Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is entered into as of
May 18, 1998 among XXXXXX AMERICAN CORP., a Delaware corporation (the
"BORROWER"), XXXXXX AMERICAN INVESTMENT CORP., a Delaware corporation (the
"PARENT"), XXXXXX AMERICAN GROUP, INC., a Delaware corporation ("INTERCO"), and
certain other direct and indirect Subsidiaries of the Parent (together with the
Parent and Interco, individually a "GUARANTOR", and collectively the
"GUARANTORS"; together with the Borrower, individually an "OBLIGOR", and
collectively the "OBLIGORS") and NATIONSBANK, N.A., in its capacity as agent (in
such capacity, the "AGENT") for the Lenders from time to time party to the
Credit Agreement described below (the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT"), among the Borrower, the Guarantors, the Lenders, the
Agent and Gleacher Natwest Inc., in its capacity as documentation agent, the
Lenders have agreed to make Loans and issue or participate in Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue and participate in Letters of Credit under the Credit Agreement that
the Obligors shall have executed and delivered this Security Agreement to the
Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement, and
the following terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment,
Farm Products, Fixtures, General Intangibles, Instruments, Inventory,
Investment Property and Proceeds. For purposes of this Security Agreement,
the term "Lender" shall include any Affiliate of any Lender which has
entered into a Hedging Agreement with any Credit Party.
(b) In addition, the following terms shall have the following
meanings:
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"COPYRIGHT LICENSES": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in SCHEDULE 1(B) hereto.
"COPYRIGHTS": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and applications
in the United States Copyright office including, without limitation, any
thereof referred to in SCHEDULE 1(B) hereto, and (b) all renewals thereof
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in SCHEDULE 1(B) hereto.
"PATENTS": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in SCHEDULE 1(B) hereto, and (b) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"SECURED OBLIGATIONS": the collective reference to all of the Credit
Party Obligations, now existing or hereafter arising pursuant to the Credit
Documents, owing from the Borrower or any other Credit Party to any Lender
or the Agent, howsoever evidenced, created, incurred or acquired, whether
primary, secondary, direct, contingent, or joint and several, including,
without limitation, all liabilities arising under Hedging Agreements and
all obligations and liabilities incurred in connection with collecting and
enforcing the foregoing.
"TRADEMARK LICENSE": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
SCHEDULE 1(B) hereto, and (b) all renewals thereof.
"WORK": any work which is subject to copyright protection pursuant to
Title 17 of the United States Code.
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2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "COLLATERAL"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses (provided the Agent shall not have a Lien
on any Copyright License that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment (provided the Agent shall not have a Lien on any
Equipment subject to a Permitted Lien to the extent such Permitted Lien
prohibits such Obligor from granting a Lien or security interest in its
rights thereunder);
(h) all Fixtures (provided the Agent shall not have a Lien on any
Fixture subject to a Permitted Lien to the extent such Permitted Lien
prohibits such Obligor from granting a Lien or security interest in its
rights thereunder);
(i) all General Intangibles (provided the Agent shall not have a Lien
on any General Intangible that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder to the extent prohibited by
such General Intangible);
(j) all Instruments;
(k) all Inventory;
(l) all Investment Property;
(m) all Patents;
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(n) all Patent Licenses (provided the Agent shall not have a Lien on
any Patent License that prohibits such Obligor from granting a Lien or
security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(o) all Trademarks;
(p) all Trademark Licenses (provided the Agent shall not have a Lien
on any Trademark License that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(q) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software (owned by such
Obligor or in which it has an interest) that at any time evidence or
contain information relating to any Collateral or are otherwise necessary
or helpful in the collection thereof or realization thereupon; and
(r) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Secured Obligations,
whether now existing or hereafter arising and (ii) is not to be construed as an
assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses.
3. PROVISIONS RELATING TO ACCOUNTS.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the
receipt by the Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of an Obligor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
under any Account (or any agreement giving rise thereto), to present or
file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
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(b) At any time after the occurrence and during the continuation of
an Event of Default, (i) the Agent shall have the right, but not the
obligation, to make test verifications of the Accounts in any manner and
through any medium that it reasonably considers advisable, and the Obligors
shall furnish all such assistance and information as the Agent may
reasonably require in connection with such test verifications, (ii) upon
the Agent's reasonable request and at the expense of the Obligors, the
Obligors shall cause independent public accountants or others satisfactory
to the Agent to furnish to the Agent reports showing reconciliations, aging
and test verifications of, and trial balances for, the Accounts. and (iii)
the Agent in its own name or in the name of others may communicate with
account debtors on the Accounts to verify with them to the Agent's
satisfaction the existence, amount and terms of any Accounts.
4. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) CHIEF EXECUTIVE OFFICE; BOOKS & RECORDS. As of the date hereof,
each Obligor's chief executive office and chief place of business is (and
for the prior four months have been) located at the locations set forth on
SCHEDULE 4(A) hereto, and each Obligor keeps its books and records at such
locations.
(b) LOCATION OF COLLATERAL. As of the date hereof, the location of
all Collateral owned by each Obligor is as shown on SCHEDULE 4(B) hereto.
(c) OWNERSHIP. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
Each Obligor's legal name is as shown in this Security Agreement and no
Obligor has in the past four months changed its name, been party to a
merger, consolidation or other change in structure or used any tradename
except as set forth in SCHEDULE 4(C) attached hereto.
(d) SECURITY INTEREST/PRIORITY. This Security Agreement creates a
valid security interest in favor of the Agent, for the benefit of the
Lenders, in the Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest in such
Collateral, to the extent such security can be perfected by filing under
the UCC, free and clear of all Liens except for Permitted Liens.
(e) FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
(f) ACCOUNTS. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be and (ii) no Account in excess of $250,000 of an Obligor
is evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been theretofore endorsed over and delivered to the
Agent.
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(g) COPYRIGHTS, PATENTS AND TRADEMARKS.
(i) SCHEDULE 1(B) hereto includes all material Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses owned by the Obligors in their own names as of the date hereof.
(ii) To the best of each Obligor's knowledge, each material
Copyright, Patent and Trademark of such Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in SCHEDULE 1(B) hereto, none of such
Copyrights, Patents and Trademarks is the subject of any licensing or
franchise agreement.
(iv) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity
of any material Copyright, Patent or Trademark.
(v) To the best of each Obligor's knowledge, no action or
proceeding is pending seeking to limit, cancel or question the validity of
any material Copyright, Patent or Trademark, or which, if adversely
determined, would have a material adverse effect on the value of any such
Copyright, Patent or Trademark.
(vi) All applications pertaining to the material Copyrights,
Patents and Trademarks of each Obligor have been duly and properly filed,
and all registrations or letters pertaining to such Copyrights, Patents and
Trademarks have been duly and properly filed and issued, and all of such
Copyrights, Patents and Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in
conflict with the security interest in the Copyrights, Patents or
Trademarks of each Obligor hereunder.
5. COVENANTS. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document or Hedging Agreement is in
effect or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated, such Obligor shall:
(a) OTHER LIENS. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of the Collateral or
any interest therein, except as permitted under the Credit Agreement.
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(b) INSTRUMENTS/CHATTEL PAPER. If any amount payable in excess of
$250,000 under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, immediately deliver
such Instrument or Chattel Paper to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Security Agreement.
(c) CHANGE IN LOCATION. Not, without providing 30 days prior written
notice to the Agent and without filing such amendments to any previously
filed financing statements as the Agent may require, (a) change the
location of its chief executive office and chief place of business (as well
as its books and records) from the locations set forth on SCHEDULE 4(A)
hereto, (b) change the location of its Collateral from the locations set
forth for such Obligor on SCHEDULE 4(B) hereto, or (c) change its name, be
party to a merger, consolidation or other change in structure or use any
tradename other than as set forth on SCHEDULE 4(C) attached hereto.
(d) PERFECTION OF SECURITY INTEREST. Execute and deliver to the
Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing
documents, as the Agent may reasonably request) and do all such other
things as the Agent may reasonably deem necessary or appropriate (i) to
assure to the Agent its security interests hereunder, including (A) such
financing statements (including renewal statements) or amendments thereof
or supplements thereto or other instruments as the Agent may from time to
time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with regard to
Copyrights, a Notice of Grant of Security Interest in Copyrights in the
form of SCHEDULE 5(D)(I), (C) with regard to Patents, a Notice of Grant of
Security Interest in Patents for filing with the United States Patent and
Trademark Office in the form of SCHEDULE 5(D)(II) attached hereto and (D)
with regard to Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark Office in
the form of SCHEDULE 5(D)(III) attached hereto, (ii) to consummate the
transactions contemplated hereby and (iii) to otherwise protect and assure
the Agent of its rights and interests hereunder. To that end, each Obligor
agrees that the Agent may file one or more financing statements disclosing
the Agent's security interest in any or all of the Collateral of such
Obligor without, to the extent permitted by law, such Obligor's signature
thereon, and further each Obligor also hereby irrevocably makes,
constitutes and appoints the Agent as such Obligor's attorney in fact with
full power and for the limited purpose to sign in the name of such Obligor
any such financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents
which in the Agent's reasonable discretion would be necessary or
appropriate in order to perfect and maintain perfection of the security
interests granted hereunder, such power, being coupled with an interest,
being and remaining irrevocable so long as the Credit Agreement is in
effect or any amounts payable thereunder or under any other Credit
Document, any Letter of Credit or any Hedging Agreement shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Obligor hereby agrees that a carbon, photographic or other
reproduction of this Security Agreement or any such financing statement is
sufficient for filing as a financing statement by the Agent without notice
thereof
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to such Obligor wherever the Agent may in its sole discretion desire to
file the same. In the event for any reason the law of any jurisdiction
other than New York becomes or is applicable to the Collateral of any
Obligor or any part thereof, or to any of the Secured Obligations, such
Obligor agrees to execute and deliver all such instruments and to do all
such other things as the Agent in its sole discretion reasonably deems
necessary or appropriate to preserve, protect and enforce the security
interests of the Agent under the law of such other jurisdiction (and, if an
Obligor shall fail to do so promptly upon the request of the Agent, then
the Agent may execute any and all such requested documents on behalf of
such Obligor pursuant to the power of attorney granted hereinabove). If
any Collateral is in the possession or control of an Obligor's agents and
the Agent so requests, such Obligor agrees to notify such agents in writing
of the Agent's security interest therein and, upon the Agent's request,
instruct them to hold all such Collateral for the Lenders' account and
subject to the Agent's instructions. Each Obligor agrees to xxxx its books
and records to reflect the security interest of the Agent in the
Collateral.
(e) COVENANTS RELATING TO COPYRIGHTS.
(i) Employ the Copyright for each Work with such notice of
copyright as may be required by law to secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby
any material Copyright would or would reasonably be expected to become
invalidated and (A) not do any act, or knowingly omit to do any act,
whereby any material Copyright would or would reasonably be expected to
become injected into the public domain; (B) notify the Agent promptly after
if it has knowledge that any material Copyright may become injected into
the public domain or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any court or tribunal in the United States
or any other country) regarding an Obligor's ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall
reasonably deem appropriate under the circumstances, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain
each registration of each material Copyright owned by an Obligor including,
without limitation, filing of applications for renewal where necessary; and
(D) promptly notify the Agent of any material infringement of any material
Copyright of an Obligor of which it becomes aware and take such actions as
it shall reasonably deem appropriate under the circumstances to protect
such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all
damages for such infringement.
(iii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Obligor hereunder.
(f) COVENANTS RELATING TO PATENTS AND TRADEMARKS.
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(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B)
maintain as in the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any xxxx which is confusingly similar or
a colorable imitation of such Trademark unless the Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest in such
xxxx pursuant to this Security Agreement, and (E) not (and not knowingly
permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any Trademark would or would reasonably be expected
to become invalidated.
(ii) Not do any act, or knowingly omit to do any act, whereby
any Patent would or would reasonably be expected to become abandoned or
dedicated.
(iii) Notify the Agent and the Lenders promptly after it has
knowledge that any application or registration relating to any material
Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or tribunal
in any country) regarding an Obligor's ownership of any material Patent or
Trademark or its right to register the same or to keep and maintain the
same.
(iv) Whenever an Obligor, either by itself or through an
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, an Obligor shall report such filing to
the Agent and the Lenders within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the Agent,
an Obligor shall execute and deliver any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's and
the Lenders' security interest in any Patent or Trademark and the goodwill
and general intangibles of an Obligor relating thereto or represented
thereby.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each material
application (and to obtain the relevant registration) and to maintain each
registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
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(vi) Promptly notify the Agent and the Lenders after it learns
that any Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly xxx for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it shall
reasonably deem appropriate under the circumstances to protect such Patent
or Trademark.
(vii) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Obligor hereunder.
(g) NEW PATENTS, COPYRIGHTS AND TRADEMARKS. Promptly provide the
Agent with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications
and issued registrations or letters shall be subject to the terms and
conditions hereunder, and (ii) (A) with respect to Copyrights, a duly
executed Notice of Security Interest in Copyrights, (B) with respect to
Patents, a duly executed Notice of Security Interest in Patents, (C) with
respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Agent may
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Copyright, Patent or
Trademark which is the subject of such new application.
(h) INSURANCE. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Agent hereunder.
6. ADVANCES BY LENDERS. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in SECTION 3.1 of the Credit
Agreement for Revolving Loans that are Base Rate Loans. No such performance of
any covenant or agreement by the Agent or the Lenders on behalf of any Obligor,
and no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement, the other Credit Documents
or any Hedging Agreement. The Lenders may make any payment hereby authorized in
accordance with any xxxx, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such xxxx,
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statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by an Obligor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
7. EVENTS OF DEFAULT.
The occurrence and continuance of an event which under the Credit Agreement
would constitute an Event of Default shall be an Event of Default hereunder (an
"EVENT OF DEFAULT").
8. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during continuation thereof, the Lenders shall have, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law (including, but not limited to, the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Agent may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the
Agent at the expense of the Obligors any Collateral at any place and time
designated by the Agent which is reasonably convenient to both parties,
(iv) remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which each
of the Obligors hereby waives to the fullest extent permitted by law, at
any place and time or times, sell and deliver any or all Collateral held by
or for it at public or private sale, by one or more contracts, in one or
more parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion (subject to
any and all mandatory legal requirements). In addition to all other sums
due the Agent and the Lenders with respect to the Secured Obligations, the
Obligors shall pay the Agent and each of the Lenders all reasonable
documented costs and expenses incurred by the Agent or any such Lender,
including, but not limited to, reasonable attorneys' fees and court costs,
in obtaining or liquidating the Collateral, in enforcing payment of the
Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including, without
limitation, any of the foregoing arising in, arising under or related to a
case under the Bankruptcy Code. To the extent the rights of notice cannot
be legally waived hereunder, each Obligor agrees that any requirement of
reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Credit Parties in accordance with the
notice provisions of SECTION 11.1 of the Credit Agreement at least 10 days
before the time of sale or other event giving rise to the requirement of
such
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notice. The Agent and the Lenders shall not be obligated to make any sale
or other disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, any Lender may be a purchaser at
any such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to any
such sale. Subject to the provisions of applicable law, the Agent and the
Lenders may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent permitted by
law, be made at the time and place to which the sale was postponed, or the
Agent and the Lenders may further postpone such sale by announcement made
at such time and place.
(b) REMEDIES RELATING TO ACCOUNTS. Upon the occurrence of an Event
of Default and during the continuation thereof, whether or not the Agent
has exercised any or all of its rights and remedies hereunder, each Obligor
will promptly upon request of the Agent instruct all account debtors to
remit all payments in respect of Accounts to a mailing location selected by
the Agent. In addition, the Agent or its designee may notify any Obligor's
customers and account debtors that the Accounts of such Obligor have been
assigned to the Agent or of the Agent's security interest therein, and may
(either in its own name or in the name of an Obligor or both) demand,
collect (including without limitation by way of a lockbox arrangement),
receive, take receipt for, sell, xxx for, compound, settle, compromise and
give acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any other
action or proceeding to protect and realize upon the security interest of
the Lenders in the Accounts. Each Obligor acknowledges and agrees that the
Proceeds of its Accounts remitted to or on behalf of the Agent in
accordance with the provisions hereof shall be solely for the Agent's own
convenience and that such Obligor shall not have any right, title or
interest in such Accounts or in any such other amounts except as expressly
provided herein. The Agent and the Lenders shall have no liability or
responsibility to any Obligor for acceptance of a check, draft or other
order for payment of money bearing the legend "payment in full" or words of
similar import or any other restrictive legend or endorsement or be
responsible for determining the correctness of any remittance. Each
Obligor hereby agrees to indemnify the Agent and the Lenders from and
against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys' fees suffered or
incurred by the Agent or the Lenders (each, an "INDEMNIFIED PARTY") because
of the maintenance of the foregoing arrangements except as relating to or
arising out of the gross negligence or willful misconduct of an Indemnified
Party or its officers, employees or agents. In the case of any
investigation, litigation or other proceeding, the foregoing indemnity
shall be effective whether or not such investigation, litigation or
proceeding is brought by an Obligor, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
(c) ACCESS. In addition to the rights and remedies hereunder, upon
the occurrence of an Event of Default and during the continuance thereof,
the Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Agent, and use the
same, together with materials, supplies, books and records
12
of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition, the
Agent may remove Collateral, or any part thereof, from such premises and/or
any records with respect thereto, in order to effectively collect or
liquidate such Collateral.
(d) NONEXCLUSIVE NATURE OF REMEDIES. Failure by the Agent or the
Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Hedging Agreement or as provided
by law, or any delay by the Agent or the Lenders in exercising the same,
shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Agent or the
Lenders shall only be granted as provided herein. To the extent permitted
by law, neither the Agent, the Lenders, nor any party acting as attorney
for the Agent or the Lenders, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct hereunder. The rights and
remedies of the Agents and the Lenders under this Security Agreement shall
be cumulative and not exclusive of any other right or remedy which the
Agent or the Lenders may have.
(e) RETENTION OF COLLATERAL. The Agent may, after providing the
notices required by Section 9-505(2) of the UCC or otherwise complying with
the requirements of applicable law of the relevant jurisdiction, to the
extent the Agent is in possession of any of the Collateral, retain the
Collateral in satisfaction of the Secured Obligations. Unless and until
the Agent shall have provided such notices, however, the Agent shall not be
deemed to have retained any Collateral in satisfaction of any Secured
Obligations for any reason.
(f) DEFICIENCY. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in SECTION 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the
Obligors or to whomsoever a court of competent jurisdiction shall determine
to be entitled thereto.
9. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the Agent, on
behalf of the Lenders, and each of its designees or agents, as
attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
13
(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court
for the purposes of collecting any Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought
and, in connection therewith, give such discharge or release as
the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an
Obligor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments
or documents evidencing payment, shipment or storage of the goods
giving rise to the Collateral of such Obligor on behalf of and in
the name of such Obligor, or securing, or relating to such
Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in respect
of, any Collateral or the goods or services which have given rise
thereto, as fully and completely as though the Agent were the
absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary
in order to perfect and maintain the security interests and liens
granted in this Security Agreement and in order to fully
consummate all of the transactions contemplated therein;
(viii) institute any foreclosure proceedings that the Agent
may deem appropriate; and
(ix) do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient
in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
14
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in this
Security Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve and
realize upon its security interest in the Collateral.
(b) PERFORMANCE BY THE AGENT OF OBLIGATIONS. If any Obligor fails to
perform any agreement or obligation contained herein, the Agent itself may
perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by
the Obligors on a joint and several basis pursuant to Section 11 hereof.
(c) ASSIGNMENT BY THE AGENT. In connection with the succession of
the Agent pursuant to Section 10.7 of the Credit Agreement, the Agent may
from time to time assign the Secured Obligations and any portion thereof
and/or the Collateral and any portion thereof, and the assignee shall be
entitled to all of the rights and remedies of the Agent under this Security
Agreement in relation thereto.
(d) THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable
care to assure the safe custody of the Collateral while being held by the
Agent hereunder, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the Obligors
shall be responsible for preservation of all rights in the Collateral, and
the Agent shall be relieved of all responsibility for the Collateral upon
surrendering it or tendering the surrender of it to the Obligors. The
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which the Agent accords its
own property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the Collateral.
10. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in SECTION 3.15(B) of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. COSTS OF COUNSEL. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with
15
respect to any legal or arbitral proceeding relating to this Security Agreement
or relating to the Collateral, or to protect the Collateral or exercise any
rights or remedies under this Security Agreement or with respect to the
Collateral, then the Obligors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Secured Obligations hereunder.
12. CONTINUING AGREEMENT.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Security Agreement shall be
automatically terminated and the Agent and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of its
liens and security interests hereunder and shall execute and deliver all
UCC termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing
all releases and indemnities provided hereunder shall survive termination
of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Secured Obligations.
13. AMENDMENTS; WAIVERS; MODIFICATIONS. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in SECTION 11.6 of the Credit Agreement.
14. SUCCESSORS IN INTEREST. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their permitted successors and assigns; PROVIDED, HOWEVER,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
16
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
15. NOTICES. All notices required or permitted to be given under this
Security Agreement shall be in conformance with SECTION 11.1 of the Credit
Agreement.
16. COUNTERPARTS. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. HEADINGS. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the
courts of the State of New York, or of the United States for the Southern
District of New York, and, by execution and delivery of this Security
Agreement, each Obligor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
such courts. Each Obligor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to SECTION
11.1 of the Credit Agreement, such service to become effective 30 days
after such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Obligor in any other
jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement brought in the courts referred to in
subsection (a) hereof and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
17
19. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. SEVERABILITY. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. ENTIRETY. This Security Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
22. SURVIVAL. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the Hedging Agreements, the delivery of the Notes
and the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
23. OTHER SECURITY. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Agent and the Lenders shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any of the
Agent's and the Lenders' rights or the Secured Obligations under this Security
Agreement, under any other of the Credit Documents or under any Hedging
Agreement.
24. JOINT AND SEVERAL OBLIGATIONS OF OBLIGORS.
(a) Each of the Obligors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Lenders under the Credit Agreement, for the mutual benefit, directly
and indirectly, of each of the Obligors and in consideration of the
undertakings of each of the Obligors to accept joint and several liability
for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Obligors with respect to the
payment and performance of all of the Secured Obligations arising under
this Security Agreement, the other Credit Documents and
18
the Hedging Agreements, it being the intention of the parties hereto that
all the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the obligations of an
Obligor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal
law relating to fraudulent conveyances or transfers) then the obligations
of such Obligor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
25. RIGHTS OF REQUIRED LENDERS. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
19
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: XXXXXX AMERICAN CORP.,
-------- a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Director, President and Chief
----------------------------------
Executive Officer
----------------------------------
GUARANTORS: XXXXXX AMERICAN INVESTMENT CORP.,
---------- a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
XXXXXX AMERICAN GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
CONSUMER DIRECT CORPORATION,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Director, President and Chief
----------------------------------
Executive Officer
----------------------------------
(Signatures Continued)
20
ARROW FACTORY STORES, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
GAKM RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
XXXXXX PEABODY RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
XXXXXX XXXXXXX HOLDING CORP.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
(Signatures Continued)
21
XXXXXX, PEABODY & CO., INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
BIDERTEX SERVICES INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
GREAT AMERICAN KNITTING XXXXX, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
XXXXXX DESIGNER GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------------
Title: Attorney-in-fact
----------------------------------
22
