Collateral.......................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES......................................7
3.1 Representations in Note Agreement............................7
3.2 Title; No Other Liens........................................7
3.3 Perfected First Priority Liens...............................7
3.4 Jurisdiction of Organization; Chief Executive Office.........8
3.5 Inventory and Equipment......................................8
3.6 Farm Products................................................8
3.7 Investment Property..........................................8
3.8 Receivables..................................................9
3.9 Intellectual Property........................................9
3.10 Deposit Accounts. Schedule 3.10 sets forth all Deposit
Accounts of the Grantor...................................9
3.11 Commercial Tort Claims. Schedule 3.11 sets forth all
Commercial Tort Claims held by the Grantor................9
SECTION 4. COVENANTS...........................................................9
4.1 Generally....................................................9
4.2 Delivery of Instruments, Certificated Securities
and Chattel Paper........................................10
4.3 Payment of Obligations......................................10
4.4 Maintenance of Perfected Security Interest and Lien;
Further Documentation....................................10
4.5 Changes in Name, Location, etc..............................11
4.6 Notices.....................................................11
4.7 Investment Property.........................................11
4.8 Receivables.................................................13
4.9 Vehicles....................................................13
4.10 Commercial Tort Claims......................................13
4.11 Deposit Accounts............................................13
SECTION 5. REMEDIAL PROVISIONS................................................13
5.1 Certain Matters Relating to Receivables.....................13
5.2 Communications with Obligors; Grantor Remains Liable........14
5.3 Pledged Capital Stock.......................................15
5.4 Proceeds to be Turned Over To Secured Party.................16
5.5 Application of Proceeds.....................................16
5.6 Code and Other Remedies.....................................16
5.7 Deficiency..................................................18
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5.8 Non-Judicial Enforcement....................................18
SECTION 6. SECURED PARTY......................................................18
6.1 Secured Party's Appointment as Attorney-in-Fact, etc........18
6.2 Duty of Secured Party.......................................20
6.3 Execution of Financing Statements...........................20
SECTION 7. MISCELLANEOUS......................................................20
7.1 Amendments in Writing.......................................20
7.2 Notices.....................................................21
7.3 No Waiver by Course of Conduct; Cumulative Remedies.........21
7.4 Enforcement Expenses; Indemnification.......................21
7.5 Successors and Assigns......................................21
7.6 Set-Off.....................................................21
7.7 Counterparts................................................22
7.8 Severability................................................22
7.9 Section Headings............................................22
7.10 Integration.................................................22
7.11 Acknowledgements............................................22
7.12 Releases....................................................23
7.13 WAIVER OF JURY TRIAL........................................23
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SCHEDULES:
Schedule 1 Pledged Capital Stock
Schedule 2 Filings and Other Actions Required to Perfect Security
Interests
Schedule 3 Jurisdiction of Organization, Identification Number and
Location of Chief Executive Office
Schedule 3.9 Intellectual Property
Schedule 3.10 Deposit Accounts
Schedule 3.11 Commercial Tort Claims
Schedule 4 Locations of Inventory and Equipment and Vehicles
EXHIBITS:
Annex A Form of Instructions Agreement
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THIS SECURITY AGREEMENT (as amended, modified or supplemented from time to
time, this "Agreement"), is made and entered into as of October ___, 2006, by
Xxxxxxx Xxxxxx & Xxxxxxxx LLP, a District of Columbia limited liability
partnership ("Grantor"), in favor of Congoleum Corporation, a
debtor-in-possession in the case designated as Case No. 03-51524 (jointly
administered) pending in the United Stated Bankruptcy Court for the District of
New Jersey (as more fully described below, "Secured Party").
RECITALS:
A. Grantor, Secured Party and the Bondholders' Committee (as defined
therein) have entered into the Note Agreement, dated as of October ___, 2006 (as
amended, modified or supplemented from time to time, the "Note Agreement").
B. It is a condition precedent to the Closing Date under the Note
Agreement that, among other things, Grantor shall have granted the security
interests and liens contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce Secured
Party to enter into the Note Agreement, Grantor hereby agrees with Secured Party
as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the Note
Agreement and used herein shall have the meanings given to them in the Note
Agreement.
(b) The following terms are used herein as defined in the UCC:
Account Debtor; Account; Certificated Security; Chattel Paper; Commercial Tort
Claim; Commodity Account; Control; Documents; Entitlement Holder; Equipment;
Farm Products; Financial Asset; General Intangible; Goods; Instrument;
Inventory; Letter-of-Credit Right; Payment Intangible; Security; Securities
Account; Security Entitlement; and Supporting Obligation.
(c) The following terms shall have the following meanings:
"Agreement": as defined in the preamble hereto.
"Collateral": All Accounts, Contract Rights, Instruments, Chattel Paper,
General Intangibles and other obligations of any kind, now or hereafter
existing, in each case arising out of or in connection with the rendering of
services by Grantor including, without limitation, Grantor's right to be
compensated for its services and reimbursed for related costs and expenses
incurred, amounts disbursed or obligations incurred for the account of Grantor's
clients for fees paid or payable to or goods or services obtained from Grantor's
partners and employees or third parties, whether or not Grantor has rendered a
xxxx for such services or disbursements or entered the value of such services or
disbursements in its books as accounts receivable, whether or not such services
or disbursements have been completed and whether or not an express or implied
agreement for compensation for such services or reimbursement for such
disbursements exists, and all rights now or hereafter existing in and to all
retainer agreements, security agreements and other contracts securing or
otherwise relating to any such Accounts, Contract Rights, Instruments, Chattel
Paper, General Intangibles or obligations (any and all such Accounts, Contract
Rights, Instruments, Chattel Paper, General Intangibles and obligations being
the "Receivables", and any and all such retainer agreements, security agreements
and other contracts being the "Related Contracts");
(b) All RCCOs received or receivable by Grantor, all rights and
powers of Grantor to enforce payment of all RCCOs under the terms of the
Partnership Agreement, and all rights of Grantor under the Partnership Agreement
with respect thereto;
(c) All Commercial Tort Claims;
(d) All Deposit Accounts, including the Escrow Account, but
excluding any trust account holding solely funds that are the property of
Grantor's clients;
(e) All Documents;
(f) All Equipment;
(g) All Inventory;
(h) All Investment Property;
(i) All Letter-of-Credit Rights;
(j) All personalty not described above now or hereafter owned by
Grantor (including, without limitation, to the extent not described above, the
Key Man Life Insurance Policy and all Vehicles);
(k) All books and records pertaining to the Collateral;
(l) All property of Grantor held by Secured Party, including all
property of every description, in the possession or custody of or in transit to
Secured Party for any purpose, including safekeeping, collection or pledge, for
the account of Grantor, or as to which Grantor may have any right or power;
provided, however, that the Collateral shall not include any asset of Grantor to
the extent (but only so long as) such asset constitutes an Excluded Asset;
(m) All real property, and all interests therein and improvements
thereon, owned or leased by Grantor; and
(n) All Proceeds of any and all of the foregoing Collateral,
including, without limitation, Proceeds which constitute property of the types
described in the foregoing clauses, cash and, to the extent not otherwise
included, all payments and rights under any insurance, indemnity, warranty or
guaranty with respect to any of the foregoing Collateral.
"Collateral Account": any collateral account as defined in Section 5.1 and
established by Secured Party as provided in Section 5.1 or 5.4.
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"Contract Rights": all rights, title and interests in and to all
"contracts," as such term is defined in Section 2-106(1) of the UCC of any
applicable jurisdiction, now owned or hereafter acquired by Grantor, in any
event, including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which Grantor
may now or hereafter have any right, title or interest, including any agreement
relating to the terms of payment or the terms of performance of any Account.
"Contractual Obligation": as to any Person, any term, condition or
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is a party or by which it or any of
its Property is bound.
"Control Account": a Securities Account over which Secured Party has
Control.
"Debt Document Obligations": the collective reference to the unpaid
principal of and interest on the Debt and all other obligations and liabilities
of Grantor (including interest accruing at the then applicable rate provided in
the Note Agreement after the maturity of the Debt and interest accruing at the
then applicable rate provided in the Note Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to Grantor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) to Secured Party under or
with respect to the Debt Documents, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Note Agreement, this
Agreement or any other Debt Document, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including all fees, charges and disbursements of counsel
to Secured Party that are required to be paid by Grantor pursuant to the Note
Agreement or any other Debt Document).
"Deposit Account": as defined in the UCC of any applicable jurisdiction
and, in any event, including any demand, time, savings, passbook or like account
maintained with a depositary institution.
"Deposit Account Control Agreement": a Deposit Account Control Agreement
to be executed among Secured Party, Grantor and each Person with whom Grantor
maintains a Deposit Account, in form and substance acceptable to Secured Party.
"Excluded Assets": the collective reference to any contract, General
Intangible, copyright license, patent license or trademark license
(collectively, "Intangible Assets"), in each case to the extent the grant by
Grantor of a security interest pursuant to this Agreement in Grantor's right,
title and interest in such Intangible Asset (a) is prohibited by legally
enforceable provisions of any contract, agreement, instrument or indenture
governing such Intangible Asset, the execution, delivery or existence of which
is not prohibited under the Note Agreement, (b) would give any other party to
such contract, agreement, instrument or indenture a legally enforceable right to
terminate its obligations thereunder or (c) is permitted only with the consent
of another party to such contract, agreement, instrument or indenture, if the
requirement to obtain such consent is legally enforceable and such consent has
not been obtained; provided that in any event any Receivable arising from or any
money or other amounts due or to become due under any such Intangible Asset or
contract, agreement, instrument or indenture shall not be Excluded Assets to the
extent that any of the foregoing is (or if it contained a provision limiting the
transferability or pledge thereof would be) subject to Section 9-406 of the UCC.
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"Governmental Requirement": any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
including occupational, safety and health standards or controls, of any
governmental authority.
"Grantor": as defined in the preamble hereto.
"Grantor Obligations": the collective reference to (i) the Debt Document
Obligations of Grantor and (ii) all other obligations and liabilities of
Grantor, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement (including Section 2 hereof) or any other Debt
Document, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including all fees and disbursements of counsel to Secured Party that are
required to be paid by Grantor pursuant to the terms of this Agreement or any
other Debt Document).
"Instructions Agreement": an agreement in the form of Annex A attached
hereto, or such other control agreement as the Secured Party shall request to
evidence Control of Pledged Capital Stock and to confirm and assure Secured
Party's rights with respect thereto, which shall be duly executed by the party
holding such Pledge Capital Stock
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including the
copyrights, the copyright licenses, the patents, the patent licenses, the
trademarks and the trademark licenses, and all rights to xxx at law or in equity
for any infringement or other impairment thereof, including the right to receive
all proceeds and damages therefrom.
"Investment Property": the collective reference to (i) all "investment
property" as such term is defined in Section 9-102(a)(49) of the UCC and (ii)
whether or not constituting "investment property" as so defined, all Pledged
Notes and all Pledged Capital Stock.
"Issuers": the collective reference to each issuer of any Investment
Property.
"Note Agreement": as defined in the preamble hereto.
"Pledged Capital Stock": the collective reference to all Pledged
Partnership Interests, Pledged LLC Interests and Pledged Stock.
"Pledged Collateral": collectively, all Pledged Notes, Pledged Capital
Stock, any other Investment Property of Grantor, all certificates or other
instruments representing any of the foregoing and all Security Entitlements of
Grantor in respect of any of the foregoing. Pledged Collateral may be General
Intangibles, Instruments or "investment property" as such term is defined in
Section 9-102(a)(49) of the UCC.
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"Pledged LLC Interests": all membership interests held of record or
beneficially owned by Grantor, including any membership interests listed on
Schedule 1, as the same may be amended or supplemented from time to time by
written notice from Grantor to Secured Party, together with all of Grantor's
right, title and interest as a member of any limited liability company and all
of Grantor's right, title and interest in, to and under any limited liability
company agreement or regulations to which it is a party.
"Pledged Notes": all promissory notes issued to or held by Grantor (other
than promissory notes issued in connection with extensions of trade credit by
Grantor in the ordinary course of business).
"Pledged Partnership Interests": with respect to Grantor, all partnership
interests held of record or beneficially owned by Grantor, including any
partnership interests listed on Schedule 1, as the same may be amended or
supplemented from time to time by written notice from Grantor to Secured Party,
together with all right, title and interest of Grantor as a limited or general
partner in all partnerships and all right, title and interest of Grantor in, to
and under any partnership agreements to which it is a party.
"Pledged Stock": all shares of Capital Stock held of record or
beneficially owned by Grantor, together with any other shares, stock
certificates, interests, options or rights of any nature whatsoever in respect
of any Capital Stock issued or granted to, or held by, Grantor while this
Agreement is in effect, including any Capital Stock listed on Schedule 1, as the
same may be amended or supplemented from time to time by written notice from
Grantor to Secured Party.
"Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64)
of the UCC and, in any event, including all dividends, distributions or other
income from the Investment Property, collections thereon or distributions or
payments with respect thereto.
"Receivable": as defined in the definition of "Collateral."
"Related Contracts": as defined in the definition of "Collateral."
"Requirement of Law": as to any Person, the constituent documents of such
Person, and any law, treaty, rule, order, statute, ordinance, code, decree,
regulation, or other legally enforceable requirements (including common law) or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Secured Party": Congoleum Corporation, its successors and assigns,
including the GHR/Kenesis Litigation Trustee, as assignee, as contemplated by
Section 7.10 of the Note Agreement.
"Securities Act": the Securities Act of 1933, as amended.
"Security": as defined in Section 2.2.
"UCC": 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
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priority of Secured Party's security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions; 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.
"Vehicles": all cars, trucks, trailers, motorcycles and other vehicles,
whether or not covered by a certificate of title law of any state and, in any
event, shall include all tires and appurtenances to any of the foregoing.
1.2 Other Definitional Provisions.
(a) The words "hereof," "herein", "hereto" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) 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 unless otherwise specified.
(d) Any reference in this Agreement to a Debt 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.
(e) The term "including" means "including without limitation" except
when used in the computation of time periods.
(f) The term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or".
(g) The term "Secured Party" includes its 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.
(i) Terms defined in the UCC not otherwise defined herein shall have
the respective meanings ascribed thereto in the UCC.
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SECTION 2. GRANT OF SECURITY INTEREST AND LIEN
2.1 Grant. 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 Grantor Obligations, hereby collaterally
assigns, mortgages, pledges and hypothecates to Secured Party, and grants to
Secured Party a lien on and security interest in, all of its right, title and
interest in, to and under the Collateral.
2.2 Transfer of Collateral. All Certificated Securities and, to the extent
required by Section 4.2, all Instruments and Chattel Paper included in the
Collateral shall be delivered to and held pursuant hereto by Secured Party or a
Person designated by Secured Party and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, and accompanied by any required transfer tax stamps to
perfect a security interest in the Collateral in favor of Secured Party.
Notwithstanding the preceding sentence, at Secured Party's discretion, all
Pledged Capital Stock that is a "security" within the meaning of Section 8-102
and 8-103 of the UCC (a "Security") must be delivered or transferred in such
manner as to permit Secured Party to be a "protected purchaser" to the extent of
its security interest as provided in Section 8-303 of the UCC (if Secured Party
otherwise qualifies as a protected purchaser).
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce Secured Party to enter into the Note Agreement, Grantor hereby
represents and warrants to Secured Party that:
3.1 Representations in Note Agreement. The representations and warranties
set forth in Article IV of the Note Agreement, each of which is hereby
incorporated herein by reference, are true and correct, and Secured Party shall
be entitled to rely on each of them as if they were fully set forth herein.
3.2 Title; No Other Liens. Except for the security interest granted to
Secured Party pursuant to this Agreement and the other Permitted Liens, Grantor
owns each item of Collateral free and clear of any and all Liens or claims of
others. No financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except such
as have been filed in favor of, or assigned to, Secured Party, pursuant to this
Agreement and except for Permitted Liens. Grantor does not conduct its business
using trade names.
3.3 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) (i) upon completion of the filings and other
actions specified on Schedule 2 (which, in the case of all filings and other
documents referred to on said Schedule, have been delivered to Secured Party in
completed and duly executed form), (ii) with respect to any Vehicles, upon
completion of such actions as may be requested by Secured Party pursuant to
Section 4.4, (iii) with respect to any Pledged Capital Stock which constitutes
Securities and which are not evidenced by a certificate, the delivery of an
Instructions Agreement, and (iv) with respect to Deposit Accounts, upon the
signing of Deposit Account Control Agreements, will constitute valid perfected
security interests in all of the Collateral in favor of Secured Party, as
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collateral security for the Grantor Obligations, which security interest is
enforceable in accordance with the terms hereof against all creditors of Grantor
and any Persons purporting to purchase any Collateral from Grantor, subject to
Permitted Liens and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for Permitted Liens.
3.4 Jurisdiction of Organization; Chief Executive Office. On the date
hereof, Grantor's legal name, jurisdiction of organization, identification
number from the jurisdiction of organization (if any), and the location of
Grantor's chief executive office or principal place of business, as the case may
be, are specified on Schedule 3. Grantor has furnished to Secured Party a
certified copy of its Partnership Agreement and a long-form good standing
certificate of Grantor issued by the Secretary of State of the District of
Columbia as of a date which is recent to the date hereof.
3.5 Inventory and Equipment. On the date hereof, all of the Inventory and
the Equipment (including all Vehicles) of Grantor are kept on the properties
listed on Schedule 4. All Vehicles, as listed on Schedule 4, are covered by
certificate of title laws, and have been properly registered in accordance with
such laws.
3.6 Farm Products. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
3.7 Investment Property.
(a) The Pledged Capital Stock, pledged by Grantor hereunder,
constitutes all the issued and outstanding shares of all classes of the Capital
Stock of each Issuer owned by Grantor.
(b) All of the Pledged Capital Stock has been duly and validly
issued and is fully paid and nonassessable.
(c) Each of the Pledged Notes, if any, pledged by Grantor hereunder
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 laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(d) Grantor is the record and beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement and Permitted Liens.
(e) No Person other than Secured Party has Control over any Pledged
Capital Stock of Grantor, except in connection with any Permitted Liens..
(f) All such action as may be required under the constituent
document governing any Pledged Capital Stock has been taken such that, upon the
occurrence and during the continuance of an Event of Default, Secured Party
shall be entitled to exercise all of the rights of Grantor therein.
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(g) Other than the Pledged Capital Stock as to which Secured Party
has received an Instructions Agreement and has Control thereof, Grantor holds no
Pledged Collateral other than (i) that constituting certificated Securities or
Instruments in the possession of and delivered to Secured Party (subject to any
prior rights of the lender under the Senior Revolving Line of Credit) or (ii)
that consisting of Security Entitlements that are held in a Control Account.
3.8 Receivables.
(a) No amount payable to Grantor under or in connection with any
Receivable is evidenced by any Instrument or Chattel Paper which has not been
delivered to Secured Party to the extent required by Section 4.2.
(b) None of the obligors on any Receivable is a Governmental
Authority, except for Receivables constituting not more than 5% of the face
amount of all Receivables.
(c) The amounts that have been represented by Grantor to Secured
Party from time to time as owing to Grantor in respect of the Receivables are
accurate.
3.9 Intellectual Property. Except as set forth on Schedule 3.9, Grantor
does not own any Intellectual Property or have any Intellectual Property
licensed to it.
3.10 Deposit Accounts. Schedule 3.10 sets forth all Deposit Accounts of
the Grantor.
3.11 Commercial Tort Claims. Schedule 3.11 sets forth all Commercial Tort
Claims held by the Grantor.
SECTION 4. COVENANTS
Grantor covenants and agrees with Secured Party that, from and after the
date of this Agreement until the Grantor Obligations shall have been satisfied
by full and final payment in cash:
4.1 Generally. Grantor shall (a) not create or suffer to exist any Lien
upon or with respect to any of the Collateral, except Permitted Liens; (b) not
use or permit any Collateral to be used unlawfully or in violation of any
provision of this Agreement, any other Debt Document, any policy of insurance
covering the Collateral, any Requirement of Law or any Contractual Obligation;
(c) not sell, transfer or assign (by operation of law or otherwise) any
Collateral except as permitted under the Note Agreement; (d) except for the Debt
Documents, not enter into any agreement or undertaking restricting the right or
ability of Grantor or Secured Party to sell, assign or transfer any of the
Collateral except as permitted under the Note Agreement; (e) promptly notify
Secured Party of its entry into any agreement or assumption of undertaking that
restricts the ability to sell, assign or transfer any of the Collateral, other
than such agreements or assumptions of undertaking entered into in the ordinary
course of business and consistent with past practices; and (f) not permit any
Collateral to be located outside the United States of America.
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4.2 Delivery of Instruments, Certificated Securities and Chattel Paper. If
any amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper shall (subject to any prior
rights of the lender under the Senior Revolving Line of Credit), be immediately
delivered to Secured Party, duly indorsed in a manner satisfactory to Secured
Party, to be held as Collateral pursuant to this Agreement, or, if consented to
by Secured Party, shall xxxx all such Instruments, Certificated Securities and
Chattel Paper with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of Congoleum
Corporation"; provided that so long as no Event of Default has occurred, Secured
Party shall deliver to Grantor, upon reasonable request, any such Instrument or
Chattel Paper in connection with the collection thereof.
4.3 Payment of Obligations. Grantor will pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its material obligations of whatever nature, including all lawful
governmental claims, taxes, assessments, charges and levies imposed upon the
Collateral or in respect of income and 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 where the amount or validity thereof is
currently being contested in good faith by appropriate actions and reserves in
conformity with GAAP with respect thereto have been provided on the books of
Grantor.
4.4 Maintenance of Perfected Security Interest and Lien; Further
Documentation.
(a) Grantor shall maintain the security interest and lien created by
this Agreement as a perfected security interest and lien having at least the
priority described in Section 3.3 and shall defend such security interest and
lien against the claims and demands of all Persons whomsoever.
(b) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing all assets and
property of Grantor, whether real or personal, and such other reports in
connection with the Collateral as Secured Party may reasonably request, all in
reasonable detail.
(c) At any time and from time to time, upon the written request of
Secured Party, and at the sole expense of Grantor, Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments, mortgages
and documents and take such further actions as Secured Party 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 (i) the filing
of any financing or continuation statements under the UCC (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby, (ii) in the case of Investment Property, Deposit Accounts and
Letter-of-Credit Rights, taking any actions necessary to enable Secured Party to
obtain and maintain Control with respect thereto, (iii) in the case of Vehicles,
noting Secured Party as the first lienholder on the certificates of title
applicable to such Vehicle issued in accordance with the certificate-of-title
act or statute of the jurisdiction applicable to such Vehicle and (iv) in the
case of real property or real property interests, executing and/or delivering
mortgages, leasehold mortgages, deeds of trust, landlord's agreements, memoranda
of leases, surveys, legal opinions, reports, title insurance policies,
environmental assessments and other related documents or instruments.
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4.5 Changes in Name, Location, etc.
(a) Except upon 15 days' prior written notice to Secured Party and
delivery to Secured Party of all additional financing statements and other
documents reasonably requested by Secured Party to maintain the validity,
perfection and priority of the security interests provided for herein, Grantor
will not:
(i) change its jurisdiction of organization or the location of
its chief executive office or principal place of business from that
referred to in Section 3.4; or
(ii) change its legal name, or change its identity or
corporate structure to such an extent that any financing statement filed
in connection with this Agreement would become misleading.
(b) 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.
4.6 Notices. Grantor will advise Secured Party promptly, in reasonable
detail, of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on any of the Collateral; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
4.7 Investment Property.
(a) If Grantor shall become entitled to receive or shall receive any
certificate (including any certificate representing a dividend or a distribution
in connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether now existing or hereinafter
acquired and whether in addition to, in substitution of, as a conversion of, or
in exchange for, any Pledged Capital Stock, or otherwise in respect thereof,
Grantor shall (subject to any prior rights of the lender under the Senior
Revolving Line of Credit) accept the same as the agent of Secured Party, hold
the same in trust for Secured Party and deliver the same forthwith to Secured
Party in the exact form received, duly indorsed by Grantor to Secured Party, if
required, together with an undated stock power covering such certificate duly
executed in blank by Grantor and with, if Secured Party so requests, signature
guaranteed, to be held by Secured Party, subject to the terms hereof, as
additional collateral security for the Grantor Obligations.
(b) Any sums paid upon or in respect of any Investment Property upon
the liquidation or dissolution of any Issuer shall be paid over to Secured Party
to be held by it hereunder as additional collateral security for the Grantor
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Obligations, and in case any distribution of capital shall be made on or in
respect of such Investment Property, or any cash or property shall be
distributed upon or with respect to such Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, or any property (other than cash) shall at any time
be distributed, the cash or property so distributed shall, unless otherwise
subject to a perfected security interest in favor of Secured Party, be delivered
to Secured Party to be held by it hereunder as additional collateral security
for the Grantor Obligations (in each case subject to any prior rights of the
lender under the Senior Revolving Line of Credit). If any sums of money or
property so paid or distributed in respect of such Investment Property shall be
received by Grantor, Grantor shall, until such money or property is paid or
delivered to Secured Party, hold such money or property in trust for the Secured
Party, segregated from other funds of Grantor, as additional collateral security
for the Grantor Obligations. Notwithstanding the foregoing, so long as no Event
of Default has occurred, Grantor shall not be required to pay over to Secured
Party or deliver to Secured Party as Collateral any proceeds of any liquidation
or dissolution of any Issuer, or any distribution of capital or property in
respect of any such Investment Property, to the extent that (i) such
liquidation, dissolution or distribution, if treated as a Disposition of the
relevant Issuer, would be permitted by Section 5.02(g) of the Note Agreement and
(ii) the proceeds thereof are applied toward prepayment of the Debt to the
extent required by Section 2.05 of the Note Agreement.
(c) Without the prior written consent of Secured Party, Grantor
shall not (i) vote to enable, or take any other action to permit, any Issuer to
issue any Capital 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 Capital Stock or other equity securities of any nature of any Issuer,
unless such securities are delivered to Secured Party, concurrently with the
issuance thereof, to be held by Secured Party as Collateral (subject to any
prior rights of the lender under the Senior Revolving Line of Credit), (ii)
sell, assign, transfer, exchange, or otherwise dispose of, or grant any option
with respect to, any Investment Property or Proceeds thereof (except pursuant to
a transaction expressly permitted by the Note Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any Investment Property or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement and
Permitted Liens, (iv) enter into any agreement or undertaking restricting the
right or ability of Grantor or Secured Party to sell, assign or transfer any of
the Pledged Collateral or the Proceeds thereof (except as may be required by the
Senior Revolving Line of Credit) or (v) issue any certificate representing
Pledged Partnership Interests or Pledged LLC Interests.
(d) Grantor shall not grant to any Person other than Secured Party,
and shall not permit any Person other than Secured Party to have, Control over
any Deposit Account, other deposit account or Investment Property (except as may
be required by the Senior Revolving Line of Credit).
(e) Grantor will not agree to any amendment of the limited liability
company agreement, regulations, partnership agreement or other organizational
document or agreement of any Issuer or any other Person that in any way
adversely affects the perfection of the security interest of Secured Party in
the Pledged Partnership Interests or Pledged LLC Interests pledged by Grantor
hereunder, including any amendment electing to treat such Pledged Partnership
Interest or Pledged LLC Interests as a Security without the prior written
consent of Secured Party.
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4.8 Receivables. Subject to the provisions of Article V, Secured Party
authorizes Grantor to continue to collect, at its own expense, all amounts due
or to become due to Grantor under the Receivables and the Related Contracts,
subject to customary practices concerning write-offs and adjustments; provided
that Secured Party may curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default. In connection with
such collections, Grantor may take such action as Grantor may deem necessary or
advisable to issue statements to its clients, modify, cancel or reissue such
statements and to enforce collection of the Receivables and the Related
Contracts, except as otherwise provided in the Note Agreement.
4.9 Vehicles. Upon request of Secured Party, Grantor shall file all
applications for certificates of title/ownership indicating Secured Party's
first priority security interest (subject to Permitted Liens) in each Vehicle
now owned or hereafter acquired by Grantor, and any other necessary
documentation, in each office in each jurisdiction which Secured Party shall
reasonably deem advisable, to perfect its security interests in the Vehicles,
and deliver or cause to be delivered the original certificates of
title/ownership as so marked to Secured Party. Grantor shall promptly notify
Secured Party in writing after the acquisition of any Vehicle.
4.10 Commercial Tort Claims. If Grantor shall at any time commence a suit,
action or proceeding with respect to any Commercial Tort Claim held by it with a
value which Grantor reasonably believes to be of $10,000 or more, Grantor shall
promptly notify Secured Party thereof in a writing signed by Grantor and
describing the details thereof and shall grant to Secured Party in such writing
a security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to Secured Party.
4.11 Deposit Accounts. Grantor shall promptly execute and deliver a
Deposit Account Control Agreement with respect to each Deposit Account
maintained by or for the benefit of Grantor and shall not open or otherwise
establish any bank account in the name or otherwise for the benefit of Grantor
unless Secured Party shall have received a Deposit Account Control Agreement, in
form and substance satisfactory to Secured Party in its sole discretion,
executed and delivered by Grantor and the bank or other financial institution at
which such account is maintained.
SECTION 5. REMEDIAL PROVISIONS
5.1 Certain Matters Relating to Receivables.
(a) Secured Party shall have the right to verify the Receivables in
any manner and through any medium that it reasonably considers advisable, and
Grantor shall furnish all such assistance and information as Secured Party may
require in connection with such test verifications. At any time and from time to
time after the occurrence and during the continuance of an Event of Default,
upon Secured Party's request and at the expense of Grantor, Grantor shall cause
independent public accountants or others satisfactory to Secured Party to
furnish to Secured Party reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
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(b) Secured Party shall have the right at any time upon the
occurrence and during the continuance of an Event of Default to direct
collections of Receivables by Grantor in a commercially reasonable manner and,
upon not less than two Business Day's notice to Grantor, to notify the account
debtors or obligors under any Receivables or Related Contracts of the security
interest granted to Secured Party in such Receivables and to direct such account
debtors or obligors to make payment of all amounts due or to become due to
Grantor thereunder directly to Secured Party to a Deposit Account maintained
under the sole dominion and control of Secured Party (a "Collateral Account")
(subject to any prior rights of the lender under the Senior Revolving Line of
Credit with respect to any such Receivables), subject to withdrawal by Secured
Party as provided in Section 5.5 and, upon such notification and at the expense
of Grantor, to enforce collection of any such Receivables, and to adjust, settle
or compromise the amount or payment thereof, in a commercially reasonable
manner, and all amounts and proceeds (including instruments) received by Grantor
in respect of the Receivables and the Related Contracts shall be received in
trust for the benefit of Secured Party hereunder, shall be segregated from other
funds of Grantor and shall be forthwith paid over to Secured Party in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and applied as provided by this Article V. If requested by Secured
Party, each such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(c) At Secured Party's request, Grantor shall deliver to Secured
Party all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables, including copies
of all new engagement letters for Contingency Fee Cases.
(d) At any time after the occurrence and during the continuance of a
Default, Grantor will cooperate with Secured Party to establish a system of
lockbox accounts, under the sole dominion and control of Secured Party (subject
to any prior rights of the lender under the Senior Revolving Line of Credit with
respect to any such Receivables), into which all Receivables shall be paid and
from which all collected funds will be transferred to a Collateral Account.
5.2 Communications with Obligors; Grantor Remains Liable.
(a) Secured Party in its own name or in the name of others may at
any time communicate with obligors under the Receivables to verify with them to
Secured Party's satisfaction the existence, amount and terms of any Receivables.
(b) Upon the request of Secured Party at any time, Grantor shall
notify obligors on the Receivables that the Receivables have been assigned to
Secured Party for the ratable benefit of the Secured Party and that payments in
respect thereof shall be made directly to Secured Party.
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(c) Anything herein to the contrary notwithstanding, Grantor shall
remain liable under each of the Receivables (or any agreement giving rise
thereto) 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. Secured Party shall have no obligation or
liability under any Receivable (or any agreement giving rise thereto) by reason
of or arising out of this Agreement or the receipt by Secured Party of any
payment relating thereto, nor shall Secured Party be obligated in any manner to
perform any of the obligations of Grantor under or pursuant to any Receivable
(or any agreement giving rise thereto), 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.
5.3 Pledged Capital Stock.
(a) Unless an Event of Default shall have occurred and be continuing
and Secured Party shall have given notice to Grantor of Secured Party's intent
to exercise its corresponding rights pursuant to Section 5.3(b), Grantor shall
be permitted to receive all dividends paid, whether in cash or in kind, or other
distributions of property in respect of the Pledged Capital Stock, to the extent
permitted in the Note Agreement, and to exercise all voting and other rights
with respect to the Pledged Capital Stock; provided that no vote shall be cast
or corporate, partnership or company right exercised or other action taken
which, in Secured Party's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Note Agreement, this Agreement or any other Debt Document.
(b) If an Event of Default shall occur and be continuing and Secured
Party shall give notice of its intent to exercise such rights to Grantor,
Secured Party shall have the right (i) to receive any and all cash or in kind
dividends or distributions otherwise permitted to be received and retained by
Grantor pursuant to Section 5.3(a), and any other payments or other Proceeds
paid in respect of the Pledged Capital Stock and make application thereof to the
Obligations in the order set forth in Section 5.5 and (ii) to have any or all of
the Pledged Capital Stock be registered in the name of Secured Party or its
nominee, and Secured Party or its nominee may thereafter exercise (A) all
voting, corporate, partnership or company and other rights pertaining to such
Pledged Capital Stock at any meeting of shareholders, partners, members or other
owners of the relevant Issuer or Issuers or otherwise and (B) any and all rights
of conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Capital Stock as if it were the absolute
owner thereof (including the right to exchange at its discretion any and all of
the Pledged Capital Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the entity structure of any
Issuer, or upon the exercise by Grantor or Secured Party of any right, privilege
or option pertaining to such Pledged Capital Stock, and in connection therewith,
the right to deposit and deliver any and all of the Pledged Capital Stock with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as Secured Party may determine), all without
liability except to account for property actually received by it, in each case
subject to any prior rights of the lender under the Senior Revolving Line of
Credit, but Secured Party shall have no duty to 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.
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(c) Grantor hereby authorizes and instructs each Issuer of any
Pledged Capital Stock pledged by Grantor hereunder to (i) comply with any
instruction received by it from Secured Party 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 Grantor, and Grantor agrees that each Issuer shall be fully
protected in so complying and (ii) unless otherwise expressly permitted by
Section 5.3(a), pay any dividends, distributions or other payments with respect
to the Pledged Capital Stock directly to Secured Party.
(d) After the occurrence and during the continuation of an Event of
Default, if the Issuer of any Pledged Capital Stock is the subject of
bankruptcy, insolvency, receivership, custodianship or other proceedings under
the supervision of any Governmental Authority, then all rights of Grantor in
respect thereof to exercise the voting and other rights which Grantor would
otherwise be entitled to exercise with respect to the Pledged Capital Stock
issued by such Issuer shall cease, and all such rights shall thereupon become
vested in Secured Party who shall thereupon have the sole right to exercise such
voting and other rights (subject to any prior rights of the lender under the
Senior Revolving Line of Credit), but Secured Party shall have no duty to
exercise any such voting or other rights and shall not be responsible for any
failure to do so or delay in so doing.
5.4 Proceeds to be Turned Over To Secured Party. In addition to the rights
of Secured Party specified in Section 5.1 with respect to payments of
Receivables, if an Event of Default shall occur and be continuing, all Proceeds
(including Proceeds of the Key Man Life Insurance Policy) received by Grantor
consisting of cash, checks and Instruments shall be held by Grantor in trust for
Secured Party, segregated from other funds of Grantor, and shall, forthwith upon
receipt by Grantor, be turned over to Secured Party in the exact form received
by Grantor (duly indorsed by Grantor to Secured Party, if required) (but subject
to any prior rights of the lender under the Senior Revolving Line of Credit).
All Proceeds received by Secured Party hereunder shall be held by Secured Party
in a Collateral Account maintained under its sole dominion and control. All
Proceeds while held by Secured Party in a Collateral Account (or by Grantor in
trust for Secured Party) shall continue to be held as collateral security for
all the Grantor Obligations and shall not constitute payment thereof until
applied as provided in Section 5.5.
5.5 Application of Proceeds. At such intervals as may be agreed upon by
Grantor and Secured Party, or, if an Event of Default shall have occurred and be
continuing, at any time at Secured Party's election, Secured Party may apply all
or any part of Proceeds constituting Collateral, whether or not held in any
Collateral Account, in payment of the Grantor Obligations in accordance with the
Note Agreement. Any balance of such Proceeds remaining after the Obligations
shall have been paid in full and the Commitments shall have terminated shall be
paid over to Grantor or to whomsoever may be lawfully entitled to receive the
same.
5.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, Secured Party may exercise, in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
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agreement securing, evidencing or relating to the Grantor Obligations, all
rights and remedies of a secured party under the UCC or any other applicable
law. Without limiting the generality of the foregoing, Secured Party, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below or
expressly required hereto or pursuant to the Note Agreement) to or upon Grantor
or any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived to the fullest extent permitted by applicable law),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and 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 Secured Party 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. Secured
Party 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 Grantor, which right or equity is hereby waived and released to
the fullest extent permitted by applicable law. Grantor further agrees, at
Secured Party's request, to assemble the Collateral and make it available to
Secured Party at places which Secured Party shall reasonably select, whether at
Grantor's premises or elsewhere. Secured Party shall apply the net proceeds of
any action taken by it pursuant to this Section 5.6 with respect to the
Collateral, after deducting all reasonable costs and expenses of every kind
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
Secured Party hereunder with respect thereto, including reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations of
Grantor, in the order specified in Section 5.5, and only after such application
and after the payment by Secured Party of any other amount required by any
provision of law, including Section 9-615(a)(3) of the UCC, and payment in full
of the Debt, need Secured Party account for the surplus, if any, to Grantor. To
the extent permitted by applicable law and except as expressly provided herein,
Grantor waives all claims, damages and demands it may acquire against 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.
(b) In the event that Secured Party elects not to sell the
Collateral, Secured Party retains its rights to dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or permitted by
law or in equity, and to apply the proceeds of the same towards payment of the
Obligations. Each and every method of disposition of the Collateral described in
this Agreement shall constitute disposition in a commercially reasonable manner.
(c) Secured Party may appoint any Person as agent to perform any act
or acts necessary or incident to any sale or transfer of the Collateral.
(d) Grantor recognizes that Secured Party may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
17
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. 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. Secured Party shall be under no
obligation to delay a sale of any of the Pledged Stock 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.
(e) 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 Stock pursuant to this Section 5.6 valid and binding and
in compliance with any and all other applicable Requirements of Law. Grantor
further agrees that a breach of any of the covenants contained in this Section
5.6 will cause irreparable injury to Secured Party, that Secured Party have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 5.6 shall be specifically
enforceable against Grantor, and 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 Note Agreement.
5.7 Deficiency. Grantor shall remain liable for any deficiency if the
Proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
Secured Party to collect such deficiency.
5.8 Non-Judicial Enforcement. Secured Party may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by law, Grantor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
SECTION 6. SECURED PARTY
6.1 Secured Party's Appointment as Attorney-in-Fact, etc.
(a) Grantor hereby irrevocably constitutes and appoints Secured
Party and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of Grantor and in the name of 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, Grantor hereby gives Secured
Party the power and right, on behalf of Grantor, without notice to or assent by
Grantor, to do any or all of the following at any time upon the occurrence and
during the continuation of an Event of Default:
(i) in the name of 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
Receivable or with respect to any Contract Right or other Collateral and
file any claim or take any other action or proceeding in any court of law
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or equity or otherwise deemed appropriate by Secured Party for the purpose
of collecting any and all such moneys due under any Receivable or with
respect to any Contract Right or 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 Secured Party may request to evidence Secured Party's
security interest in such Intellectual Property and the goodwill and
general intangibles of Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, 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 5.6, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral;
(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 Secured Party or as Secured Party shall direct; (B)
ask for or demand, 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 endorse 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 that Secured Party deems advisable 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 Grantor with respect to any Collateral that
Secured Party deems advisable; (F) settle, compromise or adjust any such
suit, action or proceeding and, in connection therewith, give such
discharges or releases as Secured Party may deem appropriate; (G) assign
any Intellectual Property (along with the goodwill of the business to
which any such Intellectual Property pertains), throughout the world for
such term or terms, on such conditions, and in such manner, as Secured
Party shall in its sole discretion determine; 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 Secured Party
were the absolute owner thereof for all purposes, and do, at Secured
Party's option and Grantor's expense, at any time, or from time to time,
all acts and things which Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security
interests therein and to effect the intent of this Agreement, all as fully
and effectively as Grantor might do; and
(vi) license or sublicense whether on an exclusive or
non-exclusive basis, any Intellectual Property for such term and on such
conditions and in such manner as Secured Party shall in its sole judgment
determine and, in connection therewith, Grantor hereby grants to Secured
Party for the benefit of the Secured Party a royalty-free, world-wide
irrevocable license of its Intellectual Property.
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(b) If Grantor fails to perform or comply with any of its agreements
contained herein, Secured Party, 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 Secured Party 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 the Debt at the Overdue Interest Rate under the Note
Agreement, from the date of payment by Secured Party to the date reimbursed by
the relevant Grantor, shall be payable by Grantor to Secured Party on demand.
(d) 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.
6.2 Duty of Secured Party. Secured Party's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as Secured Party deals with similar property for its own
account. Neither Secured Party nor any of its 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 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 Secured Party hereunder are solely to
protect Secured Party's interests in the Collateral and shall not impose any
duty upon Secured Party to exercise any such powers. Secured Party shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither Secured Party nor any of its officers,
directors, employees or agents shall be responsible to Grantor for any act or
failure to act hereunder, except for Secured Party to the extent that any such
act or failure to act is found by a final decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
such Person.
6.3 Execution of Financing Statements. Pursuant to any applicable law,
Grantor authorizes Secured Party to file or record financing statements and
other filing or recording documents or instruments with respect to the
Collateral without the signature of Grantor, if permitted by law, in such form
and in such offices as Secured Party deems appropriate to perfect the security
interests of Secured Party under this Agreement. Grantor authorizes Secured
Party to use the collateral description "all personal property" or "all assets"
in any such financing statements. Grantor hereby ratifies and authorizes the
filing by Secured Party of any financing statement with respect to the
Collateral made prior to the date hereof.
SECTION 7. MISCELLANEOUS
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 7.01 of the Note Agreement, provided that any provision
20
of this Agreement imposing obligations on Grantor may be waived by Secured Party
in a written instrument executed by Secured Party in accordance with Section
7.01 of the Note Agreement.
7.2 Notices. All notices, requests and demands to or upon Secured Party or
Grantor hereunder shall be effected in the manner provided for in Section 7.02
of the Note Agreement.
7.3 No Waiver by Course of Conduct; Cumulative Remedies. Secured Party
shall not 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 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 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 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.
7.4 Enforcement Expenses; Indemnification.
(a) Grantor agrees to pay, or reimburse Secured Party for, all its
costs and expenses incurred in enforcing or preserving any rights under this
Agreement and the other Debt Documents, including the fees and disbursements of
counsel (including the out-of-pocket expenses of in-house counsel) to Secured
Party.
(b) Grantor agrees to pay, and to save Secured Party harmless from,
any and all liabilities with respect to, or resulting from any delay in paying,
any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.
(c) Grantor agrees to pay, and to save Secured Party harmless from,
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, performance, administration
or enforcement of this Agreement as provided pursuant to Section 7.04 of the
Note Agreement.
(d) The agreements in this Section shall survive repayment of the
Grantor Obligations and all other amounts payable under the Note Agreement and
the other Debt Documents.
7.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of Grantor and shall inure to the benefit of Secured
Party and its successors and assigns; provided that Grantor may not assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of Secured Party.
7.6 Set-Off. Grantor hereby irrevocably authorizes Secured Party at any
time and from time to time upon the occurrence and during the continuance of an
Event of Default, without prior notice to Grantor, any such notice being
21
expressly waived by Grantor, to set-off and appropriate and apply any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by Secured Party or any agency thereof to
or for the credit or the account of Grantor, or any part thereof in such amounts
as Secured Party may elect, against and on account of the Grantor Obligations of
Grantor, in any currency, whether arising hereunder, under the Note Agreement,
any other Debt Document or otherwise, as Secured Party or such Secured Party may
elect, whether or not Secured Party or any other Secured Party has made any
demand for payment and although Grantor Obligations may be contingent or
unmatured. Secured Party and each other Secured Party shall notify Grantor
promptly of any such set-off and the application made by Secured Party or such
Secured Party of the Proceeds thereof, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of Secured Party under this Section 7.6 are in addition to other rights and
remedies (including other rights of set-off) which Secured Party may have.
7.7 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 instrument.
7.8 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.
7.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
7.10 Integration. This Agreement and the other Debt Documents represent
the agreement of Grantor and Secured Party with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by Secured Party relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the other Debt Documents.
7.11 Acknowledgements. Grantor hereby acknowledges that:
(a) it has been advised by counsel consisting of its own Partners in
the negotiation, execution and delivery of this Agreement and the other Debt
Documents;
(b) Secured Party has no fiduciary relationship with or duty to
Grantor arising out of or in connection with this Agreement or any of the other
Debt Documents, and the relationship between Grantor, on the one hand, and
Secured Party, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
22
(c) no joint venture is created hereby or by the other Debt
Documents or otherwise exists by virtue of the transactions contemplated hereby
between Grantor and the Secured Party.
7.12 Releases.
(a) At such time as the Debt and other Grantor Obligations shall
have been satisfied by full and final payment in cash, the Collateral shall be
released from the Liens created hereby, and this Agreement and all obligations
(other than those expressly stated to survive such termination) of Secured Party
and 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 Grantor. At the request and sole expense of Grantor following any such
termination, Secured Party shall deliver to Grantor any Collateral held by
Secured Party hereunder, and execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such release and termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by Grantor in a transaction permitted by the Note Agreement, then
Secured Party, at the request and sole expense of Grantor, shall execute and
deliver to Grantor all releases or other documents reasonably necessary or
desirable for the release of the Liens created hereby on such Collateral.
7.13 WAIVER OF JURY TRIAL. Each of Grantor and Secured Party hereby, to
the maximum extent permitted by law, irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this Agreement or any other Debt
Document or the actions of Secured Party in the negotiation, administration,
performance or enforcement thereof.
[Signature Page Follows]
23
IN WITNESS WHEREOF, each of the undersigned has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
GRANTOR:
XXXXXXX XXXXXX & XXXXXXXX LLP
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
[Signature Page to Security Agreement]
Secured Party:
CONGOLEUM CORPORATION
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
[Signature Page to Security Agreement]
Annex A
INSTRUCTIONS AGREEMENT
Reference is made to that certain Security Agreement, dated as of October
___, 2006 (the "Security Agreement"), made by Xxxxxxx Xxxxxx & Xxxxxxxx LLP, a
District of Columbia limited liability partnership ("Grantor"), in favor of
Congoleum Corporation. Unless otherwise defined herein, terms defined in the
Security Agreement and used herein shall have the meanings given to them in the
Security Agreement.
WHEREAS, it is a condition precedent to the effectiveness of the Note
Agreement that the undersigned Issuer shall execute and deliver this
Instructions Agreement to Secured Party;
NOW, THEREFORE, in consideration of the premises and to induce Secured
Party to enter into the Note Agreement, the undersigned Issuer hereby agrees
with Secured Party, that it will comply with the instructions originated by
Secured Party with respect to the Pledged Capital Stock issued by it without
further consent of Grantor as pledgor thereof, which instructions must be in
writing and state that an Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the undersigned has caused this Instructions Agreement
to be duly executed and delivered as of the date first above written.
ISSUER:
[NAME]
By:
--------------------------------------------------
Name:
Title:
[DEBTOR TO COMPLETE SCHEDULES]
Schedule 1
----------
PLEDGED CAPITAL STOCK
None
Schedule 2
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
UCC Filings
-----------
Recorder of Deeds for the District of Columbia
Actions with respect to Pledged Capital Stock
---------------------------------------------
Not applicable
Schedule 3
----------
JURISDICTION OF ORGANIZATION, IDENTIFICATION NUMBER AND
LOCATION OF CHIEF EXECUTIVE OFFICE
----------------------------------------------------------------------------------------------------------------------
Grantor Jurisdiction of Charter Location of Chief
Organization Identification Executive Office
Number
----------------------------------------------------------------------------------------------------------------------
XXXXXXX XXXXXX & XXXXXXXX LLP District of Columbia [needed] 0000 Xxx Xxxx Xxxxxx, XX,
Xxxxx 000
Xxxxxxxxxx, XX 00000
----------------------------------------------------------------------------------------------------------------------
Schedule 3.9
------------
INTELLECTUAL PROPERTY
---------------------
None
Schedule 3.10
-------------
DEPOSIT ACCOUNTS
----------------
[to be completed by Debtor]
Schedule 3.11
-------------
COMMERCIAL TORT CLAIMS
----------------------
None
Schedule 4
----------
ADDITIONAL LOCATIONS OF INVENTORY AND EQUIPMENT
All located at office specified in Schedule 3.
VEHICLES (Please indicate whether each vehicle is owned or leased)
[Debtor to complete information regarding vehicles]
