1 Exhibit 4.2
Exhibit C to Revolving
Credit Agreement
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated as of July 21, 1997, by
and between PAYLESS CASHWAYS, INC., an Iowa corporation (the "Grantor"), a
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, and
CANADIAN IMPERIAL BANK OF COMMERCE, as coordinating agent and collateral agent
(in such capacity, the "Agent") for the lenders (the "Lenders") party to the
Credit Agreement (as hereinafter defined) and the Fronting Banks and
Underwriters (each as therein defined):
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Agent, the Lenders, the Fronting Banks, the Underwriters and the
Grantor are entering into a Revolving Credit Agreement, dated as of the date
hereof (as amended, amended and restated, modified or supplemented from time to
time, the "Credit Agreement"); and
WHEREAS, unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined; and
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit that the Grantor shall have granted a security
interest, pledge and lien on substantially all of the Grantor's assets and
properties and the proceeds thereof to the Agent pursuant to Sections 364(c)(2),
364(c)(3) and 364(d) of the Bankruptcy Code; and
WHEREAS, the grant of such security interest, pledge and lien has been
authorized pursuant to Section 364(c)(2), 364(c)(3) and 364(d)(1) of the
Bankruptcy Code by the Interim Order and, after the entry thereof, will have
been so authorized by the Final Order (collectively, the "Order"); and
WHEREAS, to supplement the Order without in any way diminishing or
limiting the effect of the Order or the security interest, pledge and lien
granted thereunder, the parties hereto desire to set forth more fully their
respective rights in connection with such security interest, pledge and lien;
and
WHEREAS, this Agreement has been approved by the Order;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Loans and the Fronting Banks to issue Letters of Credit, the
Grantor hereby agrees with the Agent as follows:
SECTION 1. Grant of Security and Pledge. The Grantor hereby transfers,
grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over
to the Agent for its benefit and the ratable benefit of the Lenders, the
Fronting Banks and the Underwriters and hereby grants to the Agent for its
benefit and the ratable benefit of the Lenders, the Fronting Bank and the
Underwriters, a perfected pledge and security interest in all of the Grantor's
right, title and interest in and to the following (the "Collateral"), which
pledge and security interest shall be (x) for all purposes senior to, and shall
prime pursuant to Section 364(d)(1) of the Bankruptcy Code, all of the existing
Liens that secure the obligations of the Grantor under the Existing Agreements
and any Liens granted after the Filing Date to provide adequate protection in
respect of the Existing Agreements, (y) junior to the Prudential Lien
hereinafter referred to and subject to the prior rights of the Credit Card Banks
under the GE Credit Program Documents with respect to certain accounts
receivable, returned merchandise and general intangibles financed thereunder and
Commerce under the Commerce Bank Agreement with respect to certain documents,
inventory and related collateral and (z) subject to the Carve-Out:
(a) all present and future accounts, accounts receivable and
other rights of the Grantor to payment for goods sold or leased or for services
rendered (except those evidenced by instruments or chattel paper), whether now
existing or hereafter arising and wherever arising, and
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whether or not they have been earned by performance (collectively, the
"Accounts"); it being agreed that the security interest and lien granted hereby
in and on any Account representing a GECC Receivable, Contractor Receivable
or Monogram Receivable (each as hereinafter defined) shall only attach to
those of such Receivables which the Borrower purchases pursuant to the terms
of the GE Credit Program Documents and, as to such Receivables, shall be
subject and subordinate to perfected security interests in or liens on such
Account in favor of any Credit Card Bank, as well as to any rights of set-off
or recoupment of the Credit Card Banks in respect of such Account;
(b) all goods and merchandise now owned or hereafter acquired
by the Grantor wherever located, whether in the possession of the Grantor or of
a bailee or other person for sale, storage, transit, processing, use or
otherwise consisting of whole goods, components, supplies, materials, or
consigned, returned or repossessed goods) which are held for sale or lease or to
be furnished (or have been furnished) under any contract of service or which are
raw materials, work-in-process, finished goods or materials used or consumed in
the Grantor's business or processed by or on behalf of the Grantor
(collectively, the "Inventory"); it being agreed that the security interest and
lien granted hereby in and on any Inventory constituting returned merchandise in
respect of a Contractor Receivable or a Monogram Receivable shall be subject and
subordinate to perfected security interests in or liens on such Inventory in
favor of any Credit Card Bank;
(c) all machinery, all manufacturing, distribution, selling,
data processing and office equipment, all furniture, furnishings, appliances,
fixtures and trade fixtures, tools, tooling, molds, dies, vessels, aircraft and
all other goods of every type and description (other than Inventory) which are
used or bought for use primarily in business, in each instance whether now owned
or hereafter acquired by the Grantor and wherever located (collectively, the
"Equipment");
(d) all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
wherever located and whether now owned or hereafter acquired, and, in any event,
shall include, without limitation, the vehicles listed on Schedule 7 hereto, and
all tires and other appurtenances to any of the foregoing (collectively, the
"Vehicles");
(e) all rights, interests, choses in action, causes of action,
claims and all other intangible property of the Grantor of every kind and nature
(other than Accounts, Trademarks, Patents and Copyrights), in each instance
whether now owned or hereafter acquired by the Grantor, including, without
limitation, all general intangibles; all corporate and other business records;
all loans, royalties, and other obligations receivable; all inventions, designs,
trade secrets, computer programs, software, printouts and other computer
materials, goodwill, registrations, copyrights, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials; all customer and
supplier contracts, firm sale orders, rights under license and franchise
agreements, and other contracts and contract rights; all interests in
partnerships and joint ventures; all tax refunds and tax refund claims; all
right, title and interest under leases, subleases, licenses and concessions and
other agreements relating to real or personal property; all payments due or made
to the Grantor in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any property by any person or governmental authority;
all deposit accounts (general or special) with any bank or other financial
institution; all credits with and other claims against carriers and shippers;
all rights to indemnification; all reversionary interests in pension and profit
sharing plans and reversionary, beneficial and residual interest in trusts; all
proceeds of insurance of which the Grantor is beneficiary; and all letters of
credit, guaranties, liens, security interest and other security held by or
granted to the Grantor; and all other intangible property, whether or not
similar to the foregoing; in
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each instance, however and wherever arising, but
excluding any contract, agreement or license which prohibits the assignment or
encumbrance by the Grantor of such contract, agreement or license (or of its
rights thereunder), except to the extent that such prohibition would be
ineffective pursuant to Section 9-318(4) of the Uniform Commercial Code as in
effect in the State of New York (collectively, the "General Intangibles"); it
being agreed that the security interest and lien granted hereby in and on any
General Intangibles representing a GECC Receivable or other obligation of any
Credit Card Bank to the Grantor shall be subject and subordinate to perfected
security interests in or liens on such General Intangible in favor of any Credit
Card Bank, as well as to any rights of set-off or recoupment of such Credit Card
Bank in respect of such General Intangible;
(f) all chattel paper, all instruments, all notes (including,
but not limited to, the notes listed on Schedule 8 annexed hereto and made a
part hereof) (the "Pledged Notes") and debt instruments and all payments
thereunder and instruments and other property from time to time delivered in
respect thereof or in exchange therefor, and all bills of lading, warehouse
receipts and other documents of title and documents, in each instance whether
now owned or hereafter acquired by the Grantor;
(g) all property or interests in property now or hereafter
acquired by the Grantor which may be owned or hereafter may come into the
possession, custody or control of the Agent or any of the Lenders or the
Fronting Banks or any agent or affiliate of the Agent or any of the Lenders in
any way or for any purpose (whether for safekeeping, deposit, custody, pledge,
transmission, collection or otherwise), and all rights and interests of the
Grantor, now existing or hereafter arising and however and wherever arising, in
respect of any and all (i) notes, drafts, letters of credits, stocks, bonds, and
debt and equity securities, whether or not certificated, and warrants, options,
puts and calls and other rights to acquire or otherwise relating to the same;
(ii) money (including all cash and cash equivalents held in the Letter of Credit
Accounts (as defined and referred to in the Credit Agreement)); (iii) proceeds
of loans, including, without limitation, Loans made under the Credit Agreement;
and (iv) insurance proceeds and books and records relating to any of the
property covered by this Agreement; together, in each instance, with all
accessions and additions thereto, substitutions therefor, and replacements,
proceeds and products thereof;
(h) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, prints and labels on which said
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, and
all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings 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 political subdivision thereof (except for
"intent to use" applications for trademark or service xxxx registrations filed
pursuant to Section 1(b) of the Xxxxxx Act, unless and until an Amendment to
Allege Use or a Statement of Use under Sections 1(c) of said Act has been
filed), all whether now owned or hereafter acquired by the Grantor, including,
but not limited to, those described in Schedule 3 annexed hereto and made a part
hereof, and all reissues, extensions or renewals thereof and all licenses
thereof together, in each case, with the goodwill of the business connected with
the use of, and symbolized by each such trademark, service marks, trade name and
trade dress (all of the foregoing being herein referred to as the "Trademarks");
(i) all letters patent of the United States or any other
country, and all registrations
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and recordings thereof, including, without
limitation, applications, registrations and recordings 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, all whether now owned or hereafter acquired by the Grantor, including,
but not limited to, those described in Schedule 4 annexed hereto and made apart
hereof, and (ii) all reissues, continuations, continuations-in-part or
extensions thereof and all licenses thereof (all of the foregoing being herein
referred to as the "Patents");
(j) all copyrights of the United States, or any other country,
and all registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof, or
any other country or political subdivision thereof, all whether now owned or
hereafter acquired by the Grantor, including, but not limited to, those
described in Schedule 5 hereto and all renewals and extensions thereof and all
licenses thereof (all of the foregoing being herein referred to as the
"Copyrights");
(k) all books, records, ledger cards and other property at any
time evidencing or relating to the Accounts, Inventory, Equipment, Vehicles,
General Intangibles, Trademarks, Patents or Copyrights;
(l) (i) all the shares of capital stock owned by the Grantor,
listed on Schedule 6 hereto of the issuers listed thereon (individually, an
"Issuer", and collectively, the "Issuers") and all shares of capital stock of
any Issuer obtained in the future by the Grantor and the certificates
representing or evidencing all such shares (the "Pledged Shares"); (ii) all
other property which may be delivered to and held by the Agent in respect of the
Pledged Shares pursuant to the terms hereof; (iii) subject to Section 9 below,
all dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed, in respect of, in exchange for or upon the
conversion of the securities referred to in clauses (i) and (ii) above; and (iv)
subject to Section 9 below, all rights and privileges of the Grantor, as
applicable, with respect to the securities and other property referred to in
clauses (i), (ii) and (iii) (the items referred to in clauses (i) through (iv)
being collectively called the "Pledged Stock Collateral");
(m) all other personal property of the Grantor, whether
tangible or intangible, and whether now owned or hereafter acquired; and
(n) all proceeds and products of any of the foregoing, in any
form, including, without limitation, any claims against third parties for loss
or damage to or destruction of any or all of the foregoing.
As used herein, the following terms shall have the following meanings:
"Contractor Receivables" shall mean those certain commercial credit
accounts sold by the Grantor or extended directly to a Grantor customer by a
Credit Card Bank (including any documents, instruments, chattel paper or
intangibles evidencing any such transferred receivable or the transaction giving
rise thereto) (i) pursuant to the terms of the GE Credit Program Documents or
(ii) to any other Person pursuant to any similar contractual arrangement (but in
such case solely to the extent such an arrangement is permitted by Section 5.9
of the Credit Agreement).
"Credit Card Banks" shall mean General Electric Capital Corporation and
Monogram Credit Card Bank of Georgia.
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"Existing Credit Agreement" shall mean that certain Amended and
Restated Credit Agreement, dated as of October 3, 1996, among the Grantor, the
Existing Lenders, the Agent, CIBC as Letter of Credit Bank and the Co-Agents
named therein, as amended, amended and restated, supplemented or modified from
time to time.
"Existing Lenders" shall mean, collectively, those certain financial
institutions which have provided loans and other extensions of credit to the
Grantor under, among other agreements, the Existing Credit Agreement, together
with any successors or assigns thereof.
"GECC Receivables" shall mean receivables (including any documents,
instruments, chattel paper or intangibles evidencing any such transferred
receivable or the transaction giving rise thereto) (i) payable to the Grantor by
Credit Card Banks pursuant to the terms of the GE Credit Program Documents
arising out of sales of merchandise or services made by the Grantor or (ii)
payable to or purchased by any other Person pursuant to any similar contractual
arrangement solely to the extent such an arrangement is permitted by Section 5.9
of the Credit Agreement.
"GE Credit Program Documents" shall mean (a) the Amended and Restated
Monogram Credit Card Bank of Georgia Program Agreement, dated as of July 20,
1997, between the Grantor and Monogram Credit Card Bank of Georgia, as such
agreement may hereafter be amended, restated, supplemented or modified from time
to time to the extent permitted by the Credit Agreement, together with any
agreements entered into by the Grantor and Monogram Credit Card Bank of Georgia,
or any affiliate, in replacement of such agreement to the extent permitted by
the Credit Agreement; and (b) the Second Amended and Restated Commercial Credit
Account Purchase and Service Program Agreement, dated as of July 20, 1997,
between the Grantor and General Electric Capital Corporation, as such agreement
may hereafter be further amended, restated, supplemented or modified from time
to time to the extent permitted by the Credit Agreement, together with any
agreement entered into by the Grantor and General Electric Capital Corporation,
or any affiliate, in replacement of such agreement to the extent permitted by
the Credit Agreement.
"Monogram Receivables" shall mean all obligations now or hereafter
owing to, and all rights now or hereafter acquired by, Monogram Credit Card Bank
of Georgia arising out of any of the private label credit card sales referred to
in clause (i) of the definition of "GECC Receivables."
"Prudential" shall mean the Prudential Insurance Company of America.
"Prudential Lien" shall mean Liens in existence on the date hereof
granted under the Prudential Real Estate Financing.
"Prudential Loan Agreement" shall mean the Loan Agreement, dated June
20, 1989, by and among the Borrower, Xxxx Home Centers, Inc., Somerville and
Prudential, as the same has been and may hereafter be amended, amended and
restated, modified or supplemented to the extent permitted by this Agreement.
"Prudential Real Estate Financing" shall mean the financing by
Prudential provided for by the Prudential Loan Agreement and other documentation
executed and delivered in connection therewith.
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The Agent acknowledges that, for purposes of this Security and Pledge
Agreement, (i) the private label credit card sales and commercial account sales
referred to in clause (i) of the definition of "GECC Receivables" constitute
extensions of credit directly from Monogram to cardholders or true sales of
accounts and indebtedness from the Grantor to GECC, (ii) the Grantor has no
right, title or interest in or to any Monogram Receivables or Contractor
Receivables, except to the extent the Grantor purchases such receivables
pursuant to the terms of the GE Credit Program Documents and (iii) except to the
extent so purchased by the Grantor, no Monogram Receivable or Contractor
Receivable shall constitute Collateral (or any category of property included
within the definition thereof) for purposes of this Security and Pledge
Agreement. The Agent agrees with the Grantor that neither the security interest
created herein nor any related financing statements may be assigned by the Agent
unless, prior to any such assignments, such financing statements are amended (a)
to include the definition of "GE Credit Program Documents" set forth herein, and
(b) specifically to exclude the Monogram Receivables and the Contractor
Receivables from the collateral covered by such financing statements.
SECTION 2. Security for Obligations. This Agreement and the Collateral
secure the prompt and complete payment and performance when due of all
obligations of the Grantor, now or hereafter existing, under the Credit
Agreement, the Notes and the other Loan Documents, whether for principal,
interest, fees, expenses or otherwise, including (without limitation) all
obligations of the Grantor now or hereafter existing under or in respect of this
Agreement including, but not limited to, (a) the due and punctual payment of
principal of and interest on the Loans and the Notes and the reimbursement of
all amounts drawn under Letters of Credit, and (b) the due and punctual payment
of the Fees, indemnities and all other present and future, fixed or contingent,
direct or indirect, monetary obligations of the Grantor to the Lenders, the
Fronting Banks, the Underwriters and the Agent under the Loan Documents (all
such obligations of the Grantor being herein called the "Obligations").
SECTION 3. Delivery of Pledged Stock Collateral and Pledged Notes;
Other Action. Upon written request by the Agent (and without further order of
the Bankruptcy Court), all certificates or instruments representing or
evidencing the Pledged Stock Collateral and the Pledged Notes shall be delivered
to and held by the Agent pursuant hereto and shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent. Upon the occurrence and during the
continuance of any Event of Default, the Agent shall have the right (for the
ratable benefit of the Lenders), at any time in its discretion and without
notice to the Grantor, to transfer to or to register in the name of the Agent or
any of its nominees any or all of the Pledged Stock Collateral and all of the
Pledged Notes.
SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) All of the Inventory and/or Equipment is located at the
places specified in Schedule 1 hereto. The chief places of business and chief
executive offices of the Grantor and the offices where the Grantor keeps its
records concerning any Accounts and all originals of all chattel paper which
evidence any Account are located at the places specified in Schedule 2 hereto.
All trade names under which the Grantor has sold and will sell Inventory are
listed on Schedule 3 hereto.
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(b) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the security interest
created by this Agreement and except as permitted under Section 6.1 of the
Credit Agreement. No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral is on file in any recording
office, except (x) such as may have been filed in favor of the Agent relating to
this Agreement or in connection with the Existing Credit Agreement in favor of
the Agent thereunder and (y) in favor of any holder of a Lien otherwise
permitted under Section 6.1 of the Credit Agreement.
(c) As of the Filing Date, the Grantor does not own any
material Trademarks, Patents or Copyrights or have any material Trademarks,
Patents or Copyrights registered in, or the subject of pending applications in,
the United States Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, other than those
described in Schedules 3, 4 and 5 hereto. The registrations for the Collateral
disclosed on such Schedules 3, 4 and 5 hereto are valid and subsisting and in
full force and effect. None of the material Patents or Copyrights have been
abandoned or dedicated.
(d) The Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(e) The Grantor is the legal and beneficial owner of the
Pledged Shares described on Schedule 6 free and clear of any lien, security
interest, option or other charge or encumbrance, except for the security
interest created by this Agreement and the Orders and Liens created pursuant to
the Existing Agreement and except as disclosed on Schedule 6.
(f) The Pledged Shares described in Section 1(l) hereof
constitute all of the issued and outstanding shares of stock of each of the
Issuers and no Issuer is under any contractual obligation to issue any
additional shares of stock or any other securities, rights or indebtedness.
(g) The Vehicles listed on Schedule 7 hereto constitute a
complete and correct list of all Vehicles owned by the Grantor as of the
Effective Date.
(h) The Pledged Notes delivered at any time by the Grantor to
the Agent in accordance with this Agreement or the Credit Agreement shall at all
times constitute all of the Pledged Notes owned by the Grantor at each such
time.
(i) Except for the Orders, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the grant and pledge by the Grantor
of the security interests granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor or (ii) for the perfection of the
security interests or the exercise by the Agent of its rights and remedies
hereunder.
SECTION 5. Further Assurances.
(a) The Grantor agrees that from time to time, at the expense
of the Grantor, it will promptly execute and deliver all further instruments and
documents, and take all further action,
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that may be necessary, or that the Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent to exercise and enforce any of its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, and without further order of the Bankruptcy Court,
the Grantor will execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary,
or as the Agent may reasonably request, in order to perfect and preserve the
security interests granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Agent to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of the Grantor where
permitted by law.
(c) The Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
(d) The Grantor hereby agrees from time to time hereafter,
that upon the acquisition or creation of additional Pledged Notes, that it will
execute and deliver to the Agent, for the benefit of the Lenders, the Fronting
Banks and the Underwriters, such additional Pledged Notes, in each case,
accompanied by appropriate endorsements executed in blank.
SECTION 6. As to Equipment and Inventory. The Grantor shall:
(a) Keep the Equipment and Inventory (other than Inventory
sold in the ordinary course of business) at the places specified therefor in
Schedule 1 hereto or, upon 30 days' prior written notice to the Agent, at other
places in jurisdictions where all action required by Section 5 shall have been
taken to assure the continuation of the perfection of the security interest of
the Agent (for its benefit and the ratable benefit of the Lenders, the Fronting
Banks and the Underwriters) with respect to the Equipment and Inventory.
(b) Maintain or cause to be maintained in good repair, working
order and condition, excepting ordinary wear and tear and damage due to
casualty, all of the Equipment, and make or cause to be made all appropriate
repairs, renewals and replacements thereof, to the extent not obsolete and
consistent with past practice of the Grantor, as quickly as practicable after
the occurrence of any loss or damage thereto which are necessary or reasonably
desirable to such end.
(c) With respect to the Inventory: (a) the Grantor shall at
all times maintain records with respect to Inventory reasonably satisfactory to
the Agent, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, the Grantor's cost therefor and
daily withdrawals therefrom and additions thereto; (b) the Grantor shall conduct
a physical count of the Inventory at least once each year, but at any time or
times as the Agent may request on or after an Event of Default occurs and is
continuing, and promptly following such physical inventory shall supply the
Agent with a report in the form and with such specificity as may be reasonably
satisfactory to the Agent concerning such physical count; (c) the Grantor shall
not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of the Agent, except for sales of Inventory
and returns of Inventory to vendors, in each case
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in the ordinary course of the Grantor's business and except to move Inventory
directly from one location set forth or permitted herein to another such
location; (d) in addition to the requirements set forth above, upon the Agent's
request, the Grantor shall, at its expense, conduct through the Asset Support
Group or another inventory counting service reasonably acceptable to the Agent,
or shall permit the Agent to conduct (if the Agent so elects), a physical count
of the Inventory in form, scope and methodology reasonably acceptable to the
Agent no more than once in any twelve (12) month period, but at any time or
times as the Agent may request on or after an Event of Default occurs and is
continuing, the results of which shall be reported directly by such inventory
counting service to the Agent and the Grantor shall promptly deliver
confirmation in a form satisfactory to the Agent that appropriate adjustments
have been made to the Inventory records of the Grantor to reconcile the
Inventory count to the Grantor's Inventory records; (e) the Grantor shall
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders related thereto); (f) the Grantor retains all of its
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; and (g) the Grantor shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate the Grantor to repurchase such Inventory
(other than in the ordinary course of business consistent with past practices
and policies of the Grantor or current market practice).
SECTION 7. As to Accounts.
(a) The Grantor shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning the
Accounts, and the offices where it keeps all originals of all chattel paper
which evidence Accounts, at the location therefor specified in Section 4(a) or,
upon 30 days' prior written notice to the Agent, at such other locations in a
jurisdiction where all actions required by Section 5 shall have been taken with
respect to the Accounts. The Grantor will hold and preserve such records and
chattel paper and will permit representatives of the Agent, at any time during
normal business hours, to inspect and make abstracts from such records and
chattel paper in accordance with Section 5.6 of the Credit Agreement.
(b) Except as otherwise provided in this subsection (b), the
Grantor shall continue to collect in accordance with its customary practice, at
its own expense, all amounts due or to become due to the Grantor under the
Accounts and, prior to the occurrence of an Event of Default, the Grantor shall
have the right to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any account debtor or obligor thereof, or
allow any credit or discount thereon, all in accordance with its customary
practices. In connection with such collections, the Grantor may, upon the
occurrence and during the continuation of an Event of Default, take (and at the
direction of the Agent shall take) such action as the Grantor or the Agent may
reasonably deem necessary or advisable to enforce collection of the Accounts;
provided, that upon written notice by the Agent to the Grantor, following the
occurrence and during the continuation of an Event of Default, of its intention
so to do, the Agent shall have the right to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Agent and
to direct such account debtors or obligors to make payment of all amounts due or
to become due to the Grantor thereunder directly to the Agent and, upon such
notification and at the expense of the Grantor, to enforce collection of any
such Accounts, to take possession of and indorse and collect any checks,
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drafts, notes, acceptances or other instruments for payment of moneys due under
any Account, to file any claim or take any other action or proceeding in any
court of law or equity otherwise deemed appropriate by the Agent for the purpose
of collecting any such money and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as the Grantor might
have done. After receipt by the Grantor of the notice referred to in the proviso
to the preceding sentence, (i) all amounts and proceeds (including instruments)
received by the Grantor in respect of the Accounts shall be received in trust
for the benefit of the Agent (for the ratable benefit of the Lenders, the
Fronting Banks and the Underwriters) hereunder, shall be segregated from other
funds of the Grantor and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and either (A) released to the Grantor if such Event of Default shall
have been cured or waived or (B) if such Event of Default shall be continuing,
paid to the Agent and applied to the Obligations, and (ii) the Grantor shall not
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
(c) The Grantor will keep and maintain at its own cost and
expense satisfactory and complete records with respect to the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Accounts, and the Grantor shall make available any
such books and records to the Agent or to its representatives during normal
business hours at the request of the Agent.
SECTION 8. As to Trademarks, Patents and Copyrights.
(a) Except with respect to any Trademark that the Grantor
shall reasonably determine is of negligible economic value to it (and so advise
the Agent in writing), the Grantor shall, either itself or through licensees,
(i) continue to use the Trademarks on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain the Trademarks in full force free from any
claim of abandonment for nonuse, (ii) maintain as in the past the quality of
products and services offered under the Trademarks, (iii) employ the Trademarks
with the appropriate notice of registration, (iv) not adopt or use any xxxx
which is confusingly similar or a colorable imitation of the Trademarks unless
the Agent shall obtain a perfected security interest therein and (v) not (and
will not permit any licensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(b) The Grantor will not do any act, or omit to do any act,
whereby the Patents or Copyrights may become abandoned or dedicated and the
Grantor shall notify the Agent immediately if it knows of any reason or has
reason to know that any application or registration may become abandoned or
dedicated.
(c) The Grantor will not, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof or (ii) file any assignment of any patent or trademark, which the
Grantor may acquire from a third party, with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless the Grantor shall, within 15 days after
the date of such filing, notify the Agent thereof, and, upon request of the
Agent, execute and deliver any and all assignments, agreements, instruments,
documents and papers as the
11
Agent may request to evidence the Agent's interest in such Patent or Trademark
and the goodwill and general intangibles of the Grantor relating thereto or
represented thereby, and the Grantor hereby constitutes the Agent its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all lawful acts of such attorney being hereby ratified and confirmed;
such power being coupled with an interest is irrevocable until the full payment
and performance of the Obligations, the expiration or cancellation of all of the
Letters of Credit and the termination of the Commitment.
(d) The Grantor will take all reasonable and necessary steps
in any proceeding before the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain each application and
registration of all material Trademarks, Patents and Copyrights, including,
without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings.
(e) The Grantor will, without further order of the Bankruptcy
Court, perform all acts and execute and deliver all further instruments and
documents, including, without limitation, assignments for security in form
suitable for filing with the United States Patent and Trademark Office, and the
United States Copyright Office, respectively, reasonably requested by the Agent
at any time to evidence, perfect, maintain, record and enforce the Agent's
interest in all material Trademarks, Patents and Copyrights or otherwise in
furtherance of the provisions of this Agreement, and the Grantor hereby
authorizes the Agent to execute and file one or more accurate financing
statements (and similar documents) or copies thereof or of this Agreement with
respect to material Patents, Trademarks and Copyrights signed only by the Agent.
(f) The Grantor will, upon acquiring knowledge of any use by
any person of any term or design likely to cause confusion with any material
Trademark, promptly notify the Agent of such use, and if requested by the Agent,
shall join with the Agent, at the Grantor's expense, in such action as the
Agent, in its reasonable discretion, may deem advisable for the protection of
the Agent's interest in and to the Trademarks.
SECTION 9. As to the Pledged Stock Collateral; Voting Rights;
Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) the Grantor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged
Stock Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement; provided, that the
Grantor shall not exercise or shall refrain from exercising any
such right if, in the Agent's reasonable judgment, such action
would have a material adverse effect on the value of the Pledged
Stock Collateral or any part thereof;
(ii) notwithstanding the provisions of Section 1
hereof, the Grantor shall be entitled to receive and retain any
and all dividends paid in respect of the Pledged Stock Collateral;
provided, that any and all
(A) dividends paid or payable other than in
cash in respect of, and instruments and other
property received, receivable or otherwise
distributed in respect of, or in exchange for, any
Pledged Stock Collateral, and
(B) dividends and other distributions paid
or payable in cash in respect of any Pledged Stock
Collateral in connection with a partial or total
liquidation or dissolution or in connection with a
reduction of capital, capital surplus or
paid-in-surplus,
shall be, and shall be forthwith delivered to the Agent to hold
as, Pledged Stock
12
Collateral and shall, if received by the
Grantor, be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Grantor, and be
forthwith delivered to the Agent as Pledged Stock Collateral in
the same form as so received (with any necessary endorsement); and
(iii) the Agent shall execute and deliver (or
cause to be executed and delivered) to the Grantor all such
proxies and other instruments as the Grantor may reasonably
request for the purpose of enabling the Grantor to exercise
the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends
which it is authorized to receive and retain pursuant to
paragraph (ii) above;
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) upon written notice from the Agent to
the Grantor to such effect, all rights of the Grantor to
exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to
Section 9(a)(i) and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to
Section 9(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Agent, who shall thereupon
have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged
Stock Collateral any such dividends; and
(ii) all dividends which are received by the Grantor
contrary to the provisions of paragraph (i) of this Section
9(b) shall be received in trust for the benefit of the Agent,
shall be segregated from other funds of the Grantor and shall
be forthwith paid over to the Agent as Pledged Stock
Collateral in the same form as so received (with any necessary
endorsement).
SECTION 10. Vehicles. The Grantor will maintain each Vehicle in
good operating condition, ordinary wear and tear and immaterial impairments
of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose. Promptly after
the date hereof and, with respect to any Vehicles acquired by the Grantor
subsequent to the date hereof, all applications for certificates of title
indicating the Agent's first priority Lien on the Vehicle covered by such
certificate, and any other necessary documentation, shall be filed by the
Grantor in each office in each jurisdiction which the Agent shall deem
advisable to perfect or protect its Liens on the Vehicles. In connection
with the foregoing, the Grantor shall notify the Agent, in writing, within
30 days after the date of acquisition, of each Vehicle acquired subsequent
to the date hereof.
SECTION 11. Insurance. The Grantor shall, at its own expense,
maintain insurance with respect to the Inventory and Equipment in such
amounts, against such risks, in such form and with such insurers, as is
provided for in Section 5.3 of the Credit Agreement. Following an Event of
Default and during its continuance, the Grantor shall, at the request of
the Agent, duly execute and deliver instruments of assignment of such
insurance policies and cause the respective insurers to acknowledge notice
of such assignment.
Upon the occurrence and during the continuance of any Event of
Default, all insurance payments in respect of such Inventory and Equipment
shall be held, paid to the Agent and applied to the Obligations.
SECTION 12. Transfers to Others; Liens; Additional Shares.
The Grantor shall not:
13
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except for dispositions
otherwise permitted by the Credit Agreement.
(b) Create or suffer to exist any lien, security interest
or other charge or encumbrance upon or with respect to any of the
Collateral to secure any obligation of any person or entity, except for the
security interest created by this Agreement and the Orders, or except as
otherwise permitted by the Credit Agreement.
(c) The Grantor agrees that it will (i) cause each of the
Issuers not to issue any stock or other securities in addition to or
substitution for the Pledged Shares issued by such Issuer, except to the
Grantor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all such additional shares of
stock or other securities of each Issuer of the Pledged Shares.
SECTION 13. Agent's Appointment as Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Agent the Grantor's attorney-in-fact (which
appointment shall be irrevocable and deemed coupled with an interest), with
full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Agent's discretion, upon and
during the occurrence and continuation of an Event of Default, to take any
action and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
(i) to obtain and adjust insurance required to
be paid to the Agent pursuant to Section 11;
(ii) to ask, demand, collect, xxx for, recover,
compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the
Collateral;
(iii) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in
connection with clause (i) or (ii) above;
(iv) to receive, endorse and collect all
instruments made payable to the Grantor representing any
dividend or other distribution in respect of the Pledged Stock
Collateral or any part thereof and to give full discharge for
the same;
(v) to file any claims or take any action or
institute or defend any proceedings which the Agent may deem
necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Agent
with respect to any of the Collateral;
(vi) to direct any party liable for any payment in
respect of or arising out of any of the Collateral to make payment
of any and all moneys due or to become due thereunder directly to
the Agent or as the Agent shall direct;
(vii) to settle, compromise or adjust any suit,
action or proceeding described in clause (v) above and, in
connection therewith, to give such discharges or releases as the
Agent may deem appropriate;
(viii) to set off or cause to be set off amounts in
any account maintained with any Lender, Underwriter or Fronting
Bank or otherwise enforce rights against any of the Collateral in
the possession of any Lender, Underwriter or Fronting Bank; and
14
(ix) generally, to 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 Agent were the
absolute owner thereof for all purposes, and to do, at the Agent's
option and the Grantor's expense, at any time, or from time to
time, all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Collateral and the Agent's
Liens thereon and to effect the intent of this Agreement, all as
fully and effectively as the Grantor might do.
SECTION 14. Agent May Perform. If the Grantor fails
to perform any agreement contained herein, the Agent may itself
perform, or cause performance of, such agreement, and the expenses
of the Agent incurred in connection therewith shall be payable by
the Grantor under Section 17(b).
SECTION 15. The Agent's Duties. The powers conferred
on the Agent hereunder are solely to protect its interest and the
interests of the Lenders in the Collateral and shall not impose
any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no
duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights
pertaining to any Collateral, including, without limitation,
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Stock Collateral, whether or not the Agent has or is
deemed to have knowledge of such matters. Neither the Agent nor
any of the Lenders, Fronting Banks or Underwriters, nor any of
their respective directors, officers, employees, attorneys,
experts or agents shall be liable for failure to demand, collect
or realize upon all or any part 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 the Grantor or
otherwise. The Grantor releases the Agent, the Fronting Banks, the
Underwriters and the Lenders and their respective directors,
officers, employees, attorneys, experts and agents from any
claims, causes of action and demands at any time arising out of or
with respect to this Agreement, the Collateral, and/or any actions
taken or omitted to be taken by the Agent with respect thereto
(other than any claims, causes of action and demands arising
solely from the gross negligence or willful misconduct of the
party which desires to be so released as determined by a final
order or judgment of a court of competent jurisdiction), and the
Grantor hereby agrees to hold the Lenders and their respective
directors, officers, employees, attorneys, experts and agents
harmless from and with respect to any and all such claims, causes
of action and demands. The agreements of the Grantor contained in
this Section 15 shall survive the payment and performance of the
Obligations, the expiration or cancellation of all of the Letters
of Credit, the termination of the Commitment and the termination
of the security interests granted hereby.
SECTION 16. Remedies. If any Event of Default
shall have occurred and be continuing, and subject to the
provisions of Section 7 of the Credit Agreement:
(a) The Agent may exercise in respect of the
Collateral, in addition
15
to other rights and remedies provided for
herein or otherwise available to it, and without application to or
order of the Bankruptcy Court, all the rights and remedies of a
secured party on default under the Uniform Commercial Code and
also may (i) require the Grantor to, and the Grantor hereby agrees
that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by
the Agent and make it available to the Agent at a place to be
reasonably designated by the Agent and (ii) without notice except
as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Agent's
offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Agent
may deem commercially reasonable. The Grantor agrees that, to the
extent notice of such sale shall be required by law, at least ten
days' notice to the Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) The Agent may instruct the Grantor not to
make any further use of the Patents, Copyrights or Trademarks or
any xxxx similar thereto for any purpose.
(c) The Agent may license, whether general,
special or otherwise, and whether on an exclusive or nonexclusive
basis, any of the Trademarks, Patents or Copyrights throughout the
world for such term or terms, on such conditions, and in such
manner, as the Agent shall in its sole discretion determine.
(d) The Agent may (without assuming any
obligations or liability thereunder), at any time, enforce (and
shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of the Grantor in, to and
under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any
thereof, and the Grantor hereby releases the Agent from, and
agrees to hold the Agent free and harmless from and against any
claims arising out of, any action taken or omitted to be taken
with respect to any such license agreement.
(e) In the event of any such license, assignment,
sale or other disposition of the Collateral, or any of it, the
Grantor shall supply its know-how and expertise in connection with
the manufacture and sale of the products bearing or relating to
Trademarks, Patents or Copyrights, and its customer lists and
other records relating to the Trademarks, Patents or Copyrights
and to the distribution of said products, to the Agent or its
designee.
(f) In order to implement the assignment, sale or
other disposal of any of the Trademarks, Patents or Copyrights,
the Agent may, at any time, pursuant to the authority granted in
Section 13 hereof, execute and deliver on behalf of the Grantor,
one or more instruments of assignment of the Trademarks, Patents
or Copyrights (or any application of registration thereof), in
form suitable for filing, recording or registration in any
country.
(g) All cash proceeds received by the Agent in
respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the
Agent, be held by the Agent as collateral for, and then or at any
16
time thereafter applied (after payment of any amounts payable to
the Agent pursuant to Section 17) in whole or in part against, all
or any part of the Obligations in such order as the Agent shall
elect. Any surplus of such cash or cash proceeds held by the Agent
and remaining after payment in full of all the Obligations shall
be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.
(h) If at any time when the Agent shall determine
to exercise its right to sell all or any part of the Pledged Stock
Collateral pursuant to this Section 16, such Pledged Stock
Collateral or the part thereof to be sold shall not be effectively
registered under the Securities Act of 1933, as amended, and as
from time to time in effect, and the rules and regulations
thereunder (the "Securities Act"), the Agent is hereby expressly
authorized to sell such Pledged Stock Collateral or such part
thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable in
order that such sale may legally be effected without such
registration. Without limiting the generality of the foregoing, in
any such event the Agent, in compliance with applicable securities
laws, (a) may proceed to make such private sale notwithstanding
that a registration statement for the purpose of registering such
Pledged Stock Collateral or such part thereof shall have been
filed under such Securities Act, (b) may approach and negotiate
with a restricted number of potential purchasers to effect such
sale and (c) may restrict such sale to purchasers as to their
number, nature of business and investment intention including
without limitation to purchasers each of whom will represent and
agree to the satisfaction of the Agent that such purchaser is
purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Pledged Stock Collateral,
or part thereof, it being understood that the Agent may cause or
require the Grantor, and the Grantor hereby agrees upon the
written request of the Agent, to cause (i) a legend or legends to
be placed on the certificates to be delivered to such purchasers
to the effect that the Pledged Stock Collateral represented
thereby have not been registered under the Securities Act and
setting forth or referring to restrictions on the transferability
of such securities; and (ii) the issuance of stop transfer
instructions to such Issuer's transfer agent, if any, with respect
to the Pledged Stock Collateral, or, if such Issuer transfers its
own securities, a notation in the appropriate records of such
Issuer. In the event of any such sale, the Grantor does hereby
consent and agree that the Agent shall incur no responsibility or
liability for selling all or any part of the Pledged Stock
Collateral at a price which the Agent may deem reasonable under
the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were
public and deferred until after registration as aforesaid.
(i) Until the payment in full in cash and
performance of all Obligations, the expiration or cancellation of
all of the Letters of Credit and the termination of the Commitment
and at any time when an Event of Default has occurred and is
continuing: (i) the Grantor will perform any and all reasonable
actions requested by the Agent to enforce the Agent's security
interest in the Inventory and all of the Agent's rights hereunder,
such as leasing warehouses to the Agent or its designee, placing
and maintaining signs, appointing custodians, transferring
Inventory to warehouses, and delivering to the Agent warehouse
receipts and documents of title in the
17
Agent's name; (ii) if any
Inventory is in the possession of control of any of the Grantor's
agents, contractors or processors or any other third party, the
Grantor will notify the Agent thereof and will notify such agents,
contractors or processors or third party of the Agent's security
interest therein and, upon request, instruct them to hold all such
Inventory for the Agent's and the Grantor's account, as their
interests may appear, and subject to the Agent's instructions;
(iii) the Agent shall have the right to hold all Inventory subject
to the security interest granted hereunder; and (iv) the Agent
shall have the right to take possession of the Inventory or any
part thereof and to maintain such possession on the Grantor's
premises or to remove any or all of the Inventory to such other
place or places as the Agent desires in its sole discretion. If
the Agent exercises its right to take possession of the Inventory,
the Grantor, upon the Agent's demand, will assemble the Inventory
and make it available to the Agent at the Grantor's premises at
which it is located.
SECTION 17. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Agent from and against
any and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities directly arising from the Agent's own gross
negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Agent may
incur in connection with (i) the administration of this Agreement,(ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Agent hereunder or (iv) the failure by the Grantor
to perform or observe any of the provisions hereof.
(c) The Grantor assumes all responsibility and liability
arising from the use of the Trademarks, Patents and Copyrights, and the Grantor
hereby indemnifies and holds the Agent harmless from and against any claim,
suit, loss, damage or expense (including reasonable attorneys' fees) arising out
of any alleged defect in any product manufactured, promoted or sold by the
Grantor in connection with any Trademark or out of the manufacture, promotion,
labelling, sale or advertisement of any such product by the Grantor except as
the same may have resulted from the gross negligence or willful misconduct of
the Agent.
(d) The Grantor agrees that the Agent does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any Obligations to be performed under or with respect to any such agreement or
contract by the Grantor, and except as the same may have resulted from the gross
negligence or willful misconduct of the Agent, the Grantor agrees to indemnify
and hold the Agent harmless with respect to any and all claims by any person
relating thereto.
SECTION 18. Security Interest Absolute. All rights of the Agent and
security interests hereunder, and all Obligations of the Grantor hereunder,
shall be absolute and unconditional,
18
irrespective of any circumstance which might constitute a defense available
to, or a discharge of, any guarantor or other obligor in respect of the
Obligations.
SECTION 19. Amendments; Etc. No amendment or waiver of any provision of
this Agreement, nor any consent to any departure by the Grantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
party against whom enforcement is sought, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 20. Louisiana Remedies. For purposes of executory process under
applicable Louisiana law (and only for such purposes), upon the occurrence and
during the continuance of an Event of Default, the Grantor hereby acknowledges
the indebtedness owed under the Obligations, CONFESSES JUDGMENT thereon and
consents that judgment be rendered and signed, whether during the court's term
or during vacation, in favor of the Agent, for the benefit of the Lenders, the
Fronting Banks and the Underwriters, for the full amount of the Obligations.
Upon the occurrence of an Event of Default, and in addition to all of its
rights, powers and remedies under this Agreement and applicable law, the Agent
may, at its option, cause all or any part of the Collateral located in Louisiana
(the "Louisiana Collateral") to be seized and sold under executory process or
under writ of fieri facias issued in execution of an ordinary judgment obtained
upon the Obligations, without appraisement to the highest bidder, for cash or
under such terms as the Agent deems acceptable. The Grantor hereby waives all
and every appraisement of the Louisiana Collateral and waives and renounces the
benefit of appraisement of the Louisiana Collateral seized and sold under
executory or other legal process. The Grantor agrees to waive, and does hereby
specifically waive:
(1) the benefit of appraisement provided for in
Articles 2332, 2336, 2723 and 2724,
Louisiana Code of Civil Procedure, and all
other laws conferring such benefits;
(2) the demand and three days delay accorded by
Articles 2639 and 2721, Louisiana Code of
Civil Procedure;
(3) the notice of seizure required by Articles
2293 and 2721, Louisiana Code of Civil
Procedure;
(4) the three days delay accorded by Articles
2331 and 2722, Louisiana Code of Civil
Procedure;
(5) the benefit of the other provisions of
Articles 2331, 2722 and 2723, Louisiana
Code of Civil Procedure;
(6) the benefit of the provisions of any other
articles of the Louisiana Code of Civil
Procedure not specifically mentioned above;
and
(7) all rights of division and discussion with
respect to the Obligations.
Pursuant to the authority contained in La.R.S. 9:5136 through 9:5140.1, the
Grantor and the Agent
19
do hereby expressly designate the Agent or its designee to
be keeper or receiver ("Keeper") for the benefit of the Agent or any assignee of
the Agent, such designation to take effect immediately upon any seizure of any
of the Louisiana Collateral under writ of executory process or under writ of
sequestration or fieri facias as an incident to an action brought by the Agent.
It is hereby agreed that the Keeper shall be entitled to receive as
compensation, in excess of its reasonable costs and expenses incurred in the
administration or preservation of the Louisiana Collateral, an amount equal to
the lesser of $200 per day or four percent of the gross revenues of the
Louisiana Collateral and the payment of such fees shall be secured by the
security interest in the Louisiana Collateral granted in this Agreement. The
designation of Keeper made herein shall not be deemed to require Mortgagee to
provoke the appointment of a Keeper.
SECTION 21. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and shall be given in accordance with
the applicable provisions of the Credit Agreement.
SECTION 22. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the payment and performance in full of the Obligations,
the expiration or cancellation of all of the Letters of Credit and the
termination of the Commitment, (ii) be binding upon the Grantor, its successors
and assigns and (iii) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Agent and each of the Lenders, the Fronting
Banks and the Underwriters and their respective successors, transferees and
assigns. Upon the payment and performance in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Grantor subject to any existing liens, security
interests or encumbrances on such Collateral. Upon any such termination, the
Agent will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
SECTION 23. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York and by Federal law (including,
without limitation, the Bankruptcy Code) to the extent the same has pre-empted
the law of the State of New York or such other jurisdiction.
SECTION 24. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
IN WITNESS WHEREOF, the Grantor and the Agent have caused this Security
and Pledge Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.
GRANTOR:
20
PAYLESS CASHWAYS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------
Title: Senior Vice President
AGENT:
CANADIAN IMPERIAL BANK OF COMMERCE,
as Agent
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Title: Assistant General Manager
