1
Exhibit 4.12
EXECUTION COPY
GUARANTOR SECURITY AND PLEDGE AGREEMENT
---------------------------------------
THIS GUARANTOR SECURITY AND PLEDGE AGREEMENT ("Agreement")
dated as of April 16, 1998, is entered into by and between NRM INVESTMENTS,
INC., a Delaware corporation ("GRANTOR"), and XXXXXX XXXXXXX INC., a Delaware
corporation, as agent (in such capacity, the "AGENT") for the Holders under (and
as defined in) the Senior Subordinated Secured Note Purchase Agreement (as
hereinafter defined). Capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to such terms in the Senior Subordinated
Secured Note Purchase Agreement.
W I T N E S S E T H
WHEREAS, the National Record Mart, Inc., a Delaware
corporation (the "Issuer"), the Guarantors from time to time party thereto, the
Purchasers referred to therein, and the Agent have entered into a Senior
Subordinated Secured Note Purchase Agreement of even date herewith (as amended,
restated, supplemented or otherwise modified from time to time, the "SECURED
NOTE PURCHASE AGREEMENT"), pursuant to which, the Agent and the Purchasers have
agreed to purchase $7,500,000 in aggregate principal amount of the Grantor's
11.75% Senior Subordinated Secured Notes due 2001 (the "SECURED NOTES");
WHEREAS, pursuant to the Secured Note Purchase Agreement the
Grantor unconditionally guaranteed the prompt and complete payment and
performance of the Issuer's Obligations under the Secured Notes and the Note
Documents;
WHEREAS, pursuant to the Secured Note Purchase Agreement, the
Issuer has entered into that certain Issuer Security and Pledge Agreement of
even date herewith (the "ISSUER SECURITY AND PLEDGE AGREEMENT");
WHEREAS, it is a condition precedent to the purchase of the
Secured Notes by the Agent and the Purchasers under the Secured Note Purchase
Agreement that the Grantor shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises set forth
herein and of the purchase of the Secured Notes by the Agent and the Purchasers
or any other Holder, or any of them the Grantor hereby agrees with the Agent,
for its benefit and the ratable benefit of the Holders, as follows:
SECTION 1. GRANT OF SECURITY. The Grantor hereby pledges to
the Agent, for its benefit and the ratable benefit of the Holders, and hereby
grants to the Agent, for its benefit and the ratable benefit of the Holders, a
security interest in, all of the Grantor's right, title and interest in and to
the following, in each case whether now owned or existing or hereafter
2
acquired or arising and however and wherever arising or located (collectively,
the "COLLATERAL"):
(a) All of the Grantor's machinery, apparatus, equipment,
fittings, furniture, fixtures, motor vehicles and other tangible personal
property (other than Inventory) of every kind and description used in Grantor's
operations or owned by Grantor, or in which Grantor has an interest, whether now
owned or hereafter acquired by Grantor and wherever located, and all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor (all of the foregoing being the
"EQUIPMENT");
(b) All of Grantor's inventory, whether now owned or hereafter
acquired including, but not limited to, all goods and merchandise intended for
sale or lease by Grantor, or for display or demonstration; all works in
progress; all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in Grantor's business; and all documents
evidencing, and General Intangibles (as defined below) relating to, any of the
foregoing, whether now owned or hereafter acquired by Grantor (all of the
foregoing being the "INVENTORY");
(c) All of the Grantor's accounts, contract rights, chattel
paper, instruments (including those evidencing indebtedness owed to Grantor by
its affiliates), documents, General Intangibles relating to accounts, drafts and
acceptances, all other forms of obligations owing to Grantor arising out of or
in connection with the sale or lease of Inventory or the rendition of services,
all guarantees and other security interest therefor, whether secured on
unsecured, whether now owned or hereafter created or acquired by Grantor or in
which Grantor now has or hereafter acquired any interest and any proceedings
arising therefrom or relating thereto (all of the foregoing being, "ACCOUNTS");
(d) All of Grantor's general intangibles and other personal
property of Grantor (including things in action) other than goods, accounts,
chattel paper, documents, instruments and money, whether now owned or hereafter
created or acquired by Grantor, including, without limitation, all choses in
action, causes of action, corporate or other business records, inventions,
designs, patents, patent applications, equipment formulations, manufacturing
procedures, quality control procedures, trademarks, service marks, trade
secrets, goodwill, copyrights, design rights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs,
all claims under guaranties, security interests or other security held by or
granted to Grantor to secure payment of any of the Accounts by an account
debtor, all rights of indemnification, all deposit accounts of Grantor and all
other intangible property of every kind and nature (all of the foregoing being
the "GENERAL INTANGIBLES");
(e) All monies and other property of any kind now or at any
time or times hereafter in the possession or under the control of Collateral
Agent or any lender or a bailee of Collateral Agent or any lender;
-2-
3
(f) The following Pledged Stock and Pledged Collateral:
(i) All of the issued and outstanding shares of stock
owned by Grantor or any subsidiary of Grantor or any of its
subsidiaries (as identified on Exhibit A attached hereto and made a
part hereof), all options, warrants for the purchase of shares of the
stock of each such subsidiary now or hereafter held in the name of the
Grantor (all of said capital stock, options and warrants and all
capital stock held in the name of the Grantor as a result of the
exercise of such options and warrants being hereafter collectively
referred to as the "PLEDGED STOCK"), herewith delivered to the Agent
accompanied by acknowledgments of such Subsidiaries in the form of
EXHIBIT B attached hereto and made a part hereof (the
"ACKNOWLEDGMENTS") and stock powers in the form of EXHIBIT C attached
hereto and made a part hereof (the "POWERS") duly executed in blank,
and all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Stock, and all other products
and proceeds of the foregoing;
(ii) all additional shares of stock of any Subsidiary
of the Grantor from time to time acquired by the Grantor in any manner,
and the certificates representing such additional shares (any such
additional shares shall constitute part of the Pledged Stock), and all
dividends, cash, instruments, equity securities, financial assets and
other interests which are, or are of a type, dealt in or traded on
financial markets, or which are recognized in any way as a medium for
investment, whether certificated or uncertificated, any property held
by a financial or securities intermediary for the Grantor, securities
accounts to which any of the foregoing are credited and warrants,
options, puts and calls, and other rights or securities entitlements
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, and all other
products and proceeds of the foregoing;
(iii) the promissory notes, intercompany notes and
other instruments identified on EXHIBIT A (the "PLEDGED NOTES"), and
all products and proceeds of the Pledged Notes, including, without
limitation, all interest and principal payments, instruments, and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for the Pledged Notes;
(iv) all additional promissory notes, instruments,
bonds or debt securities, issued by any Person from time to time issued
to, or held by, the Grantor in any manner (any such additional
promissory notes or instruments shall constitute part of the Pledged
Notes) and all products and proceeds of any such additional promissory
notes and instruments, including, without limitation, all interest and
principal payments, instruments, and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any such additional promissory notes or instruments (the
property described in CLAUSES (F)(II) through (F)(V) of this SECTION 1
is collectively referred to as the "PLEDGED COLLATERAL"); and
-3-
4
(v) all bills of lading, warehouse receipts and other
documents of title;
(g) All Investment Property (as defined in the Uniform
Commercial Code as adopted and in force in the State of New York, as from time
to time in effect);
(h) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (a) through (g) above, including,
without limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral; and
(i) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Debtor pertaining to any of (a) through (h) above.
PROVIDED, HOWEVER, the foregoing grant of a security interest shall be deemed
not to grant a security interest in any of the property described below (such
property being hereinafter referred to as property subject to a "Security
Interest Restriction" and all other property being hereinafter referred to as
"Collateral"):
property that is subject to (x) the terms and
provisions of a written agreement, document or instrument in
effect on the Closing Date which prohibits the granting of a
security interest or conditions the granting of a security
interest on the consent of a third party whose consent has not
been obtained or would cause, or allow a third party to cause,
the forfeiture of such property upon the granting of a
security interest therein, as such property is described on
Exhibit G hereto; (y) the terms and provisions of a written
agreement, document or instrument entered into after the
Closing Date (or any amendment to any agreement described in
clause (x) above entered into after the Closing Date) which
prohibits the granting of a security interest or conditions
the granting of a security interest on the consent of a third
party whose consent has not been obtained or would cause, or
allow a third party to cause, the forfeiture of such property
upon the granting of a security interest, PROVIDED that (i)
the requirement of such prohibition or condition has not been
initiated by the Grantor and has been agreed or consented to
by the Grantor in the ordinary course of its business and such
prohibition or condition is believed by the Grantor in good
faith to be reasonably necessary for the Grantor to obtain the
benefits of the agreement, document or instrument entered into
by the Grantor in order to conduct its normal business
operations and (ii) the Grantor has used its best efforts to
have such prohibition or condition eliminated or to obtain
such consent; or (z) applicable law either prohibits the
granting of a security interest therein or provides for the
involuntary forfeiture of the property in the event a security
interest is granted therein without the consent of the
appropriate Governmental Authority, or at all; PROVIDED,
HOWEVER that with respect to
-4-
5
clauses (x), (y) and (z) above, if such prohibition or the
condition requiring such consent relates only to the
foreclosure of a security interest or the exercise of other
rights or remedies upon a default but not to the granting of a
security interest therein, then a security interest in such
property shall be deemed to be granted by this Agreement
subject to the condition that the consent of such third party
or Governmental Authority is obtained by the Agent prior to
the foreclosure or its exercising its other rights or remedies
hereunder, so that any involuntary forfeiture of the property
is thereby avoided.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures,
with respect to the Grantor, and the Collateral of the Grantor is collateral
security for, the prompt and complete payment of all of the Obligations of the
Grantor, whether or not for the payment of money, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising, and however acquired (all such
obligations of the Grantor, including, without limitation, the Obligations of
the Grantor, being the "SECURED OBLIGATIONS"). Without limiting the generality
of the foregoing, this Agreement secures, with respect to the Grantor, and the
Collateral of the Grantor is collateral security for, the payment of all amounts
which constitute part of the Secured Obligations of the Grantor and would be
owed by the Grantor to the Agent, any Purchaser or any Holder but for the fact
that they are unenforceable or not allowable due to the occurrence of an
Insolvency Event or any similar proceeding involving the Grantor.
SECTION 3. GRANTOR REMAINS LIABLE. Anything herein to the
contrary notwithstanding, (a) the Grantor shall remain liable under its
respective contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by the
Agent of any of the rights hereunder shall not release the Grantor from any of
its duties or obligations under its respective contracts and agreements included
in the Collateral, and (c) neither the Agent nor any Holder shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Agent or any Holder be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. Promptly upon its
receipt thereof, the Grantor shall deliver to the Collateral Agent, for the
benefit of the Holders, all certificates or instruments representing or
evidencing the Pledged Collateral acquired by the Grantor, and such Pledged
Collateral shall be held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank and, in the case
of Pledged Stock of Subsidiaries of the Grantor formed or acquired after the
date hereof, an Acknowledgment executed by such Subsidiary, all in form and
substance satisfactory to the Agent and Collateral Agent. If, at any time, (a)
any stock dividend, reclassification,
-5-
6
readjustment or other change is declared or made in the capital structure of any
of the Subsidiaries which have issued Pledged Stock, or any option included
within the Pledged Collateral is exercised, or both, or (b) any subscription
warrant(s) or any other right(s) or option(s) shall be issued in connection with
the Pledged Collateral, then all new, substituted and additional shares,
warrants, rights, options and other securities issued by reason of any of the
foregoing shall be promptly delivered to the Collateral Agent and shall be held
by the Collateral Agent under the terms of this Agreement and the Collateral
Agency Agreement and shall constitute Pledged Collateral hereunder; PROVIDED,
HOWEVER, that nothing contained in this SECTION 4 shall be deemed to permit any
stock dividend, issuance of additional stock, warrants, rights or options,
reclassification, readjustment or other change in the capital structure of any
of the Grantors which is not expressly permitted in the Secured Note Purchase
Agreement; PROVIDED, FURTHER, HOWEVER, that the Grantor's failure to so deliver
such property to the Collateral Agent shall in no way affect the Lien granted
thereon as herein provided.
SECTION 5. SUBSEQUENT CHANGES AFFECTING PLEDGED COLLATERAL.
The Grantor represents and warrants that it has made its own arrangements for
keeping itself informed of changes and potential changes affecting its Pledged
Collateral (including, but not limited to, rights to convert, rights to
subscribe, payment of dividends, payments of interest and/or principal,
reorganization and other exchanges, tender offers and voting rights), and the
Grantor agrees that neither the Agent nor any Holder shall have any obligation
to inform the Grantor of any such changes or potential changes or to take any
action or omit to take any action with respect thereto. The Agent may, after the
occurrence and during the continuance of an Event of Default, without notice and
at its option, transfer or register the Pledged Collateral or any part thereof
into its or its nominee's name with or without any indication that such Pledged
Collateral is subject to the Lien hereunder. In addition, the Agent may at any
time after the occurrence and during the continuance of an Event of Default
exchange certificates or instruments representing or evidencing the Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Grantor
represents and warrants as follows:
(a) The correct corporate name and federal tax identification
number of the Grantor on the date hereof is set forth on EXHIBIT D attached
hereto and made a part hereof. Except as set forth on EXHIBIT D for the
jurisdictions specified with respect thereto, the Grantor has no other
corporate, trade or fictitious name and has not, during the immediately
preceding five (5) years, been known by or used any other corporate, trade or
fictitious name.
(b) The principal place of business and chief executive office
of the Grantor are located at the address specified on EXHIBIT E attached hereto
and made a part hereof. All records concerning the Accounts are located at the
same address specified on EXHIBIT E for the Grantor. All records concerning the
Related Contracts and all originals of all chattel paper are
-6-
7
located at the same address specified on EXHIBIT E for the Grantor or at the
addresses specified as addresses of the Grantor on EXHIBIT F attached hereto and
made a part hereof.
(c) All of the Grantor's Inventory and Equipment is located at
the places specified on EXHIBIT F. If any location of its Inventory or Equipment
is subject to a lease, sublease, mortgage or similar instrument, the name and
address of each lessor, sublessor and/or mortgagee (other than the Grantor) is
set forth on EXHIBIT F. The legal name and address of each bailee, processor,
warehouseman, consignee, carrier and shipper or other Person (other than a
Lessee) in possession of any of the Grantor's Inventory or Equipment (each such
Person being a "BAILEE") on the date hereof is set forth on EXHIBIT F, together
with the address of the location where such Inventory or Equipment is or may be
held. Except as otherwise indicated on EXHIBIT F, no Person (other than a Lessee
or a Person identified on EXHIBIT F as being a consignee) in possession of any
of the Grantor's Inventory or Equipment conducts a business at the location of
such Inventory or Equipment other than a business in the nature of warehousing
or transporting goods for others. In the event that any of the Grantor's
Inventory or Equipment is in the possession of a Bailee, none of the receipts,
instruments or documents received and to be received by the Grantor from any
Bailee state that the Inventory or Equipment covered thereby is to be delivered
to bearer or to the order of a named person or to a named person and such named
person's assigns.
(d) The amount represented by the Grantor from time to time to
the Agent as the amount owing by each account debtor or by all account debtors
in respect of any Accounts will, at such time, be the correct amount actually
and unconditionally owing by such account debtor(s) thereunder to the best of
the Grantor's knowledge (except to the extent, if any, that such account
debtor(s) may be entitled to normal trade discounts, adjustments, returns and
allowances). None of the Accounts is evidenced by a promissory note or other
instrument, except for promissory notes and instruments delivered to the Agent
pursuant to this Agreement.
(e) The Grantor is the sole legal and beneficial owner of its
Pledged Collateral (including, without limitation, the percentage of the issued
and outstanding capital stock of each of its Subsidiary which is set forth
opposite the name of such Subsidiary on EXHIBIT A), free and clear of any Lien
except for (i) Liens of the Agent, for the benefit of the Holders, under the
Note Documents, (ii) Liens for taxes, assessments or other governmental charges,
and other similar Liens arising by operation of law for amounts that are not yet
due and payable, to the extent that payment thereof is not required by the
Secured Note Purchase Agreement and (iii) judgment Liens permitted by the
Secured Note Purchase Agreement.
(f) All of the Pledged Stock has been duly authorized, validly
issued and is fully paid and non-assessable. The Pledged Notes have been duly
authorized and executed by the respective issuers thereof and constitute the
legal, valid and binding obligations of such respective issuers.
-7-
8
(g) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the Pledged Collateral (except
as may be disclosed to the Agent or required in connection with such disposition
by laws affecting the offering and sale of securities generally).
(h) The Grantor has the right to vote, pledge and grant a
security interest in or otherwise transfer its Pledged Collateral free of any
Liens except for (i) Liens of the Agent, for the benefit of the Holders, under
the Note Documents, (ii) Liens for taxes, assessments or other governmental
charges, and other similar Liens arising by operation of law for amounts that
are not yet due and payable, to the extent that payment thereof is not required
by the Secured Note Purchase Agreement and (iii) judgment Liens permitted by the
Secured Note Purchase Agreement.
(i) The Powers are duly executed and give the Agent the
authority they purport to confer.
(j) The Acknowledgments have been duly authorized, executed
and delivered by the applicable Subsidiary of Grantor.
(k) The Pledged Stock constitutes, as of the date hereof, all
of the shares of capital stock and voting securities of each Subsidiary of the
Grantor that are not subject to a Security Interest Restriction. The Pledged
Notes constitute the only promissory notes of any Person in favor of the Grantor
as of the date hereof.
(l) The pledge of the Pledged Collateral pursuant to this
Agreement does not violate Regulation G, T, U or X.
(m) No consent, authorization, permit, notice or filing is
required (i) in connection with the execution, delivery or performance of this
Agreement by the Grantor, (ii) for the creation, perfection or maintenance of
the security interest of the Liens created hereby including the maintenance of
the first priority (subject to the Lien in favor of Fleet and purchase money
liens permitted under the Secured Note Purchase Agreement) nature of such Lien,
except with respect to the property subject to liens created, or hereafter
created, under this Agreement, or (iii) for the exercise by the Agent of its
rights and remedies hereunder, except (x) those that have been obtained or made,
(y) filings necessary to create, perfect or retain the perfection or priority of
Liens against the Grantor's Collateral, and (z) with respect to the Pledged
Collateral, as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
(n) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived in writing.
-8-
9
SECTION 7. FURTHER ASSURANCES. (a) The Grantor agrees that, at
its own expense, the Grantor will, and will cause each of its Subsidiaries to,
promptly execute and deliver all further instruments and documents, and take all
further action which may be reasonably necessary or desirable in the opinion of
the Agent, in order to (x) perfect and protect any Lien created or purported to
be created hereby, (y) enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to any of the Collateral, and (z) cause the
execution, delivery and performance of this Agreement to be duly authorized, and
the Grantor shall, and shall cause each of its Subsidiaries to, in any event
take such action as may be required to maintain the truthfulness and accuracy of
the representations and warranties contained in SECTION 6. Without limiting the
generality of the foregoing, the Grantor will: (i) if any Account or other
amount payable to the Grantor under or in connection with any of its Collateral
shall be or becomes evidenced by any promissory note, chattel paper, letter of
credit or other negotiable or non-negotiable instrument, such note, chattel
paper, letter of credit or instrument shall, within five (5) days after the
Grantor's receipt thereof, be delivered to the Agent duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance reasonably satisfactory to the Agent (or, if such note or
instrument is an item collectible through bank channels and collection accounts
have been established, deposited in one of the collection accounts, duly
endorsed in a manner reasonably satisfactory to the Agent); (ii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the Agent
may reasonably determine in its sole and absolute discretion to be necessary or
desirable, in order to perfect and preserve the Lien created or purported to be
created hereby; (iii) execute and deliver to the Agent landlord consents,
mortgagee and Bailee waivers, notices, agreements (including, without
limitation, subordination agreements) and other documents which the Agent may
reasonably determine in its sole discretion to be necessary or desirable, for
the purpose of giving advice of and perfecting the Liens granted to the Agent
for its benefit and the ratable benefit of the Holders and establishing the
senior priority thereof over such other parties' rights and interests in respect
of any of the Grantor's Equipment, Inventory or other Collateral held in the
possession of, Bailees, lessors, mortgagees or other third parties, and shall
use its best efforts to cause such third parties to acknowledge or consent to
such notices, agreements and other documents; (iv) within thirty (30) days after
the end of each calendar quarter, deliver to the Agent with respect to any item
for which a certificate of title has been issued by any state's registrar of
motor vehicles or other appropriate authority in such jurisdiction during such
calendar quarter (other than such certificates subject to Permitted Liens); (v)
except with respect to the deliveries made pursuant to SECTION 7(A)(IV), upon
the request of the Agent, after the occurrence and during the continuance of an
Event of Default, with respect to any item of Equipment or Inventory of the
Grantor, in either case which is covered by a certificate of title under a
statute of any jurisdiction under the law of which indication of a security
interest on such certificate is required as a condition of perfection thereof,
execute and file with the registrar of motor vehicles or other appropriate
authority in such jurisdiction an application or other document requesting the
notation or other indication of the Lien created hereunder on such certificate
of title; (vi) upon the request of the Agent, within thirty (30) days after the
end of each calendar quarter, deliver to the Agent copies of all
-9-
10
such applications or other documents filed pursuant to a request by the Agent
under SECTION 7(A)(V) during such calendar quarter and copies of all such
certificates of title issued during such calendar quarter indicating the Lien
created hereunder in the items of Equipment or Inventory covered thereby; and
(vii) at the Agent's reasonable request, appear in and defend any action or
proceeding that may adversely affect that Grantor's title to or the Agent's Lien
on all or any material part of the Collateral.
(b) The Grantor hereby authorizes the Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Grantor's Collateral without the signature of the Grantor
where permitted by law. The Grantor hereby agrees that a photocopy or other
reproduction of this Agreement or any financing statement covering its
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(c) The Grantor will keep and maintain at its own cost and
expense, and will cause each of its Subsidiaries to keep and maintain at their
own cost and expense, records of the Collateral in detail, form and scope
consistent with good business practice, including, without limitation, a record
of all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. If an Event of Default has occurred
and is continuing, for the Agent's further security, upon the Agent's request
therefor, the Grantor shall, and shall cause each of its Subsidiaries to,
deliver copies of, or if reasonably necessary in the opinion of the Agent, turn
over originals of, any such records to the Agent or to its representatives.
(d) The Grantor will, and will cause each of its Subsidiaries
to, furnish to the Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all in reasonable
detail, and the Grantor agrees that the Agent or its agents may enter upon the
premises of the Grantor or any of its Subsidiaries at any time and from time to
time, during normal business hours and upon 24 hours' prior notice, and at any
time at all on and after the occurrence of a Default which continues beyond the
expiration of any grace or cure period applicable thereto, and which has not
otherwise been waived pursuant to the Secured Note Purchase Agreement or cured,
for the purposes of (i) inspecting and verifying the Collateral, (ii) inspecting
and/or copying (at the Grantor's expense) any and all records pertaining thereto
and (iii) discussing the affairs, finances and business of the Grantor with any
officers, employees and directors of the Grantor or with the auditors. Upon
reasonable notice to the Grantor, the Agent or any of the Agent's officers,
employees, agents or auditors shall have the right at any time or times
hereafter to verify with account debtors or other obligors of the Grantor the
validity and amount or any other matter (including, without limitation, the
assertion by account debtors of claims, offsets or counterclaims) with respect
to any of the Collateral.
-10-
11
(e) The Grantor will, and will cause each of its Subsidiaries
to, advise the Agent promptly, in reasonable detail, (i) of any material Lien or
claim made or asserted against any of the Collateral, (ii) of any material
change in the composition of the Collateral, and (iii) of the occurrence of any
other event which would have a material adverse effect on the aggregate value of
the Collateral or on the Liens created hereunder.
SECTION 8. TRANSFERS OF COLLATERAL. The Grantor agrees that it
will not, nor will it permit any of its Subsidiaries to (a) directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of, or grant any
option with respect to, any of the Collateral, or any part thereof or interest
therein, except as expressly authorized under the Secured Note Purchase
Agreement, (b) directly or indirectly create, incur, assume, or suffer to exist
any Lien on any of the Pledged Collateral now owned or hereafter acquired except
for the Lien under this Agreement and as permitted under the Secured Note
Purchase Agreement, or (c) enter into any agreement or understanding that
purports to or may restrict or inhibit the Agent's rights or remedies hereunder,
including, without limitation, the Agent's right to sell or otherwise dispose of
the Pledged Collateral.
SECTION 9. PLACE OF PERFECTION; NAME CHANGES; RECORDS. The
Grantor shall not (a) change its name, identity or structure or adopt or use any
trade or fictitious name not specified as a current trade or fictitious name on
EXHIBIT D, or use any existing trade or fictitious name in any jurisdiction not
specified for such name on EXHIBIT D, (b) change any location of its chief
executive office, place of business or place where records concerning its
Accounts, Related Contracts and chattel paper are maintained from the locations
specified on EXHIBIT E or EXHIBIT F or (c) change any location of any Collateral
or jurisdiction where Lessees are located from the locations specified in
EXHIBIT F, unless, in each case, the Grantor shall have given the Agent at least
thirty (30) Business Days' prior written notice of any such change. At least ten
(10) Business Days prior to any such change referred to in the preceding
sentence, the Grantor shall prepare and deliver to the Agent amended exhibit(s)
reflecting such change(s) and execute and deliver to the Agent any financing
statements or other documents required by the Agent, all in form and substance
reasonably satisfactory to the Agent, and take all other actions required by
SECTION 7.
SECTION 10. COVENANTS REGARDING ACCOUNTS AND RELATED
CONTRACTS. (a) The Grantor shall, at its expense, perform and observe all of the
material terms and provisions of the Related Contracts, employment agreements,
rental contracts, leases and chattel paper to be performed or observed by it,
maintain the Related Contracts, rental contracts, leases and chattel paper in
full force and effect and enforce the Related Contracts in accordance with their
terms, except where failure to do so could not reasonably be expected to have a
Material Adverse Effect.
(b) In any suit, proceeding or action brought by the Agent
under any account comprising part of the Collateral, the Grantor agrees to save,
indemnify and keep the Agent and each Holder harmless from and against all
expense, loss or damages suffered by reason of
-11-
12
any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder, arising out of a breach by the Grantor of
any obligation or arising out of any other agreement, indebtedness or liability
at any time owing to or in favor of such obligor or its successors from the
Grantor and all such obligations of the Grantor shall be and shall remain
enforceable against and only against the Grantor and shall not be enforceable
against the Agent or any Holder.
SECTION 11. COVENANTS REGARDING EQUIPMENT AND INVENTORY. (a)
If any Equipment or Inventory of the Grantor is in the possession or control of
any Bailee or any of the Grantor's agents, the Grantor shall notify such Bailee
or agent of the Agent's Lien on such Equipment or Inventory and, upon the
Agent's request, direct such Bailee or agent to hold all such Equipment or
Inventory for the Agent's account and subject to the Agent's instructions
following the occurrence and during the continuance of an Event of Default.
(b) Upon the request of the Agent, the Grantor will promptly
deliver to the Agent a schedule listing all Equipment disposed of by the
Grantor, and the book value thereof, in the then-current (or any prior) Fiscal
Year.
(c) The Grantor will, upon request of the Agent, submit to the
Agent a current listing of all of the Grantor's Equipment, which listing shall
indicate the type, model, serial number and location of such Equipment.
(d) The Grantor shall promptly upon the issuance and delivery
to the Grantor of any negotiable document of title, upon the request of the
Agent after the occurrence and during the continuance of an Event of Default,
deliver such negotiable document of title to the Agent.
SECTION 12. VOTING RIGHTS. During the term of this Agreement,
and except as provided in the next sentence of this SECTION 12, the Grantor
shall have the right to vote its Pledged Stock on all corporate questions in a
manner not inconsistent with the terms of this Agreement, the Secured Note
Purchase Agreement and any other agreement, instrument or document executed
pursuant thereto or in connection therewith, and in a manner that would not have
a material adverse effect on the value of the Pledged Stock and the related
Pledged Collateral or any part thereof. After the occurrence and during the
continuance of an Event of Default, the Agent may, at the Agent's option and
following written notice from the Agent to the Grantor, exercise all voting
powers pertaining to the Grantor's Pledged Collateral, including the right to
take shareholder action by written consent, and the Grantor hereby irrevocably
constitutes and appoints the Agent as the Grantor's proxy and attorney-in-fact,
with full power of substitution, to do so. This proxy shall be irrevocable and
shall continue until the termination of this Agreement in accordance with
SECTION 23.
-12-
13
SECTION 13. DIVIDENDS AND OTHER DISTRIBUTIONS. (a) So long as
no Event of Default shall have occurred and be continuing and shall not have
been cured or waived, or no Event of Default would result therefrom:
(i) subject to SECTION 4 hereof and the provisions of the
Secured Note Purchase Agreement, the Grantor shall be entitled to receive,
retain and utilize all dividends, interest and principal paid in respect of its
Pledged Collateral unless any such dividend, interest or principal is not
permitted to be paid under the terms of the Secured Note Purchase Agreement; and
(ii) the Agent shall execute and deliver (or cause to be
executed and delivered) to the Grantor all such proxies and other instruments as
the Grantor may reasonably request for the purpose of enabling the Grantor to
receive the dividends, interest or principal payments which it is authorized to
receive, retain and utilize pursuant to CLAUSE (I) above.
(b) Except to the extent set forth in the Secured Note
Purchase Agreement, after the occurrence and during the continuance of an Event
of Default, or if any of the following would result in an Event of Default if
paid to a Grantor:
(i) all rights of the Grantor to receive dividends, interest
and principal payments in respect of the Pledged Collateral shall cease, and all
such rights shall thereupon become vested in the Agent, for the benefit of the
Agent and the ratable benefit of the Holders, which shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends, interest
and principal payments; and
(ii) all dividends, interest and principal payments which are
received by the Grantor contrary to the provisions of CLAUSE (I) of this SECTION
13(B) shall be received in trust for the Agent, for the benefit of the Agent and
the ratable benefit of the Holders, shall be segregated from other funds of the
Grantor and shall be paid over immediately to the Agent as Pledged Collateral in
the same form as so received (with any necessary endorsements).
(c) Except as may otherwise be provided in the Secured Note
Purchase Agreement, any and all (i) dividends, interest and principal paid or
payable other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
any Pledged Collateral, (ii) dividends and other distributions paid or payable
in cash received, receivable or otherwise distributed in respect of any Pledged
Stock in connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in redemption of, or in
exchange for, any Pledged Stock, shall in each case be delivered forthwith to
the Agent to hold as Pledged Collateral and shall, if received by a Grantor, be
received in trust for the Agent, for the benefit of Holders, be segregated from
other funds of the Grantor, and be paid over immediately to the Agent as Pledged
Collateral in the same form as so received (with any necessary endorsements).
-13-
14
[SECTION 14. DEPOSIT ACCOUNTS. Upon the occurrence and during
the continuation of an Event of Default, the Agent may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
with the Agent constituting part of the Collateral in accordance with the terms
of the Blocked Account Agreements.]
SECTION 15. AGENT APPOINTED ATTORNEY-IN-FACT. The Grantor
hereby irrevocably appoints the Agent the Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, from time to time in the Agent's Permitted Discretion, to take any
action and to execute any instrument which the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, subject to the Agent's
authority as provided in the Secured Note Purchase Agreement, including, without
limitation:
(a) after the occurrence and during the continuance of an
Event of Default, to ask, demand, collect, xxx for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with any of the Collateral;
(b) after the occurrence and during the continuance of an
Event of Default, to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with CLAUSE (A) above;
(c) after the occurrence and during the continuance of an
Event of Default, to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Agent with
respect to any of the Collateral;
(d) after the occurrence and during the continuance of an
Event of Default, to discharge any Lien or encumbrance on or against any of the
Collateral or bond the same;
(e) to give any notices and record any Liens;
(f) to make any payments or take any acts which the Agent
deems reasonably necessary or desirable to protect the Lien of the Agent, for
the benefit of the Holders, on the Collateral;
(g) after the occurrence and during the continuance of an
Event of Default, to execute and give receipt for any certificate of ownership
or any document or title; and
(h) after the occurrence and during the continuance of an
Event of Default, to transfer title to any item of Collateral.
-14-
15
All Persons dealing with the Agent, or any employee or agent of the Agent acting
pursuant hereto, or any substitute attorney-in-fact for the Agent, shall be
fully protected in treating the powers and authorities conferred by this SECTION
15 as existing and continuing in full force and effect. The Grantor hereby
ratifies all that such attorney-in-fact shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable. This power of attorney shall terminate upon the termination of this
Agreement pursuant to SECTION 23.
SECTION 16. AGENT MAY PERFORM. If the Grantor fails to perform
any agreement contained herein, the Agent, after giving prior notice to the
Grantor, may itself perform, or cause performance of, such agreement, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Grantor to the Agent upon demand by the Agent.
SECTION 17. THE AGENT'S RIGHTS AND DUTIES. The powers
conferred on the Agent and the Purchasers hereunder are solely to protect their
interest in the Collateral and shall not impose any duty upon any of them to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Agent shall have no duty as to any Collateral. Without limiting the generality
of the foregoing sentence, the Agent shall be under no obligation to (a)
ascertain or take action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Agent has or is deemed to have knowledge of such matters, but may do
so at its option or (b) take any steps necessary to preserve rights in the
Pledged Collateral against any other parties but may do so at its option. All
expenses incurred in connection therewith shall be for the sole account of the
Grantor, and shall constitute part of its Obligations secured hereby. Any action
taken or omitted to be taken by the Agent in connection with any of the
Collateral shall not result in any liability of the Agent to the Grantor unless
such action or omission shall be determined by a court of competent jurisdiction
to have arisen solely out of the gross negligence or willful misconduct of the
Agent. The Agent may exercise any of its rights and execute any of its duties
hereunder by or through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its rights and duties hereunder.
SECTION 18. REMEDIES. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, in the Secured Note
Purchase Agreement, or otherwise available to it, all the rights and remedies of
a secured party upon default under the Uniform Commercial Code in effect in any
relevant jurisdiction at that time (the "UNIFORM COMMERCIAL CODE") (whether or
not the Uniform Commercial Code applies to the affected Collateral), and also
may (i) without notice, notice, demand or legal process of any kind, all of
which the Grantor hereby waives to the extent permitted by applicable law, at
any time or times notify the account debtors or obligors under any Accounts,
chattel paper, instruments or
-15-
16
General Intangibles of the assignment of such Collateral to the Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to the Grantor thereunder directly to the Agent, to notify each
Person maintaining a lockbox or similar arrangement to which account debtors or
obligors under any Accounts, chattel paper, instruments or General Intangibles
have been directed to make payment to remit all amounts representing collections
on checks and other payment items from time to time sent to or deposited in such
lockbox or other arrangement directly to the Agent and, upon such notification
and at the expense of the Grantor, to accelerate or extend the time of payment,
compromise, issue credits, or bring suit on such Collateral (in the name of the
Grantor or the Holders) and otherwise administer and collect such Collateral, in
the same manner and to the same extent as the Grantor might have done; (ii)
without notice, demand or legal process of any kind, all of which the Grantor
hereby waives to the extent permitted by applicable law, at any time or times
enter any premises where any Collateral may be located and take physical
possession of the Collateral and maintain such possession on the premises, at no
cost to the Agent, or remove the Collateral or any part thereof, to such other
places as the Agent may desire; (iii) without notice, demand or legal process of
any kind, all of which the Grantor hereby waives to the extent permitted by
applicable law, at any time or times enter any premises where any Collateral may
be located and use, manage, operate and control the Collateral thereon and the
relevant business and property to preserve the Collateral; exclude any third
parties, whether or not claiming under the Grantor, from any such premises and
property; complete any unfinished Inventory, make repairs, replacements,
alterations, additions and improvements to the Collateral; and, dispose of all
or any portion of the Collateral in the ordinary course of business; (iv)
require the Grantor to, and the Grantor hereby agrees that it will at its own
expense and upon request of the Agent forthwith, assemble all or part of its
Collateral as directed by the Agent and make it available to the Agent at a
place or places to be designated by the Agent that is reasonably convenient for
both parties, and deliver possession of said Collateral or any part thereof to
the Agent; and (v) without notice, except as specified below, sell, lease,
assign, grant an option or options to purchase or otherwise dispose of the
Collateral or any part thereof in one or more parcels with or without
advertisement, at any exchange, broker's board, public or private sale, at any
of the Agent's offices or elsewhere, for cash, on credit, for future delivery,
or otherwise, and upon such other terms as the Agent may deem commercially
reasonable. Any repossession, retaking, sale, or other disposition of the
Collateral by the Agent shall not operate to release the Grantor from its
obligations hereunder. The Agent and each Purchaser may, in its own name or in
the name of a designee or nominee, bid for or purchase the Collateral at any
public sale and, if permitted by applicable law, buy the Collateral at any
private sale. Each purchaser of any or all of the Collateral so sold shall
thereafter own the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever on the part of the Grantor, and the Grantor hereby waives,
to the extent permitted by applicable law, all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute sale of the
whole or any part of the Collateral or the possession thereof by any purchaser
at any sale hereunder. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least five (5) Business
-16-
17
Days' notice to the Grantor(s) of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Agent may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Grantor hereby waives any claims against
the Agent arising by reason of the fact that the price at which any Collateral
may have been sold at such a private sale was less than the price which might
have been obtained at a public sale, even if the Agent accepts the first offer
received and does not offer such Collateral to more than one offeree; PROVIDED
that such sale was conducted in a commercially reasonable manner.
(b) Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter be applied in whole or in part by the Agent for its benefit and for
the ratable benefit of the Holders against, all or any part of the Grantor's
Secured Obligations in such order as the Agent shall elect, subject to any
provision of the Secured Note Purchase Agreement governing the application of
such cash, proceeds, or other realization upon the Collateral. If the proceeds
of any sale or other disposition of the Collateral of a Grantor are insufficient
to pay all of the Secured Obligations of the Grantor, the Grantor shall be
liable for the deficiency, in addition to any fees, expenses or other amounts
required to be paid pursuant to the Secured Note Purchase Agreement to collect
such deficiency. Any surplus of such cash or cash proceeds held by the Agent and
remaining after Payment In Full of all Secured Obligations shall be promptly
paid to the Grantor or to whomsoever may be lawfully entitled to receive such
surplus.
(c) The Grantor hereby consents to the voluntary dismissal by
the Agent of any judicial action, prejudgment or otherwise, brought by the
Agent, and the Grantor further consents to the exoneration of any bond that the
Agent files in such action.
SECTION 19. REGISTRATION RIGHTS. (a) In the event that the
Agent determines, after the occurrence and during the continuance of an Event of
Default, to exercise its right to sell the Pledged Stock pursuant to SECTION 18,
the Grantor shall, upon the request of the Agent, at the Grantor's expense:
(i) execute and deliver, and cause each issuer of Pledged
Stock and its respective officers and directors to execute and deliver,
all such instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion of the
Agent, the Grantor or its or their counsel, advisable to register the
applicable Pledged Collateral under the provisions of the Securities
Act of 1933, as amended (the "SECURITIES ACT") and to exercise its
reasonable efforts to cause the registration statement relating thereto
to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to
-17-
18
make all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Agent, the Grantor or its or
their counsel, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto; PROVIDED,
HOWEVER, that the Grantor shall not be required to register the Pledged
Stock pursuant to this SECTION 19(I) if the Adjusted Tangible Net Worth
of the issuer of the Pledged Stock is less than $250,000;
(ii) use its reasonable efforts to qualify its Pledged
Collateral under state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of its Pledged
Collateral, as requested by the Agent;
(iii) cause any Subsidiary which has issued Pledged Collateral
(or any of them) to make available to the holders of its securities, as
soon as practicable, earnings statements which will satisfy the
provisions of Section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and things as
may be reasonably necessary to make such sale of its Pledged Collateral
or any part thereof valid and binding and in compliance with applicable
law.
The Grantor will reimburse the Agent for all expenses incurred by the Agent,
including, without limitation, reasonable attorneys' and accountants' fees and
expenses in connection with the foregoing. Upon or at any time after the
occurrence and during the continuance of an Event of Default, if the Agent
determines that, prior to any public offering of any securities constituting
part of the Pledged Collateral, such securities should be registered under the
Securities Act and/or registered or qualified under any other federal or state
law and such registration and/or qualification is not practicable, then the
Grantor agrees that it will be commercially reasonable if a private sale is
arranged so as to avoid a public offering, even though the sales price
established and/or obtained at such private sale may be substantially less than
prices which could have been obtained for such security on any market or
exchange or in any other public sale. In so doing, the Agent may restrict the
bidders and prospective purchasers to those who are qualified and will represent
and agree that they are purchasing for investment only and not for distribution,
and the Agent may solicit offers to buy the Pledged Collateral, or any part of
it, from a limited number of investors deemed by the Agent, in its reasonable
judgment, to be financially responsible parties who might be interested in so
purchasing the Pledged Collateral. If the Agent solicits such offers from not
less than four (4) such investors, then the acceptance by the Agent of the
highest offer obtained therefrom shall be deemed to be a commercially reasonable
method of disposing of such Pledged Collateral. The Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the registrant to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the Grantor or the issuer of the Pledged Collateral would agree to do so.
-18-
19
(b) In addition to a private sale as provided above in SECTION
19(A), if any of the Pledged Collateral shall not be freely distributable to the
public without registration under the Securities Act (or similar statute) at the
time of any proposed sale pursuant to this SECTION 19, then the Agent shall not
be required to effect such registration or cause the same to be effected but, in
its discretion (subject only to applicable requirements of law), may require
that any sale hereunder (including a sale at auction) be conducted subject to
restrictions (i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale, (ii) as to the content of legends
to be placed upon any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at such
sale relating to that Person's access to financial information about the
pertinent issuer of Pledged Collateral and such Person's intentions as to the
holding of the Pledged Collateral so sold for investment, for its own account,
and not with a view of the distribution thereof, and (iv) as to such other
matters as the Agent may, in its discretion, deem necessary or appropriate in
order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Uniform Commercial Code as in effect in the
State of New York or any other relevant jurisdiction and other laws affecting
the enforcement of creditors' rights and the Securities Act and all applicable
state securities laws.
SECTION 20. WAIVERS. The Grantor waives presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or Event
of Default with respect to any of the Obligations and all other notices to which
the Grantor might otherwise be entitled, except as otherwise expressly provided
herein or in the Secured Note Purchase Agreement.
SECTION 21. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Purchasers (or by the Agent on their behalf), except
as otherwise provided in the Secured Note Purchase Agreement, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 22. NOTICES, ETC. All notices and other communications
provided for hereunder shall be given in the manner and to the addresses set
forth in the Secured Note Purchase Agreement, except that any notice provided by
the Grantor to the Agent hereunder shall be effective only upon receipt thereof
by the Agent.
SECTION 23. CONTINUING LIEN; ASSIGNMENTS UNDER SECURED NOTE
PURCHASE AGREEMENT; TERMINATION; PAYMENTS SET ASIDE. This Agreement shall create
a continuing Lien on the Collateral and shall (i) remain in full force and
effect until the Payment in Full (including after the maturity date) of the
Secured Obligations and termination of the Commitments, (ii) be binding upon the
Grantor, its successors and permitted assigns (which shall include, without
limitation, the Grantor's receivers, trustees or debtors-in-possession),
-19-
20
and (iii) inure to the benefit of, and be enforceable by, the Agent, the Holders
and their respective successors, transferees and permitted assigns. Without
limiting the generality of the foregoing CLAUSE (III), any Purchaser may assign
or otherwise transfer all or any portion of its rights and obligations under the
Secured Note Purchase Agreement in accordance with the terms thereof (including,
without limitation, all or any portion of its Commitments and any Loans owing to
it), and any Secured Note held by it (subject to the terms of the Secured Note
Purchase Agreement), to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such Purchaser
herein or otherwise. The Grantor shall not assign this Agreement, or any rights
or obligations hereunder, without the prior written consent of the Agent and the
Purchasers. Upon the payment in full (including after the maturity date) of the
Secured Obligations and the termination of the Commitments, the Lien granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantor. At such time, the Agent shall, at the request and expense of the
Grantor, reassign and redeliver to the Grantor all of the Collateral hereunder
which has not been sold, disposed of, retained or applied by the Agent in
accordance with the terms of this Agreement. Such reassignment and redelivery
shall be without warranty by or recourse to the Agent, except as to the absence
of any prior assignments by the Agent of its interest in the Collateral, and
shall be at the expense of the Grantor. To the extent that the Grantor makes a
payment or payments to the Agent or any Holder, or the Agent or the Purchasers
enforce their Liens or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such recovery, the obligation or part thereof originally intended
to be satisfied, and all Liens, rights and remedies therefor, shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.
SECTION 24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Grantor covenants, warrants, and represents to the Agent and the Holders that
all representations and warranties of the Grantor contained in this Agreement
shall be true at the time of the Grantor's execution of this Agreement, shall
survive the execution, delivery and acceptance hereof by the parties hereto and
the closing of the transactions described in the Secured Note Purchase Agreement
and the other Note Documents and shall continue in effect until all of the
Secured Obligations shall have been paid in full (including after the maturity
date) and the Secured Note Purchase Agreement has been terminated.
SECTION 25. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE
LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN SUCH STATE. AS PART OF THE CONSIDERATION FOR NEW VALUE
THIS DAY RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR
-20-
21
PRINCIPAL PLACE OF BUSINESS OF THE GRANTOR OR THE HOLDERS, GRANTOR HEREBY
CONSENTS AND AGREES THAT THE SUPREME COURT OF NEW YORK COUNTY, NEW YORK OR, AT
AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK SHALL HAVE THE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN GRANTOR AND AGENT PERTAINING TO THIS AGREEMENT OR ANY MATTER
ARISING OUT OF OR RELATED TO THIS AGREEMENT. GRANTOR EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND GRANTOR HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE
BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
AND HEREBY CONSENTS TO THE GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE GRANTOR AT THE ADDRESS SET FORTH
IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETE UPON THE
EARLIER OF THE OBLIGOR'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF THE AGENT TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY THE AGENT OF
ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER
THIS AGREEMENT TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
SECTION 26. WAIVER OF RIGHT TO TRIAL BY JURY. GRANTOR AND
HOLDERS WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE GRANTOR AND THE
HOLDERS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE, GRANTOR AND HOLDERS AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
GRANTOR AND HOLDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. GRANTOR AND
HOLDERS ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL
REGARDING THIS SECTION THAT
-21-
22
THEY FULLY UNDERSTAND ITS TERMS, CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY
AND KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
SECTION 27. LIMITATION OF LIABILITY. NONE OF THE AGENT, OR THE
PURCHASERS SHALL HAVE ANY LIABILITY TO THE GRANTOR (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY THE GRANTOR OR THEIR RESPECTIVE
SUBSIDIARIES, AND THE GRANTOR HEREBY WAIVES AND RELEASES ANY CLAIMS, IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR
RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION HEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE AGENT OR ANY SUCH
PURCHASER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF CONTRACT OR KNOWING OR GROSSLY
NEGLIGENT VIOLATIONS OF APPLICABLE REQUIREMENTS OF LAW. THE GRANTOR AGREES NOT
TO ASSERT ANY CLAIM AGAINST ANY OF THE AGENT, ANY PURCHASER OR ANY OTHER HOLDER
ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
DAMAGES ARISING OUT OF, OR IN ANY WAY IN CONNECTION WITH, THE COMMITMENTS, THE
OBLIGATIONS OR ANY OTHER MATTERS GOVERNED BY THIS AGREEMENT OR THE OTHER NOTE
DOCUMENTS.
SECTION 28. SEVERABILITY. Any provision of this Agreement that
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 (to the full
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
SECTION 29. PROTECTION OF COLLATERAL. The Agent shall have the
right (but shall not be obligated) to make payments and take actions it deems
reasonably necessary to protect its Lien on the Collateral. Grantor shall
reimburse the Agent for all such payments made, and expenses incurred with
respect to such actions taken, by the Agent, which amounts and expenses shall be
secured under this Agreement, and the Grantor shall be bound by any such payment
made or action taken by the Agent.
SECTION 30. NO WAIVER; REMEDIES. No failure on the part of any
Purchaser or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided in the Secured Note Purchase
Agreement, any other Credit Document, in equity, or by law.
-22-
23
SECTION 31. MARSHALLING; RECOURSE TO SECURITY. None of the
Purchasers or the Agent shall be under any obligation to xxxxxxxx any assets in
favor of the Grantor or any other party or against or in payment of any or all
of the Secured Obligations. Recourse to security shall not be required at any
time.
SECTION 32. EXPENSES, ETC. Whether or not the transactions
contemplated hereby are consummated, the Grantor agrees, jointly and severally
to pay all reasonable costs and expenses (including reasonable attorneys' fees
of a special counsel and, if reasonably required, local or other counsel)
incurred by the Agent or Purchasers of a Secured Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement, the Secured Notes or other Note Documents (whether
or not such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement, the Secured Notes or other Note Documents or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the Secured Notes or other Note Documents, or by
reason of being a Purchaser of any Secured Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of any Obligor or in connection with any work-out or restructuring
of the transactions contemplated hereby and by the Secured Notes and other Note
Documents. The Grantor will pay, and will save each Purchaser harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other than those retained by such Purchaser). The obligations of the Grantor
under this paragraph will survive the payment or transfer of any Secured Note,
the enforcement, amendment or waiver of any provision of this Agreement, the
Secured Notes or other Note Documents, and the termination of this Agreement.
SECTION 33. CONSTRUCTION. (a) The parties acknowledge that
each party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments or exhibits hereto.
(b) The words "hereof", "herein" and "hereunder" and words of
like 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 and exhibit
references are to this Agreement and to its attachments unless otherwise
specified.
(c) All terms defined in this Agreement in the singular shall
have comparable meanings when used in the plural, and VICE VERSA, unless
otherwise specified.
(d) Unless otherwise defined herein or in the Secured Note
Purchase Agreement, terms used in Article 9 of the Uniform Commercial Code in
effect in the State of New York are used herein as therein defined.
-23-
24
SECTION 34. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 35. EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This
Agreement and any waiver or amendment hereto may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement shall
become effective on the date on which all of the parties hereto shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Agent pursuant to the provisions of the Secured Note
Purchase Agreement and of this Agreement concerning notices.
SECTION 36. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent Holder of a Note) whether so
expressed or not.
SECTION 37. CONSTRUCTION. Each covenant contained herein shall
be construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
SECTION 38. APPOINTMENT OF COLLATERAL AGENT. The Company
hereby consents to the Agent's appointment of the Collateral Agent as the
Agent's representative with respect to the Collateral and the Agent's rights
hereunder all as set forth in the Collateral Agency Agreement. The Company
hereby acknowledges receipt of a copy of the Collateral Agency Agreement and
consents to the terms thereof.
* * *
-24-
25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above writ ten.
GRANTOR: NATIONAL RECORD MART, INC.
a Delaware corporation
By:
Name:
Title:
AGENT: XXXXXX XXXXXXX INC.
a Delaware corporation,
as Agent
By:
Name:
Title:
