EXHIBIT 10.4
SECURITY AGREEMENT dated as of March 13,
1996, among SHARED TECHNOLOGIES FAIRCHILD
COMMUNICATIONS CORP., a Delaware corporation (the
"Borrower"), SHARED TECHNOLOGIES FAIRCHILD INC., a
Delaware corporation ("STFI", which term shall, after
the Merger referred to in the Credit Agreement
referred to below, include the surviving corporation
in such Merger), each subsidiary of the Borrower
listed on Schedule I hereto (each such subsidiary
individually a "Subsidiary Guarantor" and
collectively, the "Subsidiary Guarantors"; the
Subsidiary Guarantors, STFI and the Borrower are
referred to collectively herein as the "Grantors")
and CREDIT SUISSE, a bank organized under the laws of
Switzerland, acting through its New York branch
("Credit Suisse"), as collateral agent (in such
capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of
March 12, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time
to time party thereto (the "Lenders"), Credit Suisse, as administrative agent
(in such capacity, the "Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on
Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and
NationsBank, N.A., as documentation agent (individually and collectively in such
capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement
dated as of March 12, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral
Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and the
Fronting Banks have agreed to issue Letters of Credit for the account of the
Borrower, pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement. Each of STFI and the Subsidiary Guarantors
has agreed to guarantee, among other things, all the obligations of the Borrower
under the Credit Agreement. The obligations of the Lenders to make Loans and of
the Fronting Banks to issue Letters of Credit are conditioned upon, among other
things, the execution and delivery by the Grantors of an agreement in the form
hereof to secure (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, (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, 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 Secured Parties
under the Credit Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all the
covenants, agreements, obligations and liabilities of each Loan Party under or
pursuant to this
Agreement and the other Loan Documents and (d) the due and punctual payment and
performance of all obligations of the Borrower under each Interest Rate
Protection Agreement entered into with any counterparty that was a Lender at the
time such Interest Rate Protection Agreement was entered into (all the monetary
and other obligations described in the preceding clauses (a) through (d) being
collectively called the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the
context otherwise requires, all capitalized terms used but not defined herein
shall have the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may
become obligated to any Grantor under, with respect to or on account of an
Account.
"Accounts" shall mean any and all right, title and interest of
any Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right,
title and interest in any returned goods, together with all rights, titles,
securities and guarantees with respect thereto, including any rights to stoppage
in transit, replevin, reclamation and resales, and all related security
interests, liens and pledges, whether voluntary or involuntary, in each case
whether now existing or owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable,
(b) Documents, (c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash
and cash accounts and (g) Proceeds.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to license, or granting any right to such Grantor under any Copyright now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all copyright rights in any work subject
to the copyright laws of the United States or any other country, whether as
author, assignee, transferee or otherwise, and (b) all registrations and
applications for registration of any such copyright in the United States or any
other country, including
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registrations, recordings, supplemental registrations and pending applications
for registration in the United States Copyright Office, including those listed
on Schedule II.
"Credit Agreement" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger
sheets and documents covering or relating to any of the Collateral.
"Equipment" shall mean all equipment, furniture and
furnishings, and all tangible personal property similar to any of the foregoing,
including tools, parts and supplies of every kind and description, and all
improvements, accessions or appurtenances thereto, that are now or hereafter
owned by any Grantor. The term Equipment shall include Fixtures.
"Fixtures" shall mean all items of Equipment, whether now
owned or hereafter acquired, of any Grantor that become so related to particular
real estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and
causes of action and all other assignable intangible personal property of any
Grantor of every kind and nature (other than Accounts Receivable) now owned or
hereafter acquired by any Grantor, including corporate or other business
records, indemnification claims, contract rights (including rights under leases,
whether entered into as lessor or lessee, Interest Rate Protection Agreements
and other agreements), Intellectual Property, goodwill, registrations,
franchises, tax refund claims and any letter of credit, guarantee, claim,
security interest or other security held by or granted to any Grantor to secure
payment by an Account Debtor of any of the Accounts Receivable.
"Intellectual Property" shall mean all intellectual and
similar property of any Grantor of every kind and nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection with, any
of the foregoing.
"Inventory" shall mean all goods of any Grantor, whether now
owned or hereafter acquired, held for sale or lease, or furnished or to be
furnished by any Grantor under contracts of service, or consumed in any
Grantor's business, including raw materials, intermediates, work in process,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, and all such goods that have been
returned to or repossessed by or on behalf of any Grantor.
"License" shall mean any Patent License, Trademark License,
Copyright License or other license or sublicense to which any Grantor is a
party, including those listed on Schedule III (other than those license
agreements in existence on the date hereof and listed on Schedule III and those
license agreements entered into after the date hereof, which by their terms
prohibit assignment or a grant of a security interest by such Grantor as
licensee thereunder). The Secured Parties shall have a security interest in all
authorizations issued by the Federal Communications Commission ("FCC") or any
state or
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local regulatory agency to the maximum extent permitted by law,
including, without limitation, the right to receive all proceeds derived from or
in connection with the sale, assignment or transfer of such authorizations.
"Obligations" shall have the meaning assigned to such term in
the preliminary statement of this Agreement.
"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any Grantor or which
any Grantor otherwise has the right to license, is in existence, or granting to
any Grantor any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Grantor under any such agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all letters patent of the United States
or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and pending applications in the United
States Patent and Trademark Office or any similar offices in any other country,
including those listed on Schedule IV, and (b) all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof, and the
inventions disclosed or claimed therein, including the right to make, use and/or
sell the inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 1 hereto, completed and supplemented with the
schedules and attachments contemplated thereby, and duly executed by a Financial
Officer and the chief legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the
sale, exchange, license, lease or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft, damage or other
involuntary conversion of whatever nature of any asset or property which
constitutes Collateral, and shall include, (a) any claim of any Grantor against
any third party for (and the right to sue and recover for and the rights to
damages or profits due or accrued arising out of or in connection with) (i)
past, present or future infringement of any Patent now or hereafter owned by any
Grantor, or licensed under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned by any Grantor
or licensed under a Trademark License or injury to the goodwill associated with
or symbolized by any Trademark now or hereafter owned by any Grantor, (iii)
past, present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Collateral Agent, (d) the Fronting Banks, (e) each
counterparty to an Interest Rate Protection Agreement entered into with the
Borrower if such counterparty was a Lender at the time the Interest Rate
Protection Agreement was entered into, (f) the beneficiaries of each
indemnification obligation undertaken by any Grantor under any Loan Document and
(g) the successors and assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such
term in Section 2.01.
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"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any Trademark
now or hereafter owned by any Grantor or which any Grantor otherwise has the
right to license, or granting to any Grantor any right to use any Trademark now
or hereafter owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Grantor: (a) all trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule V, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall be
applicable to this Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment
or performance, as the case may be, in full of the Obligations, each Grantor
hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in, all of such Grantor's right, title and
interest in, to and under the Collateral, whether now owned or any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (the "Security
Interest"). Without limiting the foregoing, the Collateral Agent is hereby
authorized to file one or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar
office in any other country) or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest granted by
each Grantor, without the signature of any Grantor, and naming any Grantor or
the Grantors as debtors and the Collateral Agent as secured party.
SECTION 2.02. No Assumption of Liability. The Security
Interest is granted as security only and shall not subject the Collateral Agent
or any other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Collateral.
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ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to
the Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and
valid rights in and title to the Collateral with respect to which it has
purported to grant a Security Interest hereunder and has full power and
authority to grant to the Collateral Agent the Security Interest in such
Collateral pursuant hereto and to execute, deliver and perform its obligations
in accordance with the terms of this Agreement, without the consent or approval
of any other person other than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth therein is
correct and complete. Fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
have been delivered to the Collateral Agent for filing in each governmental,
municipal or other office specified in Schedule 6 to the Perfection Certificate,
which are all the filings, recordings and registrations (other than filings
required to be made in the United States Patent and Trademark Office and the
United States Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and Copyrights) that
are necessary to publish notice of and protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral in
which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements.
(b) Each Grantor shall ensure and represents and warrants that
fully executed security agreements in the form hereof and containing a
description of all Collateral consisting of Intellectual Property shall have
been received and recorded within three months after the execution of this
Agreement with respect to United States Patents and United States registered
Trademarks (and Trademarks for which United States registration applications are
pending) and within one month after the execution of this Agreement with respect
to United States registered Copyrights for recording by the United States Patent
and Trademark Office and the United States Copyright Office pursuant to 35
U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations
thereunder, as applicable, and otherwise as may be required pursuant to the laws
of any other necessary jurisdiction, to protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, or in
any other necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary (other than
such actions as are necessary to perfect the Security Interest with respect to
any Collateral consisting of Patents, Trademarks and Copyrights (or registration
or application for registration thereof) acquired or developed after the date
hereof).
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SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
to the filings described in Section 3.02 above, a perfected security interest in
all Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable law in
such jurisdictions and (c) a security interest that shall be perfected in all
Collateral in which a security interest may be perfected upon the receipt and
recording of this Agreement with the United States Patent and Trademark Office
and the United States Copyright Office, as applicable, within the three month
period (commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261 or 15
U.S.C. ss. 1060 or the one month period (commencing as of the date hereof)
pursuant to 17 U.S.C. ss. 205 and otherwise as may be required pursuant to the
laws of any other necessary jurisdiction. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02 of the
Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned
by the Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. The Grantor has not filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records;
Place of Business. (a) Each Grantor agrees promptly to notify the Collateral
Agent in writing of any change (i) in its corporate name or in any trade name
used to identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees not to effect or permit any change
referred to in the preceding sentence unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral for
which perfection or priority, as the case may be, may be established by any such
filings. Each Grantor agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Grantor is damaged or
destroyed.
(b) Each Grantor agrees to maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and
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in accordance with such prudent and standard practices used in industries that
are the same as or similar to those in which such Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral, and, at such time
or times as the Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules in form
and detail satisfactory to the Collateral Agent showing the identity, amount and
location of any and all Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time
of delivery of annual financial statements with respect to the preceding fiscal
year pursuant to Section 5.04 of the Credit Agreement, the Borrower shall
deliver to the Collateral Agent a certificate executed by a Financial Officer
and the chief legal officer of the Borrower (a) setting forth the information
required pursuant to Section 2 of the Perfection Certificate or confirming that
there has been no change in such information since the date of such certificate
or the date of the most recent certificate delivered pursuant to Section 4.02
and (b) certifying that all Uniform Commercial Code financing statements
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (a) above to the extent necessary to
protect and perfect the Security Interest for a period of not less than 18
months after the date of such certificate (except as noted therein with respect
to any continuation statements to be filed within such period). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of Schedule
II, III, IV or V, as applicable, all Intellectual Property of any Grantor in
existence on the date thereof and not then listed on such Schedules or
previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at
its own cost and expense, take any and all actions necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its
own expense, to execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Collateral Agent may from time to time request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in connection with
the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Collateral Agent, duly endorsed in a
manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor
hereby authorizes the Collateral Agent, with prompt notice thereof to the
Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or
V hereto or adding additional schedules hereto to specifically identify any
asset or item that may constitute Copyrights, Licenses, Patents or Trademarks;
provided, however, that any Grantor shall have the right, exercisable within 10
days after it has been notified by the Collateral Agent of the specific
identification of such Collateral, to advise the Collateral Agent in writing of
any inaccuracy of the representations and warranties made by such Grantor
hereunder with respect to such Collateral. Each Grantor agrees that it will use
its best efforts to take such action as
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shall be necessary in order that all representations and warranties hereunder
shall be true and correct with respect to such Collateral within 30 days after
the date it has been notified by the Collateral Agent of the specific
identification of such Collateral.
Each Grantor further agrees that if any authorization of such
Grantor excluded from the Collateral pursuant to the final sentence of the
definition of "License" could be included therein with the receipt of any
approval of, or the taking of any action by, any Governmental Authority, such
Grantor shall use its best efforts to obtain such approval or action as
expeditiously as possible.
SECTION 4.05. Inspection and Verification. The Collateral
Agent and such persons as the Collateral Agent may reasonably designate shall
have the right, at the Grantors' own cost and expense, to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantors' affairs with the officers of the Grantors and their
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of Accounts or Collateral in
the possession of any third person, by contacting Account Debtors or the third
person possessing such Collateral for the purpose of making such a verification.
The Collateral Agent shall have the absolute right to share any information it
gains from such inspection or verification with any Secured Party (it being
understood that any such information shall be deemed to be "Information" subject
to the provisions of Section 9.16 of the Credit Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments, charges, fees,
Liens, security interests or other encumbrances at any time levied or placed on
the Collateral and not permitted pursuant to Section 6.02 of the Credit
Agreement, and may pay for the maintenance and preservation of the Collateral to
the extent any Grantor fails to do so as required by the Credit Agreement or
this Agreement, and each Grantor jointly and severally agrees to reimburse the
Collateral Agent on demand for any payment made or any expense incurred by the
Collateral Agent pursuant to the foregoing authorization; provided, however,
that nothing in this Section 4.06 shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time
any Grantor shall take a security interest in any property of an Account Debtor
or any other person to secure payment and performance of an Account, such
Grantor shall promptly assign such security interest to the Collateral Agent.
Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other person granting the security
interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each
Grantor shall remain liable to observe and perform all the conditions and
obligations to be observed and performed by it under each contract, agreement or
instrument relating to the Collateral, all in accordance with the terms and
conditions thereof, and each Grantor jointly and severally agrees to indemnify
and hold harmless the Collateral Agent and the Secured Parties from and against
any and all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the
Grantors shall make
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or permit to be made an assignment, pledge or hypothecation of the Collateral or
shall grant any other Lien in respect of the Collateral, except as expressly
permitted by Section 6.02 of the Credit Agreement. None of the Grantors shall
make or permit to be made any transfer of the Collateral and each Grantor shall
remain at all times in possession of the Collateral owned by it, except that
(a) Inventory may be sold in the ordinary course of business and (b) unless and
until the Collateral Agent shall notify the Grantors that an Event of Default
shall have occurred and be continuing and that during the continuance thereof
the Grantors shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if promptly
confirmed in writing), the Grantors may use and dispose of the Collateral in any
lawful manner not inconsistent with the provisions of this Agreement, the Credit
Agreement or any other Loan Document. Without limiting the generality of the
foregoing, each Grantor agrees that it shall not permit any Inventory to be in
the possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of
the Grantors will, without the Collateral Agent's prior written consent, grant
any extension of the time of payment of any of the Accounts Receivable,
compromise, compound or settle the same for less than the full amount thereof,
release, wholly or partly, any person liable for the payment thereof or allow
any credit or discount whatsoever thereon, other than extensions, credits,
discounts, compromises or settlements granted or made in the ordinary course of
business and consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which such Grantor is engaged.
SECTION 4.11. Insurance. The Grantors, at their own expense,
shall maintain or cause to be maintained insurance covering physical loss or
damage to the Inventory and Equipment in accordance with Section 5.02 of the
Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this Section 4.11, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
SECTION 4.12. Legend. Each Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable and its
books, records and documents evidencing or pertaining thereto with an
appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
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SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it
permit any of its licensees to, do any act, or omit to do any act, whereby any
Patent which is material to the conduct of such Grantor's business may become
invalidated or dedicated to the public, and agrees that it shall continue to
mark any products covered by a Patent with the relevant patent number as
necessary and sufficient to establish and preserve its maximum rights under
applicable patent laws.
(b) Each Grantor (either itself or through its licensees or
its sublicensees) will, for each Trademark material to the conduct of such
Grantor's business, (i) maintain such Trademark in full force free from any
claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such Trademark
with notice of Federal or foreign registration to the extent necessary and
sufficient to establish and preserve its maximum rights under applicable law and
(iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights.
(c) Each Grantor (either itself or through licensees) will,
for each work covered by a material Copyright, continue to publish, reproduce,
display, adopt and distribute the work with appropriate copyright notice as
necessary and sufficient to establish and preserve its maximum rights under
applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately
if it knows or has reason to know that any Patent, Trademark or Copyright
material to the conduct of its business may become abandoned, lost or dedicated
to the public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, United States Copyright Office or
any court or similar office of any country) regarding such Grantor's ownership
of any Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall any Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, unless it promptly
informs the Collateral Agent, and, upon request of the Collateral Agent,
executes and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States Patent
and Trademark Office, United States Copyright Office or any office or agency in
any political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
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(g) In the event that any Grantor has reason to believe that
any Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default,
each Grantor shall use its best efforts to obtain all requisite consents or
approvals by the licensor of each Copyright License, Patent License or Trademark
License to effect the assignment of all of such Grantor's right, title and
interest thereunder to the Collateral Agent or its designee.
ARTICLE V
Power of Attorney
Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact,
and in such capacity the Collateral Agent shall have the right, with power of
substitution for each Grantor and in each Grantor's name or otherwise, for the
use and benefit of the Collateral Agent and the Secured Parties, upon the
occurrence and during the continuance of an Event of Default (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to sign the
name of any Grantor on any invoice or bill of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral;
(g) to notify, or to require any Grantor to notify, Account Debtors to make
payment directly to the Collateral Agent; and (h) subject to the mandatory
requirements of applicable law, to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Collateral Agent were the
absolute owner of the Collateral for all purposes, including assigning any
contract to any Subsidiary or any other person at any time during the
continuance of any Event of Default; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent or
any Secured Party to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of
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the Collateral Agent as the agent and attorney-in-fact of the Grantors for the
purposes set forth above is coupled with an interest and is irrevocable. The
provisions of this Article V shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Loan Document with respect to the
Collateral or any part thereof or impose any obligation on the Collateral Agent
or any Secured Party to proceed in any particular manner with respect to the
Collateral or any part thereof, or in any way limit the exercise by the
Collateral Agent or any Secured Party of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder, under any
other Loan Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, each Grantor agrees to deliver
each item of Collateral to the Collateral Agent on demand, and it is agreed that
the Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the universe on such
terms and conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained), and (b) with or without legal process
and with or without prior notice or demand for performance, to take possession
of the Collateral and without liability for trespass to enter any premises where
the Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights afforded
to a secured party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral,
13
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any claim then due and payable to such Secured Party
from any Grantor as a credit against the purchase price, and such Secured Party
may, upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to any Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and no Grantor shall be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent
shall apply the proceeds of any collection or sale of the Collateral, as well as
any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Administrative Agent or the Collateral Agent (in its capacity as
such hereunder or under any other Loan Document) in connection with
such collection or sale or otherwise in connection with this Agreement
or any of the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Collateral Agent hereunder or under any other Loan Document
on behalf of any Grantor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under
any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts
so applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the date
of any such distribution); and
THIRD, to the Grantors, their successors or assigns, or as a
court of competent
14
jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property.
For the purpose of enabling the Collateral Agent to exercise rights and remedies
under this Article at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, each Grantor hereby grants to the
Collateral Agent an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to use, license or
sub-license any of the Collateral consisting of Intellectual Property now owned
or hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof. The use of such license
by the Collateral Agent shall be exercised, at the option of the Collateral
Agent, upon the occurrence and during the continuation of an Event of Default;
provided that any license, sub-license or other transaction entered into by the
Collateral Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein) be in writing
and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Guarantor shall be given
to it at its address or telecopy number set forth on Schedule I, with a copy to
the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations of the
Grantors hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or
15
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the Secured Parties and shall survive the making by
the Lenders of the Loans, and the execution and delivery to the Lenders of any
notes evidencing such Loans, regardless of any investigation made by the Lenders
or on their behalf, and shall continue in full force and effect until this
Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective as to any Grantor when a counterpart hereof
executed on behalf of such Grantor shall have been delivered to the Collateral
Agent and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon such Grantor and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of such Grantor, the Collateral Agent and the other Secured Parties
and their respective successors and assigns, except that no Grantor shall have
the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement or the Credit
Agreement. This Agreement shall be construed as a separate agreement with
respect to each Grantor and may be amended, modified, supplemented, waived or
released with respect to any Grantor without the approval of any other Grantor
and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Grantor or the Collateral Agent
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses;
Indemnification. (a) Each Grantor jointly and severally agrees to pay upon
demand to the Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, disbursements and other charges of its counsel
and of any experts or agents, which the Collateral Agent may incur in connection
with (i) the administration of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from or other realization upon any of the
Collateral, (iii) the exercise, enforcement or protection of any of the rights
of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform
or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, each Grantor jointly and severally agrees to
indemnify the Collateral Agent and the other Indemnitees against, and hold each
of them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other charges of
counsel, incurred by or asserted against any of them arising out of, in any way
connected 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.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section 7.06 shall remain
16
operative and in full force and effect regardless of the termination of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Collateral Agent or
any Lender. All amounts due under this Section 7.06 shall be payable on written
demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of
the Collateral Agent in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Fronting Banks, the Administrative Agent and
the Lenders under the other Loan Documents are cumulative and are not exclusive
of any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Collateral Agent and the Grantor or Grantors with
respect to which such waiver, amendment or modification is to apply, subject to
any consent required in accordance with Section 9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
17
SECTION 7.11 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract (subject to Section
7.04), and shall become effective as provided in Section 7.04. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used
herein are for the purpose of reference only, are not part of this Agreement and
are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a)
Each Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent, the Administrative Agent, the Fronting Banks or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.01. Nothing
in this Agreement will affected the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security
Interest shall terminate when all the Obligations have been indefeasibly paid in
full, the Lenders have no further commitment to lend, the L/C Exposure has been
reduced to zero and the Fronting Banks have no further commitment to issue
Letters of Credit under the Credit Agreement, at which time the Collateral Agent
shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform
Commercial Code termination statements and similar documents which the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 7.14
shall be without recourse to or warranty by the Collateral Agent. A Subsidiary
Guarantor shall automatically be released from its obligations hereunder and the
Security Interest in the Collateral of such Subsidiary Guarantor shall be
automatically released in the event that all the capital stock of such
Subsidiary Guarantor shall be sold, transferred or otherwise disposed of to a
person that is not an Affiliate of the Borrower in accordance with the terms of
the Credit Agreement; provided that the Required Lenders shall have consented to
such sale, transfer or other disposition (to the extent required
18
by the Credit Agreement) and the terms of such consent did not provide
otherwise.
SECTION 7.15. Additional Grantors. Upon execution and delivery
by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 2
hereto, such Subsidiary shall become a Grantor hereunder with the same force and
effect as if originally named as a Grantor herein. The execution and delivery of
any such instrument shall not require the consent of any Grantor hereunder. The
rights and obligations of each Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor as a party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SHARED TECHNOLOGIES FAIRCHILD INC.,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
SHARED TECHNOLOGIES FAIRCHILD
COMMUNICATIONS CORP.,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
MULTI-TENANT SERVICES, INC.,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
BOSTON TELECOMMUNICATIONS GROUP,
INC., d/b/a BOSTON TELECOMMUNICATIONS
COMPANY,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
19
FINANCIAL PLACE COMMUNICATIONS
COMPANY,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer of Shared
Technologies Fairchild Inc., its
General Partner
STI INTERNATIONAL, INC.,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
OFFICE TELEPHONE MANAGEMENT,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
VSI CORPORATION,
by
/s/ Vincent DiVincenzo
Name: Vincent DiVincenzo
Title: Authorized Officer
CREDIT SUISSE, as Collateral Agent,
by
/s/ Kathleen D. O'Brien
Name: Kathleen D. O'Brien
Title: Member of Senior Management
by
/s/ Will Ziglar
Name: Will Ziglar
Title: Associate
20
SCHEDULE I
SUBSIDIARY GUARANTORS
21
SCHEDULE II
COPYRIGHTS
22
SCHEDULE III
LICENSES
23
SCHEDULE IV
PATENTS
24
SCHEDULE V
TRADEMARKS
25
Annex 1 to the
Security Agreement
[Form Of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of
March 12, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time
to time party thereto (the "Lenders"), Credit Suisse, as administrative agent
(in such capacity, the "Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on
Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and
NationsBank, as documentation agent (individually and collectively in such
capacity, the "Documentation Agent"), (b) the Parent Guarantee Agreement dated
as of March 12, 1996 (as amended, supplemented or otherwise modified from time
to time, the "Parent Guarantee Agreement"), between STFI and the Collateral
Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent.
The undersigned, a Financial Officer and a Legal Officer,
respectively, of STFI, hereby certify to the Collateral Agent and each other
Secured Party as follows:
1. Names. (a) The exact corporate name of each Grantor, as such name
appears in its respective certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name each Grantor
has had in the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, no Grantor has
changed its identity or corporate structure in any way within the past five
years. Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of corporate organization. If any such change has occurred, include
in Schedule 1 the information required by Sections 1 and 2 of this certificate
as to each acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including
trade names or similar appellations) used by each Grantor or any of its
divisions or other business units in connection with the conduct of its business
or the ownership of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification
Number of each Grantor:
2. Current Locations. (a) The chief executive office of each Grantor is
located at the address set forth opposite its name below:
Grantor Mailing Address County State
(b) Set forth below opposite the name of each Grantor are all locations
where such Grantor maintains any books or records relating to any Accounts
Receivable (with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Grantor Mailing Address County State
(c) Set forth below opposite the name of each Grantor are all the
places of business of such Grantor not identified in paragraph (a) or (b) above:
Grantor Mailing Address County State
(d) Set forth below opposite the name of each Grantor are all the
locations where such Grantor maintains any Collateral not identified above:
Grantor Mailing Address County State
(e) Set forth below opposite the name of each Grantor are the names and
addresses of all persons other than such Grantor that have possession of any of
the Collateral of such Grantor:
Grantor Mailing Address County State
3. Unusual Transactions. All Accounts Receivable have been originated
by the Grantors and all Inventory has been acquired by the Grantors in the
ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are true
copies of file search reports from the Uniform Commercial Code filing offices
where filings described in Section 3.19 of the Credit Agreement are to be made.
Attached hereto as Schedule 4(B) is a true copy of each financing statement or
other filing identified in such file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 5 hereto have been prepared for filing in the
Uniform Commercial Code filing office in each jurisdiction where a Grantor has
Collateral as identified in Section 2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth, with respect to the filings described in Section 5 above, each
filing and the filing office in which such filing is to be made.
7. Filing Fees. All filing fees and taxes payable in connection with
the filings described in Section 5 above have been paid.
2
8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct
list of all the duly authorized, issued and outstanding stock of each Subsidiary
and the record and beneficial owners of such stock. Also set forth on Schedule 8
is each equity Investment of STFI and each Subsidiary that represents 50% or
less of the equity of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct list of
all notes held by STFI and each Subsidiary and all intercompany notes between
STFI and each Subsidiary of STFI and between each Subsidiary of STFI and each
other such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and correct
list of all advances made by STFI to any Subsidiary of STFI or made by any
Subsidiary of STFI to STFI or any other Subsidiary of STFI, which advances will
be on and after the date hereof evidenced by one or more intercompany notes
pledged to the Collateral Agent under the Pledge Agreement, and (b) a true and
correct list of all unpaid intercompany transfers of goods sold and delivered by
or to STFI or any Subsidiary of STFI.
11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule
setting forth, with respect to each Mortgaged Property, (i) the exact corporate
name of the corporation that owns such property as such name appears in its
certificate of incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (iii) the filing office in which
a Mortgage with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this [ ] day of [ ].
SHARED TECHNOLOGIES INC.,
by
Name:
Title: [Financial Officer]
by
Name:
Title: [Legal Officer]
3
Annex 2 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the Security
Agreement dated as of March 12, 1996, among SHARED
TECHNOLOGIES FAIRCHILD COMMUNICATIONS CORP., a Delaware
corporation (the "Borrower"), SHARED TECHNOLOGIES INC., a
Delaware corporation ("STFI"), each subsidiary of the Borrower
listed on Schedule I thereto (each such subsidiary
individually a "Subsidiary Guarantor" and collectively, the
"Subsidiary Guarantors"; the Subsidiary Guarantors, STFI and
the Borrower are referred to collectively herein as the
"Grantors") and CREDIT SUISSE, a bank organized under the laws
of Switzerland, acting through its New York branch ("Credit
Suisse"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined
herein).
A. Reference is made to (a) the Credit Agreement dated as of
March 12, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrower, STFI, the lenders from time
to time party thereto (the "Lenders"), Credit Suisse, as administrative agent
(in such capacity, the "Administrative Agent") and as collateral agent (in such
capacity, the "Collateral Agent") for the Lenders, the fronting banks listed on
Schedule 2.20 (the "Fronting Banks"), and each of Citicorp USA, Inc. and
NationsBank, N.A., as documentation agent (individually and collectively in such
capacity, the "Documentation Agent") and (b) the Parent Guarantee Agreement
dated as of March 12, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Parent Guarantee Agreement"), between STFI and the Collateral
Agent and (c) the Subsidiary Guarantee Agreement dated as of March 12, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Security Agreement
and the Credit Agreement.
C. The Grantors have entered into the Security Agreement in
order to induce the Lenders to make Loans and the Fronting Banks to issue
Letters of Credit. Section 7.15 of Security Agreement provides that additional
Subsidiaries of STFI, the Borrower and the Subsidiaries may become Grantors
under the Security Agreement by execution and delivery of an instrument in the
form of this Supplement. The undersigned Subsidiary (the "New Grantor") is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Grantor under the Security Agreement in order to induce
the Lenders to make additional Loans and the Fronting Banks to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as
follows:
SECTION 1. In accordance with Section 7.15 of the Security
Agreement, the New Grantor by its signature below becomes a Grantor under the
Security Agreement with the same force and effect as if originally named therein
as a Grantor and the New Grantor hereby (a) agrees to all the terms and
provisions of the Security Agreement applicable to it as a Grantor thereunder
and (b) represents and warrants that the representations and warranties made by
it as a Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the
New Grantor's right, title and interest in and to the Collateral (as defined in
the Security Agreement) of the New Grantor. Each reference to a "Grantor" in the
Security Agreement shall be deemed to include the New Grantor. The Security
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the
Collateral Agent and the other Secured Parties that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that
(a) set forth on Schedule I attached hereto is a true and correct schedule of
the location of any and all Collateral of the New Grantor and (b) set forth
under its signature hereto, is the true and correct location of the chief
executive office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the
Security Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and in the Security Agreement shall not in any way be affected
or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be
in writing and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below.
2
SECTION 9. The New Grantor agrees to reimburse the Collateral
Agent for its reasonable out-of-pocket expenses in connection with this
Supplement, including the reasonable fees, other charges and disbursements of
counsel for the Collateral Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent
have duly executed this Supplement to the Security Agreement as of the day and
year first above written.
[Name Of New Grantor],
by
Name:
Title:
Address:
CREDIT SUISSE, as Collateral Agent,
by
Name:
Title:
by
Name:
Title:
3
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
Description Location