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[EXECUTION COPY]
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 30, 1998, among EVENFLO
& SPALDING HOLDINGS CORPORATION, a Delaware corporation
("Holdings"), SPALDING & EVENFLO COMPANIES, INC., a Delaware
corporation (the "Borrower"), the undersigned Subsidiaries of
the Borrower (each a "Subsidiary Grantor" and collectively,
the "Subsidiary Grantors"; Holdings, the Borrower and the
Subsidiary Grantors, collectively, the "Grantors") and BANK OF
AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION ("BofA"), as
administrative agent (in such capacity, the "Administrative
Agent") for the lenders (the "Lenders") from time to time
parties to the Liquidity Facility dated as of March 30, 1998
(as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, the
"Liquidity Facility"), among the Borrower, the Lenders,
Xxxxxxx Xxxxx Capital Corporation, as documentation agent (in
such capacity, the "Documentation Agent") for the Lenders,
NationsBank N.A. South, as syndication agent (in such
capacity, the "Syndication Agent") and the Administrative
Agent.
W I T N E S S E T H
WHEREAS, pursuant to the Liquidity Facility, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and subject to
the conditions set forth therein;
WHEREAS, (a) Holdings owns 100% of the capital stock of the
Borrower, (b) each Subsidiary Grantor is a Subsidiary of the Borrower and (c)
Holdings and each Subsidiary Grantor has, pursuant to the Guaranty, guaranteed
to the Administrative Agent, for the ratable benefit of the Secured Parties and
their respective successors, endorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations;
WHEREAS, the proceeds of the Loans will be used in part to
enable the Borrower to make valuable transfers to the Subsidiary Grantors in
connection with the operation of their respective businesses;
WHEREAS, Holdings, the Borrower and the Subsidiary Grantors
are engaged in related businesses, and each Grantor will derive substantial
direct and indirect benefit from the making of the Loans; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrower under the Liquidity
Facility that Holdings, the Borrower and the Subsidiary Grantors shall have
executed and delivered this Security Agreement to the Administrative Agent for
the ratable benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce
the Secured Parties (as defined below) to enter into the Liquidity Facility and
to induce the Lenders to make their respective
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Loans, each of the Grantors hereby agrees with the Administrative Agent, for
the ratable benefit of the Secured Parties, as follows:
1. Defined Terms.
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Liquidity Facility and used herein shall have the meanings given
in the Liquidity Facility, and the following terms which are defined in the
Uniform Commercial Code in effect in the State of New York on the date hereof
are used herein as so defined: Chattel Paper, Farm Products, Instruments and
Investment property.
(b) The following terms shall have the following meanings:
"Accounts": with respect to each Grantor, any and all right,
title and interest of such Grantor to payment for goods and services
sold or leased, including any such right evidenced by Chattel Paper,
whether due or to become due, whether or not it has been earned or
performed, and whether now or hereafter acquired or arising in the
future, including, without limitation, accounts receivable from
Affiliates of such person, except to the extent that the grant of a
security interest in Accounts owed by Affiliates not incorporated or
otherwise organized in the United States of America would result in
material adverse tax or legal consequences to such Grantor.
"Accounts Receivable": with respect to each Grantor, all
right, title and interest of such Grantor to Accounts and all of its
right, title and interest in any returned goods, together with all
rights, titles, securities and guaranties with respect thereto,
including any rights to stoppage in transit, replevin, reclamation and
resales, and all related security interests, liens and pledges,
whether voluntary or involuntary in each case whether due or become
due, whether now or hereafter arising in the future.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by or is
under common control with, such Person. A Person shall be deemed
to control another Person if the controlling Person possesses,
directly or indirectly, the power (a) to vote 10% or more of the
securities having ordinary voting power for the election
of directors of such other Person or (b) to direct or cause the
direction of the management and policies of the other Person,
whether through the ownership of voting securities, membership
interests, by contract or otherwise.
"Agreement": this Security Agreement, as the same may be
amended, amended and restated, modified or otherwise supplemented
from time to time.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 2.1 of this Agreement.
"Collateral Account": any collateral account established by
the Administrative Agent as provided in Section 5.3 or Section 7.2.
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"Computer Hardware and Software Collateral" means
with respect to each Grantor, its interests in the following, in each
case to the extent the grant by such Grantor of a security interest
pursuant to this Agreement is not prohibited without the consent of
any other Person:
(a) all computer and other electronic data
processing hardware, integrated computer systems, central
processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard
and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral
devices and other related computer hardware;
(b) all software programs (including both source
code, object code and all related applications and data
files), whether now owned, licensed or leased or hereafter
acquired by each Grantor, designed for use on the computers
and electronic data processing hardware described in clause
(a) above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic
diagrams, manuals, guides and specifications) with respect to
such hardware, software and firmware described in the
preceding clauses (a) through (c); and
(e) all rights with respect to all of the foregoing,
including any and all copyrights, licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights,
renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the
foregoing.
"Contracts": with respect to each Grantor, all rights of such
Grantor under contracts and agreements 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 out of, or for, breach or default in respect thereof and (c)
all rights of such Grantor to exercise all remedies thereunder, in
each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its rights under such contract
or agreement is not prohibited without the consent of any other
person, or is permitted with consent if all necessary consents to such
grant of a security interest have been obtained from all such other
persons.
"Copyright Collateral" means with respect to each Grantor, its
interests in the following, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement is not
prohibited without the consent of any other Person:
(a) all copyrights (including copyrights for
semi-conductor chip product mask works) of each Grantor,
whether statutory or common law, registered or unregistered,
now or hereafter in force throughout the world including,
without limitation, all of each Grantor's right, title and
interest in and to all copyrights and mask works registered in
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the United States Copyright Office or anywhere else in the
world and also including, without limitation, the
copyrights and mask works referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof
(including pending applications), including the copyright and
mask works registrations and applications referred to in Item
A of Schedule IV attached hereto, if any, and all copyrights
resulting from such applications;
(b) all extensions and renewals of any of the items
described in clause (a);
(c) all copyright and mask works licenses and other
agreements providing each Grantor with the right to use any of
the items of the type referred to in clauses (a) and (b),
including each copyright license referred to in Item B of
Schedule IV attached hereto, if any;
(d) the right to xxx third parties for past, present
and future infringements of any of the Copyright Collateral
referred to in clauses (a) and (b) and, to the extent
applicable, clause (c); and
(e) all proceeds of, and rights associated with, the
foregoing, including, without limitation, licenses, royalties,
income, payments, claims, damages and proceeds of infringement
suits and all rights corresponding thereto throughout the
world.
"Deposit Accounts" means any and all demand, time, savings,
passbook or other accounts with a bank or other financial institution.
"Documents": with respect to each Grantor, all Instruments,
files, records, ledger sheets and documents covering or relating to
any of the Accounts, Equipment, General Intangibles, Intellectual
Property, Inventory or Proceeds.
"Equipment": with respect to each Grantor, all equipment,
furniture and furnishings, tools, accessories, parts and supplies of
every kind and description, wherever located, now or hereafter
existing, and all improvements, accessions or appurtenances thereto,
including Fixtures, and all other tangible personal property whether
or not similar to any of the foregoing items which are now or
hereafter acquired by such Grantor.
"Fixtures": with respect to each Grantor, all items that
would otherwise constitute items of Collateral, whether now owned or
hereafter acquired, that become so related to particular real estate
that an interest in them arises under any real estate law applicable
thereto to the extent that a security interest therein may be
perfected by filing a financing statement in the applicable
jurisdiction set forth on Schedule I hereto.
"General Intangibles": with respect to each Grantor, as
defined in the Uniform Commercial Code in effect in the State of New
York on the date hereof to the extent, in the case of any General
Intangibles arising under any contract or agreement, that the grant by
such Grantor of a security interest pursuant to this Agreement in its
rights under such contract or agreement is not prohibited without the
consent of any other person, or is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from all such
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other persons (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents), provided,
that the foregoing limitation shall not affect, limit, restrict or
impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Account or General Intangible or any money or
other amounts due or to become due under any such contract or
agreement to the extent provided in Section 9-318 of the Code as in
effect on the date hereof, and provided, further, that "General
Intangibles" shall not include any of the items within Section 2.1(h)
herein and any General Intangibles owed by Affiliates not incorporated
or otherwise organized in the United States of America to the extent
that the grant of a security interest in such General Intangibles
would result in material adverse tax or legal consequences to such
Grantor.
"Indemnitee": the Secured Parties and their respective
officers, directors, trustees, affiliates and controlling persons.
"Intellectual Property Collateral" means, collectively, the
Computer Hardware and Software Collateral, the Copyright Collateral,
the Patent Collateral, the Trademark Collateral and the Trade Secrets
Collateral.
"Inventory": with respect to each Grantor, all right, title
and interest of such Grantor in and to goods intended for sale or
lease by such person, or consumed in such person's business
(including, without limitation, all operating parts and supplies),
together with all raw materials and finished goods, whether now owned
or hereafter acquired or arising.
"Junior Security Agreement": means the Security Agreement to
be executed by the Grantors in favor of BofA, as administrative agent
under, and for the ratable benefit of the administrative agent, the
documentation agent, the syndication agent, the swing line lender, the
fronting lender and the other lenders, in each case, parties to, the
Holdings Credit Agreement.
"Material Intellectual Property Collateral": means the
following Trademarks: Spalding, Top-Flite, Etonic, Evenflo, Snugli,
Gerry, Dudley, Strata and Xxxxx.
"Obligations": the collective reference to the unpaid
principal of and interest on the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent or any Lender
(including, without limitation, interest accruing at the
then-applicable rate provided in the Liquidity Facility after the
maturity of the Loans and interest accruing at the then-applicable
rate provided in the Liquidity Facility after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter incurred, that may
arise under, out of, or in connection with, the Liquidity Facility,
the other Loan Documents or any other documents made, delivered or
given in connection therewith, whether on account of principal,
interest, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by
Holdings, the Borrower or any Subsidiary Grantor pursuant to the terms
of the Liquidity Facility or any other Loan Document) and all
obligations of each Obligor (other than the Borrower) now or hereafter
existing under this Agreement and each other Loan Document to which it
is or may become a party.
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"Patent Collateral" means with respect to each
Grantor, its interests owned in the following, in each case to the
extent the grant by such Grantor of a security interest pursuant to
this Agreement is not prohibited without the consent of any other
Person:
(a) all letters patent and applications for letters
patent throughout the world, including all patent applications
in preparation for filing anywhere in the world and including
each patent and patent application referred to in Item A of
Schedule V attached hereto;
(b) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations
of any of the items described in clause (a);
(c) all patent licenses and other agreements
providing each Grantor with the right to use any of the items
of the type referred to in clauses (a) and (b), including each
patent license referred to in Item B of Schedule V attached
hereto;
(d) the right to xxx third parties for past, present
or future infringements of any Patent Collateral described in
clauses (a) and (b) and, to the extent applicable, clause (c);
and
(e) all proceeds of, and rights associated with, the
foregoing (including license royalties and proceeds of
infringement suits), the right to xxx third parties for past,
present or future infringements of any patent or patent
application, including any patent or patent application
referred to in Item A of Schedule V attached hereto, and for
breach or enforcement of any patent license, including any
patent license referred to in Item B of Schedule V attached
hereto, and all rights corresponding thereto throughout the
world.
"Person" means an individual, a partnership, a corporation, a
limited liability company, a business trust, a joint stock company, a
trust, an unincorporated association, a joint venture or
Governmental Authority.
"Proceeds": with respect to each Grantor, any consideration
received from the sale, exchange or other disposition of any asset or
property which constitutes Collateral, any value received as a
consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of
whatever nature of any asset or property which constitutes Collateral,
and shall include, without limitation, (a) all cash and negotiable
Instruments received or held on behalf of the Administrative Agent
pursuant to Section 5.3 and (b) any claim of such Grantor against a
third party for (and the right to xxx and recover for and the rights
to damages or profits due or accrued arising out of or in connection
with) any and all amounts from time to time paid or payable under or
in connection with any of the Collateral.
"Secured Parties": (a) the Lenders, (b) the Administrative
Agent, (c) the Documentation Agent and (d) the Syndication Agent.
"Select Liens": means Liens permitted pursuant to
Section 8.1 of the Holdings Credit Agreement, incorporated by
reference in Article VIII of the Liquidity Facility, other than
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Specified Liens and Liens permitted pursuant to Section 8.1(a)
of the Holdings Credit Agreement.
"Specified Equipment" means Equipment, the aggregate book
value of which does not exceed $100,000, consisting of certain
injection mold machinery.
"Specified Liens" means Liens permitted pursuant to Sections
8.1(b), (f), (h), (l), (q) and (r) of the Holdings Credit Agreement,
incorporated by reference in Article VIII of the Liquidity Facility,
which Liens do not as of the Closing Date, in the aggregate, secure
obligations valued in excess of $5,000,000.
"Subject IP Collateral" is defined in clause (a) of Section
3.7.
"Subsidiary": a Subsidiary incorporated or otherwise
organized in the United States of America.
"Trademark Collateral" means with respect to each Grantor, its
interests owned in the following, in each case to the extent the grant
by such Grantor of a security interest pursuant to this Agreement is
not prohibited without the consent of any other Person:
(a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names,
trade styles, trade dress, service marks, certification marks,
collective marks, logos, other source of business identifiers,
prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature
and designs (all of the foregoing items in this clause (a)
being collectively called a "Trademark"), now existing in the
United States or hereafter adopted or acquired in the United
States, and all registrations and recordings thereof and all
applications in connection therewith, including registrations,
recordings and applications in the United States Patent and
Trademarks Office, including those referred to in Item A of
Schedule VI attached hereto, and all renewals thereof;
(b) all Trademark licenses and other agreements
providing each Grantor with the right to use any items of the
type described in clause (a), including each Trademark license
referred to in Item B of Schedule VI attached hereto, and all
renewals thereof;
(c) all of the goodwill of the business connected
with the use of, and symbolized by the items described in,
clause (a);
(d) the right to xxx third parties for past, present
and future infringements of any Trademark Collateral described
in clause (a) and, to the extent applicable, clause (b); and
(e) all proceeds of, and rights associated with, the
foregoing, including any claim by each Grantor against third
parties for past, present or future infringement or dilution
of any Trademark, Trademark registration or Trademark license,
including any Trademark, Trademark registration or Trademark
license referred to in Item A and Item B of Schedule VI
attached hereto, or for any injury to the goodwill associated
with the
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use of any such Trademark or for breach or enforcement of any
Trademark license and all rights corresponding thereto
throughout the world.
"Trade Secrets Collateral" means with respect to each Grantor,
its interests in the following, in each case to the extent the grant
by such Grantor of a security interest pursuant to this Agreement is
not prohibited without the consent of any other Person: all common law
and statutory trade secrets and all other confidential or proprietary
or useful information (to the extent such confidential, proprietary or
useful information is protected by each Grantor against disclosure and
is not readily ascertainable) and all know-how obtained by or used in
or contemplated at any time for use in the business of each Grantor
(all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying,
incorporating or referring in any way to such Trade Secret, all Trade
Secret licenses, including each Trade Secret license referred to in
Schedule VII attached hereto, and including the right to xxx for and
to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement
of any such Trade Secret license.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section references are to this Agreement
unless otherwise specified. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation".
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Security Interest.
2.1 Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due, whether at the stated
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise of the Obligations (including the payment of all amounts that
constitute part of the Obligations and would be owed by the Obligors to the
Administrative Agent or the Secured Parties under the Loan Documents but for
the fact that they are unenforceable or not allowable due to the existence of
an Insolvency Proceeding involving any such Obligor), each Grantor hereby
grants to the Administrative Agent, for the ratable benefit of the Secured
Parties, a first priority security interest in all of the following property
now owned or at any time hereafter acquired by such Grantor, subject only to
Liens permitted pursuant to Section 3.3 hereof (collectively, with respect to
each Grantor, the "Collateral"):
(a) all Accounts Receivable;
(b) all Contracts;
(c) all Documents;
(d) all Equipment;
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(e) all General Intangibles;
(f) all Instruments;
(g) all Inventory;
(h) all Intellectual Property Collateral;
(i) all Investment property;
(j) all books and records pertaining to the Collateral;
(k) all other personal property in which a security interest
may be perfected by filing a financing statement in the applicable
jurisdictions set forth in Schedule I hereto; and
(l) to the extent not otherwise included, all Proceeds,
products, offspring, rents, issues, profits, returns and income of any and all
of the foregoing.
Notwithstanding anything contained in this Agreement or any Loan Document to
the contrary, "Collateral" shall not include any property of the type specified
in Sections 2.1(b), (d) (to the extent such Equipment constitutes Fixtures),
(e), (f), (g) and (h) if the granting of a Lien by such Grantor hereunder would
violate the terms of, or otherwise constitute a default under, any document or
instrument to which any Grantor is a party (other than those documents or
Instruments between or among any of the Grantors only) relating to the
ownership of, or pertaining to any rights or interests held in, such property.
Such security interests are granted as security only and shall
not subject any 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.
2.2 Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all Obligations of the Grantors hereunder, shall be
absolute and unconditional, irrespective of
(a) any lack of validity or enforceability of the Liquidity
Facility, any Note or any other Loan Document,
(b) the failure of any Secured Party,
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or any
other Person under the provisions of the Liquidity Facility,
any Note, any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
guarantor of, or collateral securing, any Obligations,
(c) 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
extension, compromise or renewal of any Obligation,
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(d) any reduction, limitation, impairment or termination of
any Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject
to (and each Grantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
affecting, any Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to or departure from, any of the terms
of the Liquidity Facility, any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or
non-perfection of any collateral (including the Collateral), or any
amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Obligations, or
(g) any other circumstances which might otherwise constitute
a defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
2.3 Postponement of Subrogation, etc. No Grantor will
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Obligations, the irrevocable
termination of all Commitments. Any amount paid to a Grantor on account of any
payment made hereunder prior to the payment in full in cash of all Obligations
and the irrevocable termination of all Commitments shall be held in trust for
the benefit of the Secured Parties and shall immediately be paid to the Secured
Parties and credited and applied against the Obligations, whether matured or
unmatured, in accordance with the terms of Section 7.3; provided, however, that
if
(a) any Grantor has made payment to the Secured Parties of
all or any part of the Obligations, and
(b) all Obligations have been paid in full in cash, all
Commitments have been irrevocably terminated,
each Secured Party agrees that, at such Grantor's request and expense, the
Secured Parties will execute and deliver to the applicable Grantor appropriate
documents (without recourse and without representation or warranty) necessary
to evidence the transfer by subrogation to such Grantor of an interest in the
Obligations resulting from such payment by such Grantor. In furtherance of the
foregoing, for so long as any Obligations remain outstanding or Commitments
remain outstanding, each Grantor shall refrain from taking any action or
commencing any proceeding against the Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Agreement to any Secured Party.
3. Representations and Warranties. Each Grantor hereby
represents as follows:
3.1 Title; No Other Liens. Except for the security interest
granted to the Administrative Agent for the ratable benefit of the Secured
Parties pursuant to this Agreement and any other Liens permitted to exist
pursuant to the Liquidity Facility, if any (the "Permitted Liens"), each
Grantor owns each item of the Collateral free and clear of any and all Liens or
claims of others. No security agreement,
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financing statement or other public notice with respect to all or any part of
such Collateral is on file or of record in any public office, except such as
have been filed, pursuant to this Agreement, in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, or in respect of
Permitted Liens.
3.2 Authority. Each Grantor has full power and authority to
grant to the Administrative Agent the security interest in the 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 that has been obtained.
3.3 Enforceable Obligation; Perfected, First Priority
Security Interests. This Agreement constitutes a legal, valid and binding
obligation of each Grantor, enforceable against such Grantor in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law), and the security interests granted pursuant to this
Agreement (a) upon-completion of the filings and other actions specified in
Schedule I hereto shall constitute perfected security interests in the
Collateral (other than as to the Specified Equipment) in favor of the
Administrative Agent for the ratable benefit of the Secured Parties, and (b)
are prior to all other Liens on the Collateral in existence on the date hereof,
except for any Specified Liens and Select Liens.
3.4 Inventory and Equipment. The Inventory and the Equipment
owned by such Grantor are kept at the locations listed in Schedule II hereto,
which shall be updated from time to time in accordance with Section 4.5 of this
Agreement, or at such other locations as shall be permitted by Section 4.4.
3.5 Chief Executive Office. As of the Closing Date, each
Grantor's chief executive office and chief place of business is located at the
location under its signature set forth below.
3.6 Intentionally Omitted.
3.7 Intellectual Property Collateral. With respect to any
Material Intellectual Property Collateral maintained in the United States and
any other market material to the Borrower's and its Subsidiaries' businesses,
each Grantor has kept such Material Intellectual Property Collateral registered
with the applicable federal, state or foreign authority, as the case may be,
with an appropriate notice of such registration and has taken all reasonable
steps to maintain such Material Intellectual Property Collateral and any and
all rights with respect thereto and has not abandoned, or permitted to become
unenforceable, any Material Intellectual Property Collateral, in each case,
except where the same could not reasonably be expected to have a Material
Adverse Effect. No consent of any other Person is required in order for any
Grantor to grant a first priority security interest in the Material
Intellectual Property Collateral to the Administrative Agent pursuant to this
Agreement.
4. Covenants. Each Grantor covenants and agrees with the
Secured Parties that, from and after the date of this Agreement until (a) the
payment in full in cash of all Obligations, (b) this Agreement is terminated
and the security interests created hereby are released and (c) all Commitments
are terminated, such Grantor will perform, comply with and be bound by the
obligations set forth in this Section:
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4.1 Delivery of Instruments and Chattel Paper. If an Event
of Default shall have occurred and be continuing and if any amount payable
under or in connection with any of the Collateral owned by such Grantor shall
be or become evidenced by any promissory note, other instrument or Chattel
Paper, upon the request of the Administrative Agent, such promissory note,
instrument or Chattel Paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner reasonably satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.
4.2 Maintenance of Insurance. Each Grantor shall maintain
insurance policies in accordance with the requirements of Section 7.1 of the
Liquidity Facility. Within thirty (30) days of the date hereof, the Borrower
shall provide the Administrative Agent with a certificate of the Secretary or
Assistant Secretary of the Borrower setting forth the nature and extent of all
insurance maintained by the Borrower and its Subsidiaries, which certificate
shall also indicate where appropriate any such insurance policy for which the
Administrative Agent is named as "loss payee" or "additional insured", in
accordance with customary practice for transactions of this type, in each case,
as reasonably satisfactory to the Administrative Agent and as customary for
transactions of this type.
4.3 Maintenance of Perfected Security Interest; Further
Documentation. (a) Each Grantor shall cause all filings and other actions
listed in Schedule I to be taken. Each Grantor shall maintain the security
interests created by this Agreement as first, perfected security interests
subject only to Liens permitted pursuant to Section 3.3 hereof, and shall
defend such security interests against all claims and demands of all persons
whomsoever (other than those pursuant to Liens permitted pursuant to Section
3.3 hereof).
(b) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of a Grantor, such
Grantor shall promptly and duly execute and deliver such further instruments
and documents and take such further action as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with respect to
the security interests created hereby.
4.4 Changes in Locations, Name, etc. A Grantor shall not,
except (x) upon ten (10) days' prior written notice to the Administrative Agent
and delivery to the Administrative Agent of a written supplement to Schedule II
showing the additional location or locations at which Inventory or Equipment
shall be kept, and (y) if filings under the Code or otherwise have been made
which maintain in favor of the Administrative Agent a valid, legal and
perfected security interest in the Collateral subject to no Liens, other than
Liens permitted pursuant to Section 3.3 hereof,
(a) permit any of the Inventory or Equipment to be kept at a
location other than those listed in Schedule II hereto, except for
Inventory and Equipment (i) in transit between locations described in
this paragraph (a), (ii) in transit as part of a delivery to a
purchaser thereof, (iii) as to Specified Equipment only, when, as part
of such Grantor's ordinary course of business, such Specified
Equipment is located in jurisdictions where no financing statement in
favor of the Administrative Agent has been duly filed, or (iv)
transferred to a Foreign Subsidiary in a transaction, in each case, as
permitted by the Liquidity Facility;
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(b) change the location of its chief executive office and
chief place of business from that specified in Section 3.5; or
(c) change its (i) corporate name or any trade name used to
identify it in its conduct of business or in the ownership of its
properties, (ii) identity or (iii) corporate structure to such an
extent that any financing statement filed in favor of the
Administrative Agent in connection with this Agreement would become
seriously misleading.
4.5 Further Identification of Collateral. Each Grantor shall
furnish to the Administrative Agent from time to time statements and schedules
further identifying and describing the Collateral and, subject to Section 4.9
hereof, Deposit Accounts, and such other reports in connection with such
Collateral and Deposit Accounts as the Administrative Agent may reasonably
request, all in reasonable detail.
4.6 Notices. A Grantor shall advise the Administrative Agent
promptly in reasonable detail, at its address set forth pursuant to Section
11.2 of the Liquidity Facility of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on, any material portion of the Collateral;
(b) the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the security interests created
hereby or on the aggregate value of (i) the Collateral and (ii) all other
Collateral (as such term is defined in the Pledge Agreements) of Holdings, the
Borrower and its Subsidiaries taken as a whole; and
(c) the changing of the location of any Deposit Account and
the creation of a new, and the closing of a theretofore existing, Deposit
Account.
4.7 Administrative Agent's Liabilities and Expenses;
Indemnification. (a) Notwithstanding anything to the contrary provided
herein, the Administrative Agent assumes no liabilities with respect to any
claims regarding each Grantor's ownership (or purported ownership) of, or
rights or obligations (or purported rights or obligations) arising from, the
Collateral or any use (or actual or alleged misuse) whether arising out of any
past, current or future event, circumstance, act or omission or otherwise, or
any claim, suit, loss, damage, expense or liability of any kind or nature
arising out of or in connection with the Collateral or the production,
marketing, delivery, sale or provision of goods or services under or in
connection with any of the Collateral. All of such liabilities shall, as
between the Administrative Agent and the Grantors, be borne exclusively by the
Grantors.
(b) Each Grantor hereby agrees to pay all expenses of the
Administrative Agent and to indemnify the Administrative Agent with respect to
any and all losses, claims, damages, liabilities and related expenses in
respect of this Agreement or the Collateral in each case to the extent the
Borrower is required to do so pursuant to Section 10.7 of the Liquidity
Facility.
(c) Any amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the Pledge Agreements. Without
prejudice to the survival of any other agreements contained herein, all
indemnification and reimbursement obligations contained herein shall survive
the
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payment in cash in full of the principal and interest under the Liquidity
Facility and the termination of the Commitments or this Agreement.
4.8 Use and Disposition of Collateral. A Grantor shall not
(a) make or permit to be made an assignment, pledge or hypothecation of the
Collateral, and shall grant no other security interest in such Collateral
(other than (i) pursuant hereto, (ii) any Permitted Liens or (iii) pursuant to
the Junior Security Agreement) or (b) make or permit to be made any transfer of
such Collateral, and shall remain at all times in possession thereof other than
transfers to the Administrative Agent pursuant to the provisions hereof;
notwithstanding the foregoing, such Grantor may use and dispose of such
Collateral in any lawful manner not in violation of the provisions of this
Agreement, the Liquidity Facility or any other Loan Document, unless the
Administrative Agent shall, after an Event of Default shall have occurred and
during the continuance thereof, notify such Grantor not to sell, convey, lease,
assign, transfer or otherwise dispose of any such Collateral other than
Inventory in the ordinary course of business and other than any other transfers
between the Grantors.
4.9 Deposit Accounts. Within thirty (30) days of the date
hereof, the Borrower shall provide the Administrative Agent with a schedule
(which schedule shall (x) be delivered to the Administrative Agent for
safekeeping purposes only, and (y) not be delivered to the Lenders except upon
their written request therefor in connection with the exercise of rights and
remedies pursuant to this Agreement), substantially in the form of Schedule
VIII hereto, which schedule shall identify all Deposit Accounts owned by the
Grantors and the financial institutions and the locations where such Deposit
Accounts are maintained, which schedule shall be updated from time to time in
accordance with Sections 4.5 and 4.6 of this Agreement. Subject to, and
without limiting the effect of, Section 7.2, following the occurrence and
continuance of an Event of Default and at the direction of the Majority
Lenders, each Grantor shall make its reasonable best efforts to maintain each
of its Deposit Accounts pursuant to a deposit account agreement which is in all
respects satisfactory to the Administrative Agent and which provides, among
other things, that (a) until the deposit account bank shall have received
written notice from the Administrative Agent pursuant to this clause, the
deposit account bank will make all payments from the Deposit Account as
specified by the applicable Grantor, and, after any such notice, the deposit
account bank will make all payments from such Deposit Account to the
Administrative Agent for credit to the Collateral Account, (b) the deposit
account bank (if other than the Administrative Agent or a Lender) waives all
setoff rights (other than setoff rights for reasonable and customary account
service charges and fees and amounts based on items that are dishonored by the
payor thereof and returned to the deposit account bank), and (c) such deposit
account agreement may not be amended without the written consent of the
Administrative Agent. The Administrative Agent will not give the notice
referred to in the preceding clause (a) unless it has given, or is
contemporaneously giving, notice pursuant to Section 7.2. In the event that a
deposit account bank refuses to enter into a deposit account agreement in
accordance with the above listed terms within thirty (30) days of a Grantor's
request, the Administrative Agent shall have the right to direct each Grantor
to transfer the assets in that deposit account to a bank which will enter into
a deposit account agreement in accordance with the above listed terms.
4.10 As to Intellectual Property Collateral. With respect to
any Material Intellectual Property Collateral maintained in the United States
and any other market material to the Borrower's and its Subsidiaries'
businesses, each Grantor covenants and agrees to keep such Material
Intellectual Property Collateral registered with the applicable federal, state
or foreign authority, as the case may be, with an appropriate notice of such
registration and covenants and agrees to take all reasonable steps to maintain
such Material Intellectual Property Collateral and any and all rights with
respect thereto and
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will not abandon, or permit to become unenforceable, any Material Intellectual
Property Collateral, in each case, except where the same could not reasonably
be expected to have a Material Adverse Effect. If any Grantor shall own any
Intellectual Property, such Grantor shall execute and deliver to the
Administrative Agent any documents required to acknowledge or register or
perfect the Administrative Agent's interest in any part of the Intellectual
Property Collateral.
5. Provisions Relating to Accounts.
5.1 Grantors Remain Liable under Accounts. Anything herein
to the contrary notwithstanding, a Grantor shall remain liable under each of
the Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to each such Account. No Secured Party shall have
any obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any Secured Party of any payment relating to such
Account pursuant hereto, nor shall any Secured Party be obligated in any manner
to perform any of the obligations of a Grantor under or pursuant to any Account
(or any agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
5.2 Analysis of Accounts. The Administrative Agent shall
have the right upon the occurrence and during the continuance of an Event of
Default to make test verifications of the Accounts in any manner and through
any medium that it considers reasonably advisable, and each Grantor shall
furnish all such assistance and information as the Administrative Agent may
reasonably require in connection with such test verifications. At any time and
from time to time upon the occurrence and during the continuance of an Event of
Default, upon the Administrative Agent's reasonable request and at the expense
of each Grantor, each Grantor shall cause independent public accountants or
others reasonably satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts. Upon the occurrence
and during the continuance of an Event of Default, the Administrative Agent in
its own name or in the name of others may communicate with account debtors on
the Accounts to verify with them to the Administrative Agent's reasonable
satisfaction the existence, amount and terms of any Accounts.
5.3 Collections on Accounts. (a) The Administrative Agent
hereby authorizes each Grantor to collect the Accounts, and the Administrative
Agent may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default. If required by the
Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Accounts, when collected by
a Grantor during the continuance of such Event of Default, (i) shall be
forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent if required, in a Collateral Account maintained under the
sole dominion and control of and on terms and conditions reasonably
satisfactory to the Administrative Agent, subject to withdrawal by the
Administrative Agent as provided in Section 7.3, and (ii) until so turned over,
shall be held by such Grantor in trust for the Secured Parties, segregated from
other funds of such Grantor.
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(b) At the Administrative Agent's reasonable request after
the occurrence and during the continuance of an Event of Default, each Grantor
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
the Accounts, including, without limitation, all original orders, invoices and
shipping receipts.
5.4 Representations and Warranties. As of the Closing Date,
the place where each Grantor keeps its records concerning its Accounts is at
the location listed in Schedule III hereto.
5.5 Covenants. (a) The amount represented by each Grantor
to the Secured Parties from time to time as owing by each account debtor or by
all account debtors in respect of the Accounts shall at such time be in all
material respects the correct amount actually owing by such account debtor or
debtors thereunder.
(b) Upon the occurrence and during the continuance of an
Event of Default, a Grantor shall not grant any extension of the time of
payment of any of the Accounts Receivable, 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 in the ordinary course of such Grantor's
business, in each case if the Administrative Agent has instructed such Grantor
not to do so.
(c) Unless a Grantor shall deliver ten (10) days' prior
written notice identifying the change of location for its books and records,
such Grantor shall not remove its books and records from the location specified
in Section 5.4.
6. Provisions Relating to Contracts.
6.1 Grantors Remain Liable Under Contracts. Anything herein
to the contrary notwithstanding, each Grantor shall remain liable under each
Contract to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant to
the terms and provisions of such Contract. No Secured Party shall have any
obligation or liability under any Contract by reason of or arising out of this
Agreement or the receipt by any such Secured Party of any payment relating to
such Contract pursuant hereto, nor shall any Secured Party be obligated in any
manner to perform any of the obligations of a Grantor under or pursuant to any
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
6.2 Communication With Contracting Parties. Upon the
occurrence and during the continuance of an Event of Default, the
Administrative Agent in its own name or in the name of others may communicate
with parties to the Contracts to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Contracts.
7. Remedies.
7.1 Notice to Account Debtors and Contract Parties. Upon the
request of the Administrative Agent at any time after the occurrence and during
the continuance of an Event of Default,
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a Grantor shall notify account debtors on the Accounts and parties to the
Contracts that the Accounts and the Contracts have been assigned to the
Administrative Agent for the ratable benefit of the Secured Parties and that
payments in respect thereof during the continuance of such an Event of Default
shall be made directly to the Administrative Agent.
7.2 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the Secured Parties
specified in Section 5.3 with respect to payments of Accounts, if an Event of
Default shall occur and be continuing all Proceeds received by a Grantor
consisting of cash, checks and other near-cash items shall upon the
Administrative Agent's request be held by such Grantor in trust for the Secured
Parties, segregated from other funds of such Grantor, and shall, upon the
Administrative Agent's request (it being understood that the exercise of
remedies by the Secured Parties in connection with an Event of Default under
Sections 9.1(f) or (g) of the Liquidity Facility, shall be deemed to constitute
a request by the Administrative Agent for the purposes of this sentence)
forthwith upon receipt by such Grantor, be turned over to the Administrative
Agent in the exact form received by such Grantor (duly indorsed by such Grantor
to the Administrative Agent, if required) and held by the Administrative Agent
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent and on terms and conditions reasonably satisfactory to the
Administrative Agent. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by such Grantor in trust for the Administrative Agent
and the Secured Parties) shall subject to Section 7.3 continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 7.3.
7.3 Application of Proceeds. If an Event of Default shall
have occurred and be continuing, and the Administrative Agent shall have
requested that a Grantor take any action set forth in Section 5.3(a) or 7.2 or
the Administrative Agent shall have taken any action pursuant to Section 7.4,
the Administrative Agent shall apply the proceeds as follows:
First, to the payment of the reasonable costs and expenses of
the Administrative Agent as set forth in Sections 7.4 and 15;
Second, to the payment of all amounts of the Obligations owed
to the Secured Parties in respect of Loans made by them, pro rata as
among the Secured Parties in accordance with the amount of such
Obligations owed to them;
Third, to the payment and discharge in full of the Obligations
(other than those referred to above), pro rata as among the Secured
Parties in accordance with the amount of such Obligations owed to
them; and
Fourth, after payment in full of all obligations, to the
applicable Grantor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, any Collateral then remaining.
7.4 Code Remedies. If an Event of Default shall have
occurred and be continuing, the Administrative Agent, on behalf of the Secured
Parties may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code (whether or not, because of the jurisdiction of the
Collateral, the Code applies to the applicable
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Collateral). Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon a Grantor or any other person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of any Secured Party or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. Any Secured Party shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold, free of (to
the extent permitted by law) any right or equity of redemption in a Grantor,
which right or equity is hereby, to the extent permitted by law, waived or
released. Each Grantor further agrees, at the Administrative Agent's request,
to assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor's premises or elsewhere. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses incurred therein or
incidental to the care or safekeeping of any of such Collateral or reasonably
relating to such Collateral or the rights of the Administrative Agent and the
Secured Parties hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in accordance with Section 7.3, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(l)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to such
Grantor. If any notice of a proposed sale or other disposition of such
Collateral shall be required by law, such notice shall be in writing and deemed
reasonable and proper if given at least ten (10) days before such sale or other
disposition. The Administrative Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Administrative 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.
The Administrative Agent shall have absolute discretion as to
the time of application of any such proceeds, money or balances in accordance
with this Agreement. Upon any sale of the Collateral by the Administrative
Agent (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of the Administrative 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 shall not be
obligated to see to the application of any part of the purchase money paid over
to the Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
7.5 Waiver; Deficiency. Each Grantor waives and agrees not
to assert any rights or privileges it may acquire under Section 9-112 of the
Code. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the reasonable fees and disbursements of any attorneys employed
by any Secured Party to collect such deficiency.
8. Administrative Agent's Appointment as Attorney-in-Fact;
Administrative Agent's Performance of Grantors' Obligations.
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8.1 Powers. Each Grantor hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, during the continuance of an Event of Default, as its
true and lawful attorney-in-fact, with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name from time to time in the Administrative Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
and, without limiting the generality of the foregoing, such Grantor hereby
gives the Administrative Agent the power and right, on behalf of such Grantor,
without notice to or assent by such Grantor, to do the following upon the
occurrence and during the continuance of an Event of Default:
(a) in the name of such Grantor or its own name, or
otherwise, to take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account, Instrument, General Intangible or
Contract or with respect to any other Collateral and to file any claim
or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Administrative Agent for
the purpose of collecting any and all such money due under any
Account, Instrument, General Intangible or Contract or with respect to
any other Collateral whenever payable;
(b) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral (other than Permitted Liens), to
effect any repairs or any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof,
(c) to execute, in connection with any sale provided for in
Section 7.4 hereof, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(d) (i) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (ii) to ask or demand for, collect,
receive payment of and receipt for, any and all money, claims and
other amounts due or to become due at any time in respect of or
arising out of any Collateral; (iii) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (iv) to
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of
any Collateral; (v) to defend any suit, action or proceeding brought
against any Grantor with respect to any Collateral; (vi) to settle,
compromise or adjust any such suit, action or proceeding and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; and (vii) generally, to
use, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Administrative Agent were the absolute owner thereof for
all purposes, and to do, at the Administrative Agent's option and at
the expense of such Grantor, at any time, or from time to time, all
acts and things which the Administrative Agent reasonably deems
necessary to protect, preserve or realize upon such Collateral and the
Administrative Agent's and the Secured Parties' security interests
therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
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8.2 Performance by Administrative Agent of Grantor's
Obligations. If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation to do so, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
8.3 Grantor's Reimbursement Obligation. The expenses of the
Administrative Agent reasonably incurred in connection with actions undertaken
as provided in this Section 8, together with interest thereon at a rate per
annum equal to the default rate of interest set forth in Section 2.8(c) of the
Liquidity Facility, from the date payment is demanded by the Administrative
Agent to the date reimbursed by such Grantor, shall be payable by the Borrower
to the Administrative Agent on demand.
8.4 Ratification; Power Coupled With An Interest. Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. All powers, authorizations and agencies contained in
this Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are released.
9. Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. No Secured Party nor any of its
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of a Grantor or any other person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Secured Parties hereunder are solely to protect the
Secured Parties' interests in the Collateral and shall not impose any duty upon
any Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or wilful misconduct.
10. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, each Grantor authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of
such Grantor in such form and in such filing offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of
the Administrative Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
11. Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the
Administrative Agent and the other Secured Parties, be governed by the
Liquidity Facility and by such other agreements with respect thereto as may
exist from time to time among them but, as between the Administrative Agent and
the Grantors, the Administrative Agent shall be conclusively presumed to be
acting as agent for the other Secured Parties with full and valid authority so
to act or refrain from acting.
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21
12. Reinstatement. This Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Secured Party upon the
filing or commencement of any Insolvency Proceeding in respect of any Grantor,
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, such Grantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
13. Notices. All notices, requests and demands to or upon
the Secured Parties or the Grantors under this Agreement shall be given or made
in accordance with Section 11.2 of the Liquidity Facility and addressed as
follows:
(a) if to any Grantor other than the Borrower, in care of the
Borrower in accordance with Section 11.2 of the Liquidity Facility;
(b) if to the Borrower, in accordance with Section 11.2 of
the Liquidity Facility; and
(c) if to any Secured Party, in accordance with Section 11.2
of the Liquidity Facility.
14. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Secured Parties and shall survive the making by
the Lenders of the Loans, the execution and delivery to the Lenders of the Loan
Documents, regardless of any investigation made by the Secured Parties or on
their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan, or any fee or any other
amount payable under or in respect of this Agreement or any other Loan Document
is outstanding and unpaid and so long as the Commitments have not been
terminated.
15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 15.
16. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the
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22
other Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Grantor or any
Secured Party may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against any Grantor or any Secured
Party or its properties in the courts of any jurisdiction.
(b) Each Grantor and each Secured Party hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or the other Loan Documents in any New York State or federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 13. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
17. Release. (a) Unless the Grantors and the Administrative
Agent otherwise agree, this Agreement and the security interest created
hereunder shall terminate when all Obligations have been fully and indefeasibly
paid in full in cash and when the Secured Parties have no further Commitments
under the Liquidity Facility, at which time the Administrative Agent shall
execute and deliver to each Grantor, or to such person or persons as such
Grantor shall reasonably designate, all at such Grantor's sole expense, all
Uniform Commercial Code termination statements and similar documents prepared
by such Grantor which such Grantor shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 17(a) shall be without recourse to or warranty by the
Administrative Agent.
(b) All Collateral used, sold, transferred or otherwise
disposed of, in accordance with the terms of the Liquidity Facility (including
pursuant to a waiver or amendment of the terms thereof) shall be used, sold,
transferred or otherwise disposed of free and clear of the Lien and the
security interest created hereunder. In connection with the foregoing, (i) the
Administrative Agent shall execute and deliver to each Grantor, or to such
person or persons as such Grantor shall reasonably designate, all at such
Grantor's sole expense, all Uniform Commercial Code termination statements and
similar documents prepared by such Grantor which such Grantor shall reasonably
request to evidence the release of the Lien and security interest created
hereunder with respect to such Collateral and (ii) any representation, warranty
or covenant contained herein relating to such Collateral shall no longer be
deemed to be made with respect to such used, sold, transferred or otherwise
disposed Collateral.
18. 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. The parties hereunder
shall endeavor in good-faith negotiations to replace the invalid,
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23
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
19. Amendments in Writing; No Waiver; Cumulative Remedies.
19.1 Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the Grantors and the Administrative
Agent (on behalf of the Lenders or the Majority Lenders, as the case may be).
19.2 No Waiver by Course of Conduct. No Secured Party shall
by any act (except by a written instrument pursuant to Section 19.1 hereof) or
delay be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by any Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Secured Party would otherwise have on any future occasion.
20. Remedies Cumulative. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
21. Section Headings. The section and Section headings used
in this Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
22. Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of each Grantor and the Secured Parties and their successors and assigns,
provided that this Agreement may not be assigned by any Grantor without the
prior written consent of the Administrative Agent.
23. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Liquidity Facility and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions of the Liquidity Facility.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
25. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
26. Additional Grantors. Pursuant to the Liquidity Facility,
each Subsidiary that was not in existence or not a Subsidiary on the date
thereof is required to enter into this Agreement as a Grantor upon becoming a
Subsidiary. Upon execution and delivery, after the date hereof, by the
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24
Administrative Agent and such Subsidiary of an instrument in the form of Annex
1, such Subsidiary shall become a Grantor hereunder with the same force and
effect as if originally named as a Grantor hereunder. 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 Grantor as a
party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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25
IN WITNESS WHEREOF, the undersigned have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
EVENFLO & SPALDING HOLDINGS
CORPORATION
SPALDING & EVENFLO COMPANIES, INC.
EVENFLO COMPANY, INC.
ETONIC WORLDWIDE CORPORATION
LISCO, INC.
S&E FINANCE CO., INC.
SPALDING SPORTS CENTERS, INC.
ETONIC LISCO, INC.
LISCO FURNITURE, INC.
LISCO FEEDING, INC.
LISCO SPORTS, INC.
By: ______________________________
Name: W. Xxxxxxx Xxxxxxx
Title: Treasurer and
Vice President
S&E FINANCE CO., INC.
By: ______________________________
Name: Xxxx X. Xxxxxxx
Title: President and CEO
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Administrative Agent
By: ______________________________
Name:
Title:
26
Schedules:
Schedule I Filings and Other Actions Required to Perfect Security
Interests
Schedule II Inventory and Equipment
Schedule III Records of Accounts
Schedule IV Copyrights and Mask Works
Schedule V Patents
Schedule VI Trademarks
Schedule VII Trade Secrets
Schedule VIII Deposit Accounts
27
SCHEDULE I
TO SECURITY AGREEMENT
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
Name of Grantor Filing Jurisdiction
--------------- -------------------
28
SCHEDULE II
TO SECURITY AGREEMENT
INVENTORY AND EQUIPMENT LOCATIONS
Name of Grantor Location
--------------- --------
29
SCHEDULE III
TO SECURITY AGREEMENT
RECORDS OF ACCOUNTS
Name of Grantor Location
--------------- --------
30
SCHEDULE IV
TO SECURITY AGREEMENT
Item A. Copyrights/Mask Works
Registered Copyrights/Mask Works
--------------------------------
Grantor Registration No. Registration Date Author(s) Title
------- ---------------- ----------------- --------- -----
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
Grantor Serial No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
Item B. Copyright/Mask Work Licenses
Effective Expiration Subject
Grantor Licensor Licensee Registration No. Date Date Matter
------- -------- -------- ---------------- --------- ----------- -------
31
SCHEDULE V
TO SECURITY AGREEMENT
Item A. Patents
Issued Patents
--------------
Grantor Patent No. Issue Date Inventor(s) Title
------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
Grantor Serial No. Filing Date Inventor(s) Title
------- ---------- ----------- ----------- -----
Item B. Patent Licenses
Effective Expiration Subject
Grantor Licensor Licensee Patent No. Date Date Matter
------- -------- -------- ---------- --------- ----------- -------
32
SCHEDULE VI
TO SECURITY AGREEMENT
Item A. Trademarks
Registered Trademarks
---------------------
Grantor Trademark Registration No. Registration Date
------- --------- ---------------- -----------------
Pending Trademark Applications
------------------------------
Grantor Trademark Serial No. Filing Date
------- --------- ---------- -----------
Item B. Trademark Licenses
Effective Expiration
Grantor Trademark Licensor Licensee Registration No. Date Date
------- --------- -------- -------- ---------------- --------- -----------
33
SCHEDULE VII
TO SECURITY AGREEMENT
Trade Secret or Know-How Licenses
---------------------------------
Effective Expiration Subject
Grantor Licensor Licensee Date Date Matter
------- -------- -------- ---- ---- ------
34
SCHEDULE VIII
TO SECURITY AGREEMENT
Deposit Accounts
----------------
Account
Grantor Bank Address of Bank Type of Account Number
------- ---- --------------- --------------- ------
35
ANNEX 1
TO SECURITY AGREEMENT
SUPPLEMENT NO. dated as of , to
the Security Agreement dated as of March 30, 1998 (the
"Security Agreement"), among EVENFLO & SPALDING HOLDINGS
CORPORATION, a Delaware corporation ("Holdings"), SPALDING &
EVENFLO COMPANIES, INC., a Delaware corporation (the
"Borrower"), each of the Subsidiaries (such term and each
other capitalized term used but not defined herein having the
meaning given it in the Security Agreement) and BANK OF
AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as
administrative agent (in such capacity, the "Administrative
Agent") for the Secured Parties.
A. Reference is made to the Liquidity Facility, dated as of
March 30, 1998 (as amended, amended and restated or otherwise modified from
time to time, the "Liquidity Facility"), among the Borrower, the Lenders, the
Administrative Agent, the Documentation Agent and the Syndication Agent.
B. The Grantors have entered into the Security Agreement in
order to induce the Lenders to make Loans pursuant to, and upon the terms and
subject to the conditions specified in, the Liquidity Facility. Pursuant to
the Liquidity Facility, each Subsidiary that was not in existence or not a
Subsidiary on the date thereof is required to enter into the Security Agreement
as a Grantor upon becoming a Subsidiary. Section 26 of the Security Agreement
provides that additional Subsidiaries may become Grantors under the Security
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned (the "New Grantor") is a Subsidiary of Holdings
and is executing this Supplement in accordance with the requirements of the
Liquidity Facility to become a Grantor under the Security Agreement in order to
induce the Lenders to make additional Loans and as consideration for Loans
previously made.
Accordingly, the Administrative Agent and the New Grantor
agree as follows:
SECTION 1. In accordance with Section 26 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 agrees to all the terms and
provisions of the Security Agreement applicable to it as a Grantor thereunder.
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
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, subject to the effects of
applicable bankruptcy, insolvency or similar laws effecting creditors' rights
generally and equitable principles of general applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Supplement
shall become effective when the Administrative Agent shall have received
counterparts of this Supplement that, when taken together, bear the signatures
of the New Grantor and the Administrative Agent.
36
SECTION 4. Except as expressly supplemented hereby, the
Security Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions
contained in this Supplement should be held invalid, illegal or unenforceable
in any respect, neither party hereto shall be required to comply with such
provision for so long as such provision is held to be invalid, illegal or
unenforceable, but the validity, legality and enforceability of the remaining
provisions contained herein and in the Security Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be
in writing and given as provided in the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it at the address
set forth under its signature, with a copy to the Borrower.
IN WITNESS WHEREOF, the New Grantor and the Administrative 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: _________________________
_________________________
Fax No.: _________________________
Attention:________________________
BANK OF AMERICA NATIONAL SAVINGS &
TRUST ASSOCIATION, as
Administrative Agent
By: ______________________________
Name:
Title:
Address: _________________________
_________________________
Fax No.: _________________________
Attention:________________________
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