EXHIBIT 10.8
GUARANTY AND SECURITY AGREEMENT
THIS GUARANTY AND SECURITY AGREEMENT (this "Agreement") is
entered into as of July 29, 2004 among INFOCROSSING, INC., a Delaware
corporation (the "Borrower"), certain Subsidiaries of the Borrower listed on the
signature pages hereto (individually a "Guarantor" and collectively the
"Guarantors"; together with the Borrower, individually an "Obligor", and
collectively the "Obligors") 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 Acquisition Loan Agreement described below (the
"Lenders").
RECITALS
WHEREAS, pursuant to that certain Acquisition 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 "Acquisition Loan Agreement") by
and among 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 Guarantors are wholly-owned, direct or indirect
Subsidiaries 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 Acquisition Loan Agreement that each 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 Acquisition 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 an
Obligor is a party, as each may be amended, supplemented or otherwise modified
from time to time, including, without limitation, (a) all rights of an Obligor
to receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of an Obligor to damages arising out of or for breach
or default in respect thereof and (c) all rights of an 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 any
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 Acquisition Loan Agreement.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any 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 any 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. Each of the Guarantors hereby jointly and severally
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 Guarantors hereby further agree
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 Guarantors will, jointly and severally, 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. Each Guarantor
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 such Guarantor.
(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 each Guarantor 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, each Guarantor 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 Guarantors under Section
2 hereof are joint and several, 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 Guarantors hereunder
shall be absolute, irrevocable and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor 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 any Guarantor
hereunder which shall remain absolute, irrevocable and unconditional as
described above:
(i) at any time or from time to time, without notice to any
Guarantor, 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 any Guarantor) or shall be subordinated to the
claims of any Person (including, without limitation, any
creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor 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 Guarantors 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 each Guarantor 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. Each Guarantor further agrees that such
Guarantor 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 Guarantors agree that, to the fullest extent permitted by
law, as between the Guarantors, 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 Acquisition 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 Guarantors 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, each Guarantor waives all rights and defenses (i) available to such
Guarantor by reason of Sections 2787 through 2855, 2899 and 3433 of the
California Civil Code, including all rights or defenses such Guarantor may
have by reason of protection afforded to such Guarantor 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 such
Guarantor'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 such Guarantor'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, each 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 such Obligor in and to the personal property of
such 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 such Obligor,
including, without limitation, tort claims, rents, profits,
income, benefits, substitutions, additions and replacements
of and to any of the property of such 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 such Obligor or any computer bureau or service company
from time to time acting for such Obligor;
provided, however, the Collateral shall not include any lease, license,
contract, property right or agreement to which such 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.
Each 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, each of the Obligors 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 any 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 Obligors 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 Obligors, the Obligors 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 any 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, each 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. Each Obligor hereby represents and
warrants to the Agent, for the ratable benefit of the Lenders:
(a) Legal Name and Location of Obligors; Location of Collateral. As of the
Closing Date, each 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 Closing Date, the principal place of business and
chief executive office of each Obligor is as set forth on Schedule 5(a)
attached hereto. As of the Closing Date, no Obligor has 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 Closing Date, the location of all
Collateral owned by each Obligor is as shown on Schedule 5(b) attached
hereto.
(c) Ownership. Each 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
Acquisition 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 each 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 Acquisition 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 Acquisition Loan
Agreement. The security interest created hereunder is enforceable as such
against any and all creditors of and purchasers from each 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 Acquisition 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 each Obligor and the papers and documents
relating thereto are genuine and in all material respects are what they
purport to be, (ii) to each 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 such Obligor (or is in the process
of being delivered) or (B) services theretofore actually rendered by such
Obligor, to the account debtor named therein, (iv) no Account of such
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 such Obligor or the contracts or purchase
orders out of which they arose, other than as permitted by the Acquisition
Loan Agreement.
(g) Inventory. No Inventory is held by any 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 Closing Date, to the best of each Obligor's knowledge, each
Copyright, Patent and Trademark of such Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned.
(ii) As of the Closing 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 Closing Date, no holding, decision or judgment has been
rendered against any 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 any 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 Closing Date, all applications pertaining to the material
Copyrights, Patents and Trademarks of each 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) No Obligor has made any assignment or agreement in conflict with the
security interest in the Copyrights, Patents or Trademarks of any
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) No Obligor nor (to the best of any 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,
expect where such default or likely default could not reasonably be
expected to have a Material Adverse Effect.
(iv) The Obligors have fully performed in all material respects all their
obligations under each material Contract.
(v) The right, title and interest of any 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 any Obligor as to any material Contract.
(vi) The Obligors have 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 any 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. Each Obligor covenants that, so long as any Loan remains
outstanding or any other amount is due and owing to any Lender or the
Agent under the Acquisition Loan Agreement or under any other Loan
Document, such 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
Acquisition Loan Agreement. Neither the Agent nor any Lender authorizes
any Obligor to, and no Obligor shall, sell, exchange, transfer, assign,
lease or otherwise dispose of the Collateral or any interest therein,
except as permitted under the Acquisition 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 such 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, such Obligor shall ensure that such
Instrument, Tangible Chattel Paper or negotiable document is either in
the possession of such 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. Such 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 Acquisition Loan
Agreement.
(f) Perfection of Security Interest. Each 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 such 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. Each
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, each Obligor hereby irrevocably makes,
constitutes and appoints the Agent, its nominee or any other person
whom the Agent may designate, as such Obligor's attorney in fact with
full power and for the limited purpose to sign in the name of such
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. Each 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 such 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 any Obligor or any part thereof, or to
any of the Secured Obligations, such 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 an 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 such
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 an
Obligor and the Agent so requests, such 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. Each 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 such 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 such
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 such 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 such 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 such 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 such 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 such 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
such 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 such 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 such 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 each 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 such Obligor as
required in Section 5.5 of the Acquisition Loan Agreement. All
insurance proceeds shall be subject to the security interest of the
Agent hereunder.
(l) Covenants Relating to Contracts.
(i) Such 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 Acquisition Loan Agreement, such
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) Such 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, such 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 such 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 such 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 such 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) Personal Property. 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 any 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 Obligors on a
joint and several basis 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 Acquisition Loan Agreement. No
such performance of any covenant or agreement by the Agent or the
Lenders on behalf of any Obligor, and no such advance or expenditure
therefor, shall relieve the Obligors 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 an 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 applicable Obligor of its intent to pay such sums.
8. Events of Default.
The occurrence of an event which under the Acquisition 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
Obligors, take possession of the Collateral, (ii) dispose of any Collateral
on any such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors 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 each of the Obligors 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 Obligors 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 Obligors 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 Acquisition Loan Agreement. To the extent the rights of
notice cannot be legally waived hereunder, each 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 Acquisition 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, each of the Obligors 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 any Obligor's rights against any account debtors and
obligors on such Obligor's Accounts. Each 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 such 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 any 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. Each 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
an 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 Obligors without cost or charge to the Agent, and use the same,
together with materials, supplies, books and records of the Obligors 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 Obligors shall be jointly and severally
liable for the deficiency, together with interest thereon at the default
rate specified in Section 2.4 of the Acquisition 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 Obligors 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, each Obligor hereby designates and appoints the Agent, on behalf of
the Lenders, and each of its designees or agents, as attorney-in-fact of
such 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 an 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 such Obligor on behalf of and
in the name of such 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 any Obligor fails to
perform any agreement or obligation contained herein, after notice by
the Agent to such 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 Obligors
on a joint and several basis pursuant to Section 9 hereof.
(c) Assignment by the Agent. Upon the occurrence of an Event of Default, or
as otherwise permitted under the Acquisition 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 each Obligor shall be responsible for the preservation
of all rights in the Collateral of such Obligor, and the Agent shall
be relieved of all responsibility for Collateral upon surrendering it
or tendering the surrender of it to the Obligors. 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 Acquisition 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 in the order set forth in
Section 7 of the Acquisition Loan Agreement, and each 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 Obligors agree 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
Acquisition 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 Acquisition 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 an 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 Obligors,
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 Obligors 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, each Obligor jointly and severally 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 each 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 Acquisition
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 Acquisition Loan
Agreement.
16. Successors in Interest. This Agreement shall create a continuing
security interest in the Collateral and shall be binding upon each
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 none of the Obligors may assign its
rights or delegate its duties hereunder without the prior written
consent of each Lender or the Required Lenders, as required by the
Acquisition Loan Agreement. To the fullest extent permitted by law,
each 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 Acquisition
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. Each 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 such
Obligor at the Borrower's address set forth in Section 9.2 of the
Acquisition 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 such 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. EACH 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 Obligors 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
any 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. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several liability hereunder
in consideration of the financial accommodation to be provided by the
Lenders under the Acquisition Loan Agreement, for the mutual benefit,
directly and indirectly, of each of the Obligors and in consideration
of the undertakings of each of the Obligors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Obligors with
respect to the payment and performance of all of the Secured
Obligations arising under this Agreement and the other Loan Documents,
it being the intention of the parties hereto that all of the Secured
Obligations shall be the joint and several obligations of each of the
Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein or in
any other of the Loan Documents, the obligations of each Guarantor
under the Acquisition Loan Agreement and the other Loan Documents shall
be limited to an aggregate amount equal to the largest amount that
would not render such obligations subject to avoidance under Section
548 of the Bankruptcy Code or any comparable provisions of any
applicable state law, all as further provided in Section 2(b) hereof.
27. Rights of Required Lenders. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders
[remainder of page intentionally left blank]
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.
BORROWER: INFOCROSSING, INC., a Delaware corporation
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
GUARANTORS: INFOCROSSING SOUTHEAST, INC.,
a Georgia corporation formerly known as Amquest, Inc.
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
ETG, INC., a Delaware corporation
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
INFOCROSSING SERVICES, INC.,
a Delaware corporation
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
INFOCROSSING SERVICES SOUTHEAST, INC., a Georgia corporation
formerly known as Amquest Services, Inc.
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
INFOCROSSING WEST, INC., a California corporation formerly
known as ITO Acquisition Corporation and doing business as
Systems Management Specialists
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
INFOCROSSING SERVICES WEST, INC., a California corporation
By: /s/ ZACH LONSTEIN
-----------------
Name: Zach Lonstein
Title: Chief Executive Officer
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