SUBSIDIARY TRADEMARK SECURITY AGREEMENT
This SUBSIDIARY TRADEMARK SECURITY AGREEMENT (this "AGREEMENT") is
dated as of April 21, 1998 and entered into by and between [SUBSIDIARY], a
____________________ corporation ("GRANTOR"), and XXXXX FARGO BANK, N.A., as
administrative agent for and representative of (in such capacity herein called
"SECURED PARTY") the financial institutions ("LENDERS") party to the Credit
Agreement referred to below and any Interest Rate Exchangers (as hereinafter
defined).
PRELIMINARY STATEMENTS
A. Diamond Brands Operating Corp., a Delaware corporation
("COMPANY"), has entered into that certain Credit Agreement dated as of April
21, 1998 with DLJ Capital Funding, Inc., as Syndication Agent, Secured Party,
Xxxxxx Xxxxxxx Senior Funding Inc., as Documentation Agent, and Lenders (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined).
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with or one or more Lenders (in such
capacity, collectively, "INTEREST RATE EXCHANGERS").
C. Grantor has executed and delivered a Subsidiary Guaranty dated as
of April 21, 1998 (said Subsidiary Guaranty, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "SUBSIDIARY
GUARANTY") in favor of Secured Party for the benefit of Lenders and Interest
Rate Exchangers, pursuant to which Grantor has guarantied the prompt payment and
performance when due of all obligations of Company under the Credit Agreement
and under any Lender Interest Rate Agreements.
D. Grantor owns and uses in its business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "TRADEMARKS").
E. Secured Party desires Grantor to assign and grant to it a lien on
and security interest in all of Grantor's existing and future Trademarks, all
registrations that have been or may hereafter be issued or applied for thereon
in the United States and any state
thereof and in foreign countries (the "REGISTRATIONS"), all common law and other
rights in and to the Trademarks in the United States and any state thereof and
in foreign countries (the "TRADEMARK RIGHTS"), all goodwill of Grantor's
business symbolized by the Trademarks and associated therewith, including
without limitation the documents and things described in Section 1(b) (the
"ASSOCIATED GOODWILL"), and all proceeds of the Trademarks, the Registrations,
the Trademark Rights and the Associated Goodwill, and Grantor agrees to assign
and grant to Secured Party a secured and protected interest in the Trademarks,
the Registrations, the Trademark Rights, the Associated Goodwill and all the
proceeds thereof as provided herein.
F. Pursuant to the Subsidiary Security Agreement, Grantor has
assigned and granted to Secured Party a lien on and security interest in, among
other assets, all of Grantor's equipment, inventory, accounts and general
intangibles relating to the products and services sold or delivered under or in
connection with the Trademarks such that, upon the occurrence and during the
continuation of an Event of Default, Secured Party would be able to exercise its
remedies consistent with the Subsidiary Security Agreement, this Agreement and
applicable law to foreclose upon Grantor's business and use the Trademarks, the
Registrations and the Trademark Rights in conjunction with the continued
operation of such business, maintaining substantially the same product and
service specifications and quality as maintained by Grantor, and benefit from
the Associated Goodwill.
G. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have assigned and
granted the security interests and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into Lender Interest
Rate Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantor hereby agrees with Secured
Party as follows:
SECTION 1. ASSIGNMENT AND GRANT OF SECURITY. Grantor hereby assigns
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to Secured Party, and hereby grants to Secured Party a security interest in, all
of Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) each of the Trademarks and rights and interests in Trademarks
that are presently, or in the future may be, owned, held (whether pursuant to a
license or otherwise) or used by Grantor, in whole or in part (including,
without limitation, the Trademarks specifically identified in Schedule A annexed
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hereto, as the same may be amended pursuant hereto from time to time), and
including all Trademark Rights with respect thereto and all federal, state and
foreign Registrations therefor heretofore or hereafter granted or applied for,
the right (but not the obligation) to register claims under any state or federal
trademark law or regulation or any trademark law or regulation of any foreign
country and to apply for,
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renew and extend the Trademarks, Registrations and Trademark Rights, the right
(but not the obligation) to xxx or bring opposition or cancellation proceedings
in the name of Grantor or in the name of Secured Party or otherwise for past,
present and future infringements of the Trademarks, Registrations or Trademark
Rights and all rights (but not obligations) corresponding thereto in the United
States and any foreign country, and the Associated Goodwill; it being understood
that the rights and interests included herein shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor of
Grantor pertaining to any Trademarks, Registrations or Trademark Rights
presently or in the future owned, held or used by third parties but, in the case
of third parties which are not Affiliates of Grantor, only to the extent
permitted by such licensing or other contracts or otherwise permitted by
applicable law and, if not so permitted under any such contracts and applicable
law, only with the consent of such third parties;
(b) the following documents and things in Grantor's possession, or
subject to Grantor's right to possession, related to (Y) the production, sale
and delivery by Grantor, or by any Affiliate, licensee or subcontractor of
Grantor, of products or services sold or delivered by or under the authority of
Grantor in connection with the Trademarks, Registrations or Trademark Rights
(which products and services shall, for purposes of this Agreement, be deemed to
include, without limitation, products and services sold or delivered pursuant to
merchandising operations utilizing any Trademarks, Registrations or Trademark
Rights); or (Z) any retail or other merchandising operations conducted under the
name of or in connection with the Trademarks, Registrations or Trademark Rights
by Grantor or any Affiliate, licensee or subcontractor of Grantor:
(i) all lists and ancillary documents that identify and
describe any of Grantor's customers, or those of its Affiliates, licensees
or subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including without
limitation any lists and ancillary documents that contain a customer's name
and address, the name and address of any of its warehouses, branches or
other places of business, the identity of the Person or Persons having the
principal responsibility on a customer's behalf for ordering products or
services of the kind supplied by Grantor, or the credit, payment, discount,
delivery or other sale terms applicable to such customer, together with
information setting forth the total purchases, by brand, product, service,
style, size or other criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or delivery
of products and services sold or delivered under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any and all
materials, components and services used in the production of products and
services sold or delivered under or in connection with the Trademarks or
Trademark Rights; and
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(iv) all documents constituting or concerning the then current or
proposed advertising and promotion by Grantor or its Affiliates, licensees
or subcontractors of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights including, without
limitation, all documents which reveal the media used or to be used and the
cost for all such advertising conducted within the described period or
planned for such products and services;
(c) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(d) to the extent not included in the foregoing clauses (a) - (c),
all general intangibles relating to the Collateral; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
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Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Subsidiary Guaranty, the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender or
Interest Rate Exchanger as a preference, fraudulent transfer or otherwise (all
such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
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SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
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contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
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warrants as follows:
(a) Description of Collateral. A true and complete list of all
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Trademarks, Registrations and Trademark Rights owned, held (whether pursuant to
a license or otherwise) or used by Grantor, in whole or in part, as of the date
of this Agreement is set forth in Schedule A annexed hereto. Each Trademark,
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Registration or Trademark Right designated on Schedule A annexed hereto as a
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Material Trademark Property, each other Trademark, Registration or Trademark
Right that uses or incorporates the name "_____________" or any other
identifiers or symbols derived from or associated with the name
"[_____________]" hereafter arising or otherwise owned, held or used by Grantor,
and each other Trademark, Registration or Trademark Right hereafter arising or
otherwise owned, held or used by Grantor is referred to herein as a "MATERIAL
TRADEMARK PROPERTY".
(b) Validity and Enforceability of Collateral. Each Material
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Trademark Property is valid, subsisting and enforceable. As of the Closing Date,
Grantor is not aware of any pending or threatened claim by any third party that
any Material Trademark Property is invalid or unenforceable or that the use of
any Material Trademark Property violates the rights of any third person or of
any basis for any such claim, and there is no such pending or, to the knowledge
of Grantor, threatened claim that could reasonably be expected to have a
Material Adverse Effect.
(c) Ownership of Collateral. Except for the security interest
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assigned and created by this Agreement, Grantor is the sole legal and beneficial
owner of the entire right, title and interest in and to each Material Trademark
Property, free and clear of any Lien other than Liens of mechanics, materialmen,
attorneys and other similar liens imposed by law in the ordinary course of
business in connection with the establishment, creation or application for
Registration of any Trademarks, Registrations or Trademark Rights for sums not
yet delinquent or being contested in good faith (such Liens being referred to
herein as "PERMITTED TRADEMARK LIENS"). Except such as may have been filed in
favor of Secured Party relating to this Agreement, no effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office, including the United
States Patent and Trademark Office.
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(d) Office Locations; Other Names. The chief place of business, the
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chief executive office and the office where Grantor keeps its records regarding
the Collateral is, and has been for the four month period preceding the date
hereof, located at ___________________________________. Grantor has not in the
past done, and does not now do, business under any other name (including any
trade-name or fictitious business name).
(e) Governmental Authorizations. No authorization, approval or other
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action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the assignment and grant by Grantor
of the security interest created hereby, (ii) the execution, delivery or
performance of this Agreement by Grantor, or (iii) the perfection or exercise by
Secured Party of its rights and remedies hereunder (except as may have been
taken by or at the direction of Grantor).
(f) Perfection. This Agreement, together with the filing of a
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financing statement describing the Collateral with the Secretary of State of the
State of ______________ and the recording of this Agreement with the United
States Patent and Trademark Office, which will be made, assigns and creates a
valid, perfected and First Priority security interest in the Collateral (subject
only to Permitted Trademark Liens), securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been or will be duly made or taken.
(g) Other Information. All information heretofore, herein or
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hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND
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TRADEMARK RIGHTS; CERTAIN INSPECTION RIGHTS.
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(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest
assigned or granted or purported to be assigned or granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
Grantor will: (i) at the request of Secured Party, xxxx conspicuously each of
its records pertaining to the Collateral with a legend, in form and substance
satisfactory to Secured Party, indicating that such Collateral is subject to the
security interest granted hereby, (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, (iii) use its best efforts to obtain any necessary consents of
third parties to the assignment and perfection of a security interest to Secured
Party with respect to any Collateral, (iv) subject to the terms of the Credit
Agreement, at any reasonable
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time and upon request by Secured Party, exhibit the Collateral to and allow
inspection of the Collateral by Secured Party, or persons designated by Secured
Party, and (v) at Secured Party's request, appear in and defend any action or
proceeding that may affect Grantor's title to or Secured Party's security
interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party 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 Grantor. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining Grantor's approval of or signature to such modification by
amending Schedule A annexed hereto to include reference to any right, title or
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interest in any existing Trademark, Registration or Trademark Right or any
Trademark, Registration or Trademark Right acquired or developed by Grantor
after the execution hereof or to delete any reference to any right, title or
interest in any Trademark, Registration or Trademark Right in which Grantor no
longer has or claims any right, title or interest.
(d) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
(e) If Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, the provisions of this Agreement shall
automatically apply thereto. Grantor shall promptly notify Secured Party in
writing of any rights to any new Trademarks or Trademark Rights acquired by
Grantor after the date hereof and of any Registrations issued or applications
for Registration made after the date hereof, which notice shall state whether
such Trademark, Registration or Trademark Right constitutes a Material Trademark
Property. Concurrently with the filing of an application for Registration for
any Trademark, Grantor shall execute, deliver and record in all places where
this Agreement is recorded an appropriate Trademark Security Agreement,
substantially in the form hereof, with appropriate insertions, or an amendment
to this Agreement, in form and substance satisfactory to Secured Party, pursuant
to which Grantor shall assign and grant a security interest to the extent of its
interest in such Registration as provided herein to Secured Party unless so
doing would, in the reasonable judgment of Grantor, after due inquiry, result in
the grant of a Registration in the name of Secured Party, in which event Grantor
shall give written notice to Secured Party as soon as reasonably practicable and
the filing shall instead be undertaken as soon as practicable but in no case
later than immediately following the grant of the Registration.
(f) Grantor hereby grants to Secured Party and its employees,
representatives and agents the right to visit Grantor's and any of its
Affiliate's or subcontractor's plants, facilities and other places of business
that are utilized in connection
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with the manufacture, production, inspection, storage or sale of products and
services sold or delivered under any of the Trademarks, Registrations or
Trademark Rights (or which were so utilized during the prior six month period),
and to inspect the quality control and all other records relating thereto upon
reasonable notice to Grantor and as often as may be reasonably requested.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
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(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business or chief executive office or the office where
Grantor keeps its records regarding the Collateral;
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent permitted under the Credit Agreement;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
(f) except for Permitted Trademark Liens and the security interest
assigned and created by this Agreement, not create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral and
at all times keep at least one complete set of its records concerning
substantially all of the Trademarks, Registrations and Trademark Rights at its
chief executive office or principal place of business;
(h) not permit the inclusion in any contract to which it becomes a
party of any provision that could or might in any way conflict with this
Agreement or impair or prevent the assignment and creation of a security
interest in Grantor's rights and interests in any property included within the
definitions of any Trademarks, Registrations, Trademark Rights and Associated
Goodwill;
(i) take all steps necessary to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or in
connection with the Trademarks
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and Trademark Rights, including without limitation entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents;
(j) use proper statutory notice in connection with its use of each
Material Trademark Property to the extent reasonably necessary for the
protection of such Material Trademark Property;
(k) use consistent standards of high quality (which may be consistent
with Grantor's past practices) in the manufacture, sale and delivery of products
and services sold or delivered under or in connection with the Trademarks,
Registrations and Trademark Rights, including, to the extent applicable, in the
operation and maintenance of its merchandising operations; and
(l) upon any officer of Grantor obtaining knowledge thereof, promptly
notify Secured Party in writing of any event that may materially and adversely
affect the value of the Collateral or any portion thereof, the ability of
Grantor or Secured Party to dispose of the Collateral or any portion thereof, or
the rights and remedies of Secured Party in relation thereto, including without
limitation the levy of any legal process against the Collateral or any portion
thereof.
SECTION 7. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
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otherwise provided in this Section 7, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor in respect of the
Collateral or any portion thereof. In connection with such collections, Grantor
may take (and, at Secured Party's direction, shall take) such action as Grantor
or Secured Party may deem necessary or advisable to enforce collection of such
amounts; provided, however, that Secured Party shall have the right at any time,
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upon the occurrence and during the continuation of an Event of Default and upon
written notice to Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest assigned
and created hereby, and to direct such obligors to make payment of all such
amounts directly to Secured Party, and, upon such notification and at the
expense of Grantor, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
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(i) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of amounts due to Grantor in respect of the Collateral or
any portion thereof 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 or delivered 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 Section 14, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any such amount or release wholly or partly
any obligor with respect thereto or allow any credit or discount thereon.
SECTION 8. TRADEMARK APPLICATIONS AND LITIGATION.
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(a) Grantor shall have the duty diligently to prosecute any trademark
application relating to any Material Trademark Property that is pending as of
the date of this Agreement, to make federal application on any existing or
future registerable but unregistered Material Trademark Property (whenever it is
commercially reasonable in the reasonable judgment of Grantor to do so), and to
file and prosecute opposition and cancellation proceedings, renew Registrations
and do any and all acts which are necessary or desirable to preserve and
maintain all rights in all Material Trademark Properties. Any expenses incurred
in connection therewith shall be borne solely by Grantor. Grantor shall not
abandon any Material Trademark Property.
(b) Except as provided in Section 8(d), Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at Grantor's expense, all reasonable and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(c) Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any adverse determination in,
any proceeding (whether in the United States Patent and Trademark Office or any
federal, state, local or foreign court) described in Section 8(a) or 8(b) or
regarding Grantor's claim of ownership in or right to use any material
Trademark, material Registration or material Trademark Right, its right to
register the same, or its right to keep and maintain such Registration. Grantor
shall provide to Secured Party any information with respect thereto requested by
Secured Party.
(d) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Secured Party or otherwise, to enforce any Trademark, Registration,
Trademark Right, Associated Goodwill and any license thereunder, in which event
Grantor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party as provided in Section 15 in connection with the exercise of its
rights under this Section 8. To the extent that Secured Party shall elect not to
bring suit to enforce any Trademark, Registration, Trademark Right, Associated
Goodwill or any license thereunder as provided in this Section 8(d), Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Trademarks, Registrations,
Trademark Rights or Associated Goodwill by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
SECTION 9. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent
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that Grantor is permitted to license the Collateral, Secured Party shall enter
into a non-disturbance
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agreement or other similar arrangement, at Grantor's request and expense, with
Grantor and any licensee of any Collateral permitted hereunder in form and
substance satisfactory to Secured Party pursuant to which (a) Secured Party
shall agree not to disturb or interfere with such licensee's rights under its
license agreement with Grantor so long as such licensee is not in default
thereunder and (b) such licensee shall acknowledge and agree that the Collateral
licensed to it is subject to the security interest assigned and created in favor
of Secured Party and the other terms of this Agreement.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
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irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) while an Event of Default exists, to endorse Grantor's name on
all applications, documents, papers and instruments necessary for Secured Party
in the use or maintenance of the Collateral;
(b) while an Event of Default exists, to ask for, demand, collect,
xxx for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral;
(c) while an Event of Default exists, to receive, endorse and collect
any drafts or other instruments, documents and chattel paper in connection with
clause (b) above;
(d) while an Event of Default exists, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral;
(e) while an Event of Default exists, to pay or discharge taxes or
Liens (other than Liens permitted under this Agreement or the Credit Agreement)
levied or placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of Grantor to Secured Party, due and payable
immediately without demand; and
(f) upon the occurrence and during the continuation of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 13(b), (ii) to grant or issue an
exclusive or non-exclusive license to the Collateral or any portion thereof to
any Person, and (iii) otherwise generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Grantor's expense, at any
time or from
11
time to time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
SECTION 11. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 15.
SECTION 12. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party 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. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 13. REMEDIES. If any Event of Default shall have occurred and
--------
be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iv) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same for the
purpose of taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) exercise any and all rights and remedies
of Grantor under or in connection with the contracts related to the Collateral
or otherwise in respect of the Collateral, including without limitation any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, such contracts, and (vi) 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 Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. Secured Party or any Lender or Interest Rate Exchanger
may be the purchaser of any or all of the Collateral at any such sale and
12
Secured Party, as administrative agent for and representative of Lenders (but
not any Lender or Lenders in its or their respective individual capacities
unless Requisite Lenders shall otherwise agree in writing), shall be entitled,
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Secured Party at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Grantor, and Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to 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. Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party 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. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Upon written demand from Secured Party, Grantor shall execute and
deliver to Secured Party an assignment or assignments of the Trademarks,
Registrations, Trademark Rights and the Associated Goodwill and such other
documents as are requested by Secured Party. Grantor agrees that such an
assignment and/or recording shall be applied to reduce the Secured Obligations
outstanding only to the extent that Secured Party (or any Lender or Interest
Rate Exchanger) receives cash proceeds in respect of the sale of, or other
realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured
Party, Grantor shall make available to Secured Party, to the extent within
Grantor's power and authority, such personnel in Grantor's employ on the date of
such Event of Default as Secured Party may reasonably designate, by name, title
or job responsibility, to permit Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by
Grantor under or in connection with the Trademarks, Registrations and Trademark
Rights, such persons to be available to perform their prior functions on Secured
Party's behalf and to be compensated by Secured Party at Grantor's expense on a
per diem, pro-rata basis consistent with the salary and benefit structure
applicable to each as of the date of such Event of Default.
13
SECTION 14. APPLICATION OF PROCEEDS. All proceeds received by Secured
-----------------------
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 2.4D of
the Credit Agreement.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party and each Lender and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
such Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all reasonable out-of-pocket costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party 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 Secured Party hereunder, or (iv) the failure
by Grantor to perform or observe any of the provisions hereof.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall assign and create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest assigned and granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination Secured Party
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 17. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking
14
any action (including the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
--------
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 11 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the holders of a majority of the aggregate notional amount
(or, with respect to any Lender Interest Rate Agreement that has been terminated
in accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this Section 17(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 17(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 18. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any
15
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
SECTION 19. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be given as provided in the Credit
Agreement. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 20. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 21. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 22. HEADINGS. Section and subsection 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 or be given any
substantive effect.
SECTION 23. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE 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. Unless otherwise defined herein or in the Credit Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN XXX XXXXX, XXXXXX XXX XXXX XX XXX XXXX. BY
16
EXECUTING AND DELIVERING THIS AGREEMENT, GRANTOR, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 19;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GRANTOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 24 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
SECTION 25. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 25
AND EXECUTED BY EACH
17
OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
SECTION 26. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
[GRANTOR]
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
XXXXX FARGO BANK, N.A.,
as Administrative Agent
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
Attention:
1
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
UNITED STATES
REGISTERED TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE
---------- ------------- ------------ ------------
2
STATE OF CALIFORNIA )
) SS.:
COUNTY OF ____________ )
On ___________, 19___, before me, ____________________, a Notary Public
in and for said State, personally appeared ____________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
3
SUBSIDIARY TRADEMARK SECURITY AGREEMENT
This SUBSIDIARY TRADEMARK SECURITY AGREEMENT (this "AGREEMENT") is
dated as of April 21, 1998 and entered into by and between EMPIRE CANDLE, INC.,
a Kansas corporation ("GRANTOR"), and XXXXX FARGO BANK, N.A., as administrative
agent for and representative of (in such capacity herein called "SECURED PARTY")
the financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Diamond Brands Operating Corp., a Delaware corporation
("COMPANY"), has entered into that certain Credit Agreement dated as of April
21, 1998 with DLJ Capital Funding, Inc., as Syndication Agent, Secured Party,
Xxxxxx Xxxxxxx Senior Funding Inc., as Documentation Agent, and Lenders (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined).
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with or one or more Lenders (in such capacity,
collectively, "INTEREST RATE EXCHANGERS").
C. Grantor has executed and delivered a Subsidiary Guaranty dated as
of April 21, 1998 (said Subsidiary Guaranty, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "SUBSIDIARY
GUARANTY") in favor of Secured Party for the benefit of Lenders and Interest
Rate Exchangers, pursuant to which Grantor has guarantied the prompt payment and
performance when due of all obligations of Company under the Credit Agreement
and under any Lender Interest Rate Agreements.
D. Grantor owns and uses in its business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "TRADEMARKS").
E. Secured Party desires Grantor to assign and grant to it a lien on
and security interest in all of Grantor's existing and future Trademarks, all
registrations that have been or may hereafter be issued or applied for thereon
in the United States and any state thereof and in foreign countries (the
"REGISTRATIONS"), all common law and other rights in and to the Trademarks in
the United States and any state thereof and in foreign countries (the "TRADEMARK
RIGHTS"), all goodwill of Grantor's business symbolized by the
1
Trademarks and associated therewith, including without limitation the documents
and things described in Section 1(b) (the "ASSOCIATED GOODWILL"), and all
proceeds of the Trademarks, the Registrations, the Trademark Rights and the
Associated Goodwill, and Grantor agrees to assign and grant to Secured Party a
secured and protected interest in the Trademarks, the Registrations, the
Trademark Rights, the Associated Goodwill and all the proceeds thereof as
provided herein.
F. Pursuant to the Subsidiary Security Agreement, Grantor has
assigned and granted to Secured Party a lien on and security interest in, among
other assets, all of Grantor's equipment, inventory, accounts and general
intangibles relating to the products and services sold or delivered under or in
connection with the Trademarks such that, upon the occurrence and during the
continuation of an Event of Default, Secured Party would be able to exercise its
remedies consistent with the Subsidiary Security Agreement, this Agreement and
applicable law to foreclose upon Grantor's business and use the Trademarks, the
Registrations and the Trademark Rights in conjunction with the continued
operation of such business, maintaining substantially the same product and
service specifications and quality as maintained by Grantor, and benefit from
the Associated Goodwill.
G. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantor shall have assigned and granted
the security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into Lender Interest Rate
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantor hereby agrees with Secured
Party as follows:
SECTION 1. ASSIGNMENT AND GRANT OF SECURITY. Grantor hereby assigns
--------------------------------
to Secured Party, and hereby grants to Secured Party a security interest in, all
of Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) each of the Trademarks and rights and interests in Trademarks that
are presently, or in the future may be, owned, held (whether pursuant to a
license or otherwise) or used by Grantor, in whole or in part (including,
without limitation, the Trademarks specifically identified in Schedule A annexed
----------
hereto, as the same may be amended pursuant hereto from time to time), and
including all Trademark Rights with respect thereto and all federal, state and
foreign Registrations therefor heretofore or hereafter granted or applied for,
the right (but not the obligation) to register claims under any state or federal
trademark law or regulation or any trademark law or regulation of any foreign
country and to apply for, renew and extend the Trademarks, Registrations and
Trademark Rights, the right (but not the obligation) to xxx or bring opposition
or cancellation proceedings in the name of Grantor or in the name of Secured
Party or otherwise for past, present and future
2
infringements of the Trademarks, Registrations or Trademark Rights and all
rights (but not obligations) corresponding thereto in the United States and any
foreign country, and the Associated Goodwill; it being understood that the
rights and interests included herein shall include, without limitation, all
rights and interests pursuant to licensing or other contracts in favor of
Grantor pertaining to any Trademarks, Registrations or Trademark Rights
presently or in the future owned, held or used by third parties but, in the case
of third parties which are not Affiliates of Grantor, only to the extent
permitted by such licensing or other contracts or otherwise permitted by
applicable law and, if not so permitted under any such contracts and applicable
law, only with the consent of such third parties;
(b) the following documents and things in Grantor's possession, or
subject to Grantor's right to possession, related to (Y) the production, sale
and delivery by Grantor, or by any Affiliate, licensee or subcontractor of
Grantor, of products or services sold or delivered by or under the authority of
Grantor in connection with the Trademarks, Registrations or Trademark Rights
(which products and services shall, for purposes of this Agreement, be deemed to
include, without limitation, products and services sold or delivered pursuant to
merchandising operations utilizing any Trademarks, Registrations or Trademark
Rights); or (Z) any retail or other merchandising operations conducted under the
name of or in connection with the Trademarks, Registrations or Trademark Rights
by Grantor or any Affiliate, licensee or subcontractor of Grantor:
(i) all lists and ancillary documents that identify and
describe any of Grantor's customers, or those of its Affiliates, licensees
or subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including without
limitation any lists and ancillary documents that contain a customer's name
and address, the name and address of any of its warehouses, branches or
other places of business, the identity of the Person or Persons having the
principal responsibility on a customer's behalf for ordering products or
services of the kind supplied by Grantor, or the credit, payment, discount,
delivery or other sale terms applicable to such customer, together with
information setting forth the total purchases, by brand, product, service,
style, size or other criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or delivery
of products and services sold or delivered under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any and all
materials, components and services used in the production of products and
services sold or delivered under or in connection with the Trademarks or
Trademark Rights; and
(iv) all documents constituting or concerning the then current
or proposed advertising and promotion by Grantor or its Affiliates,
licensees or
3
subcontractors of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights including, without
limitation, all documents which reveal the media used or to be used and the
cost for all such advertising conducted within the described period or
planned for such products and services;
(c) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(d) to the extent not included in the foregoing clauses (a) - (c), all
general intangibles relating to the Collateral; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
------------------------
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Subsidiary Guaranty, the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender or
Interest Rate Exchanger as a preference, fraudulent transfer or otherwise (all
such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
4
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Description of Collateral. A true and complete list of all
-------------------------
Trademarks, Registrations and Trademark Rights owned, held (whether pursuant to
a license or otherwise) or used by Grantor, in whole or in part, as of the date
of this Agreement is set forth in Schedule A annexed hereto. Each Trademark,
----------
Registration or Trademark Right designated on Schedule A annexed hereto as a
----------
Material Trademark Property, each other Trademark, Registration or Trademark
Right that uses or incorporates the name "Empire" or any other identifiers or
symbols derived from or associated with the name "Empire" hereafter arising or
otherwise owned, held or used by Grantor, and each other Trademark, Registration
or Trademark Right hereafter arising or otherwise owned, held or used by Grantor
is referred to herein as a "MATERIAL TRADEMARK PROPERTY".
(b) Validity and Enforceability of Collateral. Each Material
-----------------------------------------
Trademark Property is valid, subsisting and enforceable. As of the Closing Date,
Grantor is not aware of any pending or threatened claim by any third party that
any Material Trademark Property is invalid or unenforceable or that the use of
any Material Trademark Property violates the rights of any third person or of
any basis for any such claim, and there is no such pending or, to the knowledge
of Grantor, threatened claim that could reasonably be expected to have a
Material Adverse Effect.
(c) Ownership of Collateral. Except for the security interest
-----------------------
assigned and created by this Agreement, Grantor is the sole legal and beneficial
owner of the entire right, title and interest in and to each Material Trademark
Property, free and clear of any Lien other than Liens of mechanics, materialmen,
attorneys and other similar liens imposed by law in the ordinary course of
business in connection with the establishment, creation or application for
Registration of any Trademarks, Registrations or Trademark Rights for sums not
yet delinquent or being contested in good faith (such Liens being referred to
herein as "PERMITTED TRADEMARK LIENS"). Except such as may have been filed in
favor of Secured Party relating to this Agreement, no effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office, including the United
States Patent and Trademark Office.
5
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Collateral is, and has been for the four month period preceding the date
hereof, located at 0000 Xxxxxxx Xxxxxxxxxx, Xxxxxx Xxxx, Xxxxxx 00000. Grantor
has not in the past done, and does not now do, business under any other name
(including any trade-name or fictitious business name).
(e) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the assignment and grant by Grantor
of the security interest created hereby, (ii) the execution, delivery or
performance of this Agreement by Grantor, or (iii) the perfection or exercise by
Secured Party of its rights and remedies hereunder (except as may have been
taken by or at the direction of Grantor).
(f) Perfection. This Agreement, together with the filing of a
----------
financing statement describing the Collateral with the Secretary of State of the
State of Kansas, Missouri and Nevada and the recording of this Agreement with
the United States Patent and Trademark Office, which will be made, assigns and
creates a valid, perfected and First Priority security interest in the
Collateral (subject only to Permitted Trademark Liens), securing the payment of
the Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been or will be
duly made or taken.
(g) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND
-----------------------------------------------------
TRADEMARK RIGHTS; CERTAIN INSPECTION RIGHTS.
-------------------------------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest
assigned or granted or purported to be assigned or granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
Grantor will: (i) at the request of Secured Party, xxxx conspicuously each of
its records pertaining to the Collateral with a legend, in form and substance
satisfactory to Secured Party, indicating that such Collateral is subject to the
security interest granted hereby, (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, (iii) use its best efforts to obtain any necessary consents of
third parties to the assignment and perfection of a security interest to Secured
Party with respect to any Collateral, (iv) subject to the terms of the Credit
Agreement, at any
6
reasonable time and upon request by Secured Party, exhibit the Collateral to and
allow inspection of the Collateral by Secured Party, or persons designated by
Secured Party, and (v) at Secured Party's request, appear in and defend any
action or proceeding that may affect Grantor's title to or Secured Party's
security interest in all or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party 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 Grantor. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(c) Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining Grantor's approval of or signature to such modification by
amending Schedule A annexed hereto to include reference to any right, title or
----------
interest in any existing Trademark, Registration or Trademark Right or any
Trademark, Registration or Trademark Right acquired or developed by Grantor
after the execution hereof or to delete any reference to any right, title or
interest in any Trademark, Registration or Trademark Right in which Grantor no
longer has or claims any right, title or interest.
(d) Grantor will furnish to Secured Party from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
(e) If Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, the provisions of this Agreement shall
automatically apply thereto. Grantor shall promptly notify Secured Party in
writing of any rights to any new Trademarks or Trademark Rights acquired by
Grantor after the date hereof and of any Registrations issued or applications
for Registration made after the date hereof, which notice shall state whether
such Trademark, Registration or Trademark Right constitutes a Material Trademark
Property. Concurrently with the filing of an application for Registration for
any Trademark, Grantor shall execute, deliver and record in all places where
this Agreement is recorded an appropriate Trademark Security Agreement,
substantially in the form hereof, with appropriate insertions, or an amendment
to this Agreement, in form and substance satisfactory to Secured Party, pursuant
to which Grantor shall assign and grant a security interest to the extent of its
interest in such Registration as provided herein to Secured Party unless so
doing would, in the reasonable judgment of Grantor, after due inquiry, result in
the grant of a Registration in the name of Secured Party, in which event Grantor
shall give written notice to Secured Party as soon as reasonably practicable and
the filing shall instead be undertaken as soon as practicable but in no case
later than immediately following the grant of the Registration.
7
(f) Grantor hereby grants to Secured Party and its employees,
representatives and agents the right to visit Grantor's and any of its
Affiliate's or subcontractor's plants, facilities and other places of business
that are utilized in connection with the manufacture, production, inspection,
storage or sale of products and services sold or delivered under any of the
Trademarks, Registrations or Trademark Rights (or which were so utilized during
the prior six month period), and to inspect the quality control and all other
records relating thereto upon reasonable notice to Grantor and as often as may
be reasonably requested.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business or chief executive office or the office where
Grantor keeps its records regarding the Collateral;
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent permitted under the Credit Agreement;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
(f) except for Permitted Trademark Liens and the security interest
assigned and created by this Agreement, not create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral and
at all times keep at least one complete set of its records concerning
substantially all of the Trademarks, Registrations and Trademark Rights at its
chief executive office or principal place of business;
(h) not permit the inclusion in any contract to which it becomes a
party of any provision that could or might in any way conflict with this
Agreement or impair or prevent the assignment and creation of a security
interest in Grantor's rights and interests in any property included within the
definitions of any Trademarks, Registrations, Trademark Rights and Associated
Goodwill;
8
(i) take all steps necessary to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or in
connection with the Trademarks and Trademark Rights, including without
limitation entering into confidentiality agreements with employees and labeling
and restricting access to secret information and documents;
(j) use proper statutory notice in connection with its use of each
Material Trademark Property to the extent reasonably necessary for the
protection of such Material Trademark Property;
(k) use consistent standards of high quality (which may be consistent
with Grantor's past practices) in the manufacture, sale and delivery of products
and services sold or delivered under or in connection with the Trademarks,
Registrations and Trademark Rights, including, to the extent applicable, in the
operation and maintenance of its merchandising operations; and
(l) upon any officer of Grantor obtaining knowledge thereof, promptly
notify Secured Party in writing of any event that may materially and adversely
affect the value of the Collateral or any portion thereof, the ability of
Grantor or Secured Party to dispose of the Collateral or any portion thereof, or
the rights and remedies of Secured Party in relation thereto, including without
limitation the levy of any legal process against the Collateral or any portion
thereof.
SECTION 7. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
--------------------------------------------
otherwise provided in this Section 7, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor in respect of the
Collateral or any portion thereof. In connection with such collections, Grantor
may take (and, at Secured Party's direction, shall take) such action as Grantor
or Secured Party may deem necessary or advisable to enforce collection of such
amounts; provided, however, that Secured Party shall have the right at any time,
-------- -------
upon the occurrence and during the continuation of an Event of Default and upon
written notice to Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest assigned
and created hereby, and to direct such obligors to make payment of all such
amounts directly to Secured Party, and, upon such notification and at the
expense of Grantor, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
-------
(i) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of amounts due to Grantor in respect of the Collateral or
any portion thereof 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 or delivered 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 Section 14, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any such amount or release wholly or partly
any obligor with respect thereto or allow any credit or discount thereon.
9
SECTION 8. TRADEMARK APPLICATIONS AND LITIGATION.
-------------------------------------
(a) Grantor shall have the duty diligently to prosecute any trademark
application relating to any Material Trademark Property that is pending as of
the date of this Agreement, to make federal application on any existing or
future registerable but unregistered Material Trademark Property (whenever it is
commercially reasonable in the reasonable judgment of Grantor to do so), and to
file and prosecute opposition and cancellation proceedings, renew Registrations
and do any and all acts which are necessary or desirable to preserve and
maintain all rights in all Material Trademark Properties. Any expenses incurred
in connection therewith shall be borne solely by Grantor. Grantor shall not
abandon any Material Trademark Property.
(b) Except as provided in Section 8(d), Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at Grantor's expense, all reasonable and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(c) Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any adverse determination in,
any proceeding (whether in the United States Patent and Trademark Office or any
federal, state, local or foreign court) described in Section 8(a) or 8(b) or
regarding Grantor's claim of ownership in or right to use any material
Trademark, material Registration or material Trademark Right, its right to
register the same, or its right to keep and maintain such Registration. Grantor
shall provide to Secured Party any information with respect thereto requested by
Secured Party.
(d) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Secured Party or otherwise, to enforce any Trademark, Registration,
Trademark Right, Associated Goodwill and any license thereunder, in which event
Grantor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party as provided in Section 15 in connection with the exercise of its
rights under this Section 8. To the extent that Secured Party shall elect not to
bring suit to enforce any Trademark, Registration, Trademark Right, Associated
Goodwill or any license thereunder as provided in this Section 8(d), Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Trademarks, Registrations,
Trademark Rights or Associated Goodwill by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
10
SECTION 9. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent that
--------------------------------
Grantor is permitted to license the Collateral, Secured Party shall enter into a
non-disturbance agreement or other similar arrangement, at Grantor's request and
expense, with Grantor and any licensee of any Collateral permitted hereunder in
form and substance satisfactory to Secured Party pursuant to which (a) Secured
Party shall agree not to disturb or interfere with such licensee's rights under
its license agreement with Grantor so long as such licensee is not in default
thereunder and (b) such licensee shall acknowledge and agree that the Collateral
licensed to it is subject to the security interest assigned and created in favor
of Secured Party and the other terms of this Agreement.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) while an Event of Default exists, to endorse Grantor's name on all
applications, documents, papers and instruments necessary for Secured Party in
the use or maintenance of the Collateral;
(b) while an Event of Default exists, to ask for, demand, collect, xxx
for, recover, compound, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Collateral;
(c) while an Event of Default exists, to receive, endorse and collect
any drafts or other instruments, documents and chattel paper in connection with
clause (b) above;
(d) while an Event of Default exists, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral;
(e) while an Event of Default exists, to pay or discharge taxes or
Liens (other than Liens permitted under this Agreement or the Credit Agreement)
levied or placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of Grantor to Secured Party, due and payable
immediately without demand; and
(f) upon the occurrence and during the continuation of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 13(b), (ii) to grant or issue an
exclusive or non-exclusive license to the Collateral or any portion thereof to
any Person, and (iii) otherwise generally
11
to sell, transfer, pledge, 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 to do, at Secured Party's
option and Grantor's expense, at any time or from time to time, all acts and
things that Secured Party deems necessary to protect, preserve or realize upon
the Collateral and Secured Party's security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as Grantor might do.
SECTION 11. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 15.
SECTION 12. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party 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. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 13. REMEDIES. If any Event of Default shall have occurred and
--------
be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iv) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same for the
purpose of taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) exercise any and all rights and remedies
of Grantor under or in connection with the contracts related to the Collateral
or otherwise in respect of the Collateral, including without limitation any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, such contracts, and (vi) 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 Secured Party's offices or
elsewhere, for
12
cash, on credit or for future delivery, at such time or times and at such price
or prices and upon such other terms as Secured Party may deem commercially
reasonable. Secured Party or any Lender or Interest Rate Exchanger may be the
purchaser of any or all of the Collateral at any such sale and Secured Party, as
administrative agent for and representative of Lenders (but not any Lender or
Lenders in its or their respective individual capacities unless Requisite
Lenders shall otherwise agree in writing), shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Grantor, and Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to 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. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party 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. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Upon written demand from Secured Party, Grantor shall execute and
deliver to Secured Party an assignment or assignments of the Trademarks,
Registrations, Trademark Rights and the Associated Goodwill and such other
documents as are requested by Secured Party. Grantor agrees that such an
assignment and/or recording shall be applied to reduce the Secured Obligations
outstanding only to the extent that Secured Party (or any Lender or Interest
Rate Exchanger) receives cash proceeds in respect of the sale of, or other
realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured Party,
Grantor shall make available to Secured Party, to the extent within Grantor's
power and authority, such personnel in Grantor's employ on the date of such
Event of Default as Secured Party may reasonably designate, by name, title or
job responsibility, to permit Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by
Grantor under or in connection with the Trademarks, Registrations and Trademark
Rights, such persons to be available to perform their prior functions on Secured
Party's behalf and to be compensated by Secured Party at Grantor's
13
expense on a per diem, pro-rata basis consistent with the salary and benefit
structure applicable to each as of the date of such Event of Default.
SECTION 14. APPLICATION OF PROCEEDS. All proceeds received by Secured
-----------------------
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied as provided in subsection 2.4D of
the Credit Agreement.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party and each Lender and each
Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
such Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all reasonable out-of-pocket costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party 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 Secured Party hereunder, or (iv) the failure
by Grantor to perform or observe any of the provisions hereof.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall assign and create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest assigned and granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination Secured Party
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 17. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
14
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Collateral), solely in accordance with this
Agreement and the Credit Agreement; provided that Secured Party shall exercise,
--------
or refrain from exercising, any remedies provided for in Section 11 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the holders of a majority of the aggregate notional amount (or, with
respect to any Lender Interest Rate Agreement that has been terminated in
accordance with its terms, the amount then due and payable (exclusive of
expenses and similar payments but including any early termination payments then
due) under such Lender Interest Rate Agreement) under all Lender Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of
this Section 17(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights and remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 17(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
15
SECTION 18. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 19. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be given as provided in the Credit
Agreement. For the purposes hereof, the address of each party hereto shall be
as set forth under such party's name on the signature pages hereof or, as to
either party, such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 20. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 21. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 22. HEADINGS. Section and subsection 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 or be given any
substantive effect.
SECTION 23. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE 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. Unless otherwise defined herein or in the Credit Agreement, terms
used in Articles 8 and 9 of the Uniform Commercial Code in the State of New York
are used herein as therein defined.
16
SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN XXX XXXXX, XXXXXX XXX XXXX XX XXX XXXX. BY
EXECUTING AND DELIVERING THIS AGREEMENT, GRANTOR, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 19;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GRANTOR IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 24 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
SECTION 25. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party further warrant and represent that
17
each has reviewed this waiver with its legal counsel, and that each knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 25 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
SECTION 26. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
18
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
EMPIRE CANDLE, INC.
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
XXXXX FARGO BANK, N.A.,
as Administrative Agent
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxx
1
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
UNITED STATES
REGISTERED TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE
---------- ------------- ------------ ------------
2
STATE OF CALIFORNIA )
) SS.:
COUNTY OF ____________ )
On ___________, 19___, before me, ____________________, a Notary Public
in and for said State, personally appeared ____________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
3
SUBSIDIARY TRADEMARK SECURITY AGREEMENT
This SUBSIDIARY TRADEMARK SECURITY AGREEMENT (this "AGREEMENT") is
dated as of April 21, 1998 and entered into by and between XXXXXXX INC.a Maine
corporation ("GRANTOR"), and XXXXX FARGO BANK, N.A., as administrative agent for
and representative of (in such capacity herein called "SECURED PARTY") the
financial institutions ("LENDERS") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Diamond Brands Operating Corp., a Delaware corporation
("COMPANY"), has entered into that certain Credit Agreement dated as of April
21, 1998 with DLJ Capital Funding, Inc., as Syndication Agent, Secured Party,
Xxxxxx Xxxxxxx Senior Funding Inc., as Documentation Agent, and Lenders (said
Credit Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT"; capitalized terms
defined therein and not otherwise defined herein being used herein as therein
defined).
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"LENDER INTEREST RATE AGREEMENTS") with or one or more Lenders (in such
capacity, collectively, "INTEREST RATE EXCHANGERS").
C. Grantor has executed and delivered a Subsidiary Guaranty dated as
of April 21, 1998 (said Subsidiary Guaranty, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "SUBSIDIARY
GUARANTY") in favor of Secured Party for the benefit of Lenders and Interest
Rate Exchangers, pursuant to which Grantor has guarantied the prompt payment and
performance when due of all obligations of Company under the Credit Agreement
and under any Lender Interest Rate Agreements.
D. Grantor owns and uses in its business, and will in the future
adopt and so use, various intangible assets, including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto (collectively,
the "TRADEMARKS").
E. Secured Party desires Grantor to assign and grant to it a lien on
and security interest in all of Grantor's existing and future Trademarks, all
registrations that have been or may hereafter be issued or applied for thereon
in the United States and any state thereof and in foreign countries (the
"REGISTRATIONS"), all common law and other rights in and to the Trademarks in
the United States and any state thereof and in foreign countries (the "TRADEMARK
RIGHTS"), all goodwill of Grantor's business symbolized by the
1
Trademarks and associated therewith, including without limitation the documents
and things described in Section 1(b) (the "ASSOCIATED GOODWILL"), and all
proceeds of the Trademarks, the Registrations, the Trademark Rights and the
Associated Goodwill, and Grantor agrees to assign and grant to Secured Party a
secured and protected interest in the Trademarks, the Registrations, the
Trademark Rights, the Associated Goodwill and all the proceeds thereof as
provided herein.
F. Pursuant to the Subsidiary Security Agreement, Grantor has
assigned and granted to Secured Party a lien on and security interest in, among
other assets, all of Grantor's equipment, inventory, accounts and general
intangibles relating to the products and services sold or delivered under or in
connection with the Trademarks such that, upon the occurrence and during the
continuation of an Event of Default, Secured Party would be able to exercise its
remedies consistent with the Subsidiary Security Agreement, this Agreement and
applicable law to foreclose upon Grantor's business and use the Trademarks, the
Registrations and the Trademark Rights in conjunction with the continued
operation of such business, maintaining substantially the same product and
service specifications and quality as maintained by Grantor, and benefit from
the Associated Goodwill.
G. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have assigned and
granted the security interests and undertaken the obligations contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into Lender Interest
Rate Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantor hereby agrees with Secured
Party as follows:
SECTION 1. ASSIGNMENT AND GRANT OF SECURITY. Grantor hereby assigns
--------------------------------
to Secured Party, and hereby grants to Secured Party a security interest in, all
of Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "COLLATERAL"):
(a) each of the Trademarks and rights and interests in Trademarks
that are presently, or in the future may be, owned, held (whether pursuant to a
license or otherwise) or used by Grantor, in whole or in part (including,
without limitation, the Trademarks specifically identified in Schedule A annexed
----------
hereto, as the same may be amended pursuant hereto from time to time), and
including all Trademark Rights with respect thereto and all federal, state and
foreign Registrations therefor heretofore or hereafter granted or applied for,
the right (but not the obligation) to register claims under any state or federal
trademark law or regulation or any trademark law or regulation of any foreign
country and to apply for, renew and extend the Trademarks, Registrations and
Trademark Rights, the right (but not the obligation) to xxx or bring opposition
or cancellation proceedings in the name of Grantor or in the name of Secured
Party or otherwise for past, present and future
2
infringements of the Trademarks, Registrations or Trademark Rights and all
rights (but not obligations) corresponding thereto in the United States and any
foreign country, and the Associated Goodwill; it being understood that the
rights and interests included herein shall include, without limitation, all
rights and interests pursuant to licensing or other contracts in favor of
Grantor pertaining to any Trademarks, Registrations or Trademark Rights
presently or in the future owned, held or used by third parties but, in the case
of third parties which are not Affiliates of Grantor, only to the extent
permitted by such licensing or other contracts or otherwise permitted by
applicable law and, if not so permitted under any such contracts and applicable
law, only with the consent of such third parties;
(b) the following documents and things in Grantor's possession, or
subject to Grantor's right to possession, related to (Y) the production, sale
and delivery by Grantor, or by any Affiliate, licensee or subcontractor of
Grantor, of products or services sold or delivered by or under the authority of
Grantor in connection with the Trademarks, Registrations or Trademark Rights
(which products and services shall, for purposes of this Agreement, be deemed to
include, without limitation, products and services sold or delivered pursuant to
merchandising operations utilizing any Trademarks, Registrations or Trademark
Rights); or (Z) any retail or other merchandising operations conducted under the
name of or in connection with the Trademarks, Registrations or Trademark Rights
by Grantor or any Affiliate, licensee or subcontractor of Grantor:
(i) all lists and ancillary documents that identify and
describe any of Grantor's customers, or those of its Affiliates, licensees
or subcontractors, for products sold and services delivered under or in
connection with the Trademarks or Trademark Rights, including without
limitation any lists and ancillary documents that contain a customer's name
and address, the name and address of any of its warehouses, branches or
other places of business, the identity of the Person or Persons having the
principal responsibility on a customer's behalf for ordering products or
services of the kind supplied by Grantor, or the credit, payment, discount,
delivery or other sale terms applicable to such customer, together with
information setting forth the total purchases, by brand, product, service,
style, size or other criteria, and the patterns of such purchases;
(ii) all product and service specification documents and
production and quality control manuals used in the manufacture or delivery
of products and services sold or delivered under or in connection with the
Trademarks or Trademark Rights;
(iii) all documents which reveal the name and address of any
source of supply, and any terms of purchase and delivery, for any and all
materials, components and services used in the production of products and
services sold or delivered under or in connection with the Trademarks or
Trademark Rights; and
(iv) all documents constituting or concerning the then current
or proposed advertising and promotion by Grantor or its Affiliates,
licensees or
3
subcontractors of products and services sold or delivered under or in
connection with the Trademarks or Trademark Rights including, without
limitation, all documents which reveal the media used or to be used and the
cost for all such advertising conducted within the described period or
planned for such products and services;
(c) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(d) to the extent not included in the foregoing clauses (a) - (c),
all general intangibles relating to the Collateral; and
(e) all proceeds, products, rents and profits (including without
limitation license royalties and proceeds of infringement suits) of or from any
and all of the foregoing Collateral and, to the extent not otherwise included,
all payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "PROCEEDS" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures, and
------------------------
the Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. (S)362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Subsidiary Guaranty, the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
for early termination of Lender Interest Rate Agreements, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender or
Interest Rate Exchanger as a preference, fraudulent transfer or otherwise (all
such obligations and liabilities being the "UNDERLYING DEBT"), and all
obligations of every nature of Grantor now or hereafter existing under this
Agreement (all such obligations of Grantor, together with the Underlying Debt,
being the "SECURED OBLIGATIONS").
4
SECTION 3. GRANTOR REMAINS LIABLE. Anything contained herein to the
----------------------
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Grantor represents and
------------------------------
warrants as follows:
(a) Description of Collateral. A true and complete list of all
-------------------------
Trademarks, Registrations and Trademark Rights owned, held (whether pursuant to
a license or otherwise) or used by Grantor, in whole or in part, as of the date
of this Agreement is set forth in Schedule A annexed hereto. Each Trademark,
----------
Registration or Trademark Right designated on Schedule A annexed hereto as a
----------
Material Trademark Property, each other Trademark, Registration or Trademark
Right that uses or incorporates the name "Empire" or any other identifiers or
symbols derived from or associated with the name "Empire" hereafter arising or
otherwise owned, held or used by Grantor, and each other Trademark, Registration
or Trademark Right hereafter arising or otherwise owned, held or used by Grantor
is referred to herein as a "MATERIAL TRADEMARK PROPERTY".
(b) Validity and Enforceability of Collateral. Each Material
-----------------------------------------
Trademark Property is valid, subsisting and enforceable. As of the Closing Date,
Grantor is not aware of any pending or threatened claim by any third party that
any Material Trademark Property is invalid or unenforceable or that the use of
any Material Trademark Property violates the rights of any third person or of
any basis for any such claim, and there is no such pending or, to the knowledge
of Grantor, threatened claim that could reasonably be expected to have a
Material Adverse Effect.
(c) Ownership of Collateral. Except for the security interest
-----------------------
assigned and created by this Agreement, Grantor is the sole legal and beneficial
owner of the entire right, title and interest in and to each Material Trademark
Property, free and clear of any Lien other than Liens of mechanics, materialmen,
attorneys and other similar liens imposed by law in the ordinary course of
business in connection with the establishment, creation or application for
Registration of any Trademarks, Registrations or Trademark Rights for sums not
yet delinquent or being contested in good faith (such Liens being referred to
herein as "PERMITTED TRADEMARK LIENS"). Except such as may have been filed in
favor of Secured Party relating to this Agreement, no effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any filing or recording office, including the United
States Patent and Trademark Office.
5
(d) Office Locations; Other Names. The chief place of business, the
-----------------------------
chief executive office and the office where Grantor keeps its records regarding
the Collateral is, and has been for the four month period preceding the date
hereof, located at Xxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx 00000. Grantor has not in the
past done, and does not now do, business under any other name (including any
trade-name or fictitious business name).
(e) Governmental Authorizations. No authorization, approval or other
---------------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the assignment and grant by Grantor
of the security interest created hereby, (ii) the execution, delivery or
performance of this Agreement by Grantor, or (iii) the perfection or exercise by
Secured Party of its rights and remedies hereunder (except as may have been
taken by or at the direction of Grantor).
(f) Perfection. This Agreement, together with the filing of a
----------
financing statement describing the Collateral with the Secretary of State of the
State of Maine and the recording of this Agreement with the United States Patent
and Trademark Office, which will be made, assigns and creates a valid, perfected
and First Priority security interest in the Collateral (subject only to
Permitted Trademark Liens), securing the payment of the Secured Obligations, and
all filings and other actions necessary or desirable to perfect and protect such
security interest have been or will be duly made or taken.
(g) Other Information. All information heretofore, herein or
-----------------
hereafter supplied to Secured Party by or on behalf of Grantor with respect to
the Collateral is accurate and complete in all material respects.
SECTION 5. FURTHER ASSURANCES; NEW TRADEMARKS, REGISTRATIONS AND
-----------------------------------------------------
TRADEMARK RIGHTS; CERTAIN INSPECTION RIGHTS.
-------------------------------------------
(a) Grantor agrees that from time to time, at the expense of Grantor,
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest
assigned or granted or purported to be assigned or granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
Grantor will: (i) at the request of Secured Party, xxxx conspicuously each of
its records pertaining to the Collateral with a legend, in form and substance
satisfactory to Secured Party, indicating that such Collateral is subject to the
security interest granted hereby, (ii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Secured Party may request, in
order to perfect and preserve the security interests granted or purported to be
granted hereby, (iii) use its best efforts to obtain any necessary consents of
third parties to the assignment and perfection of a security interest to Secured
Party with respect to any Collateral, (iv) subject to the terms of the Credit
Agreement, at any reasonable time and upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or
persons designated by Secured Party, and
6
(v) at Secured Party's request, appear in and defend any action or proceeding
that may affect Grantor's title to or Secured Party's security interest in all
or any part of the Collateral.
(b) Grantor hereby authorizes Secured Party 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 Grantor. Grantor agrees that
a carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by Grantor shall be sufficient as a financing statement and may
be filed as a financing statement in any and all jurisdictions.
(c) Grantor hereby authorizes Secured Party to modify this Agreement
without obtaining Grantor's approval of or signature to such modification by
amending Schedule A annexed hereto to include reference to any right, title or
----------
interest in any existing Trademark, Registration or Trademark Right or any
Trademark, Registration or Trademark Right acquired or developed by Grantor
after the execution hereof or to delete any reference to any right, title or
interest in any Trademark, Registration or Trademark Right in which Grantor no
longer has or claims any right, title or interest.
(d) Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
(e) If Grantor shall obtain rights to any new Trademarks,
Registrations or Trademark Rights, the provisions of this Agreement shall
automatically apply thereto. Grantor shall promptly notify Secured Party in
writing of any rights to any new Trademarks or Trademark Rights acquired by
Grantor after the date hereof and of any Registrations issued or applications
for Registration made after the date hereof, which notice shall state whether
such Trademark, Registration or Trademark Right constitutes a Material Trademark
Property. Concurrently with the filing of an application for Registration for
any Trademark, Grantor shall execute, deliver and record in all places where
this Agreement is recorded an appropriate Trademark Security Agreement,
substantially in the form hereof, with appropriate insertions, or an amendment
to this Agreement, in form and substance satisfactory to Secured Party, pursuant
to which Grantor shall assign and grant a security interest to the extent of its
interest in such Registration as provided herein to Secured Party unless so
doing would, in the reasonable judgment of Grantor, after due inquiry, result in
the grant of a Registration in the name of Secured Party, in which event Grantor
shall give written notice to Secured Party as soon as reasonably practicable and
the filing shall instead be undertaken as soon as practicable but in no case
later than immediately following the grant of the Registration.
(f) Grantor hereby grants to Secured Party and its employees,
representatives and agents the right to visit Grantor's and any of its
Affiliate's or subcontractor's plants, facilities and other places of business
that are utilized in connection
7
with the manufacture, production, inspection, storage or sale of products and
services sold or delivered under any of the Trademarks, Registrations or
Trademark Rights (or which were so utilized during the prior six month period),
and to inspect the quality control and all other records relating thereto upon
reasonable notice to Grantor and as often as may be reasonably requested.
SECTION 6. CERTAIN COVENANTS OF GRANTOR. Grantor shall:
----------------------------
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or
corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in
Grantor's chief place of business or chief executive office or the office where
Grantor keeps its records regarding the Collateral;
(d) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except to the
extent permitted under the Credit Agreement;
(e) not sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
(f) except for Permitted Trademark Liens and the security interest
assigned and created by this Agreement, not create or suffer to exist any Lien
upon or with respect to any of the Collateral to secure the indebtedness or
other obligations of any Person;
(g) diligently keep reasonable records respecting the Collateral and
at all times keep at least one complete set of its records concerning
substantially all of the Trademarks, Registrations and Trademark Rights at its
chief executive office or principal place of business;
(h) not permit the inclusion in any contract to which it becomes a
party of any provision that could or might in any way conflict with this
Agreement or impair or prevent the assignment and creation of a security
interest in Grantor's rights and interests in any property included within the
definitions of any Trademarks, Registrations, Trademark Rights and Associated
Goodwill;
(i) take all steps necessary to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or in
connection with the Trademarks and Trademark Rights, including without
limitation entering into confidentiality
8
agreements with employees and labeling and restricting access to secret
information and documents;
(j) use proper statutory notice in connection with its use of each
Material Trademark Property to the extent reasonably necessary for the
protection of such Material Trademark Property;
(k) use consistent standards of high quality (which may be consistent
with Grantor's past practices) in the manufacture, sale and delivery of products
and services sold or delivered under or in connection with the Trademarks,
Registrations and Trademark Rights, including, to the extent applicable, in the
operation and maintenance of its merchandising operations; and
(l) upon any officer of Grantor obtaining knowledge thereof, promptly
notify Secured Party in writing of any event that may materially and adversely
affect the value of the Collateral or any portion thereof, the ability of
Grantor or Secured Party to dispose of the Collateral or any portion thereof, or
the rights and remedies of Secured Party in relation thereto, including without
limitation the levy of any legal process against the Collateral or any portion
thereof.
SECTION 7. AMOUNTS PAYABLE IN RESPECT OF THE COLLATERAL. Except as
--------------------------------------------
otherwise provided in this Section 7, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor in respect of the
Collateral or any portion thereof. In connection with such collections, Grantor
may take (and, at Secured Party's direction, shall take) such action as Grantor
or Secured Party may deem necessary or advisable to enforce collection of such
amounts; provided, however, that Secured Party shall have the right at any time,
-------- -------
upon the occurrence and during the continuation of an Event of Default and upon
written notice to Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest assigned
and created hereby, and to direct such obligors to make payment of all such
amounts directly to Secured Party, and, upon such notification and at the
expense of Grantor, to enforce collection of any such amounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
-------
(i) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of amounts due to Grantor in respect of the Collateral or
any portion thereof 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 or delivered 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 Section 14, and (ii) Grantor shall not adjust, settle or
compromise the amount or payment of any such amount or release wholly or partly
any obligor with respect thereto or allow any credit or discount thereon.
SECTION 8. TRADEMARK APPLICATIONS AND LITIGATION.
-------------------------------------
9
(a) Grantor shall have the duty diligently to prosecute any trademark
application relating to any Material Trademark Property that is pending as of
the date of this Agreement, to make federal application on any existing or
future registerable but unregistered Material Trademark Property (whenever it is
commercially reasonable in the reasonable judgment of Grantor to do so), and to
file and prosecute opposition and cancellation proceedings, renew Registrations
and do any and all acts which are necessary or desirable to preserve and
maintain all rights in all Material Trademark Properties. Any expenses incurred
in connection therewith shall be borne solely by Grantor. Grantor shall not
abandon any Material Trademark Property.
(b) Except as provided in Section 8(d), Grantor shall have the right
to commence and prosecute in its own name, as real party in interest, for its
own benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution or other damage as are in its
reasonable business judgment necessary to protect the Collateral. Secured Party
shall provide, at Grantor's expense, all reasonable and necessary cooperation in
connection with any such suit, proceeding or action including, without
limitation, joining as a necessary party.
(c) Grantor shall promptly, following its becoming aware thereof,
notify Secured Party of the institution of, or of any adverse determination in,
any proceeding (whether in the United States Patent and Trademark Office or any
federal, state, local or foreign court) described in Section 8(a) or 8(b) or
regarding Grantor's claim of ownership in or right to use any material
Trademark, material Registration or material Trademark Right, its right to
register the same, or its right to keep and maintain such Registration. Grantor
shall provide to Secured Party any information with respect thereto requested by
Secured Party.
(d) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, Secured Party
shall have the right (but not the obligation) to bring suit, in the name of
Grantor, Secured Party or otherwise, to enforce any Trademark, Registration,
Trademark Right, Associated Goodwill and any license thereunder, in which event
Grantor shall, at the request of Secured Party, do any and all lawful acts and
execute any and all documents required by Secured Party in aid of such
enforcement and Grantor shall promptly, upon demand, reimburse and indemnify
Secured Party as provided in Section 15 in connection with the exercise of its
rights under this Section 8. To the extent that Secured Party shall elect not to
bring suit to enforce any Trademark, Registration, Trademark Right, Associated
Goodwill or any license thereunder as provided in this Section 8(d), Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Trademarks, Registrations,
Trademark Rights or Associated Goodwill by others and for that purpose agrees to
diligently maintain any action, suit or proceeding against any Person so
infringing necessary to prevent such infringement.
SECTION 9. NON-DISTURBANCE AGREEMENTS, ETC. If and to the extent
--------------------------------
that Grantor is permitted to license the Collateral, Secured Party shall enter
into a
10
non-disturbance agreement or other similar arrangement, at Grantor's request and
expense, with Grantor and any licensee of any Collateral permitted hereunder in
form and substance satisfactory to Secured Party pursuant to which (a) Secured
Party shall agree not to disturb or interfere with such licensee's rights under
its license agreement with Grantor so long as such licensee is not in default
thereunder and (b) such licensee shall acknowledge and agree that the Collateral
licensed to it is subject to the security interest assigned and created in favor
of Secured Party and the other terms of this Agreement.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Grantor hereby
----------------------------------------
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) while an Event of Default exists, to endorse Grantor's name on
all applications, documents, papers and instruments necessary for Secured Party
in the use or maintenance of the Collateral;
(b) while an Event of Default exists, to ask for, demand, collect,
xxx for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral;
(c) while an Event of Default exists, to receive, endorse and collect
any drafts or other instruments, documents and chattel paper in connection with
clause (b) above;
(d) while an Event of Default exists, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of Secured Party with respect to any of the Collateral;
(e) while an Event of Default exists, to pay or discharge taxes or
Liens (other than Liens permitted under this Agreement or the Credit Agreement)
levied or placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of Grantor to Secured Party, due and payable
immediately without demand; and
(f) upon the occurrence and during the continuation of an Event of
Default, (i) to execute and deliver any of the assignments or documents
requested by Secured Party pursuant to Section 13(b), (ii) to grant or issue an
exclusive or non-exclusive license to the Collateral or any portion thereof to
any Person, and (iii) otherwise generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner
11
thereof for all purposes, and to do, at Secured Party's option and Grantor's
expense, at any time or from time to time, all acts and things that Secured
Party deems necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
SECTION 11. SECURED PARTY MAY PERFORM. If Grantor fails to perform
-------------------------
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Grantor under Section 15.
SECTION 12. STANDARD OF CARE. The powers conferred on Secured Party
----------------
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party 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. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 13. REMEDIES. If any Event of Default shall have occurred
--------
and be continuing:
(a) Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"CODE") (whether or not the Code applies to the affected Collateral), and also
may (i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iv) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same for the
purpose of taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation, (v) exercise any and all rights and remedies
of Grantor under or in connection with the contracts related to the Collateral
or otherwise in respect of the Collateral, including without limitation any and
all rights of Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, such contracts, and (vi) 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 Secured Party's offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable. Secured Party
12
or any Lender or Interest Rate Exchanger may be the purchaser of any or all of
the Collateral at any such sale and Secured Party, as administrative agent for
and representative of Lenders (but not any Lender or Lenders in its or their
respective individual capacities unless Requisite Lenders shall otherwise agree
in writing), shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Collateral sold
at any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Grantor, and Grantor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to 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. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party 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. Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Secured Party
accepts the first offer received and does not offer such Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Collateral
are insufficient to pay all the Secured Obligations, Grantor shall be liable for
the deficiency and the fees of any attorneys employed by Secured Party to
collect such deficiency.
(b) Upon written demand from Secured Party, Grantor shall execute and
deliver to Secured Party an assignment or assignments of the Trademarks,
Registrations, Trademark Rights and the Associated Goodwill and such other
documents as are requested by Secured Party. Grantor agrees that such an
assignment and/or recording shall be applied to reduce the Secured Obligations
outstanding only to the extent that Secured Party (or any Lender or Interest
Rate Exchanger) receives cash proceeds in respect of the sale of, or other
realization upon, the Collateral.
(c) Within five Business Days after written notice from Secured
Party, Grantor shall make available to Secured Party, to the extent within
Grantor's power and authority, such personnel in Grantor's employ on the date of
such Event of Default as Secured Party may reasonably designate, by name, title
or job responsibility, to permit Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by
Grantor under or in connection with the Trademarks, Registrations and Trademark
Rights, such persons to be available to perform their prior functions on Secured
Party's behalf and to be compensated by Secured Party at Grantor's expense on a
per diem, pro-rata basis consistent with the salary and benefit structure
applicable to each as of the date of such Event of Default.
13
SECTION 14. APPLICATION OF PROCEEDS. All proceeds received by
-----------------------
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied as provided in
subsection 2.4D of the Credit Agreement.
SECTION 15. INDEMNITY AND EXPENSES.
----------------------
(a) Grantor agrees to indemnify Secured Party and each Lender and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's or
such Interest Rate Exchanger's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all reasonable out-of-pocket costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party 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 Secured Party hereunder, or (iv) the failure
by Grantor to perform or observe any of the provisions hereof.
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
-----------------------------------------------
Agreement shall assign and create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest assigned and granted hereby shall terminate and all rights to the
Collateral shall revert to Grantor. Upon any such termination Secured Party
will, at Grantor's expense, execute and deliver to Grantor such documents as
Grantor shall reasonably request to evidence such termination.
SECTION 17. SECURED PARTY AS ADMINISTRATIVE AGENT.
-------------------------------------
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from
14
taking any action (including the release or substitution of Collateral), solely
in accordance with this Agreement and the Credit Agreement; provided that
--------
Secured Party shall exercise, or refrain from exercising, any remedies provided
for in Section 11 in accordance with the instructions of (i) Requisite Lenders
or (ii) after payment in full of all Obligations under the Credit Agreement and
the other Loan Documents, the holders of a majority of the aggregate notional
amount (or, with respect to any Lender Interest Rate Agreement that has been
terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "REQUISITE OBLIGEES"). In furtherance of the
foregoing provisions of this Section 17(a), each Interest Rate Exchanger, by its
acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Secured Party for the benefit of
Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 17(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 18. AMENDMENTS; ETC. No amendment, modification, termination
---------------
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and
15
signed by Secured Party and, in the case of any such amendment or modification,
by Grantor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 19. NOTICES. Any notice or other communication herein
-------
required or permitted to be given shall be given as provided in the Credit
Agreement. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or, as to either
party, such other address as shall be designated by such party in a written
notice delivered to the other party hereto.
SECTION 20. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
-----------------------------------------------------
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 21. SEVERABILITY. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 22. HEADINGS. Section and subsection 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 or be given any
substantive effect.
SECTION 23. GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
--------------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE 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. Unless otherwise defined herein or in the Credit Agreement, terms used
in Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined.
SECTION 24. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
----------------------------------------------
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT
16
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION
19;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST GRANTOR
IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 24 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
SECTION 25. WAIVER OF JURY TRIAL. GRANTOR AND SECURED PARTY HEREBY
--------------------
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party further warrant and represent that each has reviewed this waiver
with its legal counsel, and that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN
17
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 25 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 26. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
XXXXXXX INC.
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
XXXXX FARGO BANK, N.A.,
as Administrative Agent
By: __________________________
Name: __________________________
Title: __________________________
Notice Address:
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxx
1
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
UNITED STATES
REGISTERED TRADEMARK REGISTRATION REGISTRATION
OWNER DESCRIPTION NUMBER DATE
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STATE OF CALIFORNIA )
) SS.:
COUNTY OF ____________ )
On ___________, 19___, before me, ____________________, a Notary Public
in and for said State, personally appeared ___________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
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