EXECUTION COPY
SECURITY AGREEMENT
by and among
A.C. MOORE INCORPORATED,
as Borrower
A.C. MOORE ARTS & CRAFTS, INC.,
MOORESTOWN FINANCE, INC.,
BLACKWOOD ASSETS, INC.,
EACH OF THE OTHER GRANTORS PARTY HERETO
and
KEYBANK NATIONAL ASSOCIATION,
As Administrative Agent
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Dated as of August 3, 2001
TABLE OF CONTENTS
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Page
ARTICLE 1. DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND
PRIORITY .................................................................. 1
Section 1.1 General Definitions ......................................... 1
Section 1.2 Other Definitions; Interpretation ........................... 7
Section 1.3 Grant of Security ........................................... 7
ARTICLE 2. SECURITY FOR OBLIGATIONS; NO ASSUMPTION OF LIABILITY .......... 8
Section 2.1 Security for Obligations .................................... 8
Section 2.2 No Assumption of Liability .................................. 8
ARTICLE 3. REPRESENTATIONS AND WARRANTIES AND COVENANTS .................. 8
Section 3.1 Generally ................................................... 8
Section 3.2 Equipment and Inventory ..................................... 12
Section 3.3 Receivables ................................................. 12
Section 3.4 Investment Related Property ................................. 13
Section 3.5 Letter of Credit Rights ..................................... 15
Section 3.6 Intellectual Property Collateral ............................ 16
Section 3.7 Commercial Tort Claims ...................................... 17
ARTICLE 4. FURTHER ASSURANCES ............................................. 18
ARTICLE 5. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT ................ 18
ARTICLE 6. REMEDIES UPON DEFAULT .......................................... 19
Section 6.1 Remedies Generally .......................................... 19
Section 6.2 Application of Proceeds of Sale ............................. 21
Section 6.3 Investment Related Property ................................. 22
Section 6.4 Grant of License to Use Intellectual Property ............... 22
Section 6.5 Registration, etc. .......................................... 23
ARTICLE 7. REIMBURSEMENT OF ADMINISTRATIVE AGENT .......................... 23
ARTICLE 8. WAIVERS; AMENDMENT ............................................. 24
ARTICLE 9. SECURITY INTEREST ABSOLUTE ..................................... 24
ARTICLE 10. TERMINATION; RELEASE .......................................... 25
ARTICLE 11. ADDITIONAL GRANTORS ........................................... 25
ARTICLE 12. NOTICES ....................................................... 25
ARTICLE 13. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS ................ 25
ARTICLE 14. SURVIVAL OF AGREEMENT; SEVERABILITY ........................... 26
ARTICLE 15. GOVERNING LAW ................................................. 26
ARTICLE 16. COUNTERPARTS .................................................. 26
ARTICLE 17. HEADINGS ...................................................... 27
ARTICLE 18. JURISDICTION; VENUE; CONSENT TO SERVICE OF PROCESS ............ 27
ARTICLE 19. WAIVER OF JURY TRIAL .......................................... 27
SCHEDULES:
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Schedule I | List of Subsidiaries and Addresses for Notices
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Schedule 3.1(a)(i) | List of Chief Executive Offices, Jurisdictions of
| Organization and Federal Employer Identification Numbers
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Schedule 3.1(a)(ii) | List of Legal and Other Names
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Schedule 3.1(a)(v) | List of Filing Offices
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Schedule 3.2 | List of Locations of Equipment and Inventory
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Schedule 3.4 | List of Investment Related Property
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Schedule 3.5 | List of Letters of Credit
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Schedule 3.6 | List of Intellectual Property
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Schedule 3.7 | List of Commercial Tort Claims
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EXHIBITS:
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Exhibit A | Form of Supplement
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SECURITY AGREEMENT, dated as of August 3, 2001, among A.C. MOORE
INCORPORATED, a Delaware corporation (the "Borrower"), A.C. MOORE ARTS & CRAFTS,
INC., a Pennsylvania corporation (the "Parent"), MOORESTOWN FINANCE, INC., a
Delaware corporation, BLACKWOOD ASSETS, INC., a Delaware corporation, each of
the subsidiaries of the Borrower listed on Schedule I (each such subsidiary,
individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors"; the Subsidiary Guarantors, the Parent, Moorestown Finance, Inc.,
Blackwoood Assets, Inc., and the Borrower are referred to collectively herein as
the "Grantors"), and KEYBANK NATIONAL ASSOCIATION, as administrative agent under
the Credit Agreement referred to in the next paragraph.
Reference is made to the Credit Agreement, dated as of August 3, 2001,
among the Borrower, the lenders from time to time party thereto and KeyBank
National Association, as Administrative Agent (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement").
The Lenders have agreed to make Loans to, and the Issuing Bank has
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 the Subsidiary Guarantors, Moorestown Finance, Inc.,
Blackwood Assets, Inc., and the Parent has agreed to guarantee, among other
things, all the obligations of each Loan Party under the Loan Documents. The
obligations of the Lenders to make Loans and the Issuing Bank 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 the Obligations.
Accordingly, the Grantors and the Administrative Agent, on behalf of
itself and each other Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE 1. DEFINITIONS; GRANT OF SECURITY; CONTINUING PERFECTION AND
PRIORITY
Section 1.1 General Definitions
As used in this Security Agreement, the following terms shall
have the meanings specified below:
"Account Debtor" means each Person who is obligated in
respect of any Receivable or any Supporting Obligation or Collateral Support
related thereto.
"Accounts" means (i) all "accounts" as defined in Article
9 of the UCC and (ii) all "health-care-insurance receivables", each as defined
in Article 9 of the UCC.
"Additional Grantor" has the meaning assigned to such
term in Article 11.
"Credit Agreement" has the meaning assigned to such term
in the preliminary statement of this Security Agreement.
"Applicable Date" means (i) in the case of any Grantor
(other than an Additional Grantor), the date hereof, and (ii) in the case of any
Additional Grantor, the date of the Supplement executed and delivered by such
Additional Grantor.
"Borrower" has the meaning assigned to such term in the
preliminary statement of this Security Agreement.
"Chattel Paper" means all "chattel paper" as defined in
Article 9 of the UCC.
"Claim Proceeds" means, with respect to any Commercial
Tort Claim or any Collateral Support or Supporting Obligation relating thereto,
all Proceeds thereof, including all insurance proceeds and other amounts and
recoveries resulting or arising from the settlement or other resolution thereof,
in each case regardless of whether characterized as a "commercial tort claim" or
"proceeds" under the UCC.
"Collateral" has the meaning assigned to such term in
Section 1.3(b).
"Collateral Records" means all books, instruments,
certificates, Records, ledger cards, files, correspondence, customer lists,
blueprints, technical specifications, manuals and other documents, and all
computer software, computer printouts, tapes, disks and related data processing
software and similar items, in each case that at any time represent, cover or
otherwise evidence, or contain information relating to, any of the Collateral or
are otherwise necessary or helpful in the collection thereof or realization
thereupon.
"Collateral Support" means all property (real or
personal) assigned, hypothecated or otherwise securing any of the Collateral,
and shall include any security agreement or other agreement granting a lien or
security interest in such real or personal property.
"Commercial Tort Claims" means all "commercial tort
claims" as defined in Article 9 of the UCC and (ii) all Claim Proceeds with
respect to any of the foregoing; including all claims described in Schedule 3.7
hereto or to the applicable Supplement.
"Copyright License" means any written agreement, now or
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned or held by or behalf of any Grantor or which any Grantor
otherwise has the right to license, or granting any right to any Grantor under
any Copyright now or hereafter owned by any third party, and all rights of any
Grantor under any such agreement, including each agreement described in Schedule
3.6 hereto or to the applicable Supplement.
"Copyrights" means all of the following: (i) 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
(ii) all registrations and applications for registration of any such copyright
in the United States or any other country, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office or any similar offices in the United States or
any other country, including those described in Schedule 3.6 hereto or to the
applicable Supplement.
"Documents" means all "documents" as defined in Article 9
of the UCC.
"Equipment" means (i) all "equipment" as defined in
Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data
processing equipment, computers, office equipment, furnishings, furniture,
appliances, fixtures and tools, in each case, regardless of whether
characterized as "equipment" under the UCC, and (iii) all accessions or
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additions to any of the foregoing, all parts thereof, whether or not at any time
of determination incorporated or installed therein or attached thereto, and all
replacements therefor, wherever located, now or hereafter existing.
"General Intangibles" means (i) all "general intangibles"
as defined in Article 9 of the UCC and (ii) all choses in action and causes of
action, all indemnification claims, all goodwill, all Hedging Agreements, all
tax refunds, all licenses, permits, concessions, franchises and authorizations,
all Intellectual Property, all Payment Intangibles and all Software, in each
case, regardless of whether characterized as a "general intangible" under the
UCC.
"Goods" means (i) all "goods" as defined in Article 9 of
the UCC and (ii) all Equipment and Inventory and any computer program embedded
in goods and any supporting information provided in connection with such
program, to the extent (a) such program is associated with such goods in such a
manner that it is customarily considered part of such goods or (b) by becoming
the owner of such goods, a Person acquires a right to use the program in
connection with such goods, in each case, regardless of whether characterized as
a "good" under the UCC.
"Grantor" and "Grantors" have the meanings assigned to
such terms in the preliminary statement of this Security Agreement.
"Instruments" means all "instruments" as defined in
Article 9 of the UCC.
"Insurance" means all insurance policies covering any or
all of the Collateral (regardless of whether the Administrative Agent or any
other Secured Party is the loss payee thereof) and all business interruption
insurance policies.
"Intellectual Property" means all intellectual and
similar property of any Grantor of every kind and nature, including inventions,
designs, Patents, Copyrights, Trademarks, Licenses, domain names, 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" means (i) all "inventory" as defined in
Article 9 of the UCC and (ii) all goods held for sale or lease or to be
furnished under contracts of service or so leased or furnished, all raw
materials, work in process, finished goods and materials used or consumed in the
manufacture, packing, shipping, advertising, selling, leasing, furnishing or
production of such inventory or otherwise used or consumed in any Grantor's
business, all goods which are returned to or repossessed by or on behalf of any
Grantor, and all computer programs embedded in any goods, and all accessions
thereto and products thereof, in each case, regardless of whether characterized
as "inventory" under the UCC.
"Investment Related Property" means Pledged Debt and
Pledged Equity Interests.
"Letter of Credit Rights" means all "letter-of-credit
rights" as defined in Article 9 of the UCC and (ii) all rights, title and
interests of each Grantor to any letter of credit, in each case regardless of
whether characterized as a "letter-of-credit right" under the UCC.
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"License" means any Copyright License, Patent License,
Trademark License, Trade Secret License or other license or sublicense to which
any Grantor is a party.
"Obligations" means (i) the due and punctual payment of
(a) 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 (b) all other monetary
obligations, including Letters of Credit, fees, commissions, 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 Loan Parties to the Secured
Parties, or that are otherwise payable to any Credit Party, in each case under
the Loan Documents, (ii) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Loan Parties or any other party
(other than a Credit Party) under or pursuant to the Loan Documents and (iii)
unless otherwise agreed upon in writing by the applicable Lender party thereto,
all obligations of the Borrower, monetary or otherwise, under each Secured
Hedging Agreement.
"Patent License" means 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 or held by or on behalf
of 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, including
each agreement described in Schedule 3.6 hereto or to the applicable Supplement.
"Patents" means all of the following: (i) 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 the United States or any other country, including those described in
Schedule 3.6 hereto or to the applicable Supplement, and (ii) 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.
"Payment Intangibles" means all "payment intangibles" as
defined in Article 9 of the UCC.
"Pledged Debt" means all debt owed or owing to any
Grantor by the Parent or any of its subsidiaries, including all debt described
in Schedule 3.4 hereto or to the applicable Supplement, all Instruments, Chattel
Paper or other documents, if any, representing or evidencing such debt, and all
interest, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such debt.
"Pledged Equity Interests" means all Equity Interests
owned or held by or on behalf of any Grantor in the Parent or any of its
subsidiaries, including all such Equity Interests described in Schedule 3.4
hereto or to the applicable Supplement, and all certificates, instruments and
other documents, if any, representing or evidencing such Equity Interests and
all interests of such Grantor on the books and records of the issuers of such
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Equity Interests, and all dividends, distributions, cash, warrants, rights,
options, instruments, securities and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Equity Interests.
"Proceeds" means (i) all "proceeds" as defined in Article
9 of the UCC, (ii) payments or distributions made with respect to any Investment
Related Property, (iii) 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 that constitutes the
Collateral, and (iv) whatever is receivable or received when any of the
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary, including 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) (a) past, present or future infringement of any Patent now or hereafter
owned or held by or on behalf of any Grantor, or licensed under a Patent
License, (b) past, present or future infringement or dilution of any Trademark
now or hereafter owned or held by or on behalf of any Grantor, or licensed under
a Trademark License, or injury to the goodwill associated with or symbolized by
any Trademark now or hereafter owned or held by or on behalf of any Grantor, (c)
past, present or future infringement of any Copyright now or hereafter owned or
held by or on behalf of any Grantor, or licensed under a Copyright License, (d)
past, present or future infringement of any Trade Secret now or hereafter owned
or held by or on behalf of any Grantor, or licensed under a Trade Secret
License, and (e) past, present or future breach of any License, in each case,
regardless of whether characterized as "proceeds" under the UCC.
"Receivables" means all rights to payment, whether or not
earned by performance, for goods or other property sold, leased, licensed,
assigned or otherwise disposed of, or services rendered or to be rendered,
including all such rights constituting or evidenced by any Account, Chattel
Paper, Instrument or other document, General Intangible or Investment Related
Property, together with all of the applicable Grantor's rights, if any, in any
goods or other property giving rise to such right to payment, and all Collateral
Support and Supporting Obligations related thereto and all Receivables Records.
"Receivables Records" means (i) all originals of all
documents, instruments or other writings or electronic records or other Records
evidencing any Receivable, (ii) all books, correspondence, credit or other
files, Records, ledger sheets or cards, invoices, and other papers relating to
any Receivable, including all tapes, cards, computer tapes, computer discs,
computer runs, record keeping systems and other papers and documents relating to
any Receivable, whether in the possession or under the control of the applicable
Grantor or any computer bureau or agent from time to time acting for such
Grantor or otherwise, (iii) all evidences of the filing of financing statements
and the registration of other instruments in connection therewith, and
amendments, supplements or other modifications thereto, notices to other
creditors or secured parties, and certificates, acknowledgments, or other
writings, including lien search reports, from filing or other registration
officers, (iv) all credit information, reports and memoranda relating thereto,
and (v) all other written forms of information related in any way to the
foregoing or any Receivable.
"Record" means a "record" as defined in Article 9 of the
UCC.
"Revised Article 9" means, with respect to any
jurisdiction, (i) until such time as a version of the 1999 Official Text of
Article 9 of the UCC (with conforming amendments to
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Articles 1, 2, 2a, 4, 5, 6, 7 and 8) is and has become effective in such
jurisdiction, such Official Text, and (ii) at all other times, the version of
such Official Text as so adopted.
"Secured Hedging Agreement" means each Hedging Agreement
entered into by the Borrower with a Person that, at the time of the entry
thereof, was a Lender (or an Affiliate thereof).
"Secured Parties" means (i) the Credit Parties, (ii)
unless otherwise agreed upon in writing by it, each counterparty to a Secured
Hedging Agreement, (iii) the beneficiaries of each indemnification obligation
undertaken by or on behalf of any Grantor under any Loan Document, and (iv) the
successors and assigns of each of the foregoing.
"Security Interest" has the meaning assigned to such term
in Section 1.3.
"Software" means all "software" as defined in Article 9
of the UCC.
"Supplement" means a supplement hereto, substantially in
the form of Exhibit A.
"Supporting Obligation" means (i) all "supporting
obligations" as defined in Article 9 of the UCC and (ii) all Guarantees and
other secondary obligations supporting any of the Collateral, in each case
regardless of whether characterized as a "supporting obligation" under the UCC.
"Trade Secret Licenses" means any written agreement, now
or hereafter in effect, granting to any third party any right to use any Trade
Secrets now or hereafter owned or held by or on behalf of any Grantor or which
such Grantor otherwise has the right to license, or granting to any Grantor any
right to use any Trade Secrets now or hereafter owned by any third party, and
all rights of any Grantor under any such agreement, including each agreement
described in Schedule 3.6 hereto or to the applicable Supplement.
"Trade Secrets" means all trade secrets and all other
confidential or proprietary information and know-how now or hereafter owned or
used in, or contemplated at any time for use in, the business of any Grantor
(all of the foregoing being collectively called a "Trade Secret"), whether or
not such Trade Secret has been reduced to a writing or other tangible form,
including all documents and things embodying, incorporating or referring in any
way to such Trade Secret.
"Trademark License" means any written agreement, now or
hereafter in effect, granting to any third party any right to use any Trademark
now or hereafter owned or held by or on behalf of any Grantor or which such
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, including each agreement described in
Schedule 3.6 hereto or to the applicable Supplement.
"Trademarks" means all of the following: (i) 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
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thereof, and all registration and recording applications filed in connection
therewith, including registrations and registration applications in the United
States Patent and Trademark Office or any similar offices in the United States
or any other country, and all extensions or renewals thereof, including those
described in Schedule 3.6 hereto or to the applicable Supplement, (ii) all
goodwill associated therewith or symbolized by any of the foregoing and (iii)
all other assets, rights and interests that uniquely reflect or embody such
goodwill.
"UCC" means the Uniform Commercial Code as in effect from
time to time in the State of New York or, when the context implies, the Uniform
Commercial Code as in effect from time to time in any other applicable
jurisdiction.
Section 1.2 Other Definitions; Interpretation
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(a) Other Definitions. Capitalized terms used herein and not
otherwise defined herein, and the term "subsidiary" shall have the meanings
assigned to such terms in the Credit Agreement.
(b) Rules of Interpretation. The rules of interpretation
specified in Sections 1.2, 1.3 and 1.4 of the Credit Agreement shall be
applicable to this Security Agreement. All references herein to provisions of
the UCC shall include all successor provisions under any subsequent version or
amendment to any Article of the UCC.
Section 1.3 Grant of Security
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(a) As security for the payment or performance, as applicable, in
full of the Obligations, each Grantor hereby bargains, sells, conveys, assigns,
sets over, mortgages, pledges, hypothecates and transfers to the Administrative
Agent (and its successors and assigns), for the ratable benefit of the Secured
Parties, and hereby grants to the Administrative Agent (and its successors and
assigns), for the ratable benefit of the Secured Parties, a security interest
(the "Security Interest") in, all personal property and fixtures of such
Grantor, including all of such Grantor's right, title and interest in, to and
under the following, in each case whether now owned or existing or hereafter
acquired or arising and wherever located (all of which being hereinafter
collectively referred to as the "Collateral"): (i) Accounts, (ii) Chattel Paper,
(iii) Commercial Tort Claims, (iv) Documents, (v) Equipment, (vi) General
Intangibles, (vii) Goods, (viii) Instruments, (ix) Insurance, (x) Intellectual
Property, (xi) Inventory, (xii) Investment Related Property, (xiii) Letter of
Credit Rights, (xiv) Receivables and Receivables Records, (xv) to the extent not
otherwise included in clauses (i) through (xiv) of this Section, all Collateral
Records, Collateral Support and Supporting Obligations in respect of any of the
foregoing, (xvi) to the extent not otherwise included in clauses (i) through
(xv) of this Section, all other property in which a security interest may be
granted under the UCC or which may be delivered to and held by the
Administrative Agent pursuant to the terms hereof (including the account
referred to in Section 3.4(c)(ii) and all funds and other property from time to
time therein or credited thereto), and (xvii) to the extent not otherwise
included in clauses (i) through (xvi) of this Section, all Proceeds, products,
substitutions, accessions, rents and profits of or in respect of any of the
foregoing.
(b) Revisions to UCC. For the avoidance of doubt, it is expressly
understood and agreed that, to the extent the UCC is revised after the date
hereof such that the definition of any of the foregoing terms included in the
description or definition of the Collateral is changed, the parties hereto
desire that any property which is included in such changed definitions, but
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which would not otherwise be included in the Security Interest on the date
hereof, nevertheless be included in the Security Interest upon the effective
date of such revision. Notwithstanding the immediately preceding sentence, the
Security Interest is intended to apply immediately on the Effective Date to all
of the Collateral to the fullest extent permitted by applicable law, regardless
of whether any particular item of the Collateral was then subject to the UCC.
(c) Certain Limited Exclusions. Notwithstanding anything in this
Section 1.3 to the contrary, in no event shall the Collateral include, and no
Grantor shall be deemed to have granted a Security Interest in, (a) any right
under any lease, license or other contract or agreement constituting a General
Intangible, if the granting of a security interest therein or an assignment
thereof would violate any enforceable provision of such lease, license or other
contract or agreement, as applicable, provided that (A) each of the Grantors,
jointly with the other Grantors and severally, hereby represents and warrants to
the Administrative Agent and the other Secured Parties that such leases,
licenses and other contracts and agreements, taken as a whole, are not material
and (B) immediately upon such provision no longer being enforceable, the
Collateral shall include, and the Grantors shall be deemed to have granted a
Security Interest in, such right as if such provision had never been
enforceable, or (b) any of the outstanding capital stock of a "controlled
foreign corporation" as defined in the Code in excess of 65% of the voting power
of all classes of capital stock of such corporation entitled to vote.
ARTICLE 2. SECURITY FOR OBLIGATIONS; NO ASSUMPTION OF LIABILITY
Section 2.1 Security for Obligations
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This Security Agreement secures, and the Collateral is collateral
security for, the prompt and complete payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 262(a) of Title 11 of the
United States Code, or any similar provision of any other bankruptcy,
insolvency, receivership or other similar law), of all Obligations with respect
to each Grantor.
Section 2.2 No Assumption of Liability
--------------------------
Notwithstanding anything to the contrary herein, the Security
Interest is granted as security only and shall not subject the Administrative
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.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES AND COVENANTS
Section 3.1 Generally
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(a) Representations and Warranties. Each of the Grantors, jointly
with the other Grantors and severally, represents and warrants to the
Administrative Agent and the other Secured Parties that:
(i) As of the Applicable Date, (A) such Grantor's chief
executive office or its principal place of business is, and for the
preceding four months has been, located at the office indicated on
Schedule 3.1(a)(i) hereto or to the applicable Supplement, (B) such
Grantor's jurisdiction of
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organization is the jurisdiction indicated on Schedule 3.1(a)(i) hereto
or to the applicable Supplement, and (C) such Grantor's Federal
Employer Identification Number is as set forth on Schedule 3.1(a)(i)
hereto or to the applicable Supplement.
(ii) As of the Applicable Date, (A) such Grantor's full legal
name is as set forth on Schedule 3.1(a)(ii) hereto or to the applicable
Supplement and (B) such Grantor has not done in the preceding five
years, and does not do, business under any other name (including any
trade-name or fictitious business name), except for those names set
forth on Schedule 3.1(a)(ii) hereto or to the applicable Supplement.
(iii) Such Grantor has not within the five years preceding
the Applicable Date become bound (whether as a result of merger or
otherwise) as debtor under a security agreement entered into by another
Person, which has not theretofore been terminated.
(iv) Such Grantor has good and valid rights in, and title to,
the Collateral with respect to which it has purported to grant the
Security Interest, except for minor defects in title that do not
interfere with its ability to conduct its business as currently
conducted or to utilize such Collateral for its intended purposes, and
except for Liens expressly permitted pursuant to the Loan Documents.
(v) All actions and consents, including all filings, notices,
registrations and recordings, necessary or desirable to create, perfect
or ensure the first priority (subject only to Liens expressly permitted
by the Loan Documents) of the Security Interest in the Collateral owned
or held by it or on its behalf or for the exercise by the
Administrative Agent or any other Secured Party of any voting or other
rights provided for in this Security Agreement or the exercise of any
remedies in respect of any such Collateral have been made or obtained,
(A) except for (1) the filing of UCC financing statements naming such
Grantor as "debtor" and the Administrative Agent as "secured party", or
the making of other appropriate filings, registrations or recordings,
containing a description of such Collateral in each applicable
governmental, municipal or other office specified on Schedule 3.1(a)(v)
hereto or to the applicable Supplement and (2) the filing, registration
or recordation of fully executed security agreements in the form hereof
(or in such other form as shall be in all respects satisfactory to the
Administrative Agent) and containing a description of all such
Collateral consisting of Patents, Trademarks and Copyrights, together
with all other necessary documents, in each applicable governmental
registry or office, (B) except for any such Collateral as to which the
representations and warranties in this Section 3.1(a)(v) would not be
true solely by virtue of such Collateral having been used or disposed
of in a manner expressly permitted hereunder or under any other Loan
Document, and (C) except to the extent that such Security Interest may
not be perfected by filing, registering, recording or taking any other
action in the United States.
(vi) All Collateral owned or held by it or on its behalf is
owned or held by it or on its behalf free and clear of any Lien, except
for Permitted Encumbrances and other Liens expressly permitted by the
Loan Documents. It has not filed or consented to the filing of (A) any
financing statement or analogous document under the UCC or any other
applicable laws covering any such Collateral, (B) any assignment in
which it assigns any such Collateral or any security agreement or
similar instrument covering any such Collateral with the United States
Patent and Trademark Office or the United States Copyright Office, or
(C) any assignment in which it assigns any such
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Collateral or any security agreement or similar instrument covering any
such Collateral with any foreign governmental, municipal or other
office, in each case, which financing statement, analogous document,
assignment or other instrument, as applicable, is still in effect,
except for Liens expressly permitted by the Loan Documents.
(vii) The Security Interest in the Collateral owned or held
by it or on its behalf (A) is effective to vest in the Administrative
Agent, on behalf of the Secured Parties, the rights of the
Administrative Agent in such Collateral as set forth herein and (B)
does not violate Regulation T, U or X as of the Applicable Date.
(b) Covenants and Agreements. Each Grantor hereby covenants and
agrees as follows:
(i) It will promptly notify the Administrative Agent in
writing of any change (A) in its legal name or in any trade name used
to identify it in the conduct of its business or in the ownership of
its properties, (B) in the location of its chief executive office,
principal place of business, any office in which it maintains books or
records relating to any of the Collateral owned or held by it or on its
behalf or, except to the extent permitted by Section 3.1(b)(vii) or
Section 3.2, any office or facility at which any such Collateral is
located (including the establishment of any such new office or
facility), (C) in its identity or legal or organizational structure or
its jurisdiction of formation, or (D) in its Federal Taxpayer
Identification Number. It 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 Administrative Agent to continue at all times following
such change to have a valid, legal and perfected security interest in
all the Collateral with the priority required hereby.
(ii) It shall maintain, at its own cost and expense, such
complete and accurate Records with respect to the Collateral owned or
held by it or on its behalf as is 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 it is
engaged, but in any event to include complete accounting Records
indicating all payments and proceeds received with respect to any part
of such Collateral, and, at such time or times as the Administrative
Agent may reasonably request, promptly to prepare and deliver to the
Administrative Agent a duly certified schedule or schedules in form and
detail satisfactory to the Administrative Agent showing the identity
and amount of any and all such Collateral.
(iii) It shall, at its own cost and expense, take any and all
actions necessary to defend title to the Collateral owned or held by it
or on its behalf against all Persons and to defend the Security
Interest in such Collateral and the priority thereof against any Lien
or other interest not expressly permitted by the Loan Documents, and in
furtherance thereof, it shall not take, or permit to be taken, any
action not otherwise expressly permitted by the Loan Documents that
could impair the Security Interest or the priority thereof or any
Secured Party's rights in or to such Collateral.
(iv) The Administrative Agent and such Persons as the
Administrative Agent may designate shall have the right, at the cost
and expense of such Grantor, to inspect all of its Records (and to make
extracts and copies from such Records), to discuss its affairs with its
officers and independent
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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 owned or held by or on behalf of
such Grantor, including, in the case of Receivables, Pledged Debt,
General Intangibles, Commercial Tort Claims or Collateral in the
possession of any third person, by contacting Account Debtors, contract
parties or other obligors thereon or any third person possessing such
Collateral for the purpose of making such a verification. The
Administrative Agent shall have the absolute right to share on a
confidential basis any information it gains from such inspection or
verification with any Secured Party.
(v) At its option, the Administrative Agent may discharge
past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Collateral
owned or held by or on behalf of such Grantor, and not permitted by the
Loan Documents, and may pay for the maintenance and preservation of
such Collateral to the extent such Grantor fails to do so as required
by the Loan Documents, and such Grantor agrees, jointly with the other
Grantors and severally, to reimburse the Administrative Agent on demand
for any payment made or any expense incurred by the Administrative
Agent pursuant to the foregoing authorization; provided, however, that
nothing in this paragraph shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the
Administrative Agent or any other 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.
(vi) It 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 owned
or held by it or on its behalf, all in accordance with the terms and
conditions thereof, and it agrees, jointly with the other Grantors and
severally, to indemnify and hold harmless the Administrative Agent and
the other Secured Parties from and against any and all liability for
such performance.
(vii) It shall not make, or permit to be made, an assignment,
pledge or hypothecation of the Collateral owned or held by it or on its
behalf, or grant any other Lien in respect of such Collateral, except
as expressly permitted by the Loan Documents. Except for Liens
expressly permitted by the Loan Documents, it shall not make or permit
to be made any transfer of such Collateral, and it shall remain at all
times in possession of such Collateral and the direct owner,
beneficially and of record, of the Pledged Equity Interests included in
such Collateral, except that (A) Inventory may be sold in the ordinary
course of business and (B) unless and until the Administrative Agent
shall notify it that an Event of Default shall have occurred and be
continuing and that, during the continuance thereof, it shall not sell,
convey, lease, assign, transfer or otherwise dispose of any such
Collateral (which notice may be given by telephone if promptly
confirmed in writing), it may use and dispose of such Collateral in any
lawful manner not inconsistent with the provisions of this Security
Agreement or any other Loan Document.
(viii) It shall, at its own cost and expense, maintain or
cause to be maintained insurance covering (A) physical loss or damage
to the Collateral owned or held by it or on its behalf against all
risks and (B) liability arising from the use or intended use, or
otherwise attributable or relating to, such Collateral, in each case in
accordance with Section 6.10 of the Credit Agreement. The policies
covering such insurance (1) shall, in the
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case of each policy under clause (A) of the immediately preceding
sentence, contain a standard loss payable clause and shall name the
Administrative Agent or its agent as sole loss payee in respect of each
claim relating to such Collateral and resulting in a payment
thereunder, (2) shall, in the case of each policy under clause (B) of
the immediately preceding sentence, be indorsed to provide, in respect
of the interests of the Administrative Agent and the other Secured
Parties, that the Administrative Agent shall be an additional insured,
and (3) shall, in the case of each policy under such clauses (A) and
(B), provide that 30 days' prior written notice of any cancellation or
modification thereof or any reduction of amounts payable thereunder
shall be given to the Administrative Agent, and in the event that such
Grantor at any time or times shall fail to pay any premium in whole or
part relating thereto, the Administrative Agent may, in its sole
discretion, pay such premium. Such Grantor irrevocably makes,
constitutes and appoints the Administrative Agent (and all officers,
employees or agents designated by the Administrative 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 such 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 such 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 Administrative 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 Administrative Agent deems advisable. All sums disbursed
by the Administrative Agent in connection with this subsection,
including reasonable attorneys' fees and expenses, court costs,
expenses and other charges relating thereto, shall be payable, upon
demand, by such Grantor to the Administrative Agent and shall be
additional Obligations secured hereby.
Section 3.2 Equipment and Inventory
-----------------------
Each of the Grantors, jointly with the other Grantors and
severally, represents and warrants to the Administrative Agent and the other
Secured Parties that, as of the Applicable Date, all of the Equipment and
Inventory included in the Collateral owned or held by it or on its behalf is
kept only at the locations specified on Schedule 3.2 hereto or to the applicable
Supplement. In addition, each Grantor covenants and agrees that it shall not
permit any Equipment or Inventory owned or held by it or on its behalf to be in
the possession or control of any warehouseman, bailee, agent or processor for a
period of greater than thirty (30) consecutive days, unless such warehouseman,
bailee, agent or processor shall have been notified of the Security Interest and
shall have agreed in writing to hold such Equipment or Inventory subject to the
Security Interest and the instructions of the Administrative Agent and to waive
and release any Lien held by it with respect to such Equipment or Inventory,
whether arising by operation of law or otherwise.
Section 3.3 Receivables
-----------------------
Each Grantor hereby covenants and agrees that:
(a) It shall mark conspicuously, in form and manner reasonably
satisfactory to the Administrative Agent, all Chattel Paper, Instruments and
other evidence of any Receivables owned or held by it or on its behalf (other
than any delivered to the Administrative Agent as provided herein), as well as
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the related Receivables Records, with an appropriate reference to the fact that
the Administrative Agent has a security interest therein.
(b) It will not, without the Administrative Agent's prior written
consent (which consent shall not be unreasonably withheld), grant any extension
of the time of payment of any such Receivable, compromise, compound or settle
the same for less than the full amount thereof, release, wholly or partly, any
Supporting Obligation or Collateral Support relating thereto, or allow any
credit or discount whatsoever thereon, other than extensions, credits,
discounts, releases, compromises or settlements granted or made in the ordinary
course of business and consistent with its current practices and in accordance
with such practices reasonably believed by such Grantor to be prudent.
(c) Except as otherwise provided in this Section, it shall
continue to collect all amounts due or to become due to it under all such
Receivables and any Supporting Obligations or Collateral Support relating
thereto, and diligently exercise each material right it may have thereunder, in
each case at its own cost and expense, and in connection with such collections
and exercise, it shall, upon the occurrence and during the continuance of an
Event of Default, take such action as it or the Administrative Agent may
reasonably deem necessary. Notwithstanding the foregoing, the Administrative
Agent shall have the right at any time after the occurrence and during the
continuance of an Event of Default to notify, or require such Grantor to notify,
any Account Debtor with respect to any such Receivable, Supporting Obligation or
Collateral Support of the Administrative Agent's security interest therein, and
in addition, at any time during the continuation of an Event of Default, the
Administrative Agent may: (i) direct such Account Debtor to make payment of all
amounts due or to become due to such Grantor thereunder directly to the
Administrative Agent and (ii) enforce, at the cost and expense of such Grantor,
collection thereof and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor would be able
to have done. If the Administrative Agent notifies such Grantor that it has
elected to collect any such Receivable, Supporting Obligation or Collateral
Support in accordance with the preceding sentence, any payments thereof received
by such Grantor shall not be commingled with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Administrative Agent hereunder and shall be forthwith delivered
to the Administrative Agent in the same form as so received (with any necessary
indorsement), and such Grantor shall not grant any extension of the time of
payment thereof, compromise, compound or settle the same for less than the full
amount thereof, release the same, wholly or partly, or allow any credit or
discount whatsoever thereon.
Section 3.4 Investment Related Property
---------------------------
(a) Representations and Warranties. Each of the Grantors, jointly
with the other Grantors and severally, represents and warrants to the
Administrative Agent and the other Secured Parties that Schedule 3.4 hereto or
to the applicable Supplement sets forth, as of the Applicable Date, all of the
Pledged Debt and Pledged Equity Interests included in the Collateral owned or
held by or on behalf of such Grantor, and that all such Pledged Equity Interests
have been duly authorized and validly issued and are fully paid and
nonassessable and such Grantor is the direct owner, beneficially and of record,
thereof.
(b) Registration in Nominee Name; Denominations. Each Grantor
hereby agrees that (i) without limiting Article 5, the Administrative Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold any Investment Related Property in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
applicable
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Grantor, endorsed or assigned, where applicable, in blank or in favor of the
Administrative Agent, (ii) at the Administrative Agent's request, such Grantor
will promptly give to the Administrative Agent copies of any material notices or
other communications received by it with respect to any Investment Related
Property registered in its name, and (iii) the Administrative Agent shall at all
times have the right to exchange any certificates, instruments or other
documents representing or evidencing any Investment Related Property owned or
held by or on behalf of such Grantor for certificates, instruments or other
documents of smaller or larger denominations for any purpose consistent with
this Security Agreement.
(c) Voting and Distributions.
(i) Unless and until an Event of Default shall have occurred
and be continuing:
(A) Each Grantor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring to an
owner of the Investment Related Property, or any part thereof, for any
purpose consistent with the terms of this Security Agreement and the
other Loan Documents; provided, however, that such Grantor will not be
entitled to exercise any such right if the result thereof could
materially and adversely affect the rights inuring to a holder of the
Investment Related Property or the rights and remedies of any of the
Secured Parties under this Security Agreement or any other Loan
Document or the ability of any of the Secured Parties to exercise the
same.
(B) The Administrative Agent shall execute and deliver to
each Grantor, or cause to be executed and delivered to each Grantor,
all such proxies, powers of attorney and other instruments as such
Grantor may reasonably request for the purpose of enabling it to
exercise the voting and/or consensual rights and powers it is entitled
to exercise pursuant to subsection (c)(i)(A) and to receive the cash
payments it is entitled to receive pursuant to subsection (c)(i)(C).
(C) Each Grantor shall be entitled to receive, retain and
use any and all cash dividends, interest and principal paid on the
Investment Related Property owned or held by it or on its behalf to the
extent and only to the extent that such cash dividends, interest and
principal are not prohibited by, and otherwise paid in accordance with,
the terms and conditions of the Credit Agreement, the other Loan
Documents and applicable laws. All non-cash dividends, interest and
principal, and all dividends, interest and principal paid or payable in
cash or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and
all other distributions (other than distributions referred to in the
preceding sentence) made on or in respect of the Investment Related
Property, whether paid or payable in cash or otherwise, whether
resulting from a subdivision, combination or reclassification of the
outstanding Pledged Equity Interests in any issuer of any Investment
Related Property or received in exchange for any Investment Related
Property, or any part thereof, or in redemption thereof, or as a result
of any merger, consolidation, acquisition or other exchange of assets
to which such issuer may be a party or otherwise, shall be and become
part of the Collateral, and, if received by such Grantor, shall not be
commingled with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of
the Administrative Agent hereunder and shall be forthwith delivered to
the Administrative Agent in the same form as so received (with any
necessary endorsement).
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(ii) Without limiting the generality of the foregoing, upon
the occurrence and during the continuance of an Event of Default:
(A) All rights of each Grantor to dividends, interest or
principal that it is authorized to receive pursuant to subsection
(c)(i)(C) shall cease, and all such rights shall thereupon become
vested in the Administrative Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends,
interest or principal, as applicable. All dividends, interest and
principal received by or on behalf of any Grantor contrary to the
provisions of this Section shall be held in trust for the benefit of
the Administrative Agent, shall be segregated from other property or
funds of such Grantor and shall be forthwith delivered to the
Administrative Agent upon demand in the same form as so received (with
any necessary endorsement). Any and all money and other property paid
over to or received by the Administrative Agent pursuant to the
provisions of this subsection (c)(ii)(A) shall be retained by the
Administrative Agent in an account to be established in the name of the
Administrative Agent, for the ratable benefit of the Secured Parties,
upon receipt of such money or other property and shall be applied in
accordance with the provisions of Section 6.2. Subject to the
provisions of this subsection (c)(ii)(A), such account shall at all
times be under the sole dominion and control of the Administrative
Agent, and the Administrative Agent shall at all times have the sole
right to make withdrawals therefrom and to exercise all rights with
respect to the funds and other property from time to time therein or
credited thereto as set forth in the Loan Documents. After all Events
of Default have been cured or waived, the Administrative Agent shall,
within five Business Days after all such Events of Default have been
cured or waived, repay to the applicable Grantor all cash dividends,
interest and principal (without interest) that such Grantor would
otherwise be permitted to retain pursuant to the terms of subsection
(c)(i)(C) and which remain in such account.
(B) All rights of each Grantor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
subsection (c)(i)(A), and the obligations of the Administrative Agent
under subsection (c)(i)(B), shall cease, and all such rights shall
thereupon become vested in the Administrative Agent, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers, provided that, unless otherwise directed
by the Required Lenders, the Administrative Agent shall have the right
from time to time following and during the continuance of an Event of
Default to permit such Grantor to exercise such rights. After all
Events of Default have been cured or waived, the applicable Grantor
will have the right to exercise the voting and consensual rights and
powers that it would otherwise be entitled to exercise pursuant to the
terms of subsection (c)(i)(A).
Section 3.5 Letter of Credit Rights
-----------------------
Each of the Grantors, jointly with the other Grantors and
severally, represents and warrants to the Administrative Agent and the other
Secured Parties that Schedule 3.5 hereto or to the applicable Supplement sets
forth, as of the Applicable Date, each letter of credit giving rise to a Letter
of Credit Right included in the Collateral owned or held by or on behalf of such
Grantor.
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Section 3.6 Intellectual Property Collateral
--------------------------------
(a) Representations and Warranties. Each of the Grantors, jointly
with the other Grantors and severally, represents and warrants to the
Administrative Agent and the other Secured Parties that Schedule 3.6 hereto or
to the applicable Supplement sets forth, as of the Applicable Date, all of the
Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights, Copyright
Licenses, Trade Secret Licenses and Domain Names included in the Collateral
owned or held by or on behalf of such Grantor.
(b) Covenants and Agreements. Each Grantor hereby covenants and
agrees as follows:
(i) It will not, nor will it permit any of its licensees (or
sublicensees) to, do any act, or omit to do any act, whereby any Patent
that is related to the conduct of its business may become invalidated
or dedicated to the public, and 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.
(ii) It will (either directly or through its licensees or its
sublicensees), for each Trademark that is related to the conduct of its
business, (A) maintain such Trademark in full force free from any claim
of abandonment or invalidity for non-use, (B) maintain the quality of
products and services offered under such Trademark, (C) display such
Trademark with notice of Federal or other analogous registration to the
extent necessary and sufficient to establish and preserve its rights
under applicable law, and (D) not knowingly use or knowingly permit the
use of such Trademark in violation of any third party's valid and legal
rights.
(iii) It will (either directly or through its licensees or
its sublicensees), for each work covered by a Copyright that is related
to the conduct of its business, 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.
(iv) It will promptly notify the Administrative Agent in
writing if it knows or has reason to know that any Intellectual
Property 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 or the United States Copyright Office, or any similar
offices or tribunals in the United States or any other country)
regarding such Grantor's ownership of any such Intellectual Property,
its right to register the same, or to keep and maintain the same.
(v) In no event shall it, either directly or through any
agent, employee, licensee or designee, file an application for any
Intellectual Property with the United States Patent and Trademark
Office, the United States Copyright Office or any similar offices in
the United States or any other country, unless it promptly notifies the
Administrative Agent in writing thereof and, upon request of the
Administrative Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Administrative Agent may
request to evidence the Administrative Agent's security interest in
- 16 -
such Intellectual Property, and such Grantor hereby appoints the
Administrative 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.
(vi) It will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar
offices or tribunals in the United States or any other country, to
maintain and pursue each material application relating to the
Intellectual Property owned or held by it or on its behalf (and to
obtain the relevant grant or registration) and to maintain each issued
Patent and each registered Trademark and Copyright that is material to
the conduct of its business, including timely filings of applications
for renewal, affidavits of use, affidavits of incontestability and
payment of maintenance fees, and, if consistent, in good faith, with
good business judgment, to initiate opposition, interference and
cancellation proceedings against third parties. In the event that it
has reason to believe that any Intellectual Property material to the
conduct of its business has been or is about to be infringed,
misappropriated or diluted by a third party, it promptly shall notify
the Administrative Agent in writing 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 Intellectual
Property.
(vii) During the continuance of an Event of Default, it
shall use its best efforts to obtain all requisite consents or
approvals by the licenser of each License to effect the assignment (as
collateral security) of all of its right, title and interest thereunder
to the Administrative Agent or its designee.
(viii) It shall take all steps reasonably necessary to
protect the secrecy of all Trade Secrets relating to the products and
services sold or delivered under or in connection with the Intellectual
Property owned or held by or on its behalf, including entering into
confidentiality agreements with employees and labeling and restricting
access to secret information and documents.
(ix) It shall continue to collect all amounts due or to
become due to such Grantor under all Intellectual Property, and
diligently exercise each material right it may have thereunder, in each
case at its own cost and expense, and in connection with such
collections and exercise, it shall, upon the occurrence and during the
continuance of an Event of Default, take such action as it or the
Administrative Agent may reasonably deem necessary. Notwithstanding the
foregoing, the Administrative Agent shall have the right at any time
after the occurrence and during the continuance of an Event of Default
to notify, or require such Grantor to notify, any relevant obligors
with respect to such amounts of the Administrative Agent's security
interest therein.
Section 3.7 Commercial Tort Claims
----------------------
(a) Representations and Warranties. Each of the Grantors, jointly
with the other Grantors and severally, represents and warrants to the
Administrative Agent and the other Secured Parties that Schedule 3.7 hereto or
to the applicable Supplement sets forth, as of the Applicable Date, all
Commercial Tort Claims made by it or on its behalf or to which it otherwise has
any right, title or interest.
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(b) Covenants and Agreements. Each Grantor hereby covenants and
agrees that promptly after the same shall have been commenced, written notice of
any Commercial Tort Claim and any judgment, settlement or other disposition
thereof.
ARTICLE 4. FURTHER ASSURANCES
Each Grantor hereby covenants and agrees, at its own cost and
expense, to execute, acknowledge, deliver and/or cause to be duly filed all such
further agreements, instruments and other documents (including favorable legal
opinions in connection with any Transaction), and take all such further actions,
that the Administrative Agent may from time to time reasonably request to
preserve, protect and perfect (including as a result of the effectiveness of
Revised Article 9 in any jurisdiction or any other change in applicable law) the
Security Interest granted by it and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with its
execution and delivery of this Security Agreement, the granting by it of the
Security Interest and the filing of any financing statements or other documents
in connection herewith or therewith. In addition, to the extent permitted by
applicable law, each Grantor hereby irrevocably authorizes the Administrative
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral owned or held by it or on
its behalf without the signature of such Grantor and agrees that a photographic
or other reproduction of this Security Agreement or of a financing statement
signed by such Grantor shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions. Each Grantor hereby
further irrevocably authorizes the Administrative Agent to file a Record or
Records, including financing statements, in all jurisdictions and with all
filing offices that the Administrative Agent may determine, in its sole and
absolute discretion, are necessary, advisable or prudent to perfect the Security
Interest granted by it and agrees that such financing statements may describe
the Collateral owned or held by it or on its behalf in the same manner as
described herein or may contain an indication or description of collateral that
describes such property in any other manner that the Administrative Agent may
determine, in its sole and absolute discretion, is necessary, advisable or
prudent to perfect the Security Interest granted by such Grantor, including
describing such property as "all assets" or "all personal property."
ARTICLE 5. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT
Each Grantor hereby appoints the Administrative Agent as its true
and lawful agent and attorney-in-fact for the purpose of carrying out the
provisions of this Security Agreement and taking any action and executing any
instrument that the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest, and without limiting the generality of the foregoing, the
Administrative Agent shall have the right, with power of substitution for such
Grantor and in such Grantor's name or otherwise, for the use and benefit of the
Administrative Agent and the other Secured Parties, upon the occurrence and
during the continuance of an Event of Default and at such other time or times
permitted by the Loan Documents, (i) 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 owned or held by it or on its behalf or
any part thereof; (ii) to demand, collect, receive payment of, give receipt for,
and give discharges and releases of, any of such Collateral; (iii) to sign the
name of such Grantor on any invoice or bill of lading relating to any of such
Collateral; (iv) to send verifications of Receivables owned or held by it or on
its behalf to any Account Debtor; (v) 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 any of the Collateral owned or
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held by it or on its behalf or to enforce any rights in respect of any of such
Collateral; (vi) to settle, compromise, compound, adjust or defend any actions,
suits or proceedings relating to any of such Collateral; (vii) to notify, or to
require such Grantor to notify, Account Debtors and other obligors to make
payment directly to the Administrative Agent, and (viii) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with any
of such Collateral, and to do all other acts and things necessary to carry out
the purposes of this Security Agreement, as fully and completely as though the
Administrative Agent were the absolute owner of such Collateral for all
purposes; provided, however, that nothing herein contained shall be construed as
requiring or obligating the Administrative Agent or any other Secured Party to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Administrative Agent or any other Secured Party, or
to present or file any claim or notice, or to take any action with respect to
any of the Collateral 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
Administrative Agent or any other Secured Party with respect to any of the
Collateral shall give rise to any defense, counterclaim or offset in favor of
such Grantor or to any claim or action against the Administrative Agent or any
other Secured Party. The provisions of this Article shall in no event relieve
any Grantor of any of its obligations hereunder or under the other Loan
Documents with respect to any of the Collateral or impose any obligation on the
Administrative Agent or any other Secured Party to proceed in any particular
manner with respect to any of the Collateral, or in any way limit the exercise
by the Administrative Agent or any other Secured Party of any other or further
right that it may have on the date of this Security Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise. Any sale
pursuant to the provisions of this paragraph shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-610(b) of the UCC as
in effect in the State of New York or its equivalent in other jurisdictions (or
any successor provision).
ARTICLE 6. REMEDIES UPON DEFAULT
Section 6.1 Remedies Generally
------------------
(a) General Rights. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral owned or held by it or on its behalf to the Administrative Agent on
demand, and it is agreed that the Administrative Agent shall have the right to
take any of or all the following actions at the same or different times: (i)
with respect to any Collateral consisting of Intellectual Property or Commercial
Tort Claims, on demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any such Collateral by the applicable Grantors to the
Administrative Agent, or, in the case of Intellectual Property, to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Administrative Agent shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained), and (ii) with or without legal process
and with or without prior notice or demand for performance, to take possession
of the Collateral owned or held by it or on its behalf and without liability for
trespass to enter any premises where such Collateral may be located for the
purpose of taking possession of or removing such Collateral and, generally, to
exercise any and all rights afforded to a secured party under the UCC or other
applicable law. Without limiting the generality of the foregoing, each Grantor
agrees that the Administrative Agent shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of any of
the Collateral owned or held by or on behalf of such Grantor, 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 Administrative Agent shall deem
- 19 -
appropriate. The Administrative Agent shall be irrevocably authorized at any
such sale of such Collateral constituting securities (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 such 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 Administrative 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 the applicable
Grantor, and such Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay, valuation 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.
(b) Sale of Collateral. The Administrative Agent shall give each
Grantor ten days' written notice (which such Grantor agrees is reasonable notice
within the meaning of Sections 9-611 and 9-612 of the UCC as in effect in the
State of New York or its equivalent in other jurisdictions (or any successor
provisions)), of the Administrative Agent's intention to make any sale of any of
the Collateral owned or held by or on behalf of such Grantor. 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 such
Collateral 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 Administrative Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral to be sold may be
sold in one lot as an entirety or in separate parcels, as the Administrative
Agent may (in its sole and absolute discretion) determine. The Administrative
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 Administrative 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 any of the Collateral is
made on credit or for future delivery, the Collateral so sold may be retained by
the Administrative Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Administrative 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 applicable
law, private) sale made pursuant to this Section, any Secured Party may bid for
or purchase, free (to the extent permitted by applicable law) from any right of
redemption, stay, valuation or appraisal on the part of such Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
any of the Collateral offered for sale and may make payment on account thereof
by using any claim then due and payable to such Secured Party from such 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 such Grantor therefor. For purposes hereof,
(i) a written agreement to purchase any of the Collateral shall be treated as a
sale thereof, (ii) the Administrative Agent shall be free to carry out such sale
pursuant to such agreement, and (iii) no Grantor shall be entitled to the return
of any of the Collateral subject thereto, notwithstanding the fact that after
the Administrative 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
Administrative Agent may proceed by a suit or suits at law or in equity to
foreclose upon any of the Collateral and to sell any of the Collateral pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
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pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Article shall be deemed to conform to the commercially
reasonable standards as provided in Section 9-610(b) of the UCC as in effect in
the State of New York or its equivalent in other jurisdictions (or any successor
provisions). Without limiting the generality of the foregoing, each Grantor
agrees as follows: (A) if the proceeds of any sale of the Collateral owned or
held by it or on its behalf pursuant to this Article are insufficient to pay all
the Obligations, it shall be liable for the resulting deficiency and the fees,
charges and disbursements of any counsel employed by the Administrative Agent or
any other Secured Party to collect such deficiency, (B) it hereby waives any
claims against the Administrative Agent arising by reason of the fact that the
price at which any such Collateral may have been sold at any private sale
pursuant to this Article was less than the price that might have been obtained
at a public sale, even if the Administrative Agent accepts the first offer
received and does not offer such Collateral to more than one offeree, (C) there
is no adequate remedy at law for failure by it to comply with the provisions of
this Section and that such failure would not be adequately compensible in
damages, and therefore agrees that its agreements in this Section may be
specifically enforced, (D) the Administrative Agent may sell any such Collateral
without giving any warranties as to such Collateral, and the Administrative
Agent may specifically disclaim any warranties of title or the like, and (E) the
Administrative Agent shall have no obligation to marshall any such Collateral.
Section 6.2 Application of Proceeds of Sale
-------------------------------
The Administrative Agent shall apply the proceeds of any
collection or sale of the Collateral, as well as any Collateral consisting of
cash (except as otherwise provided in Section 6.11 of the Credit Agreement,
Section 3.7(b)(v)), as follows:
FIRST, to the payment of all reasonable costs and expenses
incurred by the Administrative 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 Security Agreement, any other
Loan Document or any of the Obligations, including all out-of-pocket
court costs and the reasonable fees and expenses of its agents and
legal counsel, the repayment of all advances made by the Administrative
Agent hereunder or under any other Loan Document on behalf of any
Grantor and any other reasonable out-of-pocket 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 applicable Grantor, its successors or assigns,
or as a court of competent jurisdiction may otherwise direct.
The Administrative Agent shall have sole and absolute discretion as to the time
of application of any such proceeds, moneys or balances in accordance with this
Security Agreement. Upon any sale of the Collateral by the Administrative Agent
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the purchase money by the Administrative 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 Administrative Agent or such officer or be answerable in any way for
the misapplication thereof.
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Section 6.3 Investment Related Property
---------------------------
In view of the position of each Grantor in relation to the
Investment Related Property, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal securities laws") with respect to any
disposition of the Investment Related Property permitted hereunder. Each Grantor
understands that compliance with the Federal securities laws might very strictly
limit the course of conduct of the Administrative Agent if the Administrative
Agent were to attempt to dispose of all or any part of the Investment Related
Property, and might also limit the extent to which or the manner in which any
subsequent transferee of any Investment Related Property could dispose of the
same. Similarly, there may be other legal restrictions or limitations affecting
the Administrative Agent in any attempt to dispose of all or part of the
Investment Related Property under applicable Blue Sky or other state securities
laws or similar laws analogous in purpose or effect. Each Grantor recognizes
that in light of such restrictions and limitations the Administrative Agent may,
with respect to any sale of the Investment Related Property, limit the
purchasers to those who will agree, among other things, to acquire such
Investment Related Property for their own account, for investment, and not with
a view to the distribution or resale thereof. Each Grantor acknowledges and
agrees that in light of such restrictions and limitations, the Administrative
Agent, in its sole and absolute discretion, (i) may proceed to make such a sale
whether or not a registration statement for the purpose of registering such
Investment Related Property, or any part thereof, shall have been filed under
the Federal securities laws and (ii) may approach and negotiate with a single
potential purchaser to effect such sale. Each Grantor acknowledges and agrees
that any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Administrative Agent shall incur no responsibility
or liability for selling all or any part of the Investment Related Property at a
price that the Administrative Agent, in its sole and absolute discretion, may in
good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might have been realized if the
sale were deferred until after registration as aforesaid or if more than a
single purchaser were approached. The provisions of this Section will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Administrative Agent sells any such Investment Related Property.
Section 6.4 Grant of License to Use Intellectual Property
---------------------------------------------
For the purpose of enabling the Administrative Agent to exercise
rights and remedies under this Article, at such time as the Administrative Agent
shall be lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to the Administrative Agent an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor)
to use, license or sub-license any of the Collateral consisting of Intellectual
Property now owned or held or hereafter acquired or held by or on behalf of 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 Administrative
Agent shall be exercised, at the option of the Administrative 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 Administrative
Agent in accordance herewith shall be binding upon such Grantor notwithstanding
any subsequent cure of an Event of Default. Any royalties and other payments
received by the Administrative Agent shall be applied in accordance with Section
6.2.
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Section 6.5 Registration, etc.
------------------
Each Grantor agrees that, upon the occurrence and during the
continuance of an Event of Default, if for any reason the Administrative Agent
desires to sell any of the Investment Related Property owned or held by or on
behalf of such Grantor at a public sale, it will, at any time and from time to
time, upon the written request of the Administrative Agent, use its best efforts
to take or to cause, where applicable, the issuer of such Investment Related
Property to take such action and prepare, distribute and/or file such documents,
as are required or advisable in the reasonable opinion of counsel for the
Administrative Agent to permit the public sale of such Investment Related
Property. Each Grantor further agrees to indemnify, defend and hold harmless the
Administrative Agent, each other Secured Party, any underwriter and their
respective officers, directors, affiliates and controlling Persons from and
against all loss, liability, expenses, costs of counsel (including reasonable
fees and expenses of legal counsel), and claims (including the costs of
investigation) that they may incur, insofar as such loss, liability, expense or
claim, as applicable, relates to such Grantor or any of its property, and arises
out of or is based upon any alleged untrue statement of a material fact
contained in any prospectus (or any amendment or supplement thereto) or in any
notification or offering circular, or arises out of or is based upon any alleged
omission to state a material fact required to be stated therein or necessary to
make the statements in any thereof not misleading, except insofar as the same
may have been caused by any untrue statement or omission based upon information
furnished in writing to such Grantor or the issuer of such Investment Related
Property, as applicable, by the Administrative Agent or any other Secured Party
expressly for use therein. Each Grantor further agrees, upon such written
request referred to above, to use its best efforts to qualify, file or register,
or cause, where applicable, the issuer of such Investment Related Property to
qualify, file or register, any of the Investment Related Property owned or held
by or on behalf of such Grantor under the Blue Sky or other securities laws of
such states as may be requested by the Administrative Agent and keep effective,
or cause to be kept effective, all such qualifications, filings or
registrations. Each Grantor will bear all costs and expenses of carrying out its
obligations under this Section. Each Grantor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section may be
specifically enforced.
ARTICLE 7. REIMBURSEMENT OF ADMINISTRATIVE AGENT
Each Grantor agrees, jointly with the other Grantors and
severally, to pay to the Administrative Agent the amount of any and all
reasonable out-of-pocket expenses, including the fees, other charges and
disbursements of counsel and of any experts or agents, that the Administrative
Agent may incur in connection with (i) the administration of this Security
Agreement relating to such Grantor or any of its property, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral owned or held by or on behalf of such Grantor, (iii) the
exercise, enforcement or protection of any of the rights of the Administrative
Agent hereunder relating to such Grantor or any of its property, or (iv) the
failure by such Grantor to perform or observe any of the provisions hereof.
Without limitation of its indemnification obligations under the other Loan
Documents, each of the Grantors agrees, jointly with the other Grantors and
severally, to indemnify the Administrative Agent and the other Indemnitees
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related out-of-pocket expenses, including reasonable
counsel fees, other charges and disbursements, incurred by or asserted against
any Indemnitee arising out of, in any way connected with, or as a result of (a)
the execution or delivery by such Grantor of this Security Agreement or any
other Loan Document or any agreement or instrument contemplated hereby or
thereby, or the performance by such Grantor of its obligations under the Loan
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Documents and the other transactions contemplated thereby or (b) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
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. Any amounts
payable as provided hereunder shall be additional Obligations secured hereby and
by the other Security Documents. The provisions of this Section shall remain
operative and in full force and effect regardless of the termination of this
Security Agreement or any other Loan Document, the consummation of the
transactions contemplated hereby or thereby, the repayment of any of the
Obligations, the invalidity or unenforceability of any term or provision of this
Security Agreement or any other Loan Document or any investigation made by or on
behalf of the Administrative Agent or any other Secured Party. All amounts due
under this Section shall be payable within ten days of written demand therefor
and shall bear interest at the rate specified in Section 3.1 of the Credit
Agreement.
ARTICLE 8. WAIVERS; AMENDMENT
No failure or delay of the Administrative 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 Administrative Agent and the other Secured Parties hereunder
and 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 provision of
this Security 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 this Section, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice or
demand on any Grantor in any case shall entitle such Grantor to any other or
further notice or demand in similar or other circumstances. Neither this
Security Agreement nor any provision hereof may be waived, amended, supplemented
or otherwise modified, or any departure therefrom consented to, except pursuant
to an agreement or agreements in writing entered into by, between or among the
Administrative Agent and the Grantor or Grantors with respect to which such
waiver, amendment, other modification or consent is to apply, subject to any
consent required in accordance with Section 10.2 of the Credit Agreement.
ARTICLE 9. SECURITY INTEREST ABSOLUTE
All rights of the Administrative Agent hereunder, the Security
Interest and all obligations of each Grantor hereunder shall be absolute and
unconditional irrespective of (i) 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, (ii) 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 waiver, amendment,
supplement or other modification of, or any consent to any departure from, the
Credit Agreement, any other Loan Document or any other agreement or instrument
relating to any of the foregoing, (iii) any exchange, release or non-perfection
of any Lien on any other collateral, or any release or waiver, amendment,
supplement or other modification of, or consent under, or departure from, any
guaranty, securing or guaranteeing all or any of the Obligations, or (iv) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or in respect of this
Security Agreement or any other Loan Document.
- 24 -
ARTICLE 10. TERMINATION; RELEASE
This Security Agreement and the Security Interest shall terminate
when all the Obligations have been finally and indefeasibly paid in full in
cash, the Credit Parties have no further commitment to lend or otherwise extend
credit under the Credit Agreement, and all Secured Hedging Agreements have been
terminated. Upon (i) any sale, transfer or other disposition permitted by the
Loan Documents (other than any sale, transfer or other disposition of any
Collateral that would, immediately after giving effect thereto, continue to be
Collateral but for the release of the security interest therein pursuant to this
clause) or (ii) the effectiveness of any written consent to the release of the
Security Interest in any Collateral pursuant to Section 10.2 of the Credit
Agreement, the Security Interest in such Collateral shall be automatically
released. In addition, if any of the Pledged Equity Interests in any Subsidiary
are sold, transferred or otherwise disposed of pursuant to a transaction
permitted by the Loan Documents and, immediately after giving effect thereto,
such Subsidiary or subsidiary, as applicable, would no longer be a Subsidiary or
a subsidiary, as applicable, then the obligations of such Subsidiary or
subsidiary, as applicable, under this Security Agreement and the Security
Interest in the Collateral owned or held by or on behalf of such Subsidiary or
such subsidiary, as applicable, shall be automatically released. In connection
with any termination or release pursuant to this Section, the Administrative
Agent shall execute and deliver to the applicable Grantor, at its own cost and
expense, all Uniform Commercial Code termination statements and similar
documents that such Grantor may reasonably request to evidence such termination
or release. Any execution and delivery of documents pursuant to this Article
shall be without recourse to or warranty by the Administrative Agent or any
other Secured Party.
ARTICLE 11. ADDITIONAL GRANTORS
Upon execution and delivery after the date hereof by the
Administrative Agent and a Subsidiary of a Supplement, such Subsidiary or
subsidiary, as applicable, shall become a Grantor hereunder with the same force
and effect as if originally named as a Grantor herein (each an "Additional
Grantor"). The execution and delivery of any Supplement shall not require the
consent of any other Grantor hereunder. The rights and obligations of each
Grantor hereunder and each other Loan Party and other party (other than a Credit
Party) under the Loan Documents shall remain in full force and effect
notwithstanding the addition of any Additional Grantor as a party to this
Security Agreement.
ARTICLE 12. NOTICES
All communications and notices hereunder shall be in writing and
given as provided in Section 10.1 of the Credit Agreement. All communications
and notices hereunder to the Administrative Agent or the Borrower shall be given
to it at its address for notices set forth in such Section, and all
communications and notices hereunder to any other Grantor shall be given to it
at its address for notices set forth on Schedule I hereto or to the applicable
Supplement, with, in the case of any Grantor other than the Borrower, a copy to
the Borrower.
ARTICLE 13. BINDING EFFECT; SEVERAL AGREEMENT; ASSIGNMENTS
Whenever in this Security 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 that are contained in this Security Agreement shall bind
- 25 -
and inure to the benefit of each party hereto and its successors and assigns.
This Security Agreement shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor shall have been delivered
to the Administrative Agent and a counterpart hereof shall have been executed on
behalf of the Administrative Agent, and thereafter shall be binding upon such
Grantor and the Administrative Agent and their respective successors and
assigns, and shall inure to the benefit of such Grantor, the Administrative
Agent and the other Secured Parties, and their respective successors and
assigns, except that no Grantor shall have the right to assign its rights or
obligations hereunder or any interest herein or in any of the Collateral (and
any such attempted assignment shall be void), except as expressly contemplated
by this Security Agreement or the other Loan Documents. This Security Agreement
shall be construed as a separate agreement with respect to each of the Grantors
and may be amended, supplemented, waived or otherwise modified or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
ARTICLE 14. SURVIVAL OF AGREEMENT; SEVERABILITY
All covenants, agreements, representations and warranties made by
the Grantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Security Agreement or any other
Loan Document shall be considered to have been relied upon by the Administrative
Agent and the other Secured Parties and shall survive the execution and delivery
of any Loan Document and the making of any Loan, regardless of any investigation
made by the Secured Parties or on their behalf, and shall continue in full force
and effect until this Security Agreement shall terminate. In the event any one
or more of the provisions contained in this Security Agreement or in any other
Loan Document should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein or therein 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.
ARTICLE 15. GOVERNING LAW
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
ARTICLE 16. COUNTERPARTS
This Security Agreement 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
but one contract (subject to Article 13), and shall become effective as provided
in Article 13. Delivery of an executed counterpart of this Security Agreement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Security Agreement.
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ARTICLE 17. HEADINGS
Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Security Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Security Agreement.
ARTICLE 18. JURISDICTION; VENUE; CONSENT TO SERVICE OF PROCESS
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 Security 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, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such New York State court or, to the extent permitted by
applicable 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 Security Agreement shall affect any right that
the Administrative Agent or any other Secured Party may otherwise have to bring
any action or proceeding relating to this Security Agreement or the other Loan
Documents against such Grantor or any of its property in the courts of any
jurisdiction. Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Security Agreement or the other Loan
Documents in any foregoing court referred to in this Article. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court. Each party hereto irrevocably consents
to service of process in the manner provided for notices in Article 12. Nothing
in this Security Agreement will affect the right of any party hereto to serve
process in any other manner permitted by law.
ARTICLE 19. 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 SECURITY AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS ARTICLE.
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A.C. MOORE INCORPORATED
SECURITY AGREEMENT
------------------
IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.
A.C. MOORE INCORPORATED
By: /s/ Leslie H. Gordon
---------------------------
Name: Leslie H. Gordon
Title: Chief Financial Officer
A.C MOORE ARTS & CRAFTS, INC.
By: /s/ Leslie H. Gordon
---------------------------
Name: Leslie H. Gordon
Title: Chief Financial Officer
MOORESTOWN FINANCE, INC.
BLACKWOOD ASSETS, INC.
AS TO EACH OF THE FOREGOING
By: /s/ Leslie H. Gordon
---------------------------
Name: Leslie H. Gordon
Title: Chief Financial Officer
EACH OF THE SUBSIDIARIES LISTED ON
SCHEDULE I HERETO
AS TO EACH OF THE FOREGOING
By: _______________________________
Name: _____________________________
Title: ____________________________
A.C. MOORE INCORPORATED
SECURITY AGREEMENT
------------------
KEYBANK NATIONAL ASSOCIATION, as
Administrative Agent
By: /s/ Brendan Sachtjen
-------------------------
Name: Brendan Sachtjen
Title: Senior Vice President