EXHIBIT 10.5
EXECUTION COPY
SECURITY AGREEMENT, dated as of February 15, 2006, made by each of the
Grantors referred to below in favor of PLKS Funding, LLC, a Delaware limited
liability company, in its capacity as agent for the Lenders (as such term is
defined below) party to the Financing Agreement referred to below (in such
capacity, together with its successors and permitted assigns, the "Agent").
WITNESSETH:
WHEREAS, Lakes Entertainment, Inc., a Minnesota corporation (the
"Parent"), the subsidiaries of the Parent listed as a "Borrower" on the
signature pages thereto (together with the Parent, each a "Borrower" and
collectively, the "Borrowers"), each other subsidiary of the Parent that becomes
a "Guarantor" in accordance with the terms thereof (collectively, the
"Guarantors" and, together with the Borrowers, each a "Grantor" and collectively
the "Grantors"), the lenders from time to time party thereto (each a "Lender"
and collectively, the "Lenders"), and the Agent are parties to a Financing
Agreement, dated as of the date hereof (such agreement, as amended, restated,
supplemented or otherwise modified from time to time, including any replacement
agreement therefor, being hereinafter referred to as the "Financing Agreement");
WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed
to make certain loans (each a "Loan" and collectively, the "Loans"), to the
Borrowers in an aggregate principal amount at any one time outstanding not to
exceed the Total Commitment (as defined in the Financing Agreement);
WHEREAS, it is a condition precedent to the Lenders making any Loan
and providing any other financial accommodation to the Borrowers pursuant to the
Financing Agreement that each Grantor shall have executed and delivered to the
Agent a security agreement providing for the grant to the Agent for the benefit
of the Agent and the Lenders of a security interest in all personal property of
such Grantor except as may be excepted in the Loan Documents;
WHEREAS, the Grantors are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Grantor often being provided through
financing obtained by the other Grantors and the ability to obtain such
financing being dependent on the successful operations of all of the Grantors as
a whole; and
WHEREAS, each Grantor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the best interest of,
such Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and
provide other financial accommodations to the Borrowers pursuant to the
Financing Agreement, the Grantors hereby jointly and severally agree with the
Agent, for the benefit of the Lenders, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Financing Agreement or in Article 9 of
the Uniform Commercial Code as in effect from time to time in the State of New
York (the "Code") and which are not otherwise defined herein shall have the same
meanings herein as set forth therein; provided that terms used herein which are
defined in the Code as in effect in the State of New York on the date hereof
shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as the Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided
for in the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort
Claim", "Commodity Account", "Commodity Contracts", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Record", "Security Account", "Software", and "Supporting Obligations".
(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"Agreement" means this Security Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Copyright Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
"Copyrights" means all domestic and foreign copyrights, whether
registered or unregistered, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all media
(whether now or hereafter developed), in and to all original works of authorship
fixed in any tangible medium of expression, acquired or used by any Grantor
(including, without limitation, all copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
"Excluded Accounts" means (i) Deposit Accounts specially and
exclusively used for xxxxx cash (provided that the aggregate balance of the
funds on deposit in all such xxxxx cash Deposit Accounts shall not exceed
$25,000), payroll, payroll taxes and other
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employee wage and benefit payments to or for the benefit of a Grantor's salaried
employees, (ii) the Pokagon Account, and (iii) any Deposit Account in which the
average monthly cash deposits do not exceed $100,000.
"Excluded Debt" is defined in the Pledge Agreement.
"Indian Gaming Authority" is defined in the Pledge Agreement.
"Intellectual Property" means the Copyrights, Trademarks and
Patents.
"Licenses" means the Copyright Licenses, the Trademark Licenses
and the Patent Licenses.
"Patent Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to manufacture, use or sell any
invention covered by any Patent (including, without limitation, all Patent
Licenses set forth in Schedule II hereto).
"Patents" means all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how, formulae, rights of publicity and other general intangibles of like
nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how and formulae described
in Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar office or
agency of the United States or any other country or any political subdivision
thereof), and all reissues, divisions, continuations, continuations in part and
extensions or renewals thereof.
"Trademark Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensor or licensee
and providing for the grant of any right concerning any Trademark, together with
any goodwill connected with and symbolized by any such trademark licenses,
contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or
hereafter covered by such licenses (including, without limitation, all Trademark
Licenses described in Schedule II hereto).
"Trademarks" means all domestic and foreign trademarks, service
marks, collective marks, certification marks, trade names, business names,
d/b/a's, Internet domain names, trade styles, designs, logos and other source or
business identifiers and all general intangibles of like nature, now or
hereafter owned, adopted, acquired or used by any Grantor (including, without
limitation, all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, business names, d/b/a's, Internet
domain names, trade styles, designs, logos and other source or business
identifiers described in Schedule II hereto), all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar
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office or agency of the United States, any state thereof or any other country or
any political subdivision thereof), and all reissues, extensions or renewals
thereof, together with all goodwill of the business symbolized by such marks and
all customer lists, formulae and other Records of any Grantor relating to the
distribution of products and services in connection with which any of such marks
are used.
SECTION 2. Grant of Security Interest. As collateral security for all
of the Obligations (as defined in Section 3 hereof), each Grantor hereby pledges
to the Agent, and grants to the Agent, for the benefit of the Lenders, a
continuing security interest in, all personal property of such Grantor, wherever
located and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (the
"Collateral"), including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time
to time deposited therein and the monies and property in the possession or under
the control of any Agent or any Lender or any affiliate, representative, agent
or correspondent of the Agent or any Lender;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all
Payment Intangibles and any Grantor's option to purchase real property);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory Notes);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of such
Grantor (whether or not subject to the Code), including, without limitation, all
bank and other accounts
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and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements of
and to any of the property of such Grantor described in the preceding clauses of
this Section 2 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by such
Grantor in respect of any of the items listed above), and all books,
correspondence, files and other Records, including, without limitation, all
tapes, disks, cards, Software, data and computer programs in the possession of
or under the control of such Grantor or any other Person from time to time
acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds,
and products of any and all of the foregoing Collateral; in each case howsoever
such Grantor's interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise) provided, however, that the interest of
any Grantor in the following shall not be included as Collateral:
(i) the Pokagon Account and other Excluded Accounts;
(ii) any rights or interests in any contract with an Indian
Tribe, the valid grant or enforcement of a security interest or lien therein to
the Agent (A) would give such Indian Tribe a legally enforceable right to
terminate its obligations thereunder, (B) is prohibited by the terms thereof and
such prohibition has not been waived or cannot be waived under applicable law,
(C) requires the consent of the other party to such contract and such consent,
to the extent required by the terms thereof, has not been obtained, or (D)
requires the review or approval of applicable Indian Gaming Authority which has
not been obtained (but, for the avoidance of doubt, it is understood that the
Lien granted herein on such Grantor's right to receive payments with respect to
any such rights or interests (the "Payment Rights") shall be included as
Collateral whether or not the grant of such right is permitted under such
contract with such Indian Tribe, provided that in no event will the Agent be
permitted to assume any other rights of a Grantor under any such contract, and
provided further that such Lien in the Payment Rights shall not be enforceable
against or otherwise impose any duty or obligation on such Indian Tribe.
(iii) the Capital Stock of any Excluded Subsidiary, Excluded Debt
(as defined in the Pledge Agreement), and any other Collateral or proceeds
expressly excluded in or by the terms of the Pledge Agreement, and
(iv) the Lease Intended As Security, dated as of December 3,
1999, between Banc of America Leasing & Capital, LLC, 30084 and Lakes Gaming,
Inc., a Minnesota corporation, as amended, and all aircraft described in that
lease, as amended.
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SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) the punctual payment by each Grantor, as and when due and payable
(whether by stated maturity, by acceleration or otherwise), of all amounts from
time to time owing by it in respect of the Financing Agreement and the other
Loan Documents, including, without limitation, (i) all principal of and interest
on the Loans (including, without limitation, all interest that accrues after the
commencement of any Insolvency Proceeding of any Loan Party, irrespective of
whether a claim therefor is allowed in such Insolvency Proceeding), (ii) in the
case of a Guarantor, all amounts from time to time owing by such Guarantor in
respect of its guaranty made pursuant to Article X of the Financing Agreement or
under any other Guaranty to which it is a party, including all obligations
guaranteed by such Guarantor and (iii) all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document; and
(b) the due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of the Loan Documents.
SECTION 4. Representations and Warranties. Each Grantor jointly and
severally represents and warrants (but to the extent any representation or
warranty in this Section 4 is substantively the same as a representation or
warranty contained in Article V of the Financing Agreement and such
representation or warranty is qualified by a materiality or other qualifier in
the Financing Agreement, such representation or warranty herein shall be subject
to the same materiality or other qualifier as in Article V of the Financing
Agreement) as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each
Grantor and (ii) the organizational identification number of each Grantor or
states that no such organizational identification number exists.
(b) Each Grantor (i) is a corporation, limited liability company or
limited partnership duly organized, validly existing and/or in good standing (as
applicable) under the laws of the state or jurisdiction of its organization as
set forth on Schedule I hereto, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and to
execute, deliver and perform this Agreement and each other Loan Document to be
executed and delivered by it pursuant hereto and to consummate the transactions
contemplated hereby and thereby, and (iii) is duly qualified to do business and
is in good standing (except in the case of Louisiana where a dispute regarding
taxes is currently ongoing and as to which the aggregate tax liability shall not
exceed an amount indicated in Section 5.01(k) of the Financing Agreement) in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified and in
good standing could not reasonably be expected to have a Material Adverse
Effect.
(c) The execution, delivery and performance by each Grantor of this
Agreement and each other Loan Document to which such Grantor is or will be a
party (i) have been duly authorized by all necessary action, (ii) do not and
will not contravene its charter or by-
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laws, its limited liability company or operating agreement or its certificate of
partnership or partnership agreement, as applicable, or any applicable law or
any Material Contract binding on or otherwise affecting such Grantor or any of
its properties, (iii) do not and will not result in or require the creation of
any Lien (other than pursuant to any Loan Document) upon or with respect to any
of its properties and (iv) do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to it or its
operations or any of its properties.
(d) This Agreement is, and each other Loan Document to which any
Grantor is or will be a party, when executed and delivered, will be, a legal,
valid and binding obligation of such Grantor, enforceable against such Grantor
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws.
(e) Except as disclosed in Schedule 5.01(f) to the Financing
Agreement, there is no pending or, to the best knowledge of any Grantor,
threatened action, suit, proceeding or claim affecting any Grantor or its
properties, before any Governmental Authority or any arbitrator, or any order,
judgment or award by any Governmental Authority or arbitrator, that may
adversely affect the grant by any Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral, or the exercise by
the Agent of any of its rights or remedies hereunder in any manner other than a
de minimus amount.
(f) All Federal and foreign and all state and local tax returns and
other reports required by applicable law to be filed by any Grantor have been
filed, or extensions have been obtained, and all taxes, assessments and other
governmental charges imposed upon any Grantor or any property of such Grantor
(including, without limitation, all federal income and social security taxes on
employee's wages and all sales taxes) and which have become due and payable on
or prior to the date hereof have been paid, except to the extent contested in
good faith by proper proceedings (including in the case of Louisiana where a
dispute regarding taxes is currently ongoing and as to which the aggregate tax
liabilities with penalties shall not exceed an amount indicated in Section
4.01(d)(xii) of the Financing Agreement) which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof in
accordance with GAAP.
(g) All Equipment, Fixtures, Goods and Inventory now existing are, and
all Equipment, Fixtures, Goods and Inventory hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto (as
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof). Each Grantor's chief place of business and chief executive
office, the place where such Grantor keeps its Records concerning Accounts and
all originals of all Chattel Paper are located at the addresses specified
therefor in Schedule III hereto. None of the Accounts is evidenced by Promissory
Notes or other Instruments other than Promissory Notes and Instruments delivered
to the Agent pursuant to the terms of the Pledge Agreement except to the extent
they may constitute Excluded Debt. Set forth in Schedule IV hereto is a complete
and accurate list, as of the date of this Agreement, of each Deposit Account,
Securities Account and Commodities Account of each Grantor, together with the
name and address of each institution at which each such Account is maintained,
the account number for each such Account and a description of the purpose of
each such Account. Set forth in Schedule II hereto is (i) a complete and correct
list of each trade name used by each
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Grantor and (ii) the name of, and each trade name used by, each Person from
which such Grantor has acquired any substantial part of the Collateral within
four months prior to the date hereof.
(h) Each Grantor has delivered to the Agent complete and correct
copies of each License described in Schedule II hereto, including all schedules
and exhibits thereto, which represents all of the Licenses material to such
Grantor's business and existing on the date of this Agreement. Each such License
sets forth the entire agreement and understanding of the parties thereto
relating to the subject matter thereof, and there are no other agreements,
arrangements or understandings, written or oral, relating to the matters covered
thereby or the rights of any Grantor or any of its Affiliates in respect
thereof. Each such License now existing is, and each other License which is
material to such Grantor's business will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default by any Grantor, or, to the best knowledge
of each Grantor, any other party thereto has occurred under any such License,
nor does any defense, offset, deduction or counterclaim exist thereunder in
favor of any such party.
(i) The Grantors own and control, or otherwise possess adequate rights
to use, all Trademarks, Patents and Copyrights, which are the only trademarks,
patents, copyrights, inventions, trade secrets, proprietary information and
technology, know-how, formulae, and rights of publicity necessary to conduct
their business in substantially the same manner as conducted as of the date
hereof. Schedule II hereto sets forth a true and complete list of all
Intellectual Property and Licenses owned or used by each Grantor as of the date
hereof which are material to such Grantor's business. All such Intellectual
Property is subsisting and in full force and effect, has not been adjudged
invalid or unenforceable, is valid and enforceable and has not been abandoned in
whole or in part. Except as set forth in Schedule II, no such Intellectual
Property is the subject of any licensing or franchising agreement. No Grantor
has any knowledge of any conflict with the rights of others to any Intellectual
Property, and, to the best knowledge of each Grantor, no Grantor is now
infringing or in conflict with any such rights of others in any material respect
and no other Person is now infringing or in conflict in any material respect
with any such properties, assets and rights owned or used by any Grantor. No
Grantor has received any written notice that it is violating or has violated in
any material respect, the trademarks, patents, copyrights, inventions, trade
secrets, proprietary information and technology, know-how, formulae, rights of
publicity or other intellectual property rights of any third party.
(j) The Grantors are and will be at all times the sole and exclusive
owners of, or otherwise have and will have adequate rights in, the Collateral
free and clear of any Lien except for (i) the Lien created by this Agreement and
(ii) the Permitted Liens. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording or filing office except (A) such as may have been filed in favor of
the Agent relating to this Agreement and (B) such as may have been filed to
perfect or protect any Permitted Lien.
(k) The exercise by the Agent of any of its rights and remedies
hereunder will not contravene any law or any Material Contract and will not
result in, or require the creation of, any Lien upon or with respect to any of
its properties.
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(l) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory body, or any
other Person, is required for (i) the grant by any Grantor, or the perfection,
of the security interest purported to be created hereby in the Collateral or
(ii) the exercise by the Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule V
hereto, all of which financing statements have been duly filed and are in full
force and effect, (B) with respect to the perfection of the security interest
created hereby in the Intellectual Property, for the recording of the
appropriate Assignment for Security, substantially in the form of Exhibit A
hereto in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, (C) with respect to the perfection of the
security interest created hereby in foreign Intellectual Property and Licenses,
for registrations and filings in jurisdictions located outside of the United
States and covering rights in such jurisdictions relating to the Intellectual
Property and Licenses, (D) with respect to any action that may be necessary to
obtain control in Collateral described in Sections 5(i) and 5(k) hereof, the
taking of such action and (E) the taking possession of all Documents, Chattel
Paper, Instruments and cash constituting Collateral.
(m) This Agreement creates in favor of the Agent for the benefit of
the Agent and the Lenders a legal, valid and enforceable security interest in
the Collateral, as security for the Obligations. The Agent's having possession
of all Instruments, Documents, Chattel Paper and cash constituting Collateral
and obtaining control of all Collateral described in Sections 5(i) and 5(k)
hereof and the Pledge Agreement from time to time, the recording of the
appropriate Assignment for Security executed pursuant hereto in the United
States Patent and Trademark Office and the United States Copyright Office, as
applicable, and the filing of the financing statements described in Schedule V
hereto and, with respect to the Intellectual Property hereafter existing and not
covered by an appropriate Assignment for Security, the recording in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, of appropriate instruments of assignment, result in the perfection
of such security interests. Such security interests are, or in the case of
Collateral in which any Grantor obtains rights after the date hereof, will be,
perfected, first priority security interests, subject only to the Permitted
Liens and the taking of actions described in this Section 5(m). Such recordings
and filings and all other action necessary or desirable to perfect and protect
such security interest have been duly taken, except for (i) the Agent's having
possession of Instruments, Documents, Chattel Paper and cash constituting
Collateral after the date hereof, (ii) the Agent obtaining control of any
Collateral described in Sections 5(i) and 5(k) of this Agreement after the date
hereof, and (iii) the other filings and recordations described in Section 4(l)
hereof.
(n) As of the date hereof, no Grantor holds any Commercial Tort Claims
or is aware of any such pending claims, except for such claims described in
Schedule VI.
(o) The partnership interests or membership interests of each Grantor
(other than the Parent) in each of its Subsidiaries that is a partnership or a
limited liability company are not (i) dealt in or traded on securities exchanges
or in securities markets, (ii) securities for purposes of Article 8 of any
relevant Uniform Commercial Code, (iii) investment company securities within the
meaning of Section 8-103 of any relevant Uniform Commercial Code and (iv)
evidenced by a certificate. Such partnership interests or membership interests
constitute General Intangibles.
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SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding and all Commitments shall not have expired
or terminated, unless the Agent shall otherwise consent in writing:
(a) Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Agent may reasonably request in order to (i) enable the Agent to perfect and
protect the security interest purported to be created hereby; (ii) enable the
Agent to exercise and enforce its rights and remedies hereunder in respect of
the Collateral; or (iii) otherwise effect the purposes of this Agreement,
including, without limitation: (A) marking conspicuously all Chattel Paper,
Licenses and Records pertaining to the Collateral with a legend, in form and
substance satisfactory to the Agent, indicating that such Chattel Paper, License
or Collateral is subject to the security interest created hereby, (B) if any
Account shall be evidenced by Promissory Notes or other Instruments or Chattel
Paper, delivering and pledging to the Agent hereunder such Promissory Notes (as
provided in the Pledge Agreement), Instruments or Chattel Paper, duly endorsed
and accompanied by executed instruments of transfer or assignment, all in form
and substance satisfactory to the Agent, (C) executing and filing (to the
extent, if any, that such Grantor's signature is required thereon) or
authenticating the filing of, such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that the Agent may
request in order to perfect and preserve the security interest purported to be
created hereby, (D) furnishing 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, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Agent's security interest created
hereby and obtaining a written acknowledgment from such Person that such Person
holds possession of the Collateral for the benefit of the Agent, which such
written acknowledgement shall be in form and substance reasonably satisfactory
to the Agent, (F) if at any time after the date hereof, any Grantor acquires or
holds any Commercial Tort Claim, immediately notifying the Agent in a writing
signed by such Grantor setting forth a brief description of such Commercial Tort
Claim and granting to the Agent a security interest therein and in the proceeds
thereof, which writing shall incorporate the provisions hereof and shall be in
form and substance satisfactory to the Agent, and (G) taking all actions
required by any earlier versions of the Uniform Commercial Code or by other law,
as applicable, in any relevant Uniform Commercial Code jurisdiction, or by other
law as applicable in any foreign jurisdiction.
(b) Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory (other than used Equipment and Inventory sold in the
ordinary course of business in accordance with Section 5(g) hereof) at one or
more of the locations specified therefor in Section 4(g) hereof or, upon not
less than 20 days' prior written notice to the Agent accompanied by a new
Schedule III hereto indicating each new location of the Equipment and Inventory,
at such other locations in the continental United States or Canada, as the
Grantors may elect, provided that (i) all action has been taken to grant to the
Agent a perfected, first priority security interest in such Equipment and
Inventory (subject only to Permitted Liens), and (ii) the Agent's rights in such
Equipment and Inventory, including, without limitation, the existence,
perfection and priority of the security interest created hereby in such
Equipment and Inventory, are not adversely affected thereby.
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(c) Condition of Equipment. Each Grantor will maintain or cause the
Equipment which is necessary to the proper conduct of its business to be
maintained and preserved in good condition, repair and working order, ordinary
wear and tear excepted, and will forthwith, or in the case of any loss or damage
to any Equipment promptly after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection therewith which
are necessary or desirable, consistent with past practice, or which the Agent
may request to such end. Each Grantor will promptly furnish to the Agent a
statement describing in reasonable detail any loss or damage in excess of
$50,000 to any such Equipment.
(d) Taxes, Etc. Each Grantor jointly and severally agrees to pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Equipment and Inventory, except to the
extent otherwise provided in the Financing Agreement.
(e) Insurance.
(i) Each Grantor will, at its own expense, maintain insurance
(including, without limitation, comprehensive general liability, hazard, rent
and business interruption insurance) with respect to all of its properties,
including, without limitation, its Equipment and Inventory and all real
properties leased or owned by it in such amounts, against such risks, in such
form as is required by the Credit Agreement.
(ii) Reimbursement under any liability insurance maintained by
any Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by a Grantor pursuant to this Section 5(e) shall be paid to the Agent for the
benefit of the Agent and the Lenders in accordance with the terms of the
Financing Agreement.
(iii) Upon the occurrence and during the continuance of an Event
of Default or upon any insurance payment in respect of any Equipment or
Inventory, all insurance payments in respect of such Equipment or Inventory
shall be paid to the Agent for the benefit of the Agent and the Lenders and
applied as specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) No Grantor shall change (A) its name, organizational
identification number or FEIN, or (B) its jurisdiction of incorporation as set
forth in Section 4(b) hereof, except that a Grantor may (x) change its name,
organizational identification number or FEIN or its jurisdiction of
incorporation in connection with a transaction permitted by Section 6.02(c) of
the Financing Agreement and (y) change its name upon at least 30 days' prior
written notice by the Administrative Borrower to the Agent of such change and so
long as, at the time of such written notification, such Person provides any
financing statements or fixture filings necessary to perfect and continue
perfected the Agent's Liens. Each Grantor shall (x) immediately notify the Agent
upon obtaining an organizational identification number, if on the date hereof
such Grantor did not have such identification number, and (y) keep adequate
records concerning the Accounts and
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Chattel Paper and permit representatives of the Agent pursuant to the terms of
the Financing Agreement to inspect and make abstracts from such Records and
Chattel Paper.
(ii) Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts in accordance with its usual business practices
and the terms of the Loan Documents. In connection with such collections, each
Grantor may (and upon the occurrence and during the continuance of an Event of
Default, at the Agent's direction, will) take such action as such Grantor or
(after the occurrence and during the continuance of an Event of Default) the
Agent, as the case may be, deem necessary or advisable to enforce collection or
performance of the Accounts; provided, however, that the Agent shall have the
right at any time, upon the occurrence and during the continuance of an Event of
Default, to notify the Account Debtors or obligors under any Accounts of the
assignment of such Accounts to the Agent and to direct such Account Debtors or
obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Agent or its designated agent and, upon such
notification and at the expense of such Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by any Grantor of a notice
from the Agent that the Agent has notified, intends to notify, or has enforced
or intends to enforce a Grantor's rights against the Account Debtors or obligors
under any Accounts as referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including Instruments) received by such
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Agent hereunder, shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Agent or its designated agent in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and either (i) credited to the Loan Account so long as no Event of
Default shall have occurred and be continuing or (ii) if an Event of Default
shall have occurred and be continuing, applied as specified in Section 7(b)
hereof, and (B) such Grantor will not adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any Account Debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Agent may (in
its sole and absolute discretion) direct any or all of the banks and financial
institutions with which any Grantor either maintains a Deposit Account or a
lockbox or deposits the proceeds of any Accounts to send immediately to the
Agent or its designated agent by wire transfer (to such account as the Agent
shall specify, or in such other manner as the Agent shall direct) all or a
portion of such securities, cash, investments and other items held by such
institution. Any such securities, cash, investments and other items so received
by the Agent or its designated agent shall (in the sole and absolute discretion
of the Agent) be held as additional Collateral for the Obligations or
distributed in accordance with Section 7 hereof.
(iii) Upon the occurrence and during the continuance of any
breach or default under any License described in Schedule II hereto by any party
thereto other than a Grantor, (A) the relevant Grantor will, promptly after
obtaining knowledge thereof, give the Agent written notice of the nature and
duration thereof, specifying what action, if any, it has taken and proposes to
take with respect thereto, (B) no Grantor will, without the prior written
consent of the Agent, declare or waive any such breach or default or
affirmatively consent to the cure thereof or exercise any of its remedies in
respect thereof, and (C) after the occurrence and during the continuance of an
Event of Default, each Grantor will, upon written instructions from
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the Agent and at such Grantor's expense, take such action as the Agent may deem
necessary or advisable in respect thereof.
(iv) Each Grantor will, at its expense, promptly deliver to the
Agent a copy of each notice or other communication received by it by which any
other party to any License referred to in Schedule II hereto which purports to
exercise any of its rights or affect any of its obligations thereunder, together
with a copy of any reply by such Grantor thereto.
(v) Each Grantor will exercise promptly and diligently each and
every right which it may have under each License described in Schedule II hereto
(other than any right of termination) and will duly perform and observe in all
respects all of its obligations under each such License and will take all action
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Agent, cancel, terminate, amend or
otherwise modify in any respect, or waive any provision of, any such License.
(g) Transfers and Other Liens.
(i) Except to the extent expressly permitted by Section 6.02(c)
or 7.04 of the Financing Agreement, no Grantor will sell, assign (by operation
of law or otherwise), lease, license, exchange or otherwise transfer or dispose
of any of the Collateral.
(ii) Except to the extent expressly permitted by the Financing
Agreement or hereunder, no Grantor will create, suffer to exist or grant any
Lien upon or with respect to any Collateral.
(h) Intellectual Property.
(i) If applicable, each Grantor has duly executed and delivered
the applicable Assignment for Security in the form attached hereto as Exhibit A.
Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force, free from any claim of abandonment for non-use, and no Grantor will
(nor permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Intellectual Property may become invalidated; provided, however,
that so long as no Event of Default has occurred and is continuing, no Grantor
shall have an obligation to use or to maintain any Intellectual Property (A)
that relates solely to any product or work, that has been, or is in the process
of being, discontinued, abandoned or terminated, (B) that is being replaced with
Intellectual Property substantially similar to the Intellectual Property that
may be abandoned or otherwise become invalid, so long as the failure to use or
maintain such Intellectual Property does not materially adversely affect the
validity of such replacement Intellectual Property and so long as such
replacement Intellectual Property is subject to the Lien created by this
Agreement, (C) that is substantially the same as another Intellectual Property
that is in full force, so long the failure to use or maintain such Intellectual
Property does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such other Intellectual Property is subject
to the Lien and security interest created by this Agreement or (D) that is not
material to the business of any Grantor or any line of business of any
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Grantor. Each Grantor will cause to be taken all necessary steps in any
proceeding before the United States Patent and Trademark Office and the United
States Copyright Office or any similar office or agency in any other country or
political subdivision thereof to maintain each registration of the Intellectual
Property (other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantors shall (x) in the case of any Intellectual
Property described in Schedule II hereto, upon obtaining knowledge of such
infringement, misappropriation, dilution or other violation, promptly notify the
Agent and (y) to the extent the Grantors shall deem appropriate under the
circumstances, promptly xxx for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as the Grantors shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Agent, from time to time upon the Agent's request (which,
unless an Event of Default has occurred and is continuing, shall be made no more
frequently than quarterly), statements and schedules further identifying and
describing the Intellectual Property and Licenses, and such other reports in
connection with the Intellectual Property and Licenses as the Agent may
reasonably request, all in reasonable detail. Following receipt by the Agent of
any such statements, schedules or reports, the Grantors shall modify this
Agreement by amending Schedule II hereto to include any Intellectual Property or
License, as the case may be, which becomes part of the Collateral under this
Agreement, and shall execute and authenticate such documents and do such acts as
shall be necessary or, in the reasonable business judgment of the Agent,
desirable to subject such Intellectual Property and Licenses to the Lien and
security interest created by this Agreement. Notwithstanding anything herein to
the contrary, upon the occurrence and during the continuance of an Event of
Default, no Grantor may abandon or otherwise permit any Intellectual Property to
become invalid without the prior written consent of the Agent, and if any
Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, the Grantors will take such
action as the Agent shall deem appropriate under the circumstances to protect
such Intellectual Property.
(ii) Upon request of the Agent, each Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Agent may reasonably request to evidence the Agent's
security interest hereunder in such Intellectual Property and the General
Intangibles of such Grantor relating thereto or represented thereby, and each
Grantor hereby appoints the Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the termination of all Commitments,
the indefeasible repayment of all of the Obligations in full and the termination
of each of the Loan Documents. In the event that any Grantor shall (A) obtain
rights to any new Trademarks necessary for the operation of its business, or any
reissue, renewal or extension of any existing Trademark necessary for the
operation of its business, (B) obtain rights to or develop any new patentable
inventions, or become entitled to the benefit of any Patent, or any reissue,
division, continuation, renewal, extension or continuation-in-part of any
existing Patent or any improvement thereof (whether pursuant to any license or
otherwise), (C) obtain rights to or develop any new works protectable
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by Copyright, or become entitled to the benefit of any rights with respect to
any Copyright or any registration or application therefor, or any renewal or
extension of any existing Copyright or any registration or application therefor,
or (D) obtain rights to or develop new other Intellectual Property, the
provisions of Section 2 hereof shall automatically apply thereto and such
Grantor shall give to the Agent prompt notice thereof in accordance with the
terms of this Agreement and the Financing Agreement. Except as otherwise
provided herein or in the Financing Agreement each Grantor, either itself or
through any agent, employee, licensee or designee, shall give the Agent written
notice of each application for the registration of any Trademark or Copyright or
the issuance of any Patent with the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, or in any similar office or
agency of the United States or any country or any political subdivision thereof.
(i) Deposit, Commodities and Securities Accounts. Prior to the date
hereof, each Grantor shall cause each bank and other financial institution
referred to in Schedule IV hereto to execute and deliver to the Agent a control
agreement, in form and substance reasonably satisfactory to the Agent, duly
executed by such Grantor and such bank or financial institution, or enter into
other arrangements in form and substance satisfactory to the Agent, pursuant to
which such institution shall irrevocably agree, inter alia, that (i) it will
comply at any time with the instructions originated by the Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of such Grantor, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of such Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Agent, (iii) any right of set off, banker's
Lien or other similar Lien, security interest or encumbrance shall be fully
waived as against the Agent and (iv) upon receipt of written notice from the
Agent during the continuance of an Event of Default, such bank or financial
institution shall immediately send to the Agent by wire transfer (to such
account as the Agent shall specify, or in such other manner as the Agent shall
direct) all such cash, the value of any Commodity Contracts, securities,
Investment Property and other items held by it. Unless an Event of Default shall
have occurred and be continuing, the Agent shall not originate any instructions
or give any notice to any such bank or financial institution under any such
control agreement, including but not limited to, instructions, the effect of
which would be to (x) direct the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of such Grantor or (y) direct such bank or
financial institution to send to the Agent by wire transfer all such cash, the
value of any Commodity Contracts, securities, Investment Property and other
items held by it. Without the prior written consent of the Agent, no Grantor
shall make or maintain any Deposit Account, Commodity Account or Securities
Account except for the accounts set forth in Schedule IV hereto. The provisions
of this paragraph 5(i) shall not apply to (i) Deposit Accounts for which the
Agent is the depositary, or (ii) Excluded Accounts.
(j) [Intentionally Omitted].
(k) Control. Each Grantor hereby agrees to take any or all action that
may be necessary or desirable or that the Agent may request in order for the
Agent to obtain control in accordance with the Pledge Agreement, the Security
Agreement and with Sections 9-104, 9-105,
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9-106, and 9-107 of the Code with respect to the following Collateral: (i)
Deposit Accounts, (ii) Electronic Chattel Paper, (iii) Investment Property and
(iv) Letter-of-Credit Rights.
(l) Inspection and Reporting. Each Grantor shall permit the Agent or
any agents or representatives thereof or such professionals or other Persons as
the Agent and the Lenders may designate (i) to examine and make copies of and
abstracts from such Grantor's records and books of account, (ii) to visit and
inspect its properties, (iii) to verify materials, leases, notes, Accounts,
Inventory and other assets of such Grantor from time to time, (iv) to conduct
audits, physical counts, appraisals and/or valuations, Phase I ESAs and Phase II
Environmental Site Assessments or examinations at the locations of such Grantor
and (v) to discuss such Grantor's affairs, finances and accounts with any of its
directors, officers, managerial employees, independent accountants or any of its
other representatives, in each case as provided in the Financing Agreement.
(m) Partnership and Limited Liability Company Interest. No Grantor
that is a partnership or a limited liability company shall, nor shall any
Grantor with any Subsidiary that is a partnership or a limited liability
company, permit such partnership interests or membership interests to (i) be
dealt in or traded on securities exchanges or in securities markets, (ii) become
a security for purposes of Article 8 of any relevant Uniform Commercial Code,
(iii) become an investment company security within the meaning of Section 8-103
of any relevant Uniform Commercial Code or (iv) be evidenced by a certificate.
Each Grantor agrees that such partnership interests or membership interests
shall constitute General Intangibles.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) Each Grantor hereby (i) authorizes the Agent at any time and from
time to time to file financing statements, continuation statements and
amendments thereto that describe the Collateral as all assets of such Grantor or
words of similar effect and that contain any other information required by Part
5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment, including whether such
Grantor is an organization, the type of organization and any organizational
identification number issued to such Grantor, and (ii) ratifies such
authorization to the extent that the Agent has filed any such financing or
continuation statements, or amendments thereto prior to the date hereof. Each
Grantor agrees to furnish any such information to the Agent promptly upon
request.
(b) Each Grantor hereby irrevocably appoints the Agent as its
attorney-in-fact and proxy (exercisable after the occurrence and during
continuance of an Event of Default), with full authority in the place and stead
of such Grantor and in the name of such Grantor or otherwise, from time to time
in the Agent's 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 rights of a Grantor under this Agreement),
including, without limitation, (i) to obtain and adjust insurance required to be
paid to the Agent for the benefit of the Agent and Lenders pursuant to Section
5(e) hereof, (ii) to ask, demand, collect, xxx for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (i) or
(ii) above, (iv) to file any claims or
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take any action or institute any proceedings which the Agent may deem necessary
or desirable for the collection of any Collateral or otherwise to enforce the
rights of the Agent and the Lenders with respect to any Collateral, and (v) to
execute assignments, licenses and other documents to enforce the rights of the
Agent and the Lenders with respect to any Collateral. This power is coupled with
an interest and is irrevocable until the termination of all Commitments and the
indefeasible repayment of all of the Obligations in full.
(c) For the purpose of enabling the Agent to exercise rights and
remedies hereunder, at such time as the Agent shall be lawfully entitled to
exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to any
Grantor and following the occurrence and during continuance of an Event of
Default) to use, assign, license or sublicense any Intellectual Property now
owned or hereafter acquired by any Grantor, wherever the same may be located,
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof. Notwithstanding anything contained herein
to the contrary, but subject to the provisions of the Financing Agreement that
limit the right of a Grantor to dispose of its property and Section 5(h) hereof,
so long as no Event of Default shall have occurred and be continuing, each
Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Intellectual Property in
the ordinary course of its business. In furtherance of the foregoing, unless an
Event of Default shall have occurred and be continuing, the Agent shall from
time to time, upon the request of a Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor's judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the termination of all Commitments and the indefeasible payment in
full of the all of the Obligations, the Agent (subject to Section 10(e) hereof)
shall release and reassign to the Grantors all of the Agent's right, title and
interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever and at the Grantor's sole
expense. The exercise of rights and remedies hereunder by the Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by any Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Agent from any claims, causes of action
and demands at any time arising out of or with respect to any actions taken or
omitted to be taken by the Agent under the powers of attorney granted herein
other than actions taken or omitted to be taken through the Agent's gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.
(d) If any Grantor fails to perform any agreement contained herein as
and when required, the Agent may itself perform, or cause performance of, such
agreement or obligation, in the name of such Grantor or the Agent, and the
expenses of the Agent incurred in connection therewith shall be jointly and
severally payable by the Grantors pursuant to Section 8 hereof and shall be
secured by the Collateral.
(e) The powers conferred on the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys
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actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Agent of any of its rights hereunder shall not release any
Grantor from any of its obligations under the Licenses or otherwise in respect
of the Collateral, and (iii) the Agent shall not have any obligation or
liability by reason of this Agreement under the Licenses or with respect to any
of the other Collateral, nor shall the Agent be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION 7. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing (except as it may be limited in the Pledge
Agreement):
(a) The Agent may exercise in respect of the Collateral, in addition
to any other rights and remedies provided for herein or otherwise available to
it, all of the rights and remedies of a secured party upon default under the
Code (whether or not the Code applies to the affected Collateral), and also may
(i) take absolute control of the Collateral, including, without limitation,
transfer into the Agent's name or into the name of its nominee or nominees (to
the extent the Agent has not theretofore done so) and thereafter receive, for
the benefit of the Agent, all payments made thereon, give all consents, waivers
and ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to, and
each Grantor hereby agrees that it will at its expense and upon request of the
Agent forthwith, assemble all or part of the Collateral as directed by the Agent
and make it available to the Agent at a place or places to be designated by the
Agent that is reasonably convenient to both parties, and the Agent may enter
into and occupy any premises owned or leased by any Grantor where the Collateral
or any part thereof is located or assembled for a reasonable period in order to
effectuate the Agent's rights and remedies hereunder or under law, without
obligation to any Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to prepare or
process the Collateral for sale, (A) sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Agent may deem commercially reasonable
and/or (B) lease, license or dispose of the Collateral or any part thereof upon
such terms as the Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale or any other disposition of the Collateral
shall be required by law, at least 10 days' prior notice to a Grantor of the
time and place of any public sale or the time after which any private sale or
other disposition of the Collateral is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale or other
disposition 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. Each Grantor hereby
waives any claims against the Agent and the Lenders arising by reason of the
fact that the price at which the Collateral may have been sold at a private sale
was less than the price which might have been
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obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree, and waives all rights that such
Grantor may have to require that all or any part of the Collateral be marshalled
upon any sale (public or private) thereof. Each Grantor hereby acknowledges that
(i) any such sale of the Collateral by the Agent shall be made without warranty,
(ii) the Agent may specifically disclaim any warranties of title, possession,
quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and
(ii) above shall not adversely effect the commercial reasonableness of any such
sale of the Collateral. In addition to the foregoing, (i) upon notice to any
Grantor from the Agent, each Grantor shall cease any use of the Intellectual
Property or any trademark, patent or copyright similar thereto for any purpose
described in such notice; (ii) the Agent may, at any time and from time to time,
upon 10 days' prior notice to any Grantor, license, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Agent shall in its sole discretion
determine; and (iii) the Agent may, at any time, pursuant to the authority
granted in Section 6 hereof (such authority being effective upon the occurrence
and during the continuance of an Event of Default), execute and deliver on
behalf of a Grantor, one or more instruments of assignment of the Intellectual
Property (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Agent as Collateral and all Cash Proceeds
received by the Agent in respect of any sale of or collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Agent pursuant
to Section 8 hereof) in whole or in part by the Agent against, all or any part
of the Obligations in such order as the Agent shall elect, consistent with the
provisions of the Financing Agreement. Any surplus of such cash or Cash Proceeds
held by the Agent and remaining after termination of all Commitments and the
indefeasible payment in full of all of the Obligations, shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Agent and the
Lenders are legally entitled, the Grantors shall be jointly and severally liable
for the deficiency, together with interest thereon at the highest rate specified
in any applicable Loan Document for interest on overdue principal thereof or
such other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees, costs, expenses and other client charges of
any attorneys employed by the Agent to collect such deficiency.
(d) Each Grantor hereby acknowledges that if the Agent complies with
any applicable state or federal law requirements in connection with a
disposition of the Collateral, such compliance will not adversely affect the
commercial reasonableness of any sale or other disposition of the Collateral.
(e) The Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other
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assurances of payment in any particular order, and all of the Agent's rights
hereunder and in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that any Grantor lawfully may, such Grantor
hereby agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the Agent's
rights under this Agreement or under any other instrument creating or evidencing
any of the Obligations or under which any of the Obligations is outstanding or
by which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.
SECTION 8. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to defend, protect,
indemnify and hold each Indemnitee harmless from and against any and all
damages, losses, liabilities, obligations, penalties, fees, costs and expenses
(including, without limitation, reasonable legal fees, costs and expenses of
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement);
provided, however, that the Grantors shall not have any obligation under this
Section 8(a) to any Indemnitee caused by such Person's gross negligence or
willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.
(b) Each Grantor jointly and severally agrees to pay to the Agent upon
demand the amount of any and all costs and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Agent and of any
experts and agents (including, without limitation, any collateral trustee which
may act as agent of the Agent), which the Agent may incur in connection with (i)
the preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder, or (iv) the failure by any Grantor to
perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied or delivered by hand,
Federal Express or other reputable overnight courier, if to a Grantor, to it in
care of the Administrative Borrower at its address specified in the Financing
Agreement and if to the Agent, to it at its address specified in the Financing
Agreement; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective (a) if sent by certified mail, postage prepaid
and return receipt requested, when received or 3 days after deposited in the
mails, whichever occurs first, (b) if telecopied, when transmitted and
confirmation received, or (c) if delivered by hand, Federal Express or other
reputable overnight courier, upon delivery.
SECTION 10. Security Interest Absolute. All rights of the Agent and
the Lenders, all Liens and all obligations of each of the Grantors hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Financing
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Agreement or any other Loan Document, (b) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Obligations, or any other amendment or waiver of or consent to any departure
from the Financing Agreement or any other Loan Document, (c) any exchange or
release of (except to the extent of such release), or non-perfection of any Lien
on any Collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations, or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any of the Grantors in respect of the Obligations other than
payment in full of all Obligations. All authorizations and agencies contained
herein with respect to any of the Collateral are irrevocable and powers coupled
with an interest.
SECTION 11. Miscellaneous.
(a) No amendment of any provision of this Agreement (including any
Schedule attached hereto) shall be effective unless it is in writing and signed
by each Grantor and the Agent, and no waiver of any provision of this Agreement,
and no consent to any departure by any Grantor therefrom, shall be effective
unless it is in writing and signed by the Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) No failure on the part of the Agent or the Lenders to exercise,
and no delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Agent and the Lenders provided
herein and in the other Loan Documents are cumulative and are in addition to,
and not exclusive of, any rights or remedies provided by law. The rights of the
Agent and the Lenders under any Loan Document against any party thereto are not
conditional or contingent on any attempt by such Person to exercise any of its
rights under any other Loan Document against such party or against any other
Person, including but not limited to, any Grantor.
(c) 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the later of (A)
the indefeasible payment in full of all of the Obligations and (B) after the
termination of all Commitments and (ii) be binding on each Grantor and all other
Persons who become bound as debtor to this Agreement in accordance with Section
9-203(d) of the Code and shall inure, together with all rights and remedies of
the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders
and their respective permitted successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Agent and the Lenders may assign or otherwise transfer their rights and
obligations under this Agreement and any other Loan Document in accordance with
the provisions of the Financing Agreement, to any other Person and such other
Person shall thereupon become vested with all of the benefits in respect thereof
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granted to the Agent and the Lenders herein or otherwise. Upon any such
permitted assignment or transfer, all references in this Agreement to any such
Agent or any such Lender shall mean the assignee of such Agent or such Lender.
None of the rights or obligations of any Grantor hereunder may be assigned or
otherwise transferred without the prior written consent of the Agent, and any
such assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Obligations and the
termination of all Commitments, (i) this Agreement and the security interests
and licenses created hereby shall terminate and all rights to the Collateral
shall revert to the Grantors and (ii) the Agent will, upon the Grantors' request
and at the Grantors' expense, without any representation, warranty or recourse
whatsoever, (A) return to the Grantors such of the Collateral as shall not have
been sold or otherwise disposed of or applied pursuant to the terms hereof and
(B) execute and deliver to the Grantors such documents as the Grantors shall
reasonably request to evidence such termination.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX
XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH OF THE GRANTORS (AND BY ITS ACCEPTANCE OF THE BENEFITS OF
THIS AGREEMENT, THE AGENT) WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
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DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each Grantor irrevocably consents to the service of process of any
of the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to such Grantor at its address provided herein,
such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Agent to
serve process in any other manner permitted by law or commence legal proceedings
or otherwise proceed against any Grantor or any property of any Grantor in any
other jurisdiction.
(k) Each Grantor irrevocably and unconditionally waives any right it
may have to claim or recover in any legal action, suit or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
(l) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
(m) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together constitute one in the
same Agreement. Delivery of an executed counterpart of this Agreement by
facsimile shall be equally effective as delivery of an original executed
counterpart.
(n) All of the obligations of the Grantors hereunder are joint and
several. The Agent may, in its sole and absolute discretion, enforce the
provisions hereof against any of the Grantors and shall not be required to
proceed against all Grantors jointly or seek payment from the Grantors ratably.
In addition, the Agent may, in its sole and absolute discretion, select the
Collateral of any one or more of the Grantors for sale or application to the
Obligations, without regard to the ownership of such Collateral, and shall not
be required to make such selection ratably from the Collateral owned by all of
the Grantors. The release or discharge of any Grantor by the Agent shall not
release or discharge any other Grantor from the obligations of such Person
hereunder.
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
GRANTORS:
LAKES ENTERTAINMENT, INC.
By: /S/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and Chief Financial
Officer
BORDERS LAND COMPANY, LLC
GREAT LAKES GAMING OF MICHIGAN, LLC
LAKES CLOVERDALE, LLC
LAKES GAMING AND RESORTS, LLC
LAKES GAME DEVELOPMENT, LLC
LAKES GAMING-MISSISSIPPI, LLC
LAKES IOWA CONSULTING, LLC
LAKES IOWA MANAGEMENT, LLC
LAKES JAMUL, INC.
LAKES JAMUL DEVELOPMENT, LLC
LAKES KAR SHINGLE SPRINGS, L.L.C.
LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA,
L.L.C.
LAKES KICKAPOO CONSULTING, LLC
LAKES KICKAPOO MANAGEMENT, LLC
LAKES NIPMUC, LLC
LAKES PAWNEE CONSULTING, LLC
LAKES PAWNEE MANAGEMENT, LLC
LAKES POKER TOUR, LLC
LAKES SHINGLE SPRINGS, INC.
By: /S/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer of each
of the above listed entities.
