EXHIBIT 4.14
CONFORMED COPY
SECURITY AGREEMENT dated as of April 30, 1998, among CDRJ
ACQUISITION CORPORATION (to be renamed JAFRA COSMETICS
INTERNATIONAL, INC.), a Delaware corporation ("JCI" or the
"Grantor"), each subsidiary of JCI listed on Schedule I hereto
(each such subsidiary individually a "Subsidiary Grantor" and
collectively, the "Subsidiary Grantors"; the Subsidiary Grantors
and JCI are referred to collectively herein as the "Grantors")
and CREDIT SUISSE FIRST BOSTON, a bank organized under the laws
of Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of Mexico ("JCISA" and, together
with JCI, the "Borrowers"), the lenders from time to time party thereto (the
"Lenders"), the Issuing Bank (as defined therein) and Credit Suisse First
Boston, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), as swingline lender and as Collateral Agent and (b) the
JCI Guarantee Agreement.
The Lenders have agreed to make Loans to the Borrowers and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrowers pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. JCI has agreed to guarantee, among other things, all the obligations
of JCISA under the Credit Agreement. The JCI Subsidiary Grantors will agree to
guarantee, among other things, all the obligations of JCI under the Credit
Agreement and the JCI Guarantee Agreement. The obligations of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit are conditioned
upon, among other things, the execution and delivery by the Grantors of an
agreement in the form hereof to secure their respective obligations under the
Credit Agreement, the JCI Subsidiary Guarantee Agreement and the other Loan
Documents, including (a) in the case of JCI, (i) the due and punctual payment by
JCI of (A) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans of JCI, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (B) each payment required to be made by JCI under the Credit
Agreement in respect of any Letter of Credit issued for its benefit, when and as
due, including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (C) all other monetary
obligations, including fees, costs, expenses and indemnities, whether direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
JCI to the Secured Parties under the Credit Agreement, the JCI Guarantee
Agreement and the other Loan Documents, (ii) the due and punctual performance of
all covenants, agreements, obligations and liabilities of JCI under or pursuant
to the Credit Agreement, the JCI Guarantee Agreement and the other Loan
Documents, (iii) unless otherwise agreed to in writing by the applicable
counterparty thereto, the due and punctual payment and performance of all
obligations of JCI under each Hedging Agreement entered into with any
counterparty (whether or not a Lender or an Affiliate thereof) and (iv) the due
and punctual payment and performance of all guarantee obligations of JCI
referred to in Section 6.01(d)(ii) of the Credit Agreement as to which any
Lender or any Affiliate thereof is originally a beneficiary (all the monetary
and other obligations described in the preceding clauses (i) through (iv) being
collectively called the "JCI Obligations") and (b) in the case of any Subsidiary
Grantor, its respective obligations under the JCI Subsidiary Guarantee Agreement
and the other Loan Documents to which such Subsidiary Grantor is a party (the
"Subsidiary Grantor Obligations" and, together with the JCI Obligations, the
"Obligations").
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Accordingly, each Grantor and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise
requires, all capitalized terms used but not defined herein shall have the
meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
"Accounts" shall have the meaning set forth in the Uniform Commercial Code.
"Chattel Paper" shall have the meaning set forth in the Uniform Commercial
Code.
"Collateral" shall mean, with respect to each Grantor, all (a) Accounts,
(b) Contracts, (c) Documents, (d) Equipment, (e) General Intangibles, (f)
Inventory, (g) cash and cash accounts, (h) Intellectual Property, (i) Investment
Property, (j) Instruments, (k) Chattel Paper and (l) Proceeds of the foregoing,
excluding the Pledged Securities (as defined in the Pledge Agreement), and all
properties and assets excluded from the definition of Pledged Securities in the
Pledge Agreement (including, without limitation, any Capital Stock of any
Foreign Subsidiary in excess of 65% of any series of such stock and intercompany
indebtedness).
"Contracts" shall mean, with respect to any Grantor, all contracts,
agreements, instruments and indentures in any form, and portions thereof, to
which such Grantor is a party or under which such Grantor has any right, title
or interest or to which such Grantor or any property of such Grantor is subject,
as the same may from time to time be amended, supplemented or otherwise
modified, including, without limitation, (a) all rights of such Grantor to
receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of such Grantor to damages arising thereunder and (c)
all rights of such Grantor to perform and to exercise all remedies thereunder.
"Copyright Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary providing for the grant by such Grantor of any right
to use any Copyright of such Grantor, subject, in each case, to the terms of
such license agreements, and the right to prepare for sale, sell and advertise
for sale, all Inventory now or hereafter covered by such licenses.
"Copyrights" shall mean, with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States copyrights, whether or not
the underlying works of authorship have been published or registered, United
States copyright registrations and copyright applications and (a) all renewals
thereof, (b) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including payments under all licenses
entered into in connection therewith, and damages and payments for past, present
or future infringements thereof and (c) the right to xxx or otherwise recover
for past, present and future infringements thereof.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
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"Documents" shall have the meaning set forth in the Uniform Commercial
Code.
"Equipment" shall have the meaning set forth in the Uniform Commercial Code
(other than all cars, trucks, trailers, construction and earth moving equipment
and other vehicles covered by a certificate of title law of any state and all
liens and other appurtenances to any of the foregoing).
"General Intangibles" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) all properties and assets excluded from the definition of Pledged
Securities in the Pledge Agreement.
"Instruments" shall have the meaning specified in the Uniform Commercial
Code, excluding the Pledged Securities (as defined in the Pledge Agreement) and
all properties and assets excluded from the definition of Pledged Securities in
the Pledge Agreement.
"Intellectual Property" shall mean, with respect to any Grantor, the
collective reference to such Grantor's Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses.
"Inventory" shall mean, with respect to any Grantor, all inventory (as
defined in the Uniform Commercial Code) of such Grantor.
"Investment Property" shall have the meaning specified in the Uniform
Commercial Code, excluding the Pledged Securities (as defined in the Pledge
Agreement) and all the properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement.
"IP Collateral" shall mean, with respect to any Grantor, the collective
reference to such Grantor's Patents, Patent Licenses, Trademarks, Trademark
Licenses, General Intangibles connected with the use of or symbolized by the
Trademarks and Patents and, to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
"License" shall mean any Patent License, Trademark License or Copyright
License to which any Grantor is a party, including those listed on Schedule II.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Patent Licenses" shall mean with respect to any Grantor, all United States
written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Patents of such Grantor
or such other Person's patents, whether such Grantor is a licensor or a licensee
under any such agreement, subject, in each case, to the terms of such license
agreements, and the right to prepare for sale, sell and advertise for sale, all
Inventory now or hereafter covered by such licenses.
"Patents" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States patents, patent
applications and patentable inventions, including all patents and patent
applications identified in Schedule III and including (a) all inventions and
improvements described and claimed therein, (b) the right to xxx or otherwise
recover for any and all past, present and future infringements thereof, (c) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (d) all other rights corresponding thereto in the
United States and all reissues, divisions, continuations, continuations-in-part,
substitutes, renewals, and extensions thereof, all improvements thereon and all
other rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto.
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"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 2 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of JCI.
"Proceeds" shall have the meaning set forth in the Uniform Commercial Code.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) unless otherwise agreed to
in writing by the applicable counterparty thereto, each counterparty to a
Hedging Agreement entered into with JCI (whether or not a Lender or an Affiliate
of a Lender) at the time the Hedging Agreement was entered into, (f) the
beneficiaries of each indemnification obligation undertaken by any Grantor under
any Loan Document and (g) the successors and assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Trade Secrets" shall mean, with respect to any Grantor, all of such
Grantor's right, title and interest in and to all United States trade secrets,
including know-how, processes, formulae, compositions, designs and confidential
business and technical information, and all rights of any kind whatsoever
accruing thereunder or pertaining thereto, including (a) all income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including payments under all licenses, non-disclosure agreements and memoranda
of understanding entered into in connection therewith and damages and payments
for past or future misappropriations thereof and (b) the right to xxx or
otherwise recover for past, present or future misappropriations thereof.
"Trademark Licenses" shall mean, with respect to any Grantor, all United
States written license agreements of such Grantor with any Person who is not an
Affiliate or a Subsidiary in connection with any of the Trademarks of such
Grantor or such other Person's names or trademarks, whether such Grantor is a
licensor or a licensee under any such agreement, subject, in each case, to the
terms of such license agreements, and the right to prepare for sale, sell and
advertise for sale, all Inventory now or hereafter covered by such licenses.
"Trademarks" shall mean with respect to any Grantor, all of such Grantor's
right, title and interest in and to all United States trademarks, service marks,
trade names, trade dress or other indicia of trade origin or business
identifiers, trademark and service xxxx registrations, and applications for
trademark or service xxxx registrations (except for "intent to use" applications
for trademark or service xxxx registrations filed pursuant to Section 1(b) of
the Xxxxxx Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use
or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed),
and any renewals thereof, including each registration and application identified
in Schedule IV, and including (a) the right to xxx or otherwise recover for any
and all past, present and future infringements or dilutions thereof, (b) all
income, royalties, damages and other payments now and hereafter due and/or
payable with respect thereto (including payments under all licenses entered into
in connection therewith, and damages and payments for past, present or future
infringements thereof) and (c) all other rights corresponding thereto in the
United States and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto in the United States, together in each
case with the goodwill of the business connected with the use of, and symbolized
by, each such trademark, service xxxx, trade name, trade dress or other indicia
of trade origin or business identifiers.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. Subject to Section 2.03, each Grantor,
as security for the payment or performance, as the case may be, in full of the
Obligations, hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in, all of
such Grantor's right, title and interest in, to and under its respective
Collateral (the "Security Interest"). Without limiting the foregoing, the
Collateral Agent is hereby authorized to file one or more financing statements,
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office) or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of such Grantor, and naming such Grantor as debtor and the Collateral Agent as
secured party (in each case, to the extent permitted by applicable law). The
Collateral Agent shall provide copies of each such filing to the Grantors
promptly upon the filing or recordation of any such filing.
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
SECTION 2.03. Certain Exceptions. No Security Interest is or will be
granted pursuant hereto in (and the term "Collateral" shall not include) the
right, title and interest of any Grantor under or in:
(a) any Instruments, Contracts, Chattel Paper, Documents, General
Intangibles, Licenses or other contracts or agreements with or issued by Persons
other than Parent, the Subsidiaries or the Borrowers (collectively, "Excluded
Agreements") that would otherwise be included in the Collateral (and such
Excluded Agreements shall not be deemed to constitute a part of the Collateral)
for so long as, and to the extent that, the granting of such a Security Interest
pursuant hereto would result in a breach, default or termination of such
Excluded Agreements;
(b) any Equipment that would otherwise be included in the Collateral
(and such Equipment shall not be deemed to constitute a part of the Collateral)
if such Equipment is subject to a Lien permitted by Section 6.02(g) of the
Credit Agreement; or
(c) any Pledged Securities (as such term is defined in the Pledge
Agreements), and all properties and assets excluded from the definition of
Pledged Securities in the Pledge Agreement (including, without limitation, any
Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such
stock and intercompany indebtedness).
ARTICLE III
Representations and Warranties
Each Grantor represents and warrants to the Collateral Agent and the
Secured Parties that:
SECTION 3.01. Title and Authority. Such Grantor has good and valid rights
in and title to its Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.
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SECTION 3.02. Perfected Liens. (a) This Agreement is effective to create,
as collateral security for the Obligations of such Grantor, valid and
enforceable Liens on such Grantor's Collateral in favor of the Collateral Agent,
for the benefit of the Secured Parties, except as enforceability may be affected
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(b) Except with regard to Liens (if any) on Specified Assets, upon
the completion of the Filings, and the delivery to and continuing possession by
the Collateral Agent of all Instruments, Chattel Paper and Documents, a security
interest in which is perfected by possession, the Liens created pursuant to this
Agreement will constitute valid Liens on and (to the extent provided herein) a
perfected Security Interest in such Grantor's Collateral in favor of the
Collateral Agent for the benefit of the Secured Parties, and will be prior to
all other Liens of all other Persons other than Permitted Liens, and which Liens
are enforceable as such as against all other Persons other than Ordinary Course
Buyers, except to the extent that the recording of an assignment or other
transfer of title to the Collateral Agent or the recording of other applicable
documents in the United States Patent and Trademark Office, the United States
Copyright Office or the Commonwealth of Puerto Rico may be necessary for
perfection or enforceability, and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law) or by an implied covenant of good faith and fair dealing. As used in
this Section 3.02, the following terms shall have the following meanings:
(i) "Filings" shall mean the filing or recording of the Financing
Statements, the Mortgages, and this Agreement as set forth in Section 3.20
of the Credit Agreement, and any filings after the Closing Date in any
other jurisdiction as may be necessary under any Requirement of Law.
(ii) "Financing Statements" shall mean the financing statements
delivered to the Collateral Agent by each Grantor on the Closing Date for
filing in the jurisdictions listed on Schedule 3.20 to the Credit Agreement
(which Financing Statements are in proper form for filing in such
jurisdictions).
(iii) "Ordinary Course Buyers" shall mean, with respect to goods
only, buyers in the ordinary course of business to the extent provided in
Section 9-307(1) of the Uniform Commercial Code as in effect from time to
time in the applicable jurisdiction.
(iv) "Permitted Liens" shall mean Liens permitted pursuant to the
Loan Documents, including those permitted to exist pursuant to Section 6.02
of the Credit Agreement.
(v) "Specified Assets" shall mean the following property and assets
of each Grantor:
(A) Equipment constituting Fixtures;
(B) Patents, Patent Licenses, Trademarks and Trademark Licenses to
the extent that (1) Liens thereon cannot be perfected by the filing of
financing statements under the Uniform Commercial Code or by the filing and
acceptance thereof in the United States Patent and Trademark Office or (2)
such Patents, Patent Licenses, Trademarks and Trademarks Licenses as are
not, individually or in the aggregate, material to the business of the
Parent, the Borrowers and the Subsidiaries taken as a whole;
(C) Copyrights and Copyright Licenses and Accounts or receivables
arising therefrom only to the extent that the Uniform Commercial Code as in
effect from time to time in the relevant jurisdiction is not applicable to
the creation or perfection of Liens thereon;
(D) uncertificated securities;
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(E) Collateral for which the perfection of Liens thereon requires
filings in or other actions under the laws of jurisdictions outside the
United States of America, any State, territory or dependency thereof or the
District of Columbia;
(F) Contracts, Accounts or receivables on which the United States of
America or any department, agency or instrumentality thereof is the
obligor, and property or assets subject to any rights reserved in favor of
the United States government as required under law;
(G) goods included in Collateral received by any Person for "sale or
return" within the meaning of Section 2-326 of the Uniform Commercial Code
of the applicable jurisdiction, to the extent of claims of creditors of
such Person; and
(H) Proceeds of Accounts or Inventory until transferred to the
Collateral Agent.
SECTION 3.03. IP Collateral. Schedules II, III and IV together list all
material Trademarks and Patents in each case registered in the United States
Patent and Trademark Office and owned by such Grantor in its own name as of the
date hereof, and all material Trademark Licenses and Patent Licenses (including
material Trademark Licenses for registered Trademarks and Patent Licenses for
registered Patents) owned by such Grantor in its own name as of the date hereof.
SECTION 3.04. Farm Products. None of such Grantor's Collateral
constitutes, or is the Proceeds of, Farm Products.
SECTION 3.05. Accounts. The amount represented by such Grantor to the
Collateral Agent or the other Secured Parties from time to time as owing by each
account debtor or by all account debtors in respect of such Grantor's Accounts
will at such time be the correct amount, in all material respects, actually
owing by such account debtor or debtors thereunder, except to the extent that
appropriate reserves therefor have been established on the books of such Grantor
in accordance with GAAP. Unless otherwise indicated in writing to the
Collateral Agent, each Account of such Grantor arises out of a bona fide sale
and delivery of goods or rendition of services by such Grantor. Such Grantor
has not given any account debtor any deduction in respect of the amount due
under any such Account, except in the ordinary course of business or as such
Grantor may otherwise advise the Collateral Agent in writing.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its properties
to the extent that any financing statement filed in connection with this
Agreement would become seriously misleading, (ii) in the location of its chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the establishment
of any such new office or facility), (iii) in its identity or corporate
structure to the extent that any financing statement filed in connection with
this Agreement would become seriously misleading or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees to make all filings (other than in
the Commonwealth of Puerto Rico) under the Uniform Commercial Code or otherwise
that are required in order for the Collateral Agent to continue at all times
following such change to have a perfected security interest in all the
Collateral (other than Specified Assets).
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in
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accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all reasonable actions necessary to defend title to
the Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral as a perfected security interest having at
least the priority described in Section 3.02 against any Lien not permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in connection with
the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
SECTION 4.04. Inspection and Verification. At any time during the
occurrence and continuance of an Event of Default, the Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at each Grantor's own cost and expense, to inspect such Grantor's Collateral,
all records related thereto (and to make extracts and copies from such records)
and the premises upon which any of such Grantor's Collateral is located, to
discuss such Grantor's affairs with the officers of such Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, such Grantor's Collateral, excluding, however, in the case of
Accounts or Collateral in the possession of any third Person, by contacting
Account Debtors or the third Person possessing such Collateral for the purpose
of making such a verification. The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any Lender (it being understood that any such information shall be deemed
to be "Confidential Information" subject to the provisions of Section 9.17 of
the Credit Agreement).
SECTION 4.05. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
that are not permitted pursuant to the Credit Agreement, and may pay for the
maintenance and preservation of any Grantor's Collateral to the extent such
Grantor fails to do so as required by the Credit Agreement or this Agreement,
and each Grantor severally agrees to reimburse the Collateral Agent on demand
for any reasonable payment made or any reasonable expense incurred by the
Collateral Agent pursuant to the foregoing authorization on such Grantor's
behalf; provided, however, that nothing in this Section 4.05 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.06. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral.
SECTION 4.07. Use and Disposition of Collateral. None of the Grantors
shall grant any Lien in respect of the Collateral, except as permitted by the
Credit Agreement. Each Grantor agrees that if any Inventory is in the
possession or control of any warehouseman, bailee, agent or processor and the
Collateral Agent reasonably requests, such Grantor shall inform such
warehouseman, bailee, agent or processor of the Security Interest and shall use
good faith efforts to obtain from such
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warehouseman, bailee, agent or processor its agreement to hold the Inventory
subject to the Security Interest and to waive and release any Lien held by it
with respect to such Inventory (unless such Lien is permitted by the Credit
Agreement or other Loan Document), whether arising by operation of law or
otherwise.
SECTION 4.08. Limitation on Modification of Accounts. None of the
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, releases,
discounts, compromises or settlements granted that would not reasonably be
expected to materially adversely affect the value of the Accounts constituting
Collateral taken as a whole.
SECTION 4.09. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage in
accordance with Section 5.06 of the Credit Agreement. Each Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor's true
and lawful agent (and attorney-in-fact) for the purpose, during the continuance
of an Event of Default specified in Section 7.01(a) or 7.02(a), of making,
settling and adjusting claims in respect of such Grantor's Collateral under
policies of insurance, endorsing the name of such Grantor on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of such Grantor hereunder, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Collateral Agent
reasonably deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.09, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the respective Grantor to the Collateral Agent and shall be
additional Obligations secured hereby.
SECTION 4.10. Covenants Regarding Copyrights, Patents, and Trademarks.
(a) Within 90 days after the end of each calendar year, such Grantor will notify
the Collateral Agent of any acquisition by such Grantor of any registration of
any material Copyright, Patent or Trademark or any exclusive right under a
material License, in each case constituting Collateral and shall take such
actions as may be reasonably requested by the Collateral Agent (but only to the
extent such actions are within such Grantor's control) to perfect the Security
Interest granted to the Collateral Agent and the other Secured Parties therein
to the extent provided in respect of Copyrights, Patents or Trademarks
constituting Collateral on the date hereof (including without limitation by (x)
the execution and delivery of a Security Agreement (or amendments to any such
agreement previously executed or delivered by such Grantor) and/or (y) the
making of appropriate filings in the United States Patent and Trademark Office
or the United States Copyright Office and/or appropriate Uniform Commercial Code
filings).
(b) Except as permitted in the Loan Documents, such Grantor agrees to take
all reasonably necessary steps, including in the United States Patent and
Trademark Office or in any court, to (i) maintain each trademark registration
and each Trademark License identified on Schedule II or IV hereto, as the case
may be, and (ii) pursue each trademark application now or hereafter identified
in Schedule V hereto, including, without limitation, the filing of responses to
office actions issued by the United States Patent and Trademark Office, the
filing of applications for renewal, the filing of affidavits under Sections 8
and 15 of the United States Trademark Act, and the participation in opposition,
cancelation, infringement and dilution proceedings, except, in each case in
which such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired trademark or service xxxx registration, or
application for trademark or service xxxx registration, or any rights obtained
under any Trademark License, in each case, to which it is now or later becomes
entitled,
10
except in each case in which such Grantor has reasonably determined that any of
the foregoing is not of material economic value to it. Any expenses incurred in
connection with such activities shall be borne by such Grantor.
(c) Except as permitted in the Loan Documents, such Grantor agrees to take
all necessary steps, including in the United States Patent and Trademark Office
or in any court, to (i) maintain each patent and each Patent License identified
on Schedule II or III, as applicable, and (ii) pursue each patent application,
now or hereafter identified in Schedule III including the filing of divisional,
continuation, continuation-in-part and substitute applications, the filing of
applications for reissue, renewal or extensions, the payment of maintenance
fees, and the participation in interference, reexamination, opposition or
infringement and misappropriation proceedings, except, in each case in which
such Grantor has reasonably determined that any of the foregoing is not of
material economic value to it. Such Grantor agrees to take corresponding steps
with respect to each new or acquired patent, patent application, or any rights
obtained under any Patent License, in each case, which it is now or later
becomes entitled, except in each case in which such Grantor has reasonably
determined that any of the foregoing is not of material economic value to it.
Any expenses incurred in connection with such activities shall be borne by such
Grantor.
(d) Except as provided in subsection (f) hereof, such Grantor shall take
all additional steps not set forth in subsections (b) and (c) hereof which it or
the Collateral Agent deems reasonably appropriate under the circumstances to
preserve and protect its material Copyrights, Copyright Licenses, Trademarks,
Trademark Licenses, Patents and Patent Licenses.
(e) Such Grantor shall not abandon any trademark registration, patent or
any pending trademark or patent application, in each case listed on Schedule III
or IV, without the written consent of the Collateral Agent, unless such Grantor
shall have previously determined that such use or the pursuit or maintenance of
such trademark registration, patent or pending trademark or patent application
is not of material economic value to it, in which case, such Grantor will, at
least annually, give notice of any such abandonment to the Collateral Agent in
writing, in reasonable detail, at its address set forth in the Credit Agreement.
(f) In the event that any Grantor becomes aware that any of such Grantor's
IP Collateral which such Grantor has reasonably determined to be material to its
business is infringed or misappropriated by a third party, which infringement or
misappropriation would reasonably be expected to have a Material Adverse Effect,
such Grantor shall notify the Collateral Agent promptly and in writing, in
reasonable detail, at its address set forth in the Credit Agreement, and shall
take such actions as such Grantor or the Collateral Agent deems reasonably
appropriate under the circumstances to protect such IP Collateral including
suing for damages and/or for an injunction against such infringement or
misappropriation. Any expense incurred in connection with such activities shall
be borne by such Grantor. Such Grantor will advise the Collateral Agent
promptly and in writing, in reasonable detail, at its address set forth in the
Credit Agreement, of any adverse determination or the institution of any
proceeding (including, without limitation, the institution of any proceeding in
the United States Patent and Trademark Office or any court) regarding any item
of such Grantor's IP Collateral which could reasonably result in a Material
Adverse Effect.
(g) Such Grantor shall xxxx its products with the trademark registration
symbol (R), the numbers of all appropriate patents, the common law trademark
symbol , or the designation "patent pending", as the case may be, to the extent
that it is reasonably and commercially practicable.
(h) Such Grantor will not create, incur or permit to exist, will defend
such Grantor's IP Collateral against, and will take such other action as is
reasonably necessary to remove, any material Lien or material adverse claim on
or to any of such Grantor's IP Collateral other than Liens created hereby and
other than as permitted pursuant to the Loan Documents (including any Liens
permitted to exist on such Grantor's IP Collateral pursuant to Section 6.02 of
the Credit Agreement), and will defend the right, title and interest of the
Collateral Agent and the other Secured Parties in and to any
11
of the IP Collateral against the claims and demands of all Persons whomsoever,
except where failure to defend would not have a Material Adverse Effect.
(i) Without the prior written consent of the Collateral Agent, such Grantor
will not sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, such Grantor's IP Collateral, or attempt, offer or
contract to do so, except with respect to licenses in the ordinary course of
business or as permitted by this Agreement or the Loan Documents.
(j) Such Grantor will advise the Collateral Agent promptly and in writing,
in reasonable detail, at its address set forth in the Credit Agreement, (i) of
any Lien (other than Liens created hereby or permitted under the Loan Documents,
including, without limitation, any Liens permitted to exist on such Grantor's
Patents or Trademarks pursuant to Section 6.02 of the Credit Agreement) on any
of such Grantor's IP Collateral and (ii) of the occurrence of any other event
which would reasonably be expected in the aggregate to have a material adverse
effect on the aggregate value of the IP Collateral as a whole or the Liens
created hereunder.
Section 4.13. o Protection of Trade Secrets. Such Grantor shall take all
steps which it deems commercially reasonable to preserve and protect the secrecy
of all material Trade Secrets of such Grantor.
ARTICLE V
Collections
SECTION 5.01. Power of Attorney. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers and employees of
the Collateral Agent designated by the Collateral Agent) as such Grantor's true
and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent
shall have the right, with power of substitution for each Grantor and in each
Grantor's name or otherwise, for the use and benefit of the Collateral Agent and
the Secured Parties, but only upon the occurrence and during the continuance of
an Event of Default (a) to receive, endorse, assign and/or deliver any and all
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to such Grantor's Collateral or any part thereof; (b) to demand,
collect, receive payment of, give receipt for and give discharges and releases
of all or any of such Grantor's Collateral; (c) to sign the name of such Grantor
on any invoice or xxxx of lading relating to any of such Grantor's Collateral;
(d) to send verifications of such Grantor's Accounts to any Account Debtor; (e)
to commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of such Grantor's Collateral or to enforce any rights in respect of
any such Collateral; (f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to all or any of such Grantor's
Collateral; (g) to notify, or to require such Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (h) subject to any
existing reserved rights or licenses, to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with all or any of such
Grantor's Collateral, and to do all other acts and things necessary to carry out
the purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of such Grantor's Collateral for all purposes;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or, except as otherwise provided
herein, to take any action with respect to the Collateral or any part thereof or
the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of any Grantor or to any claim or action against
the Collateral Agent. It is understood and agreed that the appointment of the
Collateral Agent as the agent and attorney-in-fact of each Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document
12
with respect to the such Grantor's Collateral or any part thereof or, such
Grantor's impose any obligation on the Collateral Agent or any Secured Party to
proceed in any particular manner with respect to the Collateral or any part
thereof, or, except as otherwise provided herein, in any way limit the exercise
by the Collateral Agent or any Secured Party of any other or further right which
it may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise. Anything in this Section 5.01 to
the contrary notwithstanding, the Collateral Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section
5.01 unless an Event of Default shall have occurred and be continuing.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees that the Collateral
Agent shall have the right to take any of or all the following actions at the
same or different times: (a) in the case of any Copyright, Patent or Trademark
constituting Collateral of such Grantor, execute and deliver any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's and the other Secured
Parties' security interest in such Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby and, subject to any existing reserved rights or licenses, assign any
Copyright, Patent or Trademark constituting Collateral of such Grantor (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), for such term or terms, on such conditions, and in such
manner, as the Collateral Agent shall in its sole discretion determine, and (b)
with or without legal process and with or without prior notice or demand for
performance, to take possession of such Grantor's Collateral and without
liability for trespass to enter any premises where such Grantor's Collateral may
be located for the purpose of taking possession of or removing such Grantor's
Collateral and, generally, to exercise any and all rights afforded to a secured
party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of such
Grantor's Collateral, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall reasonably deem appropriate. The Collateral Agent shall
be authorized at any such sale of any Grantor's Collateral subject to
restrictions on sales under the Securities Act of 1933, as amended (if it
reasonably deems it advisable to do so), to restrict the prospective bidders
or purchasers to Persons who will represent and agree that they are purchasing
such Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which such
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors at least 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Grantor's Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and, in the
case of a sale at a broker's board or on a securities exchange, shall state the
board or exchange at which such sale is to be made and the day on which the
Collateral, or portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may in its sole and absolute
discretion determine. The
13
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall reasonably determine not to do so, regardless of the fact that notice of
sale of such Collateral shall have been given. The Collateral Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted by
law, private) sale made pursuant to this Section, any Secured Party may bid for
or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
such Grantor's Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to such
Secured Party from such Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement with any Person (other than a
Secured Party or affiliate thereof) to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and no Grantor shall be
entitled to the return of such Grantor's Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall have been
remedied and the Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Collateral Agent may proceed by a
suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent may, in the
sole discretion of the Collateral Agent, apply the proceeds of any collection or
sale of the Collateral, as well as any Collateral consisting of cash against the
respective Obligations of the relevant Grantor then due and owing in the
following order of priority:
FIRST, to the payment of all reasonable costs and reasonable expenses
incurred by the Collateral Agent hereunder in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations of the relevant Grantor then due and owing, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all reasonable advances made by the Collateral
Agent hereunder on behalf of such Grantor and any other reasonable costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, to the payment in full of the Obligations of the relevant
Grantor then due and owing (the amounts so applied to be distributed among
the Secured Parties pro rata in accordance with the amounts of such
Obligations then due and owing to them on the date of any such
distribution); and
THIRD, to the relevant Grantor, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers
14
shall not be obligated to see to the application of any part of the purchase
money paid over to the Collateral Agent or such officer or be answerable in any
way for the misapplication thereof.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.02 of the Credit Agreement. All communications and
notices hereunder to any Subsidiary Grantor shall be given to it in care of JCI.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants and agreements, made
by any Grantor herein shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein except with
the consent of the Collateral Agent or as contemplated by this Agreement or the
Credit Agreement. This Agreement shall be construed as a separate agreement
with respect to each Grantor and may be amended, modified, supplemented, waived
or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO
THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
15
SECTION 7.07. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.01 of the Credit Agreement.
SECTION 7.08. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
SECTION 7.09. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 7.10 Counterparts. This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument and shall become effective as
provided in Section 7.04. Delivery of an executed signature page to this
Agreement by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.11. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.12. Jurisdiction; Consent to Service of Process. Each party
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts of any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient forum and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form
16
of mail), postage prepaid, to applicable party at the address specified in
Section 7.01 or at such other address of which the parties hereto shall
have been notified pursuant thereto.
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to xxx in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section 7.12 any punitive damages.
SECTION 7.13. Termination. This Agreement shall terminate and the
Security Interest shall be automatically released, all without delivery of any
instrument or performance of any act by any party, (a) when all the Obligations
have been paid in full, the Lenders have no further commitment to lend, the L/C
Exposure has been reduced to zero and the Issuing Bank has no further commitment
to issue Letters of Credit under the Credit Agreement, at which time the
Collateral Agent shall execute and deliver to the Grantors, at the Grantors'
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent, (b) upon any sale or other transfer by any Grantor of any
Collateral that is permitted under the Credit Agreement to any Person (unless
such sold Collateral is to a Person that is required to pledge such Collateral
to the Collateral Agent pursuant to Section 5.11 of the Credit Agreement) or (c)
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.01(d) of the
Credit Agreement. A Subsidiary Grantor shall automatically be released from its
obligations hereunder and the Security Interest in the Collateral of such
Subsidiary Grantor shall be automatically released in the event that all the
capital stock of such Subsidiary Grantor shall be sold, transferred or otherwise
disposed of to a Person that is not an Affiliate of JCI in accordance with the
terms of the Credit Agreement.
SECTION 7.14. Additional Grantors. Pursuant to Section 5.11 of the Credit
Agreement, certain Domestic Subsidiaries of JCI are required to become
Subsidiary Grantors hereunder. Upon execution and delivery by the Collateral
Agent and such Domestic Subsidiary of an instrument in the form of Annex 2
hereto, such Domestic Subsidiary shall become a Subsidiary Grantor hereunder
with the same force and effect as if originally named as a Subsidiary Grantor
herein. The execution and delivery of any such instrument shall not require the
consent of any Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Grantor as a party to this Agreement.
17
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CDRJ ACQUISITION CORPORATION,
By /s/ Xxxxx X. Xxxxx
----------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice Chairman and EVP
CREDIT SUISSE FIRST BOSTON,
as Collateral Agent,
By /s/ Xxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Director
By /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Director
SCHEDULE I
SUBSIDIARY GRANTORS
None
Schedule II
LICENSES
NONE
Schedule III
PATENTS
Patent
------
App. No. Patent No. Title File/Issue
-------- ---------- ----- ----------
07/891,293 5,234,132 Cosmetic Dispenser 5/29/1992
8/10/1993
07/889,745 D 347,165 Design: Cosmetic Dispenser 5/28/1992
(Royal Jelly Milk Balm) 5/24/1994
07/891,348 5,238,131 Two-Part Plastic Cap for 5/29/1992
Container 8/24/1993
07/894,798 D 351,560 Design: Design for a Skin 5/29/1992
Programmer 10/18/1994
29/019,925 D 358,332 Design: Triangular-Shaped 3/15/1994
Cologne Bottle 5/16/1995
29/019,957 D 361,270 Design for V-Shaped Cosmetic 3/15/1994
Bottle 8/15/1995
29/050,058 D 379,766 Formal Title: Perfume Bottle 2/06/1996
6/10/1997
29/068,510 D 390,783 Formal Title: Perfume Bottles 3/25/1997
2/17/1998
Schedule IV
US TRADEMARK REGISTRATIONS
U.S. Registration Registration
Trademark No. Date
------------------- -------------- --------------
ADORISSE 2021127 03-DEC-96
BELLE CLASSIQUE 1760542 23-MAR-93
BIOLOGICALLY
EFFECTIVE SKINCARE 1597042 22-MAY-90
EAU D'AROMES 1975243 21-MAY-96
FLEURS CLASSIQUE 1760541 23-MAR-93
JAFRA 1269604 13-MAR-84
JAFRA 677471 21-APR-59
JAFRA COSMETICS
INTERNATIONAL 2046002 00-XXX-00
XXXXX XXXXXX 0000000 03-OCT-95
JF9 2095901 09-SEP-97
OPTIMEYES 2111401 04-NOV-97
ORIENTAL CLASSIQUE 1790911 31-AUG-93
PRECIOUS PROTEIN 1632839 29-JAN-91
REDISCOVER 1918674 12-SEPT-95
RISQUE (STYLIZED) 1721032 29-SEPT-92
SOOTHING RETREAT 2111326 04-NOV-97
TIME PROTECTOR 1709095 18-AUG-92
TRANQUIL SEAS 2111327 04-NOV-97
WHITE SOUFFLE 1445817 07-JUL-87
US TRADEMARK APPLICATIONS
U.S. Application Application
Trademark No. Date
--------------------- ------------ -------------
ALWAYS COLOR 75/341106 14-AUG-97
CHOSEN 75/353720 14-AUG-97
CHOSEN 75/341107 14-AUG-97
EPIC 75/394175 21-NOV-97
FM (STYLIZED) FORCE
MAGNETIQUE 74/340837 14-AUG-97
FOR ALL THE WOMEN
YOU ARE 74/570240 06-SEP-94
FRESH AWAKENINGS 75/091861 22-APR-96
JOIE DE VIVRE 75/394165 00-XXX-00
XX XXXXX 00/000000 00-XXX-00
XX XXXXX 75/260053 19-MAR-97
TIME CORRECTOR 75/351422 14-AUG-97
STATE TRADEMARK REGISTRATIONS
State Trademark Registration No. Registration Date
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California JAFRA 38,890 11-OCT-57
2
Annex 1
to the Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe anonyme
("Parent"), CDRJ Acquisition Corporation (to be renamed Jafra Cosmetics
International, Inc.), a Delaware corporation ("JCI"), Jafra Cosmetics
International, S.A. de C.V., a sociedad anonima de capital variable organized
under the laws of the United Mexican States ("JCISA" and together with JCI, the
"Borrowers"), the lenders from time to time party thereto (the "Lenders"), the
Issuing Bank (as defined therein), Credit Suisse First Boston, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), as
swingline lender and as Collateral Agent, and (b) the JCI Guarantee Agreement
dated as of April 30, 1998 (as amended, supplemented or otherwise modified from
time to time, the "JCI Guarantee Agreement") between JCI and the Collateral
Agent.
Capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Security Agreement, dated as of April 30, 1998,
as amended, modified or supplemented from time to time, among JCI, the
Subsidiary Grantors and the Collateral Agent.
The undersigned, an Officer of JCI, hereby certifies (as of the
consummation of the Transactions and thereafter) to the Collateral Agent as
follows:
1. Names. (a) The exact corporate name of JCI, as such name appears in
its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name JCI has had in the past
five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, JCI has not changed its
identity or corporate structure in any material way within the past year.
Changes in identity or corporate structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by JCI or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past year:
2
(e) Set forth below is the Federal Taxpayer Identification Number of JCI:
2. Current Locations. (a) The chief executive office of JCI is located at
the address set forth opposite its name below:
Grantor Mailing Address County State
------- --------------- ------ -----
(b) Set forth below opposite the name of JCI are all locations where JCI
maintains any books or records relating to any Accounts:
Grantor Mailing Address County State
------- --------------- ------ -----
(c) Set forth below opposite the name of JCI are all the places of
business of JCI not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
------- --------------- ------ -----
(d) Set forth below opposite the name of JCI are all the locations where
JCI maintains any Collateral not identified above:
Grantor Mailing Address County State
------- --------------- ------ -----
(e) Set forth below opposite the name of JCI are the names and addresses
of all Persons other than JCI that have possession of any of the Collateral of
JCI:
Grantor Mailing Address County State
------- --------------- ------ -----
3. Unusual Transactions. All Accounts have been originated by the Grantor
and all Inventory has been acquired by the Grantor in the ordinary course of
business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where the Grantor has
Collateral as identified in Section 2 hereof.
5. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings pursuant to the Uniform Commercial
Code, each filing and the filing office in which such filing is to be made.
6. Stock Ownership. Attached hereto as Schedule 6 is a true and correct
list of all the duly authorized issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule
6 is each equity Investment of Parent and each Subsidiary that represents 50% or
less of the equity of the entity in which such investment was made.
3
IN WITNESS WHEREOF, the undersigned have duly executed this certificate on
this 30th day of April, 1998.
JAFRA COSMETICS INTERNATIONAL, INC.,
by ______________________________
Name:
Title:
Annex 2
to the Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security Agreement
dated as of April 30, 1998, among JAFRA COSMETICS INTERNATIONAL,
INC. (formerly named CDRJ Acquisition Corporation), a Delaware
corporation ("JCI"), each subsidiary of JCI listed on Schedule I
thereto (each such subsidiary individually a "Subsidiary Grantor"
and collectively, the "Subsidiary Grantors"; the Subsidiary
Grantors and JCI are referred to collectively herein as the
"Grantors"), and CREDIT SUISSE FIRST BOSTON, a bank organized
under the laws of Switzerland, acting through its New York
branch, as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of April 30,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among CDRJ Investments (Lux) S.A., a Luxembourg societe
anonyme ("Parent"), JCI, Jafra Cosmetics International, S.A. de C.V., a
sociedad anonima de capital variable organized under the laws of the United
Mexican States ("JCISA" and, together with JCI, the "Borrowers"), the lenders
from time to time party thereto (the "Lenders"), the Issuing Bank (as defined
therein) and Credit Suisse First Boston, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), as swingline lender and as
Collateral Agent and (b) the JCI Guarantee Agreement dated as of April 30, 1998
(as amended, supplemented or otherwise modified from time to time, the "JCI
Guarantee Agreement"), between JCI and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of the Security Agreement provides that additional Domestic
Subsidiaries of JCI may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Domestic Subsidiary (the "New Grantor") is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans and the Issuing Bank to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of its respective Obligations (as defined in the Security
Agreement), does hereby grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in all of the New Grantor's right, title and interest in and
to the Collateral (as defined in the Security Agreement) of the New Grantor.
Each reference to a "Grantor" in the Security Agreement shall be deemed to
include the New Grantor. The Security Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally,
2
general equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor. Such information, to the extent applicable, shall be
added to the Schedules to the Security Agreement.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICTS OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
SECTION 7. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 7.01 of the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it care of JCI.
3
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name Of New Grantor],
by _____________________________
Name:
Title:
Address:
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by _____________________________
Name:
Title:
by _____________________________
Name:
Title:
SCHEDULE I
to Supplement No.___
to the Security Agreement
LOCATION OF COLLATERAL
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Description Location
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