EXHIBIT 10.2
GUARANTY AND SECURITY AGREEMENT
THIS GUARANTY AND SECURITY AGREEMENT (this "AGREEMENT") is entered into as
of April 2, 2004 between ITO ACQUISITION CORPORATION, a California corporation
(the "OBLIGOR") and CAPITALSOURCE FINANCE LLC, in its capacity as agent (in such
capacity, the "AGENT") for the ratable benefit of the lenders from time to time
party to the Term Loan Agreement described below (the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Amended and Restated Term Loan Agreement
dated as of the date hereof (including all annexes, exhibits and schedules
thereto, as from time to time amended, restated, supplemented or otherwise
modified and in effect from time to time, the "TERM LOAN AGREEMENT") by and
among Infocrossing, Inc., a Delaware corporation (the "BORROWER"), the Agent and
the Lenders, the Lenders have agreed to make and hold loans (the "LOANS") upon
the terms and subject to the conditions set forth therein;
WHEREAS, the Obligor is a wholly-owned Subsidiary of Borrower and as such
will derive substantial tangible and intangible benefits from the making and
holding of the Loans to Borrower by the Lenders;
WHEREAS, it is a condition precedent to the effectiveness of the Term Loan
Agreement that the Obligor shall have executed and delivered this Agreement to
the Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein shall
have the meanings ascribed to such terms in the Term Loan Agreement, and the
following terms which are defined in Article 9 of the Uniform Commercial Code
(the "UCC") in effect in the State of New York on the date hereof are used
herein as so defined: Accessions, Accounts, As-Extracted Collateral, Chattel
Paper, Commercial Tort Claim, Consumer Goods, Deposit Accounts, Documents,
Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Manufactured Home, Proceeds, Software, Supporting
Obligation and Tangible Chattel Paper.
(b) In addition, the following terms shall have the following meanings:
"BANKRUPTCY CODE": the Federal Bankruptcy Reform Act of 1978 (11
U.S.C.ss.101, et seq.), as amended and in effect from time to time
and the regulations issued from time to time thereunder.
"CONTRACTS": all licenses or other agreements to which the Obligor is
a party, as each may be amended, supplemented or otherwise modified from
time to time, including, without limitation, (a) all rights of the Obligor
to receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of the Obligor to damages arising out of or for
breach or default in respect thereof and (c) all rights of the Obligor to
exercise all remedies thereunder.
"CONTROL": (i) with respect to Electronic Chattel Paper, "control"
(within the meaning of Section 9-105 of the UCC) over such Electronic
Chattel Paper, (ii) with respect to Deposit Accounts, "control" (within the
meaning of Section 9-104 of the UCC) over such Deposit Accounts, (iii) with
respect to Investment Property constituting certificated securities,
uncertificated securities, securities accounts, securities entitlements,
commodity accounts or commodity contracts (each as referred to in the UCC),
"control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over
such Investment Property, and (iv) with respect to Letter-of-Credit Rights,
"control" (within the meaning of Section 9-107 of the UCC) with respect to
such Letter-of-Credit Rights.
"COPYRIGHT LICENSES": any written agreement, naming the Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 5(h) hereto.
"COPYRIGHTS": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and applications
in the United States Copyright Office including, without limitation, any
thereof referred to in Schedule 5(h) hereto, (b) all renewals thereof
including, without limitation, any thereof referred to in Schedule 5(h)
hereto and (c) all income, royalties, damages and payments now and
hereafter due and/or payable under or with respect to any of the foregoing,
including, without limitation, damages and payments for past, present and
future infringements of any of the foregoing and the right to sue for past,
present and future infringements of any of the foregoing.
"NOTES": all notes issued by the Borrower to the Lenders pursuant to
the terms of the Term Loan Agreement.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to the Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 5(h) hereto.
"PATENTS": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 5(h) hereto, (b) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 5(h)
hereto and (c) all income, royalties, damages and payments now and
hereafter due and/or payable under or with respect to any of the foregoing,
including, without limitation, damages and payments for past, present and
future infringements of any of the foregoing and the right to sue for past,
present and future infringements of any of the foregoing.
"SECURED OBLIGATIONS": (a) the due and punctual payment by the
Borrower of (i) the principal of, and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (ii) all other monetary obligations, including
fees, costs, expenses, reimbursements, damages, indemnities and other
liabilities, whether primary, secondary, direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of the
Borrower to the Agent and the Lenders under the Loan Documents, (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Borrower under or pursuant to the Loan Documents, and
(c) the due and punctual payment and performance of all the covenants,
agreements, obligations and liabilities of the Guarantors under or pursuant
to the Loan Documents.
"TRADEMARK LICENSE": means any agreement, written or oral, providing
for the grant by or to the Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 5(h)
hereto.
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule 5(h) hereto, (b) all renewals thereof and (c) all income,
royalties, damages and payments now and hereafter due and/or payable under
or with respect to any of the foregoing, including, without limitation,
damages and payments for past, present and future infringements of any of
the foregoing and the right to sue for past, present and future
infringements of any of the foregoing.
"WORK": any work which is subject to copyright protection pursuant to
Title 17 of the United States Code.
2. Guaranty.
(a) The Guarantee. The Obligor hereby unconditionally and irrevocably
guarantees, as a primary obligor and not merely as a surety, to each Lender and
to the Agent as hereinafter provided, the prompt payment and performance of the
Secured Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the terms
thereof. The Obligor hereby further agrees that if any of the Secured
Obligations are not paid in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise), the Obligor will promptly
pay the same, without any demand or notice whatsoever, and that in the case of
any extension of time or payment or renewal of any of the Secured Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
as a mandatory prepayment, by acceleration or otherwise) in accordance with the
terms of such extension or renewal. The Obligor agrees that this is a continuing
guarantee of payment and not of collectibility, and is intended to be
independent of and in addition to any other guaranty, indorsement, collateral or
other agreement held by the Agent or the Lenders therefor or with respect
thereto, whether or not furnished by the Obligor.
(b) Notwithstanding any provision of this Agreement to the contrary, it is
intended that the guaranty evidenced by this Agreement, and any interests, Liens
and security interests granted by the Obligor as security for such guaranty,
including, without limitation, the Liens and security interests granted
hereunder, not constitute a "Fraudulent Conveyance" (as defined below) in the
event that such guaranty or such interest is subject to the Bankruptcy Code or
any applicable fraudulent conveyance or fraudulent transfer law or similar law
of any state. Consequently, the Obligor and the Agent agree that if such
guaranty, or any such interests, Liens or security interests securing such
guaranty, would, but for the application of this sentence, constitute a
Fraudulent Conveyance, such guaranty and each such Lien and security interest
shall be valid and enforceable only to the maximum extent that would not cause
such guaranty or such interest, Lien or security interest to constitute a
Fraudulent Conveyance, and such guaranty shall automatically be deemed to have
been amended accordingly at all relevant times. For purposes hereof, "Fraudulent
Conveyance" means a fraudulent conveyance under Section 548 of the Bankruptcy
Code or a fraudulent conveyance or fraudulent transfer under the provisions of
any applicable fraudulent conveyance or fraudulent transfer law or similar law
of any state, as in effect from time to time.
(c) Obligations Unconditional. The obligations of the Obligor under Section
2 hereof are absolute, irrevocable and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Loan
Documents, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Secured Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 2 that the obligations of the Obligor
hereunder shall be absolute, irrevocable and unconditional under any
and all circumstances. The Obligor agrees that it shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Secured Obligations for amounts paid under this
guaranty until such time as the Lenders have been paid in full. Without limiting
the generality of the foregoing, it is agreed that, to the fullest extent
permitted by law, the occurrence of any one or more of the following shall not
alter or impair the liability of the Obligor hereunder which shall remain
absolute, irrevocable and unconditional as described above:
(i) at any time or from time to time, without notice to the Obligor,
the time for any performance of or compliance with any of the Secured
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Loan Documents or any other agreement or instrument referred to in the Loan
Documents shall be done or omitted;
(iii) the maturity of any of the Secured Obligations shall be
accelerated, or any of the Secured Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the Loan
Documents or any other agreement or instrument referred to in the Loan
Documents shall be waived or any other guarantee of any of the Secured
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any Lender or
the Lenders as security for any of the Secured Obligations shall fail to
attach or be perfected; or
(v) any of the Secured Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any creditor of
the Obligor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of the Obligor).
With respect to its obligations hereunder, the Obligor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Loan Documents or
any other agreement or instrument referred to in the Loan Documents, or against
any other Person under any other guarantee of, or security for, any of the
Secured Obligations.
(d) Reinstatement. The obligations of the Obligor under this Section 2
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of any Person in respect of the Secured Obligations is
rescinded or must be otherwise restored by any holder of any of the Secured
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Obligor agrees that it will indemnify the
Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or any Lender and each of their Affiliates and their respective members,
partners, directors, officers, employees, agents and advisors of the Agent, each
Lender and each of their Affiliates (each such Person being called an
"INDEMNITEE") in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a Fraudulent Conveyance, preference, or similar payment
under the Bankruptcy Code or any other bankruptcy, insolvency or similar law;
provided that such indemnity shall not be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee.
(e) Certain Additional Waivers. The Obligor further agrees that the Obligor
shall have no right of recourse to security for the Secured Obligations until
such time as all of the Secured Obligations have been paid in full and all of
the Loan Documents have been terminated.
(f) Remedies. The Obligor agrees that, to the fullest extent permitted by
law, as between the Obligor, on the one hand, and the Agent and the Lenders on
the other hand, the Secured Obligations may be declared to be forthwith due and
payable as provided in Section 7 of the Term Loan Agreement (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 7) for purposes of this Section 2, notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Secured Obligations from becoming automatically due and payable) as against any
other Person and that, in the event of such declaration (or the Secured
Obligations being deemed to have become automatically due and payable), the
Secured Obligations (whether or not due and payable by any other Person) shall
forthwith become due and payable by the Obligor for purposes of this Section 2.
(g) Continuing Guarantee. The guarantee in this Section 2 is a continuing
guarantee, and shall apply to all Secured Obligations whenever arising.
(h) California Waivers. In accordance with Section 2856 of the California
Civil Code, the Obligor waives all rights and defenses (i) available to the
Obligor by reason of Sections 2787 through 2855, 2899 and 3433 of the California
Civil Code, including all rights or defenses the Obligor may have by reason of
protection afforded to the Obligor with respect to any of the Secured
Obligations, or to any other person liable for any of the Secured Obligations,
in either case in accordance with the antideficiency or other laws of the State
of California limiting or discharging the Obligor's indebtedness or obligations,
including Sections 580a, 580b, 580d and 726 of the California Code of Civil
Procedure; and (ii) arising out of an election of remedies by the Agent and the
Lenders, even though such election, such as a nonjudicial foreclosure with
respect to security for any Secured Obligation (or any obligation of any other
person of any of the Secured Obligations), has destroyed the Obligor's right of
subrogation and reimbursement against the Borrower (or any other person), by
operation of Section 580d of the California Code of Civil Procedure or
otherwise. No other provision of this Agreement shall be construed as limiting
the generality of any of the covenants and waivers set forth in this Section 2.
As provided in Section 20, this Agreement shall be governed by, and shall be
construed and enforced in accordance with the laws of the State of New York.
This Section 2 is solely out of an abundance of caution, and shall not be
construed to mean that any of the above-referenced provisions of California law
are in any way applicable to this Agreement or to any of the Secured
Obligations.
3. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations, the
Obligor pledges and grants to the Agent, for the ratable benefit of the Lenders,
a Lien on, a continuing security interest in, and a right to set off against,
any and all right, title and interest of the Obligor in and to the personal
property of the Obligor, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "COLLATERAL") including, without
limitation, the following:
(a) all Accounts;
(b) all money, cash and Cash Equivalents;
(c) all Chattel Paper;
(d) those certain Commercial Tort Claims set forth on Schedule 2(d)
attached hereto;
(e) all Contracts;
(f) all Copyrights;
(g) all Copyright Licenses;
(h) all Deposit Accounts;
(i) all Documents;
(j) all Equipment;
(k) all Fixtures;
(l) all General Intangibles (including payment intangibles (as defined in
the UCC));
(m) all Goods;
(n) all Instruments;
(o) all Inventory;
(p) all Investment Property;
(q) all Letter-of-Credit Rights;
(r) all Patents;
(s) all Patent Licenses;
(t) all Software;
(u) all Supporting Obligations;
(v) all Trademarks;
(w) all Trademark Licenses;
(x) all Accessions;
(y) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing; and
(z) all other tangible and intangible property of the Obligor, including,
without limitation, tort claims, rents, profits, income, benefits,
substitutions, additions and replacements of and to any of the property of the
Obligor described in the preceding clauses of this Section 3 (including, without
limitation, any proceeds of insurance thereon, insurance claims and all rights,
claims and benefits against any Person relating thereto), other rights to
payments not otherwise included in the foregoing, and all books, correspondence,
files, records, invoices and other papers, including without limitation all
tapes, cards, computer runs, computer programs, computer files and other papers,
documents and records in the possession or under the control of the Obligor or
any computer bureau or service company from time to time acting for the Obligor;
provided, however, the Collateral shall not include any lease, license,
contract, property right or agreement to which Obligor is a party or any of its
rights or interests or other General Intangibles arising thereunder (i) if the
grant of a security interest in such lease, license, contract, property right,
agreement or other General Intangible would violate the agreement under which
such rights arise except to the extent provided under the UCC, or (ii) to the
extent that the pledge or assignment of such rights or agreement requires the
consent of any third party unless such third party has consented thereto except
to the extent provided under the UCC.
The Obligor and the Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest created hereby in the Collateral constitutes
continuing collateral security for all of the Secured Obligations, whether now
existing or hereafter arising.
4. Provisions Relating to Accounts/Contracts.
(a) Anything herein to the contrary notwithstanding, the Obligor shall
remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account.
Neither the Agent nor any Lender shall have any obligation or liability under
any Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Agent or any Lender of any payment
relating to such Account pursuant hereto, nor shall the Agent or any Lender be
obligated in any manner to perform any of the obligations of the Obligor under
or pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under
any Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
(b) At any time after the occurrence and during the continuation of an
Event of Default, the Agent shall have the right, but not the obligation, to
make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Obligor shall furnish all such
assistance and information as the Agent may reasonably require in connection
with such test verifications. Furthermore, at any time after the occurrence and
during the continuation of an Event of Default, upon the Agent's request and at
the expense of the Obligor, the Obligor shall cause independent public
accountants or others satisfactory to the Agent to furnish to the Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Accounts. At any time after the occurrence and during the continuation
of an Event of Default, or after having provided written notice to the Borrower
upon a determination by the Agent that that communication is reasonably
necessary, the Agent in its own name or in the name of others may communicate
with account debtors on the Accounts to verify with them to the Agent's
satisfaction the existence, amount and terms of any Accounts.
(c) Neither the Agent nor any Lender shall have any obligation or liability
under any Contract by reason of or arising out of this Agreement or the receipt
by the Agent or any such Lender of any payment relating to such Contract
pursuant hereto, nor shall the Agent or any Lender be obligated in any manner to
perform any of the obligations of the Obligor under or pursuant to any Contract,
to make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any Contract, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
(d) (i) At any time after the occurrence and during the continuation of an
Event of Default or (ii) in connection with any audit of the Contracts by the
Agent or any other Person designated by the Agent, after having provided written
notice to the Borrower, the Agent in its own name or in the name of others may
communicate with parties to the Contracts to verify with them to the Agent's
satisfaction the existence, amount and terms of any Contract.
(e) At the Agent's request after the occurrence and during the continuance
of an Event of Default, the Obligor shall deliver to the Agent all original and
other documents in their possession or control (or as to which they have a right
or ability to get) evidencing, and relating to, the agreements and transactions
which gave rise to the Accounts.
5. Representations and Warranties. The Obligor hereby represents and
warrants to the Agent, for the ratable benefit of the Lenders:
(a) Legal Name and Location of the Obligor; Location of Collateral. As of
the Effective Restatement Date, the Obligor's exact legal name and state of
formation is (and for the prior four months has been) as shown on the signature
pages to this Agreement. As of the Effective Restatement Date, the principal
place of business and chief executive office of the Obligor is as set forth on
Schedule 5(a) attached hereto. As of the Effective Restatement Date, the Obligor
has not in the past four months changed its name, been party to a merger,
consolidation or other change in structure or used any tradename except as set
forth in Schedule 5(a) attached hereto.
(b) Location of Collateral. As of the Effective Restatement Date, the
location of all Collateral owned by the Obligor is as shown on Schedule 5(b)
attached hereto.
(c) Ownership. The Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same free
and clear of any and all Liens other than Liens permitted by Section 6.3 of the
Term Loan Agreement.
(d) Security Interest/Priority. This Agreement creates a valid security
interest in favor of the Agent, for the ratable benefit of the Lenders, in the
Collateral of the Obligor and, when properly perfected by filing, shall
constitute a valid first priority perfected security interest in such Collateral
(except with respect to any Collateral subject to Liens permitted by Sections
6.3(f), (g), (h), (l) and (m) of the Term Loan Agreement), to the extent such
security can be perfected by filing under the UCC and/or by filing in the United
States Copyright Office or the United States Patent and Trademark Office, free
and clear of all Liens except for Liens permitted by Section 6.3 of the Term
Loan Agreement. The security interest created hereunder is enforceable as such
against any and all creditors of and purchasers from the Obligor (other than
purchasers and lessees of Inventory in the ordinary course of business and
non-exclusive licensees of General Intangibles in the ordinary course of
business and as otherwise provided for by law), subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing. Except as set forth in
the Term Loan Agreement, no authorization, approval or consent is required to be
obtained from any Governmental Authority or other Person for the grant of the
security interest herein, the perfection thereof or the exercise by the Agent of
its rights and remedies hereunder.
(e) Types of Collateral. None of the Collateral consists of, or is the
Proceeds of, Farm Products, As-Extracted Collateral, Consumer Goods,
Manufactured Homes or timber to be cut.
(f) Accounts. (i) Each Account of the Obligor and the papers and documents
relating thereto are genuine and in all material respects are what they purport
to be, (ii) to Obilgor's knowledge, each Account constitutes a legally valid and
binding obligation of the applicable account debtor, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing, (iii) each Account
arises out of (A) a bona fide sale of goods sold and delivered by the Obligor
(or is in the process of being delivered) or (B) services theretofore actually
rendered by the Obligor, to the account debtor named therein, (iv) no Account of
the Obligor relating to an amount in excess of $100,000 is evidenced by any
Instrument or Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to, or submitted to the Control of, the
Agent and (v) no surety bond was required or given in connection with any
Account of the Obligor or the contracts or purchase orders out of which they
arose, other than as permitted by the Term Loan Agreement.
(g) Inventory. No Inventory is held by the Obligor pursuant to consignment,
sale or return, sale on approval or similar arrangement and such Inventory is of
good and merchantable quality, free from any material defects. [No Inventory is
subject to any licensing, royalty, trademark, trade name or copyright agreements
with any third parties which would require any consent of any third party upon
sale or other disposition of that Inventory or the payment of any monies to
third parties upon such sale or other disposition.
(h) Copyrights, Patents and Trademarks.
(i) As of the Effective Restatement Date, to the best of the Obligor's
knowledge, each Copyright, Patent and Trademark of the Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(ii) As of the Effective Restatement Date, except as set forth in
Schedule 5(h) attached hereto, none of such Copyrights, Patents and
Trademarks is the subject of any licensing or franchise agreement.
(iii) As of the Effective Restatement Date, no holding, decision or
judgment has been rendered against the Obligor by any Governmental
Authority which would limit, cancel or question the validity of any
Copyright, Patent or Trademark.
(iv) No action or proceeding is pending against the Obligor seeking to
limit, cancel or question the validity of any material Copyright, Patent or
Trademark, or which, if adversely determined, would have a material adverse
effect on the value of such Copyright, Patent or Trademark.
(v) As of the Effective Restatement Date, all applications pertaining
to the material Copyrights, Patents and Trademarks of the Obligor have been
duly and properly filed, and all registrations or letters pertaining to
such material Copyrights, Patents and Trademarks have been duly and
properly filed and issued, and all of such material Copyrights, Patents and
Trademarks are valid and enforceable.
(vi) The Obligor has not made any assignment or agreement in conflict
with the security interest in the Copyrights, Patents or Trademarks of the
Obligor hereunder.
(i) Contracts.
(i) Each material Contract is in full force and effect and constitutes
a valid and legally enforceable obligation of the parties thereto, except
as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing.
(ii) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly
obtained, made or performed, are in full force and effect and do not
subject the scope of any such Contract to any material adverse limitation,
either specific or general in nature.
(iii) Neither the Obligor nor (to the best of the Obligor's knowledge)
any other party to any material Contract is in default or is likely to
become in default in the performance or observance of any of the terms
thereof.
(iv) The Obligor has fully performed in all material respects all its
obligations under each material Contract.
(v) The right, title and interest of the Obligor in, to and under each
material Contract are not subject to any defense, offset, counterclaim or
claim which would materially adversely affect the value of such Contract as
Collateral, nor have any of the foregoing been asserted or alleged against
the Obligor as to any material Contract.
(vi) The Obligor has delivered, or made available, to the Agent a
complete and correct copy of each material Contract requested by the Agent,
including all amendments, supplements and other modifications thereto.
(vii) No amount payable to the Obligor under or in connection with any
Contract in excess of $100,000 is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Agent.
(viii) None of the parties to any material Contract is a Governmental
Authority.
6. Covenants. The Obligor covenants that, so long as any Loan remain
outstanding or any other amount is due and owing to any Lender or the Agent
under the Term Loan Agreement or under any other Loan Document, the Obligor
shall:
(a) Other Liens. Defend the Collateral against the claims and demands of
all other parties claiming an interest therein and keep the Collateral free from
all Liens, except for Liens permitted by Section 6.3 of the Term Loan Agreement.
Neither the Agent nor any Lender authorizes the Obligor to, and the Obligor
shall not, sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the Term Loan
Agreement or this Agreement.
(b) Preservation of Collateral. Keep the Collateral in good order,
condition and repair (other than any Collateral that has become obsolete or is
not material to the Obligor) and not use the Collateral in violation of the
provisions of this Agreement or any other agreement relating to the Collateral
or any policy insuring the Collateral or any applicable statute, law, bylaw,
rule, regulation or ordinance.
(c) Instruments/Tangible Chattel Paper/Negotiable Documents. If any amount
payable in excess of $100,000 under or in connection with any of the Collateral
shall be or become evidenced by any Instrument or Tangible Chattel Paper, or if
any property constituting Collateral with a value in excess of $100,000 shall be
stored or shipped subject to a negotiable document, the Obligor shall ensure
that such Instrument, Tangible Chattel Paper or negotiable document is either in
the possession of the Obligor at all times or, if requested by the Agent to
perfect its security interest in such Collateral, is delivered to the Agent duly
indorsed in a manner satisfactory to the Agent. The Obligor shall ensure that
any Collateral consisting of Tangible Chattel Paper is marked with a legend
acceptable to the Agent indicating the Agent's security interest in such
Tangible Chattel Paper.
(d) Change in Organizational Structure or Location. Not, without providing
thirty (30) days prior written notice to the Agent and without filing such
amendments to any previously filed financing statements as the Agent may
reasonably require, (i) alter its corporate existence or, in one transaction or
a series of transactions, merge into or consolidate with any other entity, or
sell all or substantially all of its assets, (ii) change its state of
incorporation or formation or (iii) change its registered legal name.
(e) Inspection. Allow the Agent or its representatives to visit and inspect
the Collateral as set forth in Section 5.6 of the Term Loan Agreement.
(f) Perfection of Security Interest. The Obligor hereby authorizes the
Agent to prepare and file such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other instruments as
the Agent may from time to time deem reasonably necessary or appropriate in
order to perfect and maintain the security interests granted hereunder in
accordance with the UCC, which financing statements may be without the signature
of the Obligor (to the extent such signature is not required under the laws of
any applicable jurisdiction), and which may describe the Collateral as "all
assets" or "all personal property" or words of like import. The Obligor shall
also execute and deliver to the Agent such agreements, assignments or
instruments (including affidavits, notices, reaffirmations and amendments and
restatements of existing documents, as the Agent may reasonably request) and do
all such other things as the Agent may reasonably deem necessary or appropriate
(i) to assure to the Agent its security interests hereunder, including (A) with
regard to Copyrights, a Notice of Grant of Security Interest in Copyrights in
the form of Schedule 6(f)(i) attached hereto, (B) with regard to Patents, a
Notice of Grant of Security Interest in Patents for filing with the United
States Patent and Trademark Office in the form of Schedule 6(f)(ii) attached
hereto, (C) with regard to Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark Office in the
form of Schedule 6(f)(iii) attached hereto and (D) with regard to Deposit
Accounts, Investment Property, Letter-of-Credit Rights and Electronic Chattel
Paper, all agreements, assignments, instruments or other documents as requested
by the Agent for the purpose of obtaining and maintaining Control, including any
deposit account control agreements, (ii) to consummate the transactions
contemplated hereby and (iii) to otherwise protect and assure the Agent of its
rights and interests hereunder. To that end, the Obligor hereby irrevocably
makes, constitutes and appoints the Agent, its nominee or any other person whom
the Agent may designate, as the Obligor's attorney in fact with full power and
for the limited purpose to sign in the name of the Obligor any such notices or
similar documents which in the Agent's reasonable discretion would be necessary,
appropriate or convenient in order to perfect and maintain perfection of the
security interests granted hereunder, such power, being coupled with an
interest, being and remaining irrevocable for so long as this Agreement is in
effect and until this Agreement is terminated in accordance with Section 13(a)
hereof. The Obligor hereby agrees that a carbon, photographic or other
reproduction of this Agreement or any such financing statement is sufficient for
filing as a financing statement by the Agent without notice thereof to the
Obligor wherever the Agent may in its sole discretion desire to file the same.
In the event for any reason the law of any jurisdiction other than New York
becomes or is applicable to the Collateral of the Obligor or any part thereof,
or to any of the Secured Obligations, the Obligor agrees to execute and deliver
all such instruments and to do all such other things as the Agent in its sole
discretion reasonably deems necessary or appropriate to preserve, protect and
enforce the security interests of the Agent under the law of such other
jurisdiction (and, if the Obligor shall fail to do so promptly upon the request
of the Agent, then the Agent may execute any and all such requested documents on
behalf of the Obligor pursuant to the power of attorney granted hereinabove). If
any Collateral having a value of $100,000 or more is in the possession or
control of a warehouseman, bailee or any agent or processor of the Obligor and
the Agent so requests, the Obligor agrees to (i) notify such agents in writing
of the Agent's security interest therein, (ii) instruct them to hold all such
Collateral for the Lenders' account and subject to the Agent's instructions and
(iii) obtain an acknowledgment from such Person that it is holding such
Collateral for the benefit of the Agent. The Obligor agrees to mark its books
and records to reflect the security interest of the Agent in the Collateral.
(g) Treatment of Accounts. Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the full amount
thereof, or release any person or property, in whole or in part, from payment
thereof, or allow any credit or discount thereon, other than as normal and
customary in the ordinary course of the Obligor's business.
(h) Covenants Relating to Copyrights.
(i) Employ the Copyrights included in the Collateral for each material
published Work with such notice of copyright as may be required by law to
secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby any
material Copyright included in the Collateral may become invalidated and
(A) not do any act, or knowingly omit to do any act, whereby any material
Copyright included in the Collateral may become injected into the public
domain; (B) notify the Agent immediately if it knows, or has reason to
know, that any material Copyright included in the Collateral may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any court or tribunal in the United States
or any other country) regarding the Obligor's ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall deem
appropriate under the circumstances, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of each material Copyright owned by the Obligor including,
without limitation, filing of applications for renewal where necessary; and
(D) promptly notify the Agent of any material infringement of any material
Copyright of the Obligor of which it becomes aware and take such actions as
it shall reasonably deem appropriate under the circumstances to protect
such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all
damages for such infringement, unless, in the Obligor's reasonable good
faith judgment, there is a valid business reason to taking or omitting to
take any such action.
(iii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of the Obligor hereunder.
(i) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
material Trademark in full force free from any claim of abandonment for
non-use, (B) maintain as in the past the quality of products and services
offered under such material Trademark, (C) employ such Trademark with the
appropriate notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Agent, for the ratable benefit of the Lenders, shall obtain a perfected
security interest in such mark pursuant to this Agreement, and (E) not (and
not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material Trademark may become invalidated.
(ii) Not do any act, or omit to do any act, whereby any Patent may
become abandoned or dedicated unless, in the Obligor's reasonable good
faith judgment, there is a valid business reason to taking or omitting to
take any such action.
(iii) Notify the Agent and the Lenders immediately if it knows, or has
reason to know, that any application or registration relating to any
material Patent or Trademark included in the Collateral may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent
and Trademark Office or any court or tribunal in any country) regarding the
Obligor's ownership of any material Patent or Trademark or its right to
register the same or to keep and maintain the same.
(iv) Unless, in the Obligor's reasonable good faith judgment, there is
a valid business reason to taking or omitting to take any such action, take
all reasonable and necessary steps, including, without limitation, in any
proceeding before the United States Patent and Trademark Office, or any
similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of each Patent and
each Trademark included in the Collateral, including, without limitation,
filing of applications for renewal, affidavits of use and affidavits of
incontestability.
(v) Promptly notify the Agent and the Lenders after it learns that any
material Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it shall
reasonably deem appropriate under the circumstances to protect such Patent
or Trademark unless, in the Obligor's reasonable good faith judgment, there
is a valid business reason to taking or omitting to so sue, seek, recover
or take any such action.
(vi) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of the Obligor hereunder.
(j) New Patents, Copyrights and Trademarks. Promptly provide the Agent (i)
with respect to Copyrights, a duly executed Notice of Security Interest in
Copyrights, (ii) with respect to Patents, a duly executed Notice of Security
Interest in Patents, (iii) with respect to Trademarks, a duly executed Notice of
Security Interest in Trademarks or (iv) such other duly executed documents as
the Agent may request in a form acceptable to counsel for the Agent and suitable
for recording to evidence the security interest in the Copyright, Patent or
Trademark which is the subject of such new application.
(k) Insurance. Insure, repair and replace the Collateral of the Obligor as
required in Section 5.5 of the Term Loan Agreement. All insurance proceeds shall
be subject to the security interest of the Agent hereunder.
(l) Covenants Relating to Contracts.
(i) The Obligor will perform and comply with all its obligations under
material Contracts and all its other contractual obligations relating to
the Collateral.
(ii) Except as otherwise provided in the Term Loan Agreement, the
Obligor will not fail to exercise promptly and diligently each and every
material right which it may have under each Contract except in the exercise
of reasonable business judgment.
(iii) The Obligor will deliver to the Agent a copy of each material
demand, notice or document received by it relating in any way to any
material Contract.
(iv) In any suit, proceeding or action brought by the Agent or any
Lender under any Contract for any sum owing thereunder, or to enforce any
provisions of any Contract, the Obligor will save, indemnify and keep the
Agent and such Lender harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the obligor thereunder, arising out of
a breach by Obligor of any obligation thereunder 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 Obligor except for any such
expense, loss or damage which results from the gross negligence of the
willful misconduct of the Agent or such Lender.
(m) Commercial Tort Claims; Notice of Litigation. (i) Promptly forward to
the Agent written notification of any and all Commercial Tort Claims in excess
of $100,000, including, but not limited to, any and all actions, suits, and
proceedings before any court or Governmental Authority by or affecting the
Obligor or any of its Subsidiaries and (ii) execute and deliver such statements,
documents and notices and do and cause to be done all such things as may be
reasonably required by the Agent, or required by law, including all things which
may from time to time be necessary under the UCC to fully create, preserve,
perfect and protect the priority of the Agent's security interest in any
Commercial Tort Claims.
(n) Deposit Accounts. Not open any new Deposit Account without providing
prior written notice to the Agent and simultaneously therewith executing and
delivering to the Agent a deposit account control agreement in form and
substance reasonably satisfactory to the Agent, unless the Agent (in its sole
discretion) has waived such requirement of a deposit account control agreement.
(o) At all times maintain the Collateral as personal property and not affix
any of the Collateral to any real property in a manner which would change its
nature from personal property to real property or a Fixture to real property.
7. Advances by the Lenders. On failure of the Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligor promptly upon timely notice thereof
and demand therefor, shall constitute additional Secured Obligations and shall
bear interest from the date said amounts are expended at the default rate
specified in Section 2.4 of the Term Loan Agreement. No such performance of any
covenant or agreement by the Agent or the Lenders on behalf of the Obligor, and
no such advance or expenditure therefor, shall relieve the Obligor of any
default under the terms of this Agreement or the other Loan Documents. The
Lenders may make any payment hereby authorized in accordance with any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by the Obligor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP provided,
that the Agent has given written notice to the Obligor of its intent to pay such
sums.
8. Events of Default.
The occurrence of an event which under the Term Loan Agreement would
constitute a Default or Event of Default shall be a Default or Event of Default,
as the case may be, hereunder.
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and during
continuation thereof, the Agent and the Lenders shall have, in addition to the
rights and remedies provided herein, in the Loan Documents or by law (including,
but not limited to, levy of attachment, garnishment and the rights and remedies
set forth in the UCC of the jurisdiction applicable to the affected Collateral),
all rights and remedies of a secured party under the UCC (regardless of whether
the UCC is the law of the jurisdiction where the rights and remedies are
asserted and regardless of whether the UCC applies to the affected Collateral),
and further, the Agent may, with or without judicial process or the aid and
assistance of others, to the extent permitted by the UCC, (i) enter on any
premises on which any of the Collateral may be located and, without resistance
or interference by the Obligor, take possession of the Collateral, (ii) dispose
of any Collateral on any such premises, (iii) require the Obligor to assemble
and make available to the Agent at the expense of the Obligor any Collateral at
any place and time designated by the Agent which is reasonably convenient to
both parties, (iv) remove any Collateral from any such premises for the purpose
of effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which the
Obligor hereby waives to the fullest extent permitted by law, at any place and
time or times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more parcels, for
cash, upon credit or otherwise, at such prices and upon such terms as the Agent
deems advisable, in its sole discretion (subject to any and all mandatory legal
requirements). Neither the Agent's compliance with any applicable state or
federal law in the conduct of such sale, nor its disclaimer of any warranties
relating to the Collateral, shall be considered to adversely affect the
commercial reasonableness of such sale. In addition to all other sums due the
Agent and the Lenders with respect to the Secured Obligations, the Obligor shall
pay the Agent and each of the Lenders all reasonable documented costs and
expenses incurred by the Agent or any such Lender, including, but not limited
to, reasonable attorneys' fees and court costs, in obtaining or liquidating the
Collateral, in enforcing payment of the Secured Obligations, or in the
prosecution or defense of any action or proceeding by or against the Agent or
the Lenders or the Obligor concerning any matter arising out of or connected
with this Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or related to
a case under the Bankruptcy Code, to the extent that the Borrower would be
obligated to pay such costs and expenses pursuant to Section 9.5 of the Term
Loan Agreement. To the extent the rights of notice cannot be legally waived
hereunder, the Obligor agrees that any requirement of reasonable notice shall be
met if such notice is personally served on or mailed, postage prepaid, to the
Borrower in accordance with the notice provisions of Section 9.2 of the Term
Loan Agreement at least ten (10) days before the time of sale or other event
giving rise to the requirement of such notice. The Agent and the Lenders shall
not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. To the extent permitted by law, any
Lender may be a purchaser at any such sale. To the extent permitted by
applicable law, the Obligor hereby waives all of its rights of redemption with
respect to any such sale. Subject to the provisions of applicable law, the Agent
and the Lenders may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such sale,
and such sale may, without further notice, to the extent permitted by law, be
made at the time and place to which the sale was postponed, or the Agent and the
Lenders may further postpone such sale by announcement made at such time and
place.
(b) Remedies relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Agent has
exercised any or all of its rights and remedies hereunder, the Agent shall have
the right to enforce the Obligor's rights against any account debtor and obligor
on the Obligor's Accounts. The Obligor acknowledges and agrees that the Proceeds
of its Accounts remitted to or on behalf of the Agent in accordance with the
provisions hereof shall be solely for the Agent's own convenience and that the
Obligor shall not have any right, title or interest in such Accounts or in any
such other amounts except as expressly provided herein. The Agent and the
Lenders shall have no liability or responsibility to the Obligor for acceptance
of a check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any remittance.
The Obligor hereby agrees to indemnify the Agent and the Lenders from and
against all liabilities, damages, losses, actions, claims, judgments, costs,
expenses, charges and attorneys' fees suffered or incurred by each Indemnitee
(as defined in Section 2(d) above) because of the maintenance of the foregoing
arrangements; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee. In the case of any investigation, litigation or
other proceeding, the foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by the Obligor, its
directors, shareholders or creditors or an Indemnitee or any other Person or any
other Indemnitee is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuance thereof, the Agent
shall have the right to enter and remain upon the various premises of the
Obligor without cost or charge to the Agent, and use the same, together with
materials, supplies, books and records of the Obligor for the purpose of
collecting and liquidating the Collateral, or for preparing for sale and
conducting the sale of the Collateral, whether by foreclosure, auction or
otherwise. In addition, the Agent may remove Collateral, or any part thereof,
from such premises and/or any records with respect thereto, in order to
effectively collect or liquidate such Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or the Lenders to
exercise any right, remedy or option under this Agreement, any other Loan
Document or as provided by law, or any delay by the Agent or the Lenders in
exercising the same, shall not operate as a waiver of any such right, remedy or
option. No waiver hereunder shall be effective unless it is in writing, signed
by the party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Agent or the Lenders
shall only be granted as provided herein. To the extent permitted by law,
neither the Agent, the Lenders, nor any party acting as attorney for the Agent
or the Lenders, shall be liable hereunder for any acts or omissions or for any
error of judgment or mistake of fact or law other than their gross negligence or
willful misconduct hereunder. The rights and remedies of the Agents and the
Lenders under this Agreement shall be cumulative and not exclusive of any other
right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing the notices
required by Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, accept or retain
the Collateral in satisfaction of the Secured Obligations. Unless and until the
Agent shall have provided such notices, however, the Agent shall not be deemed
to have retained any Collateral in satisfaction of any Secured Obligations for
any reason.
(f) Deficiency. In the event that the proceeds of any sale, collection or
realization are insufficient to pay all amounts to which the Agent or the
Lenders are legally entitled, the Obligor shall be liable for the deficiency,
together with interest thereon at the default rate specified in Section 2.4 of
the Term Loan Agreement together with the costs of collection and the reasonable
fees of any attorneys employed by the Agent to collect such deficiency. Any
surplus remaining after the full payment and satisfaction of the Secured
Obligations shall be returned to the Obligor or to whomsoever a court of
competent jurisdiction shall determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney contained
herein, the Obligor hereby designates and appoints the Agent, on behalf of the
Lenders, and each of its designees or agents, as attorney-in-fact of the
Obligor, irrevocably and with power of substitution, with authority to take any
or all of the following actions upon the occurrence and during the continuance
of an Event of Default:
(i) to demand, collect, settle, compromise, adjust, give discharges
and releases, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any Collateral and enforcing any other right in
respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Agent may deem
reasonably appropriate;
(iv) receive, open and dispose of mail addressed to the Obligor and
endorse checks, notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to the Collateral of the
Obligor on behalf of and in the name of the Obligor, or securing, or
relating to such Collateral;
(v) sell, assign, transfer, make any agreement in respect of, or
otherwise deal with or exercise rights in respect of, any Collateral or the
goods or services which have given rise thereto, as fully and completely as
though the Agent were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy relating
thereto;
(vii) execute and deliver all assignments, conveyances, statements,
financing statements, renewal financing statements, agreements, affidavits,
notices and other agreements, instruments and documents that the Agent may
determine necessary in order to perfect and maintain the security interests
and liens granted in this Agreement and in order to fully consummate all of
the transactions contemplated therein;
(viii) institute any foreclosure proceedings that the Agent may deem
appropriate; and
(ix) do and perform all such other acts and things as the Agent may
reasonably deem to be necessary, proper or convenient in connection with
the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable and shall remain in full force and effect for so long as this
Agreement is in effect and until this Agreement is terminated in accordance with
Section 13(a) hereof. The Agent shall be under no duty to exercise or withhold
the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Agreement, and shall not be liable for
any failure to do so or any delay in doing so. The Agent shall not be liable for
any act or omission or for any error of judgment or any mistake of fact or law
in its individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This power
of attorney is conferred on the Agent solely to protect, preserve and realize
upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If the Obligor fails to
perform any agreement or obligation contained herein, after notice by the Agent
to the Obligor the Agent itself may perform, or cause performance of, such
agreement or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligor pursuant to Section 9 hereof.
(c) Assignment by the Agent. Upon the occurrence of an Event of Default, or
as otherwise permitted under the Term Loan Agreement, the Agent may assign the
Secured Obligations and any portion thereof and/or the Collateral and any
portion thereof, and the assignee shall be entitled to all of the rights and
remedies of the Agent under this Agreement in relation thereto.
(d) The Agent's Duty of Care in Respect of Pledged Collateral. The Agent's
sole duty with respect to the safe custody of the Collateral, while being held
by the Agent hereunder, under Section 9-207 of the UCC, shall be substantially
equal to that which the Agent accords its own property. Other than this duty,
the Agent shall have no duty or liability to preserve rights pertaining thereto,
it being understood and agreed that the Obligor shall be responsible for the
preservation of all rights in the Collateral of the Obligor, and the Agent shall
be relieved of all responsibility for Collateral upon surrendering it or
tendering the surrender of it to the Obligor. It is understood and agreed that
the Agent shall not have responsibility for cleaning up, repairing or otherwise
preparing the Collateral for sale in the event of a public or private sale of
Collateral pursuant to Section 8 hereof.
11. Application of Proceeds. Upon the acceleration of the Secured
Obligations pursuant to Section 7 of the Term Loan Agreement, any payments in
respect of the Secured Obligations and any proceeds of the Collateral, when
received by the Agent or any of the Lenders in cash or its equivalent, will be
applied first, to the payment of costs and expenses of the Agent in connection
with the collection or sale or otherwise in connection with this Agreement, any
other Loan Document or any of the Secured Obligations, including all court costs
and the fees and expenses of its agents and legal counsel, the repayment of all
advances made by the Agent hereunder or under any other Loan Document on behalf
of the Obligor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document, and
second, in reduction of the Secured Obligations in the order set forth in this
Agreement and the Term Loan Agreement, and the Obligor irrevocably waives the
right to direct the application of such payments and proceeds and acknowledges
and agrees that the Agent shall have the continuing and exclusive right to apply
and reapply any and all such payments and proceeds in the Agent's sole
discretion, notwithstanding any entry to the contrary upon any of its books and
records.
12. Costs of Counsel. At all times hereafter, the Obligor agrees to
promptly pay upon demand any and all reasonable costs and expenses of the Agent
or the Lenders, (a) as required under Section 9.5 of the Term Loan Agreement and
(b) subject to the limitations on the fees of counsel to the Agent and the
Lenders set forth in Section 9.5 of the Term Loan Agreement, as reasonably
necessary to protect the Collateral or to exercise any rights or remedies under
this Agreement or with respect to any Collateral, including the costs and
expenses of the Agent's counsel and of any experts or agents that the Agent may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, sale or collection of, or realization upon, any
Collateral or (iii) the failure of the Obligor to perform or observe any
covenant or agreement hereunder. All of the foregoing costs and expenses shall
constitute Secured Obligations hereunder.
13. Continuing Agreement.
(a) This Agreement shall be a continuing agreement in every respect and
shall remain in full force and effect until the Secured Obligations have been
paid in full (other than any contingent indemnification obligations set forth in
the Loan Documents). Upon such payment in full this Agreement shall be
automatically terminated and the Agent and the Lenders shall, upon the request
and at the expense of the Obligor, forthwith release all of its liens and
security interests hereunder and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Obligor evidencing
such termination.
(b) This Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of
any of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Agent or any Lender as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar law, all as though such
payment had not been made; provided that in the event payment of all or any part
of the Secured Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any reasonable legal
fees and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of the
Secured Obligations.
14. Indemnity. Without limitation of its indemnification obligations under
the other Loan Documents, the Obligor agrees to indemnify each Indemnitee (as
defined in Section 2(d) above) against, and hold each Indemnitee harmless from,
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel and
in-house documentation and diligence fees and legal expenses) which may be
imposed on, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of, the execution, delivery or performance of
this Agreement or any claim, litigation, investigation or proceeding relating
hereto or to the Collateral, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee; and provided further that the expense reimbursement obligations
of the Obligor under this Section 14 shall be limited to the same extent as the
expense reimbursement obligations of the Borrower set forth in Section 9.5 of
the Term Loan Agreement.
15. Amendments; Waivers; Modifications. This Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in Section 9.1 of the Term Loan Agreement.
16. Successors in Interest. This Agreement shall create a continuing
security interest in the Collateral and shall be binding upon the Obligor, its
successors and assigns and shall inure, together with the rights and remedies of
the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders
and their successors and permitted assigns; provided, however, that the Obligor
may not assign its rights or delegate its duties hereunder without the prior
written consent of each Lender or the Required Lenders, as required by the Term
Loan Agreement. To the fullest extent permitted by law, the Obligor hereby
releases the Agent and each Lender, and its successors and assigns, from any
liability for any act or omission relating to this Agreement or the Collateral,
except for any liability arising from the gross negligence or willful misconduct
of the Agent, or such Lender, or its officers, employees or agents.
17. Notices. All notices required or permitted to be given under this
Agreement shall be in conformance with Section 9.2 of the Term Loan Agreement.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
20. Governing Law; Submission to Jurisdiction; Venue. THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
The Obligor hereby irrevocably and unconditionally: (a) submits for itself and
its property in any legal action or proceeding relating to this Agreement and
the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof; (b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same; (c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Obligor at the
Borrower's address set forth in Section 9.2 of the Term Loan Agreement or at
such other address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right of the
Agent or any Lender to bring proceedings against the Obligor in the courts of
any other jurisdiction having jurisdiction; (e) agrees that any judicial
proceedings against the Agent or any Lender involving, directly or indirectly,
the Secured Obligations, any Loan Document or any related agreement shall be
brought only in courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts from any
thereof; and (f) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
21. Waiver of Jury Trial. THE OBLIGOR, THE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
22. Severability. If any provision of any of the Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
23. Entirety. This Agreement and the other Loan Documents represent the
entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Loan Documents or the transactions
contemplated herein and therein.
24. Survival. All representations and warranties of the Obligor hereunder
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the making of the Loans.
25. Other Security. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by the Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence and continuation of any Event of Default, and
the Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Secured Obligations under this
Agreement, under any other of the Loan Documents.
26. Rights of Required Lenders. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
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Guaranty and Security Agreement
Each of the parties hereto has caused a counterpart of this Agreement to be
duly executed and delivered as of the date first above written.
OBLIGOR: ITO ACQUISITION CORPORATION,
a California corporation
By: /s/ William J. McHale
---------------------
Name: William J. McHale
Title: Vice President
Accepted and agreed to as of the date
first above written.
CAPITALSOURCE FINANCE LLC, as Agent
By: /s/ Joseph Turitz
----------------------
Name: Joseph Turitz
Title: General Counsel