EXHIBIT 10.37
AMENDED AND RESTATED SECURITY AGREEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT (this "AGREEMENT") dated
as of March 24, 2003 is made by Midway Games Inc., a Delaware corporation (the
"COMPANY"), the other Persons listed on the signature pages hereof and the
Additional Grantors (as defined in Section 22) (the Company, the Persons so
listed and the Additional Grantors being, collectively, the "GRANTORS"), in
favor of Bank of America, N.A., as agent (together with any successors and
assigns, the "AGENT") for the Banks defined in the Credit Agreement referred to
below. The Agent, the Banks, the Issuing Bank (as defined in the Credit
Agreement), the beneficiaries of each indemnification obligation undertaken by
any Grantor under any Loan Document (as defined in the Credit Agreement) and the
successors and assigns of each of the foregoing are herein referred to
collectively as the "SECURED PARTIES."
PRELIMINARY STATEMENTS.
(1) The Company has entered into an Amended and Restated Credit
Agreement dated as of March 24, 2003 (said Agreement, as it may hereafter be
amended, amended and restated, supplemented or otherwise modified from time to
time, being the "CREDIT AGREEMENT") with the Agent, the Banks and Banc of
America Securities LLC as Arranger.
(2) Pursuant to Section 7.15 of the Credit Agreement, the Grantors
are entering into this Agreement in order to grant to the Agent for the benefit
of the Secured Parties a security interest in all of its personal property and
fixtures now owned or hereafter acquired.
(3) Each Grantor is the owner of the shares (the "INITIAL PLEDGED
SHARES") of stock set forth opposite such Grantor's name on and as otherwise
described in Part I of Schedule I hereto and issued by the corporations named
therein and of the indebtedness (the "INITIAL PLEDGED DEBT") set forth opposite
such Grantor's name on and as otherwise described in Part II of Schedule I
hereto and issued by the obligors named therein.
(4) The Company has authorized the Agent to open a collateral
securities account (the "COLLATERAL ACCOUNT"), with Bank of America, N.A. at its
office at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (or at such other
location as the Agent shall have designated to the Company), in the name of the
Agent and under the sole control and dominion of the Agent and subject to the
terms of this Agreement.
(5) The Company has authorized the Agent to open collateral
securities account (the "L/C COLLATERAL ACCOUNT"), with Bank of America, N.A. at
its office at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (or at such
other location as the Agent shall have designated to the Company), in the name
of the Agent and under the sole control and dominion of the Agent and subject to
the terms of this Agreement.
(6) The Company and certain Grantors have opened cash concentration
deposit accounts set forth on Schedule XI hereto (the "CASH CONCENTRATION
ACCOUNTS"), with Bank of America, N.A., with respect to which the Company and
the applicable Grantors have entered into letter agreements substantially in the
form of Exhibit G hereto (or such other form acceptable to the Agent). The
Company and each of the applicable Grantors hereby authorize
the Agent to designate each Cash Concentration Account in such manner as shall
be acceptable to the Agent.
(7) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Loan Documents.
(9) Terms defined in the Credit Agreement and not otherwise defined
in this Agreement are used in this Agreement as defined in the Credit Agreement.
Further, unless otherwise defined in this Agreement or in the Credit Agreement,
terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the
State of Illinois ("ILLINOIS UNIFORM COMMERCIAL CODE") and/or defined in the
Federal Book Entry Regulations (as defined below) are used in this Agreement as
such terms are defined in such Article 8 or 9 and/or the Federal Book Entry
Regulations. The term "FEDERAL BOOK ENTRY REGULATIONS" means (a) the federal
regulations contained in Subpart B ("Treasury/Reserve Automated Debt Entry
System (TRADES)") governing book-entry securities consisting of U.S. Treasury
bonds, notes and bills and Subpart D ("Additional Provisions") of 31 C.F.R. Part
357, 31 C.F.R. Section 357.2, Section 357.10 through Section 357.14 and Section
357.41 through Section 357.44 and (b) to the extent substantially identical to
the federal regulations referred to in clause (a) above (as in effect from time
to time), the federal regulations governing other book-entry securities.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make Credit Extensions under the Credit Agreement, each
Grantor hereby agrees with the Agent as follows:
Section 1. GRANT OF SECURITY. Each Grantor hereby assigns and pledges
to the Agent for the benefit of the Secured Parties, and hereby grants to the
Agent for the benefit of the Secured Parties a security interest in, such
Grantor's right, title and interest in and to the following, in each case, as to
each type of property described below, whether now owned or hereafter acquired
by such Grantor, wherever located, and whether now or hereafter existing or
arising (collectively, the "Collateral"):
(a) all equipment in all of its forms (including, without
limitation, all machinery, equipment, furnishings, tools, parts and
supplies) all fixtures and all parts thereof and all accessions thereto
(any and all such equipment, fixtures, parts and accessions being the
"EQUIPMENT");
(b) (i) all inventory in all of its forms and raw materials and work
in process therefor, finished goods thereof and materials used or consumed
in the manufacture, production, preparation or shipping thereof, (ii) goods
in which such Grantor has an interest in mass or a joint or other interest
or right of any kind (including, without limitation, goods in which such
Grantor has an interest or right as consignee) and (iii) goods that are
returned to or repossessed or stopped in transit by such Grantor), and all
accessions thereto and products thereof and documents therefor (any and all
such inventory, accessions, products and documents being the "INVENTORY").
Inventory shall not include inventory which is expressly subject to an
intellectual property licensing agreement which permits the licensor to
terminate such agreement in the event a security
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interest is granted by the licensee in such inventory without the consent
of the licensor (the "EXCLUDED INVENTORY");
(c) all accounts, chattel paper, instruments, deposit accounts,
general intangibles and other obligations of any kind owed to such Grantor,
whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all
security agreements, leases, guaranties, indemnities and other contracts
securing or otherwise relating to any such accounts, chattel paper,
instruments, deposit accounts, general intangibles or obligations (any and
all such accounts, chattel paper, instruments, deposit accounts, general
intangibles and obligations, to the extent not included in clause (d), (e),
(f) or (g) below, being the "RECEIVABLES", and any and all such security
agreements, guaranties, indemnities, leases and other contracts being the
"RELATED CONTRACTS");
(d) the following (the "SECURITY COLLATERAL"):
(i) the Initial Pledged Shares and the certificates, if any,
representing the Initial Pledged Shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of the Initial Pledged Shares;
(ii) the Initial Pledged Debt and the instruments, if any,
evidencing the Initial Pledged Debt (including, without limitation,
the master promissory note in the form of Exhibit H attached hereto)
and all interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Initial Pledged Debt;
(iii) all additional shares of stock of any issuer of the
Pledged Shares from time to time acquired by such Grantor in any
manner (such shares, together with the Initial Pledged Shares, being
the "PLEDGED SHARES"), and the certificates, if any, representing such
additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
shares;
(iv) all additional indebtedness from time to time owed to
such Grantor (such indebtedness, together with the Initial Pledged
Debt, being the "PLEDGED DEBT") and the instruments, if any,
evidencing such indebtedness, and all interest, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness;
(v) the securities accounts, all securities entitlements
with respect to all financial assets from time to time credited to the
any of the Company's accounts (the "PLEDGED SECURITY ENTITLEMENTS"),
and all financial assets from time to time credited to the any of the
Company's accounts (the "PLEDGED FINANCIAL ASSETS"), and all
dividends, interest, cash, instruments and other property from
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time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Pledged Security Entitlements
or such Pledged Financial Assets;
(vi) the commodities accounts, all of the Company's rights in
and to all commodity contracts (the "PLEDGED COMMODITY CONTRACTS")
from time to time carried in any of the Company's commodities accounts
(the "COMMODITY ACCOUNTS"), and all value, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Pledged Commodity Contracts; and
(vii) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, (C) securities accounts,
(D) commodity contracts and (E) commodity accounts) in which such
Grantor has now, or acquires from time to time hereafter, any right,
title or interest in any manner, and the certificates or instruments,
if any, representing or evidencing such investment property, and all
dividends, interest, distributions, value, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
investment property;
(e) the following (collectively, the "ACCOUNT COLLATERAL"):
(i) the Collateral Account, all financial assets from time
to time credited to the Collateral Account (including, without
limitation, all Cash Equivalents(1) from time to time credited to the
Collateral Account), and all
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(1) "CASH EQUIVALENTS" means any of the following, to the extent owned by the
Company or any of its Subsidiaries free and clear of all Liens other than Liens
created in favor of the Agent and the Banks and having a maturity of not greater
than 180 days from the date of acquisition thereof: (a) readily marketable
direct obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the full
faith and credit of the Government of the United States, (b) insured
certificates of deposit of or time deposits with any commercial bank that is a
Bank or a member of the Federal Reserve System, which issues (or the parent of
which issues) commercial paper rated as described in clause (c) below, is
organized under the laws of the United States or any State thereof and has
combined capital and surplus of at least $1 billion, or (c) commercial paper
issued by any corporation organized under the laws of any State of the United
States and rated at least "Prime-1" (or the then equivalent grade) by Xxxxx'x
Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard &
Poor's Ratings Services, a division of The XxXxxx-Xxxx Companies, Inc., or (d)
marketable obligations of any state, territory or possession of the United
States of America or any political subdivision of any of the foregoing, or the
District of Columbia; which obligations, at the time of acquisition by the
Company or any Domestic Subsidiary, are accorded a rating of AA, or better, by
Standard & Poor's Corporation and Aa, or better, by Xxxxx'x Investors Service,
Inc. (or an equivalent rating by another nationally recognized credit rating
agency of similar standing if either of such corporations is not then in the
business of rating municipal obligations), and having a final maturity not
greater than 180 days from the date of investment, or (e) Investments in money
market or mutual funds that invest solely in Cash Equivalents of the types
described in clauses (a), (b), (c) and (d) above.
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dividends, interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such financial assets;
(ii) the L/C Collateral Account, all financial assets from
time to time credited to the L/C Collateral Account (including,
without limitation, all Cash Equivalents from time to time credited to
the L/C Collateral Account), and all dividends, interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such financial assets;
(iii) the Cash Concentration Accounts, all financial assets
from time to time credited to the Cash Concentration Accounts
(including, without limitation, all Cash Equivalents from time to time
credited to the Cash Concentration Accounts), and all dividends,
interest, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such financial assets, and all funds held
therein and all certificates and instruments, if any, from time to
time representing or evidencing the Cash Concentration Accounts;
(iv) all Pledged Accounts (as defined in Section 5(a)) from
time to time, all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing the
Pledged Accounts;
(v) all other deposit accounts of such Grantor from time to
time (including, without limitation, all other demand, time, savings,
passbook accounts), all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing such
deposit accounts;
(vi) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time delivered to or
otherwise possessed by the Agent or the Banks for or on behalf of such
Grantor, including, without limitation, those delivered or possessed
in substitution for or in addition to any or all of the then existing
Account Collateral; and
(vii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(f) the following (collectively, the "INTELLECTUAL PROPERTY
COLLATERAL"):
(i) all United States, international and foreign patents,
patent applications, utility models, and statutory invention
registrations, including,
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without limitation, the patents and patent applications set forth in
Schedule II hereto (as such Schedule II may be supplemented from time
to time by supplements to this Agreement, each such supplement being
in substantially the form of Exhibit F hereto (an "IP SECURITY
AGREEMENT SUPPLEMENT"), executed and delivered by such Grantor to the
Agent from time to time), together with all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations
thereof, all inventions therein, all rights therein provided by
international treaties or conventions and all improvements thereto,
and all other rights of any kind whatsoever of such Grantor accruing
thereunder or pertaining thereto (the "PATENTS");
(ii) all trademarks (including, without limitation, service
marks), certification marks, collective marks, trade dress, logos,
domain names, product configurations, trade names, business names,
corporate names and other source identifiers, whether or not
registered, whether currently in use or not, including, without
limitation, all common law rights and registrations and applications
for registration thereof, including, without limitation, the trademark
registrations and trademark applications set forth in Schedule II
hereto (as such Schedule II may be supplemented from time to time by
IP Security Agreement Supplements executed and delivered by such
Grantor to the Agent from time to time), and all other marks
registered in the U.S. Patent and Trademark Office or in any office or
agency of any State or Territory of the United States or any foreign
country (but excluding any United States intent-to-use trademark
application prior to the filing and acceptance of a Statement of Use
or an Amendment to allege use in connection therewith to the extent
that a valid security interest may not be taken in such an
intent-to-use trademark application under applicable law), and all
rights therein provided by international treaties or conventions, all
reissues, extensions and renewals of any of the foregoing, together in
each case with the goodwill of the business connected therewith and
symbolized thereby, and all rights corresponding thereto throughout
the world and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto (the "TRADEMARKS");
(iii) all copyrights, copyright applications, copyright
registrations and like protections in each work of authorship, whether
statutory or common law, whether published or unpublished, any
renewals or extensions thereof, all copyrights of works based on,
incorporated in, derived from, or relating to works covered by such
copyrights, including, without limitation, the copyright registrations
and copyright applications set forth in Schedule II hereto (as such
Schedule II may be supplemented from time to time by IP Security
Agreement Supplements executed and delivered by such Grantor to the
Agent from time to time), together with all rights corresponding
thereto throughout the world and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto
(the "COPYRIGHTS");
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(iv) all confidential and proprietary information, including,
without limitation, know-how, trade secrets, manufacturing and
production processes and techniques, inventions, research and
development information, technical data, financial, marketing and
business data, pricing and cost information, business and marketing
plans, and customer and supplier lists and information (the "TRADE
SECRETS");
(v) all computer software programs and databases (including,
without limitation, source code, object code and all related
applications and data files), firmware, and documentation and
materials relating thereto, and all rights with respect to the
foregoing, together with any and all options, warranties, service
contracts, program services, test rights, maintenance rights,
improvement rights, renewal rights and indemnifications and any
substitutions, replacements, additions or model conversions of any of
the foregoing (the "COMPUTER SOFTWARE");
(vi) to the extent the following are assignable under the
terms thereof and appropriate consents can be obtained through the
best efforts of the Grantors, all license agreements, permits,
authorizations and franchises, whether with respect to the Patents,
Trademarks, Copyrights, Trade Secrets or Computer Software, or with
respect to the patents, trademarks, copyrights, trade secrets,
computer software or other proprietary right of any other Person,
including, without limitation, the license agreements set forth in
Schedule II hereto (as such Schedule II may be supplemented from time
to time by IP Security Agreement Supplements executed and delivered by
such Grantor to the Agent from time to time), and all income,
royalties and other payments now or hereafter due and/or payable with
respect thereto, subject, in each case, to the terms of such license
agreements, permits, authorizations and franchises, (the "LICENSES");
and
(vii) any and all claims for damages for past, present and
future infringement, misappropriation or breach with respect to the
Patents, Trademarks, Copyrights, Trade Secrets, Computer Software or
Licenses, with the right, but not the obligation, to xxx for and
collect, or otherwise recover, such damages;
(g) all general intangibles of every description and in any event
including, without limitation: (i) all tax and other refunds, rebates or
credits of every kind and nature to which such Grantor is now or hereafter
may become entitled; (ii) all good will, choses in action and causes of
action, whether legal or equitable, whether in contract or tort and however
arising; (iii) all interests in limited and general partnerships to the
extent not included in the Security Collateral; (iv) all rights of stoppage
in transit, replevin and reclamation; (v) all licenses, permits, consents,
indulgences and rights of whatever kind issued in favor of or otherwise
recognized as belonging to such Grantor by any governmental authority; and
(vi) all indemnity agreements, guaranties, insurance policies and other
contractual, equitable and legal rights of whatever kind or nature;
(h) all books, records and other written, electronic or other
documentation in whatever form maintained now or hereafter by or for such
Grantor in connection with the ownership of its assets or the conduct of
its business or evidencing or containing
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information relating to the Collateral, including, without limitation: (i)
ledgers; (ii) records indicating, summarizing, or evidencing such Grantor's
assets (including Inventory and Receivables), business operations or
financial condition; (iii) computer programs and software; (iv) computer
discs, tapes, files, manuals, spreadsheets; (v) computer printouts and
output of whatever kind; (vi) any other computer prepared or electronically
stored, collected or reported information and equipment of any kind; and
(vii) any and all other rights now or hereafter arising out of any contract
or agreement between such Grantor and any service bureau, computer or data
processing company or other Person charged with preparing or maintaining
any of such Grantor's books or records or with credit reporting, including
with regard to the Grantor's accounts (all of the foregoing being the
"BOOKS"); and
(i) all proceeds of any and all of the Collateral (including,
without limitation, proceeds that constitute property of the types
described in clauses (a) through (h) of this Section 1 and this clause (i))
and, to the extent not otherwise included, all (i) payments under insurance
(whether or not the Agent 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; (ii) payments (in any form
whatsoever) made or due and payable to such Grantor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental authority);
(iii) other amounts from time to time paid or payable under or in
connection with any of the Collateral or for an account of any damage or
injury to or conversion of any Collateral by any Person; (iv) cash and (v)
proceeds of proceeds.
Notwithstanding the foregoing, (i) Collateral shall not include the stock or
equity interest in any Foreign Subsidiary (as defined in Section 7.15 of the
Credit Agreement) and (ii) the security interest of the Agent in any collateral
(the "LC Credit Agreement Collateral") furnished pursuant to the LC Credit
Agreement is subordinate to the security interest of the Agent and the Banks
under (and as defined in) the LC Credit Agreement and related documents, and no
rights under this Agreement may be exercised in respect of the LC Credit
Agreement Collateral until the occurrence of the Facility Termination Date (as
defined in the L/C Account Agreement referred to in the LC Credit Agreement).
Section 2. SECURITY FOR OBLIGATIONS. The Collateral granted by each
Grantor pursuant to this Agreement jointly and severally secures the payment and
performance of all Obligations (as defined in the Credit Agreement), all
Liabilities (as defined in the Guaranties), all obligations of Guarantors under
the Guaranties and all other obligations of Grantors now or hereafter existing
under the Loan Documents, in each case whether direct or indirect, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
for principal, reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, expenses or otherwise (all
of the foregoing being, collectively, the "SECURED OBLIGATIONS").
Section 3. GRANTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements
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included in such Grantor's 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 the Agent of any of the
rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral and
(c) no Secured Party shall have any obligation or liability under the contracts
and agreements included in the Collateral by reason of this Agreement or any
other Loan Document, nor shall any Secured Party be obligated to perform any of
the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
Section 4. DELIVERY AND CONTROL OF SECURITY COLLATERAL.
(a) All certificates or instruments representing or evidencing
Security Collateral shall be delivered to and held by or on behalf of the Agent
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Agent. For the better perfection
of the Agent's rights in and to the Security Collateral, if requested by the
Banks, each Grantor shall forthwith, upon the pledge hereunder of any Security
Collateral pursuant to SECTION 1 hereof in which it has any right, title or
interest, cause such Security Collateral to be registered in the name of the
Agent or such of its nominees as the Agent may direct, subject only to the
revocable rights specified in Section 15(a). In addition, the Agent shall have
the right at any time after the occurrence of an Event of Default to exchange
certificates or instruments representing or evidencing Security Collateral for
certificates or instruments of smaller or larger denominations. Also, the Agent
shall have the right at any time to convert Security Collateral consisting of
financial assets credited to the Securities Account to Security Collateral
consisting of financial assets held directly by the Agent, and to convert
Security Collateral consisting of financial assets held directly by the Agent to
Security Collateral consisting of financial assets credited to the Securities
Account.
(b) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes an uncertificated security,
such Grantor will cause the issuer thereof either (i) to register the Agent as
the registered owner of such security or (ii) to agree in writing with such
Grantor and the Agent that such issuer will comply with instructions with
respect to such security originated by the Agent without further consent of such
Grantor, such agreement to be in form and substance satisfactory to the Agent.
Each Grantor which has issued any Pledged Shares pledged hereunder to any other
Grantor hereby agrees that it will follow and comply with the instructions of
the Agent with respect to such Pledged Shares without any further consent of
such other Grantor.
(c) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a security entitlement, such
Grantor will cause the securities intermediary with respect to such security
entitlement either (i) to identify in its records the Agent as the entitlement
holder of such security entitlement against such securities intermediary or (ii)
to agree in writing with such Grantor and the Agent that such securities
intermediary will comply with entitlement orders (that is, notifications
communicated to such securities intermediary directing transfer or redemption of
the financial asset to which such Grantor has a security entitlement) originated
by the Agent without further consent of such
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Grantor, such agreement to be in substantially the form of Exhibit C hereto or
otherwise in form and substance satisfactory to the Agent (such agreement being
a "SECURITIES ACCOUNT CONTROL AGREEMENT"). The provisions of this Section 4(c)
regarding a Securities Account Control Agreement shall not apply to Unblocked
Accounts (as defined in Section 5(a)).
(d) With respect to any Security Collateral in which any Grantor has
any right, title or interest and that constitutes a commodity contract, such
Grantor shall cause the commodity intermediary with respect to such commodity
contract to agree in writing with such Grantor and the Agent that such commodity
intermediary will apply any value distributed on account of such commodity
contract as directed by the Agent without further consent of such Grantor, such
agreement to be in substantially the form of Exhibit D hereto or otherwise in
form and substance satisfactory to the Agent (such agreement being a "COMMODITY
ACCOUNT CONTROL AGREEMENT", and all such agreements, together with all
Securities Account Control Agreements being, collectively, "CONTROL
AGREEMENTS").
(e) No Grantor will change or add any securities intermediary or
commodity intermediary that maintains any securities account or commodity
account in which any of the Collateral is credited or carried, or change or add
any such securities account or commodity account, in each case without first
complying with the above provisions of this Section 4 in order to perfect the
security interest granted hereunder in such Collateral.
Section 5. MAINTAINING THE PLEDGED ACCOUNTS. So long as any Credit
Extension or any other Obligation of any Credit Party under any Loan Document
shall remain unpaid, any Letter of Credit shall be outstanding, or any Bank
shall have any Commitment under the Credit Agreement:
(a) Grantor will not create or permit exist any lockbox or deposit
account or investment account except (i) Pledged Accounts (defined below),
(ii) Cash Concentration Accounts (as defined in Section 6 of the
Preliminary Statements), (iii) deposit accounts and investment accounts
listed in Schedule X hereto (such deposit accounts and investment accounts
listed in Schedule X being herein called the "Unblocked Accounts"), and
(iv) the cash collateral account (the "LC Credit Agreement Cash Collateral
Account") established pursuant to the LC Credit Agreement.
For purposes hereof, a "Pledged Account" means a lockbox or
deposit account or investment account maintained with a bank ("Pledged
Account Bank"), provided that such Pledged Account Bank shall have entered
into a letter agreement in substantially the form of Exhibit B hereto or
such other form as is acceptable to the Agent (or, in the event such
Pledged Account Bank is not the Agent, in such other form as may be
required by the Agent so as to assure that the Agent has control thereof
pursuant to Section 9-104 of the UCC).
(b) Each Grantor will (i) immediately instruct each Person obligated
at any time to make any payment to such Grantor for any reason (an
"OBLIGOR") to make such payment to a Pledged Account of such Grantor or to
the Cash Concentration Accounts and (ii) deposit in a Pledged Account or
pay to the Agent for deposit in the Cash
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Concentration Accounts, at the end of each Business Day, all proceeds of
Collateral and all other cash of such Grantor in excess of $500,000 in the
aggregate.
(c) Concurrently with or promptly after entering into a Pledged
Account Letter with any Pledged Account Bank, each Grantor will instruct
such Pledged Account Bank to transfer to the Cash Concentration Accounts,
at the end of each Business Day, in same day funds, an amount equal to the
credit balance of the Pledged Account in such Pledged Account Bank. If any
Grantor shall fail to give any such instructions to any Pledged Account
Bank, the Agent may do so without further notice to any Grantor.
(d) Each Grantor agrees that it will not add any bank as a Pledged
Account Bank or add any account as a Pledged Account to those listed in
Schedule IX hereto, unless the Agent shall have received at least 10 days'
prior written notice of such addition and shall have received a Pledged
Account Letter executed by such new Pledged Account Bank and such Grantor
or a supplement to an existing Pledged Account Letter covering such new
Pledged Account, as the case may be (and, upon the receipt by the Agent of
such Pledged Account Letter or supplement, Schedule IX hereto shall be
automatically amended to include such Pledged Account Bank or Pledged
Account). Each Grantor agrees that it will not terminate any bank as a
Pledged Account Bank or terminate any account as a Pledged Account, unless
the Agent shall have received at least 10 days' prior written notice of
such termination (and, upon such termination, Schedule IX hereto shall be
automatically amended to delete such Pledged Account Bank or Pledged
Account).
(e) Upon any termination of any Pledged Account Letter or other
agreement with respect to the maintenance of a Pledged Account by any
Grantor or any Pledged Account Bank, such Grantor will immediately notify
all Obligors that were making payments to such Pledged Account to make all
future payments to another Pledged Account or to the Cash Concentration
Accounts. Each Grantor agrees to terminate any or all Pledged Accounts and
Pledged Account Letters upon request by the Agent.
(f) At such times as the Agent shall determine (including on a daily
basis) the Agent shall (and is hereby irrevocably authorized and directed
by each Grantor to) withdraw amounts from the Pledged Accounts to pay or
prepay Revolving Loans outstanding under the Loan Documents. So long as no
Event of Default shall have occurred and be continuing, the Company will
draw checks on, and otherwise withdraw amounts from, the Pledged Accounts
in such amounts as may be required in the ordinary course of business
(including, without limitation, to pay or prepay Secured Obligations under
the Loan Documents). So long as no Event of Default shall have occurred and
be continuing, the Agent will direct the applicable Collateral Bank (as
hereinafter defined) to transfer amounts on deposit in the Cash
Concentration Accounts to the Pledged Accounts to the extent necessary to
pay all checks drawn on, and all amounts otherwise withdrawn from, the
Pledged Accounts.
(g) Each Grantor agrees that it will not add any deposit account or
investment account as an Unblocked Account to those listed in Schedule X
hereto and will not terminate any deposit or investment account as an
Unblocked Account, unless the Agent shall have received at least 10 days'
prior written notice of such addition or termination
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(and, upon such addition or termination, Schedule X hereto shall be
automatically amended to add or delete such deposit account or investment
account, as applicable). Notwithstanding the foregoing, each Grantor
further agrees that at any time that any Revolving Loans or L/C Obligations
shall be outstanding, it will not permit the aggregate balances of all
Unblocked Accounts to exceed $100,000.
Section 6. MAINTAINING THE CASH CONCENTRATION ACCOUNTS, THE
COLLATERAL ACCOUNT AND THE L/C COLLATERAL ACCOUNT. So long as any Credit
Extension or any other Obligation of any Credit Party under any Loan Document
shall remain unpaid, any Letter of Credit shall be outstanding, or any Bank
shall have any Commitment under the Credit Agreement:
(a) The Company will maintain the Cash Concentration Accounts, the
Collateral Account and the L/C Collateral Account with the Agent or another
commercial bank acceptable to the Agent and that, in the case of the Cash
Concentration Accounts, the Collateral Account and the L/C Collateral
Account, has entered into a Securities Account Control Agreement (the Agent
or any bank with which the Cash Concentration Accounts, the Collateral
Account or the L/C Collateral Account are maintained being a "COLLATERAL
BANK").
(b) It shall be a term and condition of each of the Cash
Concentration Accounts, the Collateral Account and the L/C Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the Cash Concentration Accounts, the Collateral
Account or the L/C Collateral Account, as the case may be, and except as
otherwise provided by the provisions of Sections 5, 8 and 20, that no
amount (including interest on Cash Equivalents credited thereto) will be
paid or released to or for the account of, or withdrawn by or for the
account of, the Company or any other Person from the Cash Concentration
Accounts, the Collateral Account or the L/C Collateral Account, as the case
may be.
Section 7. INVESTING OF AMOUNTS IN THE CASH CONCENTRATION ACCOUNTS,
THE COLLATERAL ACCOUNT AND THE L/C COLLATERAL ACCOUNT. The Agent will, subject
to the provisions of Sections 5, 8 and 20, from time to time direct the
applicable Collateral Bank to (a) invest amounts received with respect to the
Cash Concentration Accounts, the Collateral Account and the L/C Collateral
Account in such Cash Equivalents credited to the Cash Concentration Accounts,
the Collateral Account and the L/C Collateral Account, respectively, as the
Company may select and the Agent may approve and (b) invest interest paid on the
Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of
any such Cash Equivalents that may mature or be sold, in each case in such Cash
Equivalents credited to the Cash Concentration Accounts, the Collateral Account
and the L/C Collateral Account, respectively, as the Company may select and the
Agent may approve. Interest and proceeds that are not invested or reinvested in
Cash Equivalents as provided above shall be deposited and held in a deposit
account with the applicable Collateral Bank in the name of the Agent and under
the sole control and dominion of the Agent, such deposit account to be deemed to
constitute part of the Cash Concentration Accounts, the Collateral Account or
the L/C Collateral Account, as the case may be. In addition, the Agent shall
have the right at any time to direct the applicable Collateral Bank to exchange
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such Cash Equivalents for similar Cash Equivalents of smaller or larger
determinations, or for other Cash Equivalents, credited to the Cash
Concentration Accounts, the Collateral Account or the L/C Collateral Account, as
the case may be.
Section 8. RELEASE OF AMOUNTS. So long as no Default under
Sections 10.1(a), (f) or (g) of the Credit Agreement or Event of Default shall
have occurred and be continuing, the Agent will direct the applicable Collateral
Bank to pay and release to the Company or at its order or, at the request of the
Company, to the Agent to be applied to the Obligations of the Company under the
Loan Documents, in the case of the L/C Collateral Account, such amount, if any,
as is then on deposit in the L/C Collateral Account to the extent permitted to
be released under the terms of the Credit Agreement governing Cash
Collaterilized amounts (as such term is defined in the Credit Agreement) and, in
the case of the Collateral Account, the amount, if any, by which the aggregate
principal amount of the Cash Equivalents credited to the Collateral Account
exceeds all amounts then due and payable under the Loan Documents together with
all accrued and unpaid interest and fees under the Credit Agreement.
Section 9. REPRESENTATIONS AND WARRANTIES. Each Grantor represents
and warrants as follows:
(a) Except for Collateral in transit, all of the Equipment and
Inventory of such Grantor are located at the places specified therefor in
Schedule III hereto, as such Schedule III may be amended from time to time
pursuant to Section 11(a).
(b) The chief executive office of such Grantor, the state of
incorporation or formation and the original copies of Related Contract to
which such Grantor is a party, all Books and all originals of all chattel
paper that evidence Receivables of such Grantor, are located at the address
specified therefor in Schedule IV hereto, as such Schedule IV may be
amended from time to time pursuant to Section 13(a).
(c) Such Grantor's federal tax identification number are set forth
opposite such Grantor's name in Schedule V hereto.
(d) All Security Collateral consisting of certificated securities
and instruments have been delivered to the Agent (except for the treasury
shares). None of the Receivables is evidenced by a promissory note or other
instrument that has not been delivered to the Agent.
(e) Except for Collateral in transit, such Grantor is the legal and
beneficial owner of the Collateral of such Grantor free and clear of any
Lien, claim, option or right of others, except for the security interest
created under this Agreement or Permitted Liens. No effective financing
statement or other instrument similar in effect covering all or any part of
such Collateral or listing such Grantor or any trade name of such Grantor
as debtor is on file in any recording office, except such as may have been
filed in favor of the Agent relating to the Loan Documents or Permitted
Liens.
(f) Such Grantor has the trade names listed on Schedule VI hereto as
such Schedule VI may be amended from time to time pursuant to Section
10(d). Except as set
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forth in Schedule VI, such Grantor has not, at any time during the
preceding five years: (i) been known as or used any other corporate, trade
or fictitious name; (ii) changed its name; (iii) been the surviving or
resulting corporation in a merger or consolidation; or (iv) acquired
through asset purchase or otherwise any business of any Person.
(g) Except for Collateral in transit and subject to Permitted Liens,
such Grantor has exclusive possession and control of the Equipment and
Inventory and no Inventory is stored with any bailee, warehouseman or
similar Person or on any premises leased to such Grantor, nor has any
inventory been consigned to such Grantor or consigned by such Grantor to
any Person or is held by such Grantor for any Person under any "xxxx and
hold" or other arrangement, other than Inventory stored at leased premises
or warehouse set forth on Schedule VII for which a landlord's or
warehouseman's agreement, in form and substance satisfactory to the Agent,
is or will be in effect within 90 days from the effective date hereof, as
such Schedule VII may be amended from time to time pursuant to Section
10(d).
(h) (i) None of the Equipment or other Collateral is affixed to real
property, except Collateral with respect to which such Grantor has supplied
the Collateral Agent with all information and documentation necessary to
make all fixture filings required to perfect and protect the priority of
the Collateral Agent's security interest in all such Collateral which may
be fixtures as against all Persons having an interest in the premises to
which such property may be affixed; and (ii) none of the Equipment is
leased from or to any Person, except as set forth in Schedule VIII.
(i) The Pledged Shares pledged by such Grantor hereunder have been
duly authorized and validly issued and are fully paid and non-assessable.
The Pledged Debt pledged by such Grantor hereunder has been duly
authorized, authenticated or issued and delivered, is the legal, valid and
binding obligation of the issuers thereof, is evidenced by one or more
promissory notes (which notes have been delivered to the Agent) and is not
in default.
(j) The Initial Pledged Shares constitute the percentage of the
issued and outstanding shares of stock of the issuers thereof indicated on
Schedule I hereto, as such Schedule I may be amended from time to time
pursuant to Section 10(d). The Initial Pledged Debt constitutes all of the
outstanding indebtedness owed to such Grantor by the issuers thereof and is
outstanding, as of the date hereof, in the principal amount indicated on
Schedule I hereto, as such Schedule I may be amended from time to time
pursuant to Section 10(d).
(k) All of the investment property constituting Pledged Shares or
Pledged Debt owned by such Grantor as of the date hereof is listed on
Schedule I hereto.
(l) Such Grantor has no lockbox, deposit account or investment
account other than the Pledged Accounts (as listed on Schedule IX), the
Unblocked Accounts (as listed on Schedule X), hereto, and the Cash
Concentration Accounts (as listed on Schedule XI hereto), as such Schedule
IX or Schedule X may be amended from time to time pursuant to Section 5(d)
or 5(g). The Unblocked Accounts aggregate balance does not exceed the
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amount referred to in Section 5(g) hereto. Such Grantor has instructed all
existing Obligors to make all payments to either a Pledged Account or the
Cash Concentration Accounts.
(m) All financing statements, other documents for filings and other
actions necessary or desirable to perfect and protect the security interest
in the Collateral of such Grantor created under this Agreement have been
executed and delivered to the Agent or have been (or are in the process of
being) made or taken or, in the case of future-acquired Collateral, will be
executed and delivered to the Agent or will be made or taken;
(n) This Agreement creates in favor of the Agent for the benefit of
the Secured Parties a valid and, together with such filings and other
actions, perfected first priority security interest in the Collateral of
such Grantor, securing the payment of the Secured Obligations.
(o) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the grant by such Grantor of the
assignment, pledge and security interest granted hereunder or for the
execution, delivery or performance of this Agreement by such Grantor, (ii)
the perfection or maintenance of the assignment, pledge and security
interest created hereunder (including the first priority nature of such
assignment, pledge or security interest), except for the filing of
financing and continuation statements under the Uniform Commercial Code,
which financing statements have been executed and delivered to the Agent,
the recordation of the Intellectual Property Security Agreements referred
to in Section 14(f) with the U.S. Patent and Trademark Office and the U.S.
Copyright Office, which Agreements have been executed and delivered to the
Agent or, in the case of future-acquired Collateral, will be executed and
delivered to the Agent and the actions described in Section 4 with respect
to Security Collateral will be taken no later than 10 days of the grant of
the security interest under this Agreement becoming effective pursuant to
Section 1, or (iii) for the exercise by the Agent of its voting or other
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Security Collateral
by laws affecting the offering and sale of securities generally.
(p) The Inventory that has been produced or distributed by such
Grantor has been produced in compliance in all material respects with all
requirements of applicable law, including, without limitation, the Fair
Labor Standards Act and the aggregate value of Excluded Inventory for all
Grantors will not at any time exceed $5,000,000.
(q) As to itself and its Intellectual Property Collateral, except
with respect to Intellectual Property Collateral which is not material to
the Company's business:
(i) To the Grantor's knowledge, the rights of such Grantor
in or to the Intellectual Property Collateral do not misappropriate or
infringe the intellectual property rights of any third party, and no
claim has been asserted that the use of
-15-
such Intellectual Property Collateral does or may infringe the
intellectual property rights of any third party.
(ii) To the Grantor's best knowledge, such Grantor is the
exclusive owner of the entire and unencumbered right, title and
interest in and to the Intellectual Property Collateral and is
entitled to use all such Intellectual Property Collateral without
limitation, subject only to the license terms of the Licenses.
(iii) The Intellectual Property Collateral set forth on
Schedule II hereto includes all of the patents, patent applications,
trademark registrations and applications, copyright registrations and
applications of such Grantor to the extent such Intellectual Property
Collateral is material to the business of the Company and its
Subsidiaries taken as a whole.
(iv) The Intellectual Property Collateral is subsisting and
has not been adjudged invalid or unenforceable in whole or part, and
is valid and enforceable. Such Grantor is not aware of any uses of any
item of Intellectual Property Collateral that could be expected to
lead to such item becoming invalid or unenforceable.
(v) Such Grantor has made or performed or will make or
perform within a commercially reasonable time after the effective date
of this Agreement, all filings, recordings and other acts and has paid
all required fees and taxes to maintain and protect its interest in
each and every item of Intellectual Property Collateral in full force
and effect throughout the world, and to protect and maintain its
interest therein including, without limitation, recordations of any of
its interests in the Patents and Trademarks with the U.S. Patent and
Trademark Office and recordation of any of its interests in the
Copyrights with the U.S. Copyright Office.
(vi) No action, suit, investigation, litigation or proceeding
has been asserted or is pending or, to the best of such Grantor's
knowledge, threatened against such Grantor (i) based upon or
challenging or seeking to deny or restrict the use of any of the
Intellectual Property Collateral, or (ii) alleging that any services
provided by, processes used by, or products manufactured or sold by,
such Grantor infringe or misappropriate any patent, trademark,
copyright or any other proprietary right of any third party, except to
the extent the foregoing would not have a Material Adverse Effect. To
the best of such Grantor's knowledge, no Person is engaging in any
activity that infringes upon or misappropriates the Intellectual
Property Collateral or upon the rights of such Grantor therein, except
to the extent the foregoing would not have a Material Adverse Effect.
Except as set forth on Schedule II hereto, such Grantor has not
granted any license, release, covenant not to xxx, non-assertion
assurance, or other right to any Person with respect to any part of
the Intellectual Property Collateral. The consummation of the
transactions contemplated by the Transaction Documents will not result
in the termination or impairment of any of the Intellectual Property
Collateral, except to the extent the foregoing would not have a
Material Adverse Effect.
-16-
(vii) With respect to each License: (A) such License is valid
and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to
the subject matter of such License; (B) such License will not cease to
be valid and binding and in full force and effect on terms identical
to those currently in effect as a result of the rights and interest
granted herein, nor will the grant of such rights and interest
constitute a breach or default under such License or otherwise give
the licensor or licensee a right to terminate such License; (C) such
Grantor has not received any notice of termination or cancellation
under such License; (D) such Grantor has not received any notice of a
breach or default under such License, which breach or default has not
been cured; (E) such Grantor has not granted to any other third party
any rights, adverse or otherwise, under such License; and (F) neither
such Grantor nor any other party to such License is in breach or
default in any material respect, and no event has occurred that, with
notice or lapse of time or both, would constitute such a breach or
default or permit termination, modification or acceleration under such
License.
(viii) To the Grantor's knowledge, (A) none of the Trade
Secrets of such Grantor has been used, divulged, disclosed or
appropriated to the detriment of such Grantor for the benefit of any
other Person other than such Grantor; (B) no employee, independent
contractor or agent of such Grantor has misappropriated any trade
secrets of any other Person in the course of the performance of his or
her duties as an employee, independent contractor or agent of such
Grantor; and (C) no employee, independent contractor or agent of such
Grantor is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of inventions
agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of such Grantor's
Intellectual Property Collateral.
(ix) None of the Intellectual Property Collateral is subject
to any outstanding decree, order, injunction, judgement or ruling
restricting the use of such Intellectual Property Collateral or that
would impair the validity or enforceability of such Intellectual
Property Collateral.
Section 10. FURTHER ASSURANCES.
(a) Each Grantor agrees that from time to time, at the expense of
such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Agent may request, in order to perfect and protect any
pledge, assignment or security interest granted or purported to be granted by
such Grantor hereunder or to enable the Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral of such Grantor. Without
limiting the generality of the foregoing, each Grantor will promptly with
respect to Collateral of such Grantor: (i) upon the occurrence of Default or an
Event of Default or as the Agent may request, promptly xxxx conspicuously its
Inventory documentation, each chattel paper included in Receivables, each
Related Contract, and, at the request of the Agent, its records pertaining to
-17-
such Collateral with a legend, in form and substance reasonably satisfactory to
the Agent, indicating that such document, chattel paper, Related Contract, or
Collateral is subject to the security interest granted hereby; (ii) if any such
Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Agent hereunder such note or instrument
or chattel paper duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Agent;
(iii) execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, notices or documents as may be necessary or
desirable, or as the Agent may request, in order to perfect and preserve the
security interest granted or purported to be granted by such Grantor hereunder
(including financing statements and documents in anticipation of the revised
Article 9 of the Uniform Commercial Code); (iv) deliver and pledge to the Agent
for benefit of the Secured Parties certificates representing Security Collateral
that constitutes certificated securities, accompanied by undated stock or bond
powers executed in blank; and (v) deliver to the Agent evidence that all other
action that the Agent may deem reasonably necessary or desirable in order to
perfect and protect the security interest created by such Grantor under this
Agreement has been taken.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral of such Grantor without the signature of such Grantor
where permitted by law. A photocopy or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Agent may reasonably request, all in reasonable detail.
(d) Each Grantor will (i) notify the Agent, upon 40 days' prior
written notice, of any change in the content of Schedule I, VI or VII as the
case may be and (ii) provide the Agent a revised Schedule I, VI or VII which
shall amend Schedule I, VI, or VII as the case may be, PROVIDED, HOWEVER that
such change shall be in compliance with the terms and conditions of the Loan
Documents including without limitation the terms and conditions of Section 12.1
of the Credit Agreement.
Section 11. AS TO EQUIPMENT AND INVENTORY.
(a) Each Grantor will keep the Equipment and Inventory of such
Grantor (other than Inventory in transit or sold in the ordinary course of
business) at the places therefor specified in Section 9(a) or, upon 30 days'
prior written notice to the Agent, at such other places in a jurisdiction where
all action required by Section 10 shall have been taken with respect to such
Equipment and Inventory (and, upon the taking of such action in such
jurisdiction, Schedule III hereto shall be automatically amended to include such
other places).
(b) Each Grantor will cause the Equipment of such Grantor to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and will forthwith, or in the case of any loss or damage to any of such
Equipment as soon as practicable after the occurrence
-18-
thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith that are reasonably necessary or desirable
to such end. Each Grantor will promptly furnish to the Agent a statement
respecting any loss or damage exceeding $100,000 to any of the Equipment or
Inventory of such Grantor.
(c) Each Grantor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including, without limitation, claims for labor, materials and supplies)
against, the Equipment and Inventory of such Grantor, except for claims which
such Grantor is actively and in good faith disputing. In producing its
Inventory, each Grantor will comply in all material respects with all
requirements of applicable law, including, without limitation, the Fair Labor
Standards Act.
(d) The Company will not permit the aggregate value of Excluded
Inventory for all Grantors to exceed at any time $5,000,000.
Section 12. INSURANCE.
(a) Upon the occurrence of the earlier of an Event of Default, each
Grantor will, at its own expense, maintain insurance with respect to the
Equipment and Inventory of such Grantor in such amounts, against such risks, in
such form and with such insurers, as shall be reasonably satisfactory to the
Agent from time to time. Each policy of each Grantor for liability insurance
shall provide for all losses to be paid on behalf of the Agent and such Grantor
as their interests may appear, and each policy for property damage insurance
shall provide for all losses (except for losses of less than $1,000,000 per
occurrence) to be paid directly to the Agent. Each such policy shall in addition
(i) name such Grantor and the Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent) as their interests
may appear, (ii) contain the agreement by the insurer that (except for amounts
permitted to be paid directly to the Company pursuant to Sections 12(b) and
12(c)), any loss thereunder shall be payable to the Agent notwithstanding any
action, inaction or breach of representation or warranty by such Grantor, (iii)
provide that there shall be no recourse against the Agent for payment of
premiums or other amounts with respect thereto and (iv) provide that at least 10
days' prior written notice of cancellation or of lapse shall be given to the
Agent by the insurer. Each Grantor will deliver to the Agent a certificate for
such insurance and, if so requested by the Agent, deliver to the Agent duplicate
policies of such insurance and, as often as the Agent may reasonably request, a
report of a reputable insurance broker with respect to such insurance. Further,
each Grantor will, at the request of the Agent, duly execute and deliver
instruments of assignment of such insurance policies to comply with the
requirements of Section 10 and cause the insurers to acknowledge notice of such
assignment.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 12 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 12 is not
applicable, the applicable Grantor will make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance properly received by or released to such Grantor shall be used by such
Grantor, except as otherwise required hereunder or by the Credit Agreement, to
pay or as reimbursement for the costs of such repairs or replacements.
-19-
(c) So long as no Default or Event of Default shall have occurred
and be continuing, all insurance payments received by the Agent in connection
with any loss, damage or destruction of any Inventory or Equipment will be
released by the Agent to the applicable Grantor for the repair, replacement or
restoration thereof, subject to such terms and conditions with respect to the
release thereof as the Agent may reasonably require. Upon the occurrence of any
Default or Event of Default or the actual or constructive total loss (in excess
of $1,000,000 per occurrence) of any Equipment or Inventory, all insurance
payments in respect of such Equipment or Inventory shall be paid to the Agent
and shall, in the Agent's sole discretion, (i) be released to the applicable
Grantor to be applied as set forth in the first sentence of this subsection (c)
or (ii) be held as additional Collateral hereunder or applied as specified in
Section 20(b).
Section 13. PLACE OF PERFECTION; RECORDS; COLLECTION OF RECEIVABLES.
(a) Each Grantor will keep its chief executive office, and originals
of the Related Contracts to which such Grantor is a party and all originals of
all chattel paper that evidence Receivables of such Grantor, at the location
therefor specified in Section 9(b) or, upon 30 days' prior written notice to the
Agent, at such other location in a jurisdiction where all actions required by
Section 10 shall have been taken with respect to the Collateral of such Grantor
(and, upon the taking of such action in such jurisdiction, Schedule IV hereto
shall be automatically amended to include such other location). Each Grantor
will hold and preserve its records relating to the Collateral, the Related
Contracts and chattel paper and will permit representatives of the Agent at any
time during normal business hours and upon notice given reasonably in advance to
inspect and make abstracts from such records and other documents.
(b) Except as otherwise provided in this subsection (b), each
Grantor will continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables and the Related Contracts. In
connection with such collections, such Grantor may take (and, at the Agent's
direction, will take) such action as such Grantor or the Agent may deem
necessary or advisable to enforce collection of the Receivables and the Related
Contracts; PROVIDED, HOWEVER, that so long as an Event of Default shall exist
the Agent shall have the right at any time, in the event that the Agent in good
faith it believes that the prospect of payment of the Secured Obligations in the
normal course, or the performance or collection of the Receivables or the
Related Contracts of such Grantor, is impaired and upon written notice to such
Grantor of its intention to do so, to notify the Obligors under any Receivables
or Related Contracts of the assignment of such Receivables or Related Contracts
to the Agent and to direct such Obligors to make payment of all amounts due or
to become due to such Grantor thereunder directly to the Agent and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Receivables or Related Contracts, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done. After receipt by any Grantor of the notice from the
Agent referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including instruments) received by such Grantor in respect of the
Receivables and the Related Contracts of such Grantor shall be received in trust
for the benefit of the Agent hereunder, shall be segregated from other funds of
such Grantor and shall be forthwith paid over to the Agent in the same form as
so received (with any necessary indorsement) to be deposited in the Collateral
Account and either (A) released to such Grantor on the terms set forth in
Section 8 so long as no Event of Default shall have occurred
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and be continuing or (B) if any Event of Default shall have occurred and be
continuing, applied as provided in Section 20(b) and (ii) such Grantor will not
adjust, settle or compromise the amount or payment of any Receivable, release
wholly or partly any Obligor thereof, or allow any credit or discount thereon.
No Grantor will permit or consent to the subordination of its right to payment
under any of the Receivables or the Related Contracts to any other indebtedness
or obligations of the Obligor thereof.
Section 14. AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) With respect to each material item of its Intellectual Property
Collateral (other than in respect of any Intellectual Property Collateral that,
in the judgment of such Grantor, is no longer desirable in the conduct of the
business of the Company and its Subsidiaries taken as a whole), each Grantor
agrees to take, at its expense, all necessary steps, including, without
limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office
and any other governmental authority, to (i) maintain the validity and
enforceability of each such item of Intellectual Property Collateral and
maintain each such item of Intellectual Property Collateral in full force and
effect, and (ii) pursue the registration and maintenance of each patent,
trademark, or copyright registration or application, now or hereafter included
in the Intellectual Property Collateral of such Grantor, including, without
limitation, the payment of required fees and taxes, the filing of responses to
office actions, the filing of applications for renewal or extension, the filing
of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of
divisional, continuation, continuation-in-part, reissue and renewal applications
or extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings. No Grantor shall, without the written consent of
the Agent, discontinue use of or otherwise abandon any Intellectual Property
Collateral, or abandon any right to file an application for letters patent,
trademark, or copyright, unless such Grantor shall have previously determined
that such use or the pursuit or maintenance of such Intellectual Property
Collateral is no longer desirable in the conduct of such Grantor's business and
that the loss thereof would not be reasonably likely to have a Material Adverse
Effect, in which case, such Grantor will give prompt notice of any such
abandonment to the Agent.
(b) Each Grantor agrees promptly to notify the Agent if such Grantor
learns (i) that any item of the Intellectual Property Collateral may have become
abandoned, placed in the public domain, invalid or unenforceable, or of any
adverse determination or development regarding such Grantor's ownership of any
of the Intellectual Property Collateral or its right to register the same or to
keep and maintain and enforce the same, or (ii) of any adverse determination or
the institution of any proceeding (including, without limitation, the
institution of any proceeding in the U.S. Patent and Trademark Office or any
court) regarding any item of the Intellectual Property Collateral, except to the
extent the foregoing could not reasonably be expected to have a Material Adverse
Effect.
(c) In the event that any Grantor becomes aware that any item of the
material Intellectual Property Collateral is being infringed or misappropriated
by a third party such Grantor shall promptly notify the Agent and shall take
such actions, at its expense, as such Grantor or the Agent deems reasonable and
appropriate under the circumstances to protect such
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Intellectual Property Collateral, including, without limitation, suing for
infringement or misappropriation and for an injunction against such infringement
or misappropriation, except to the extent the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(d) Each Grantor shall use proper statutory notice in connection with
its use of each item of its Intellectual Property Collateral. No Grantor shall
do or permit any act or knowingly omit to do any act whereby any of its material
Intellectual Property Collateral may lapse or become invalid or unenforceable or
placed in the public domain, except to the extent the foregoing could not
reasonably be expected to have a Material Adverse Effect.
(e) Each Grantor shall take all steps which it or the Agent deems
reasonable and appropriate under the circumstances to preserve and protect each
item of its material Intellectual Property Collateral, including, without
limitation, maintaining the quality of any and all products or services used or
provided in connection with any of the Trademarks, consistent with the quality
of the products and services as of the date hereof, and taking all steps
necessary to ensure that all licensed users of any of the Trademarks use such
consistent standards of quality, except to the extent the foregoing could not
reasonably be expected to have a Material Adverse Effect.
(f) With respect to its Intellectual Property Collateral, each Grantor
agrees to execute an agreement, in substantially the form set forth in Exhibit E
hereto (an "INTELLECTUAL PROPERTY SECURITY AGREEMENT"), for recording the
security interest granted hereunder to the Agent in such Intellectual Property
Collateral with the U.S. Patent and Trademark Office, the U.S. Copyright Office
and any other governmental authorities necessary to perfect the security
interest hereunder in such Intellectual Property Collateral.
(g) Each Grantor agrees that, should it obtain an ownership interest
in any item of the type set forth in Section 1(f) which is not on the date
hereof a part of the Intellectual Property Collateral (the "AFTER-ACQUIRED
INTELLECTUAL Property"), (i) the provisions of Section 1 shall automatically
apply thereto, (ii) any such After-Acquired Intellectual Property and, in the
case of trademarks, the goodwill of the business connected therewith or
symbolized thereby, shall automatically become part of the Intellectual Property
Collateral subject to the terms and conditions of this Agreement and of the
Credit Agreement with respect thereto, (iii) at the end of each calendar
quarter, such Grantor shall notify the Agent of any and all After-Acquired
Intellectual Property obtained during such calendar quarter and provide the
Agent with a revised Schedule II amending it no later than 30 days after the end
of such calendar quarter, and (iv) such Grantor shall execute and deliver to the
Agent an IP Security Agreement Supplement covering such After-Acquired
Intellectual Property as "Additional Collateral" thereunder and as defined
therein, for recordation with the U.S. Patent and Trademark Office, the U.S.
Copyright Office and any other governmental authorities necessary to perfect the
security interest hereunder in such After-Acquired Intellectual Property.
Section 15. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Default under Sections 10.1(a), (f) or (g) of the
Credit Agreement or Event of Default has occurred:
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(i) Each Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral of such
Grantor or any part thereof for any purpose other than originate
Entitlement Orders (as defined in any Control Agreement) with respect to
the Securities Account or the Commodity Accounts; PROVIDED HOWEVER, that
such Grantor will not exercise or refrain from exercising any such right if
such action would have a material adverse effect on the value of the
Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and all
dividends, interest and other distributions paid in respect of the Security
Collateral of such Grantor if and to the extent that the payment thereof is
not otherwise prohibited by the terms of the Loan Documents; PROVIDED,
HOWEVER, that any and all
(A) dividends, interest and other distributions paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of,
or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Security Collateral in connection with a
partial or total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any Security
Collateral
shall be, and shall be forthwith delivered to the Agent to hold as,
Security Collateral and shall, if received by such Grantor, be received in
trust for the benefit of the Agent, be segregated from the other property
or funds of such Grantor and be forthwith delivered to the Agent as
Security Collateral in the same form as so received (with any necessary
indorsement).
(iii) The Agent will execute and deliver (or cause to be executed and
delivered) to each Grantor all such proxies and other instruments as such
Grantor may reasonably request for the purpose of enabling such Grantor to
exercise the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments that it is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuance of a Default under
Sections 10.1(a), (f) or (g) or an Event of Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to Section 15(a)(i) shall, upon notice to
such Grantor by the Agent, cease and (y) to receive the dividends, interest
and other distributions that it would otherwise be authorized to receive
and retain pursuant to Section 15(a)(ii) shall automatically cease, and all
such rights shall thereupon become vested in the Agent, which shall
thereupon
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have the sole right to exercise or refrain from exercising such voting and
other consensual rights and to receive and hold as Security Collateral such
dividends, interest and other distributions.
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of this
Section 15(b) shall be received in trust for the benefit of the Agent,
shall be segregated from other funds of such Grantor and shall be forthwith
paid over to the Agent as Security Collateral in the same form as so
received (with any necessary indorsement).
(iii) The Agent shall be authorized to send to each Securities
Intermediary or Commodity Intermediary as defined in and under any Control
Agreement a Notice of Exclusive Control as defined in and under such
Control Agreement.
Section 16. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
(a) Each Grantor agrees that it will not (i) sell, assign or otherwise
dispose of, or grant any option with respect to, any of the Collateral, other
than sales, assignments and other dispositions of Collateral, and options
relating to Collateral, permitted under the terms of the Credit Agreement, or
(ii) create or suffer to exist any Lien upon or with respect to any of the
Collateral of such Grantor except for the pledge, assignment and security
interest created under this Agreement and Liens permitted under the Credit
Agreement.
(b) Each Grantor agrees that it will (i) cause each issuer of the
Pledged Shares pledged by such Grantor not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all additional shares
of stock or other securities of each issuer of the Pledged Shares.
Section 17. AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby
irrevocably appoints the Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time, upon the occurrence and during the continuance
of an Event of Default, in the Agent's discretion, to take any action and to
execute any instrument that the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the Agent
pursuant to Section 12,
(b) to ask for, demand, collect, xxx for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
and
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(d) to file any claims or take any action or institute any proceedings
that the Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Agent with respect
to any of the Collateral.
Section 18. AGENT MAY PERFORM. If any Grantor fails to perform any
agreement contained herein, the Agent may, as the Agent deems necessary to
protect the security interest granted hereunder in the Collateral or to protect
the value thereof, but without any obligation to do so and without notice,
itself perform, or cause performance of, such agreement, and the expenses of the
Agent incurred in connection therewith shall be payable by such Grantor under
Section 21(b).
Section 19. THE AGENT'S DUTIES.
(a) The powers conferred on the Agent hereunder are solely to protect
the Secured Parties' interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Agent shall have no duty as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
any Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property.
(b) Anything contained herein to the contrary notwithstanding, the
Agent may from time to time, when the Agent deems it to be necessary, appoint
one or more subagents (each a "SUBAGENT") for the Agent hereunder with respect
to all or any part of the Collateral. In the event that the Agent so appoints
any Subagent with respect to any Collateral, (i) the assignment and pledge of
such Collateral and the security interest granted in such Collateral by each
Grantor hereunder shall be deemed for purposes of this Agreement to have been
made to such Subagent, in addition to the Agent, for the benefit of the Secured
Parties, as security for the Secured Obligations of such Grantor, (ii) such
Subagent shall automatically be vested, in addition to the Agent, with all
rights, powers, privileges, interests and remedies of the Agent hereunder with
respect to such Collateral, and (iii) the term "Agent," when used herein in
relation to any rights, powers, privileges, interests and remedies of the Agent
with respect to such Collateral, shall include such Subagent; PROVIDED, HOWEVER,
that no such Subagent shall be authorized to take any action with respect to any
such Collateral unless and except to the extent expressly authorized in writing
by the Agent.
Section 20. REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party upon default under the
Illinois Uniform Commercial Code (whether or not the Illinois Uniform
Commercial Code applies to the affected Collateral) and also
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may: (i) require each Grantor to, and each Grantor hereby agrees that it
will at its expense and upon request of the Agent forthwith, assemble all
or part of the Collateral as directed by the Agent and make it available to
the Agent at a place and time to be designated by the Agent that is
reasonably convenient to both parties; (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Agent may deem commercially reasonable; (iii) occupy any
premises owned or leased by any of the Grantors where the Collateral or any
part thereof is assembled or located for a reasonable period in order to
effectuate its rights and remedies hereunder or under law, without
obligation to such Grantor in respect of such occupation; and (iv) exercise
any and all rights and remedies of any of the Grantors under or in
connection with the Receivables and the Related Contracts or otherwise in
respect of the Collateral, including, without limitation, any and all
rights of such Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of the Receivables and the Related
Contracts. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Grantor of the time and
place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned.
(b) Any cash held by or on behalf of the Agent and all cash proceeds
received by or on behalf of the Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may, in
the discretion of the Agent, be held by the Agent as Collateral for, and/or
then or at any time thereafter applied (after payment of any amounts
payable to the Agent pursuant to Section 21) in whole or in part by the
Agent for the benefit of the Secured Parties against, all or any part of
the Secured Obligations, in the following manner:
(I) FIRST, to the Agents for any amounts owing to the Agents
pursuant to Section 12.4 of the Credit Agreement or otherwise under
the Loan Documents, ratably in accordance with such respective amounts
then owing to the Agents;
(II) SECOND, deposited as Collateral in the L/C Collateral
Account up to an amount equal to 100% of the aggregate L/C Obligations
of all outstanding Letters of Credit, PROVIDED that in the event that
any such Letter of Credit is drawn, the Agent shall pay to the Issuing
Bank that issued such Letter of Credit the amount held in the L/C
Collateral Account in respect of such Letter of Credit, PROVIDED
FURTHER that, to the extent that any such Letter of Credit shall
expire or terminate undrawn and as a result thereof the amount of the
Collateral in the L/C Collateral Account shall exceed the aggregate
L/C Obligations of all then outstanding Letters of Credit, such excess
amount of such Collateral shall be applied in accordance with the
order of priority set out in this Section 20(b);
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(III) THIRD, to the Issuing Banks for any amounts then owing
to them, in their capacities as such, under the Loan Documents ratably
in accordance with such respective amounts then owing to the Issuing
Banks; and
(IV) FOURTH, to the Banks for any amount then owing to them,
in their capacities as such, under the Loan Documents ratably in
accordance with such respective amounts then owing to the Banks.
Any surplus of such cash or cash proceeds held by or on the behalf of the
Agent and remaining after payment in full of all the Secured Obligations
shall be paid over to the applicable Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
(c) All payments received by any Grantor in respect of the Collateral
shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid
over to the Agent in the same form as so received (with any necessary
indorsement).
(d) The Agent may, without notice to any Grantor except as required by
law and at any time or from time to time, charge, set-off and otherwise
apply all or any part of the Secured Obligations against any funds held in
the Cash Concentration Accounts, the Collateral Account or the L/C
Collateral Account or in any deposit account related thereto.
(e) In the event of any sale or other disposition of any of the
Intellectual Property Collateral of any Grantor, the goodwill of the
business connected with and symbolized by any Trademarks subject to such
sale or other disposition shall be included therein, and such Grantor shall
supply to the Agent or its designee such Grantor's know-how and expertise,
and documents and things relating to any Intellectual Property Collateral
subject to such sale or other disposition, and such Grantor's customer
lists and other records and documents relating to such Intellectual
Property Collateral and to the manufacture, distribution, advertising and
sale of products and services of such Grantor.
Section 21. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify, defend and save and hold
harmless each Secured Party and each of their Affiliates and their respective
officers, directors, employees, agents and advisors (each, an "INDEMNIFIED
PARTY") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable fees
and expenses of counsel) that may be incurred by or asserted or awarded against
any Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct.
(b) Each Grantor will upon demand pay to the Agent the amount of any
and all reasonable expenses, including, without limitation, the reasonable fees
and expenses of its
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counsel and of any experts and agents, that the Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from or other realization upon,
any of the Collateral of such Grantor, (iii) the exercise or enforcement of any
of the rights of the Agent or the other Secured Parties hereunder or (iv) the
failure by such Grantor to perform or observe any of the provisions hereof.
Section 22. AMENDMENTS; WAIVERS; ADDITIONAL GRANTORS; ETC.
(a) No amendment or waiver of any provision of this Agreement, and no
consent to any departure by any Grantor herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of the Agent or any
other Secured Party to exercise, and no delay in exercising any right hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right.
(b) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a
"SECURITY AGREEMENT SUPPLEMENT"), (i) such Person shall be referred to as an
"ADDITIONAL GRANTOR" and shall be and become a Grantor hereunder and each
reference in this Agreement and the other Loan Documents to "Grantor" shall also
mean and be a reference to such Additional Grantor, and (ii) the supplemental
schedules I, II, III, IV, V, VI, VII, VIII and IX attached to each Security
Agreement Supplement shall be incorporated into and become a part of and
supplement Schedules I, II, III, IV, V, VI, VII, VIII and IX respectively,
hereto, and the Agent may attach such supplemental schedules to such Schedules;
and each reference to such Schedules shall mean and be a reference to such
Schedules as supplemented pursuant to each Security Agreement Supplement.
Section 23. NOTICES; ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic or telecopier)
and mailed, telegraphed, telecopied or delivered to, in the case of the Company
or the Agent, addressed to it at its address specified in the Credit Agreement
and, in the case of each Grantor other than the Company, addressed to it at its
address set forth opposite such Grantor's name on the signature pages hereto or
on the signature page to the Security Agreement Supplement pursuant to which it
became a party hereto; or, as to any party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications shall, when mailed, telegraphed or telecopied,
be effective when deposited in the mails, delivered to the telegraph company,
telecopied, respectively, addressed as aforesaid; except that notices and other
communications to the Agent shall not be effective until received by the Agent.
Delivery by telecopier of an executed counterpart of any amendment or waiver of
any provision of this Agreement or of any Security Agreement Supplement or
Schedule hereto shall be effective as delivery of an original executed
counterpart thereof.
Section 24. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT
AGREEMENT. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the latest of (i)
the payment in full in cash of the Secured Obligations, (ii) the Revolving
Termination Date and (iii) the termination or expiration of all
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Letters of Credit, (b) be binding upon each Grantor, its successors and assigns
and (c) inure, together with the rights and remedies of the Agent hereunder, to
the benefit of the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c), any
Bank may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement (including, without limitation, all or
any portion of its Commitments, the Credit Extensions and the Note or Notes, if
any, held by it) to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Banks
herein or otherwise, in each case as provided in the Credit Agreement.
Section 25. RELEASE; TERMINATION.
(a) Upon any sale, lease, transfer or other disposition of any item of
Collateral of any Grantor in accordance with the terms of the Loan Documents
(other than sales of Inventory in the ordinary course of business), the Agent
will, at such Grantor's expense, execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence the release of
such item of Collateral from the assignment and security interest granted
hereby; PROVIDED, HOWEVER, that (i) at the time of such request and such release
no Default shall have occurred and be continuing, (ii) such Grantor shall have
delivered to the Agent, at least ten Business Days prior to the date of the
proposed release, a written request for release describing the item of
Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable detail, including, without limitation, the price thereof and any
expenses in connection therewith, together with a form of release for execution
by the Agent and a certificate of such Grantor to the effect that the
transaction is in compliance with the Loan Documents and as to such other
matters as the Agent may request and (iii) the proceeds of any such sale, lease,
transfer or other disposition required to be applied, or any payment to be made
in connection therewith, in accordance with Article II of the Credit Agreement
shall, to the extent so required, be paid or made to, or in accordance with the
instructions of, the Agent when and as required under Article II of the Credit
Agreement.
(b) Upon the latest of (i) the payment in full in cash of the Secured
Obligations, (ii) the Revolving Termination Date and (iii) the termination or
expiration of all Letters of Credit, the pledge, assignment and security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantor. Upon any such termination, the Agent will, at
the applicable Grantor's expense, execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
Section 26. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
Section 27. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois, notwithstanding
the conflicts or choice of law principles thereof.
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Section 28. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE UNITED STATES
FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH GRANTOR AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE GRANTORS AND
THE COLLATERAL AGENT EACH IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE GRANTORS AND THE AGENT EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY ILLINOIS LAW.
Section 29. WAIVER OF JURY TRIAL. THE GRANTORS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GRANTORS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 30. RIGHT OF RECOVERY. Anything contained in the Loan
Documents, including Guaranties to the contrary notwithstanding, the right of
recovery against each Grantor that is a Guarantor shall be limited to a maximum
aggregate amount equal to the greatest amount that would not render such
Grantor's obligations under its Guaranty or this Agreement subject to avoidance
as a fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Code or any provisions of applicable state law (collectively, the
"FRAUDULENT TRANSFER LAWS"), in each case after giving effect to all other
liabilities of such Grantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Grantor (a) in respect of intercompany indebtedness to the
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Company or Affiliates of the Company to the extent that such indebtedness would
be discharged in an amount equal to the amount paid by such Grantor under its
Guaranty or this Agreement and (b) under any guaranty of senior unsecured
indebtedness or indebtedness subordinated in right of payment to the Secured
Obligations which guaranty contains a limitation as to maximum amount similar to
that set forth in this Section, pursuant to which the liability of such Grantor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, contribution, reimbursement, indemnity or similar rights of such
Grantor pursuant to (i) applicable law or (ii) any agreement providing for an
equitable allocation among such Grantors and other Affiliates of the Company of
obligations under guaranties by such parties (including this Agreement).
Section 31. SUBROGATION, CONTRIBUTION, ETC.
(a) In addition to all such rights of indemnity and subrogation as the
Grantors may have under applicable law (but subject to Section 31(c)), the
Company agrees that (i) in the event any Grantor that is a Guarantor makes a
payment under any of its Guaranty, the Company shall indemnify such Grantor for
the full amount of such payment and such Grantor shall be subrogated to the
rights of the person to whom such payment is made to the extent of such payment
and (ii) in the event any assets of any Grantor that is a Domestic Subsidiary
are sold pursuant to any Loan Document to satisfy a claim of any Secured Party,
the Company shall indemnify such Grantor in an amount equal to the greater of
the book value or the fair market value of the assets so sold.
(b) Each Grantor that is a Domestic Subsidiary (a "CONTRIBUTING
GRANTOR") agrees (subject to Section 31(c)) that, in the event any other Grantor
that is a Guarantor makes a payment under any of its Guaranty or any assets of
any other Grantor that is a Guarantor are sold pursuant to any Loan Document to
satisfy a claim of any Secured Party and such other Subsidiary Grantor (the
"CLAIMING GRANTOR") has not been fully indemnified by the Company as provided in
Section 31), the Contributing Grantor shall indemnify the Claiming Grantor in an
amount equal to the amount of such payment or the greater of the book value or
the fair market value of such assets, as the case may be, in each case
multiplied by a fraction of which the numerator shall be the net worth of the
Contributing Grantor on the date hereof and the denominator shall be the net
worth of all Grantors on the date hereof (or, in the case of any Grantor
pursuant to Section 22, the date of the Security Agreement Supplement hereto
executed) and any Contributing Grantor making a payment to a Claiming Grantor
pursuant to this Section shall be subrogated to the rights of such Claiming
Grantor under Section 31(a) to the extent of such payment.
(c) Notwithstanding any provision of this Agreement to the contrary,
all rights of the Grantors under Sections 31(a) and 31(b) and all other rights
of indemnity, contribution or subrogation under applicable law or otherwise
shall be fully subordinated to the indefeasible payment in full in cash of the
Secured Obligations. No failure on the part of the Company or any other Grantor
to make the payments required by 31(a) and 31(b) (or any other payments required
under applicable law or otherwise) shall in any respect limit the obligations
and liabilities of any Grantor with respect to its obligations hereunder and
under the other Loan Documents, and each
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Grantor shall remain liable for the full amount of the obligations of such
Grantor hereunder and under the other Loan Documents.
Section 32. CERTAIN THIRD-PARTY AGREEMENTS.
(a) This Agreement is absolute, unconditional and irrevocable and is
in no way conditioned or contingent on the Company's or any Grantor's
performance of any obligation hereunder or under any other Loan Document, any
attempt to enforce in whole or in part any of the Company's liabilities and
obligations to any Secured Party or the existence or continuance of the Company
or any other Person as a legal entity, nor shall this Agreement or the Grantors'
respective obligations hereunder be limited, impaired, restricted or otherwise
affected by the consolidation or merger of the Company with or into any other
entity, the sale, lease or other disposition by the Company of all or
substantially all of its assets to any other entity (whether or not effected in
compliance with the Loan Documents), or the bankruptcy or insolvency of the
Company, the admission in writing by the Company of its inability to pay its
debts as they mature, or its making of a general assignment for the benefit of,
or entering into a composition or arrangement with, creditors.
(b) The Collateral Agent and the other Secured Parties may, at any
time and from time to time, without the consent of or notice to the Grantors,
except such notice as may be required by applicable statute which cannot be
waived, without incurring responsibility to the Grantors, and without impairing
or releasing the obligations of the Grantors hereunder, upon or without any
terms or conditions and in whole or in part, (i) to the extent permitted by the
Loan Documents, change the manner, place and terms of payment or change or
extend the time of payment of, renew or alter any obligation of the Company
hereby secured, or in any manner modify, amend or supplement the terms of the
Loan Documents (other than this Agreement) or any documents, instruments or
agreements executed in connection therewith (other than this Agreement), and
this Agreement shall apply to the obligations and liabilities of the Company, as
changed, extended, renewed, modified, amended, supplemented or altered in any
manner, (ii) subject to the terms of this Agreement and the other Loan Documents
exercise or refrain from exercising any rights against the Company or others
(including the other Grantors) or otherwise act or refrain from acting, (iii)
settle or compromise any obligations and liabilities herein secured or any
obligations and liabilities (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and may subordinate the payment of
all or any part thereof to the payment of any obligations and liabilities which
may be due to the Collateral Agent, the other Secured Parties or others, (iv) in
the manner permitted by the Loan Documents, sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner or in any order any property
pledged or mortgaged by anyone to secure or in any manner securing the Secured
Obligations, any liabilities or obligation (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof or any other
obligations or liabilities of the Company or the other Grantors to the Secured
Parties or any offset there against, (v) take and hold security or additional
security for any or all of the Secured Obligations, (vi) apply any sums by
whomsoever paid or howsoever realized to any obligations and liabilities of the
Company to the Secured Parties regardless of what obligations and liabilities
remain unpaid, and (vii) in accordance with the Loan Documents, assign their
rights and interests under this Agreement or the other Loan Documents, in whole
or in part. Without limiting the generality of the foregoing, each Grantor
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hereby specifically waives such Grantor's rights and benefits under any statute,
regulation, judicial decision or other law which purports to exonerate or reduce
the liability of a surety if the underlying obligation is altered in any respect
or if the rights and remedies of the creditor against the principal in respect
of a secured obligation are in any way altered, impaired or suspended and agrees
that, by so doing, such Grantor's obligations hereunder shall continue even if
the Secured Parties alter any obligations under the Loan Documents (other than
this Agreement) in any respect or the Secured Parties' remedies or rights
against the Company are in any way impaired or suspended without such Grantor's
consent.
(c) No invalidity, irregularity or unenforceability of the obligations
or liabilities of the Company under the Credit Agreement or any other Loan
Document shall affect, impair or be a defense to this Agreement. Each Grantor
hereby waives any and all benefits and defenses under any statute, regulation,
judicial decision or other law which purports to exonerate or reduce the
liability of a surety as a result of any disability or absence of liability of
the principal or any defense to liability or enforcement which the principal may
have and agrees that, by so doing, such Grantor's obligations and the security
interests granted hereunder shall continue even if the Company had no liability
at the time of execution of the Credit Agreement or thereafter ceased or ceases
to be liable. Each Grantor also waives any and all benefits and defenses under
any statute, regulation, judicial decision or other law which purports to limit
the liability of a surety to that of the principal or to reduce the liability of
a surety in proportion to any reduction in the liability of the principal and
agrees that, by so doing, such Grantor's obligations hereunder may be more
burdensome than that of the Company.
(d) Each Grantor, to the extent permitted under applicable law, hereby
waives any right, whether arising under any statute, regulation, judicial
decision or otherwise, to require the Collateral Agent or any other Secured
Party to (i) proceed against the Company or any other Person acting as surety,
guaranteeing or providing collateral or other credit support for the Company's
obligations under the Loan Documents (each a "THIRD PARTY CREDIT SUPPORT
PROVIDER"), (ii) proceed against or exhaust any security received from the
Company or any Third Party Credit Support Provider, or (iii) pursue any other
right or remedy in the Collateral Agent's or the other Secured Parties' power
whatsoever.
(e) Each Grantor further waives, to the extent permitted under
applicable law: (i) any defense resulting from the absence, impairment or loss
of any right of reimbursement, subrogation, contribution or other right or
remedy of such Grantor against the Company, any Third Party Credit Support
Provider or any security, whether resulting from an election by the Collateral
Agent and the other Secured Parties to foreclose upon security by judicial or
nonjudicial sale or otherwise; (ii) any setoff or counterclaim of the Company or
any defense of any kind (including defenses resulting from any disability) or
the cessation or stay of enforcement from any cause whatsoever of the liability
of the Company (including without limitation the lack of validity or
enforceability of the Loan Documents); (iii) any right to exoneration, in whole
or in part, of sureties or Third Party Credit Support Providers which would
otherwise be applicable; (iv) except as required under the respective Loan
Documents, all presentments, demands for performance, notices of
non-performance, protests, notice of dishonor, notices of acceptance of this
Agreement or of the existence, creation or incurring of
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new or additional obligations under the Loan Documents, or any other notices of
any kind; and (v) all valuation, appraisal, extension or redemption laws now or
hereafter in effect.
(f) Each Grantor acknowledges that it has the ability, and hereby
assumes the obligation and responsibility, to keep informed of the financial
condition of the Company and any Third Party Credit Support Provider and of
other matters or circumstances affecting the ability of any of them to pay or
perform their respective obligations thereunder or the risk of nonpayment and
nonperformance. Each Grantor hereby waives any obligation on the part of the
Collateral Agent or any other Secured Party to inform such Grantor of the
financial condition, or any changes in financial condition, of the Company or
any Third Party Credit Support Provider or of any other matter or circumstance
which might effect the ability of the Company to pay and perform under the Loan
Documents, or the risk of nonpayment or nonperformance.
[SIGNATURES ON THE FOLLOWING PAGES]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
MIDWAY GAMES INC.
By /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
ADDRESS FOR NOTICES FOR ALL MIDWAY
ENTITIES: MIDWAY INTERACTIVE INC.
c/o Midway Games Inc.
Attn: Chief Financial Officer
0000 Xxxx Xxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000 ------------------------------------
Telephone: (000) 000-0000 Print Name: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000 Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
With a copy to:
Xxxxxxx X. Xxxxxx
Senior Vice President, Secretary and MIDWAY HOME ENTERTAINMENT INC.
General Counsel
Midway Games Inc.
0000 Xxxx Xxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000 ------------------------------------
Telephone: (000) 000-0000 Print Name: Xxxxxx X. Xxxxxx
Facsimile: (000)000-0000 Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
MIDWAY GAMES WEST INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
35
MIDWAY AMUSEMENT GAMES, LLC
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
MIDWAY SALES COMPANY, LLC
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
MIDWAY HOME STUDIOS INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Print Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President - Finance,
Treasurer and Chief Financial Officer
36
Accepted by:
BANK OF AMERICA, N.A., AS AGENT
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Print Name: Xxxxx X. Xxxxxxxx
Title: Vice President
37
LIST OF EXHIBITS
Exhibit A Form of Security Agreement Supplement
Exhibit B Form of Pledged Account Letter
Exhibit C Form of Control Agreement (Securities Account)
Exhibit D Form of Control Agreement (Commodity Account)
Exhibit E Form of Amended and Restated Intellectual Property Security
Agreement
Exhibit F Form of Amended and Restated Intellectual Property Security
Agreement Supplement
Exhibit G Form of Cash Concentration Account Letter
Exhibit H Intercompany Note
LIST OF SCHEDULES
Schedule I Pledged Shares and Pledged Debt
Schedule II Patents, Trademarks, Trade Names, Copyrights and Licenses
Schedule III Locations of Equipment and Inventory
Schedule IV Chief Executive Office, State of Incorporation or Formation, and
Location of Books, Records and Original Chattel Paper Pertaining
to Receivables
Schedule V Federal Tax Identification Number
Schedule VI Trade Names and Trade Styles; Other Corporate, Trade or Fictitious
Names
Schedule VII Inventory Stored with Warehousemen or on Leased Premises
Schedule VIII Leased Equipment
Schedule IX Pledged Accounts (Deposit Accounts and Lockbox Accounts)
Schedule X Unblocked Accounts
Schedule XI Cash Concentration Accounts
