EXHIBIT 10.2
EXECUTION COPY
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GUARANTEE AND COLLATERAL AGREEMENT
made by
GENERAL NUTRITION CENTERS HOLDING COMPANY
GENERAL NUTRITION CENTERS, INC.
and certain of its Subsidiaries
in favor of
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
Dated as of December 5, 2003
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TABLE OF CONTENTS
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SECTION 1. DEFINED TERMS...................................................................... 2
1.1. Definitions........................................................................ 2
1.2. Other Definitional Provisions...................................................... 7
SECTION 2. GUARANTEE.......................................................................... 8
2.1. Guarantee.......................................................................... 8
2.2. Rights of Reimbursement, Contribution and Subrogation.............................. 9
2.3. Amendments, etc. with respect to the Borrower Obligations.......................... 10
2.4. Guarantee Absolute and Unconditional............................................... 11
2.5. Reinstatement...................................................................... 12
2.6. Payments........................................................................... 12
SECTION 3. GRANT OF SECURITY INTEREST; CONTINUING LIABILITY UNDER COLLATERAL................. 12
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................................... 14
4.1. Representations in Credit Agreement................................................ 14
4.2. Title; No Other Liens.............................................................. 14
4.3. Perfected First Priority Liens..................................................... 14
4.4. Name; Jurisdiction of Organization, etc............................................ 15
4.5. Inventory and Equipment............................................................ 15
4.6. Farm Products...................................................................... 15
4.7. Investment Property................................................................ 15
4.8. Receivables........................................................................ 16
4.9. Contracts.......................................................................... 17
4.10. Intellectual Property.............................................................. 17
4.11. Vehicles........................................................................... 19
4.12. Letter of Credit Rights............................................................ 19
4.13. Commercial Tort Claims............................................................. 19
SECTION 5. COVENANTS.......................................................................... 19
5.1. Covenants in Credit Agreement...................................................... 19
5.2. Delivery and Control of Instruments, Chattel Paper, Negotiable
Documents, Investment Property and Deposit Accounts................................ 19
5.3. Maintenance of Insurance........................................................... 20
5.4. Payment of Obligations............................................................. 21
5.5. Maintenance of Perfected Security Interest; Further Documentation.................. 21
5.6. Changes in Locations, Name, Jurisdiction of Incorporation, etc..................... 22
5.7. Notices. .......................................................................... 22
5.8. Investment Property................................................................ 22
5.9. Receivables........................................................................ 24
5.10. Intellectual Property.............................................................. 24
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5.11. Vehicles........................................................................... 26
SECTION 6. REMEDIAL PROVISIONS................................................................ 27
6.1. Certain Matters Relating to Receivables............................................ 27
6.2. Communications with Obligors; Grantors Remain Liable............................... 28
6.3. Pledged Securities................................................................. 28
6.4. Proceeds to be Turned Over To Administrative Agent................................. 29
6.5. Application of Proceeds............................................................ 29
6.6. Code and Other Remedies............................................................ 30
6.7. Registration Rights................................................................ 32
6.8. Waiver; Deficiency................................................................. 33
SECTION 7. THE ADMINISTRATIVE AGENT........................................................... 33
7.1. Administrative Agent's Appointment as Attorney-in-Fact, etc........................ 33
7.2. Duty of Administrative Agent....................................................... 34
7.3. Execution of Financing Statements.................................................. 35
7.4. Authority of Administrative Agent.................................................. 35
7.5. Appointment of Co-Collateral Agents................................................ 35
SECTION 8. MISCELLANEOUS...................................................................... 36
8.1. Amendments in Writing.............................................................. 36
8.2. Notices. .......................................................................... 36
8.3. No Waiver by Course of Conduct; Cumulative Remedies................................ 36
8.4. Enforcement Expenses; Indemnification.............................................. 36
8.5. Successors and Assigns............................................................. 37
8.6. Set-Off. .......................................................................... 37
8.7. Counterparts....................................................................... 37
8.8. Severability....................................................................... 37
8.9. Section Headings................................................................... 37
8.10. Integration........................................................................ 38
8.11. GOVERNING LAW...................................................................... 38
8.12. Submission to Jurisdiction; Waivers................................................ 38
8.13. Acknowledgments.................................................................... 38
8.14. Additional Grantors................................................................ 39
8.15. Releases........................................................................... 39
8.16. WAIVER OF JURY TRIAL............................................................... 39
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SCHEDULES
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Description of Pledged Investment Property
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Exact Legal Name, Location of Jurisdiction of Organization and
Chief Executive Office
Schedule 5 Location of Inventory and Equipment
Schedule 6 Copyrights, Patents, Trademarks, Intellectual Property Licenses
and Other Intellectual Property
EXHIBITS
Exhibit A Acknowledgment and Consent
Exhibit B-1 Intellectual Property Security Agreement
Exhibit B-2 After-Acquired Intellectual Property Security Agreement
Exhibit C Intercompany Subordinated Demand Promissory Note
Annex I Assumption Agreement
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EXECUTION COPY
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 5,
2003, made by each of the signatories hereto (together with any other entity
that may become a party hereto as provided herein, the "Grantors"), in favor of
LEHMAN COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, the
"Administrative Agent") for (i) the banks and other financial institutions or
entities (the "Lenders") from time to time parties to the Credit Agreement,
dated as of December 5, 2003 (as amended, supplemented, replaced or otherwise
modified from time to time, the "Credit Agreement"), among GENERAL NUTRITION
CENTERS HOLDING COMPANY, a Delaware corporation ("Holdings"), GENERAL NUTRITION
CENTERS, INC., a Delaware corporation (the "Borrower"), the several banks and
other financial institutions or entities from time to time parties thereto (the
"Lenders"), LEHMAN BROTHERS INC. and J.P. MORGAN SECURITIES INC., as joint lead
arrangers and joint bookrunners (in such capacity, the "Arrangers"), JP MORGAN
CHASE BANK, as syndication agent (in such capacity, the "Syndication Agent"),
and the Administrative Agent, and (ii) the other Secured Parties (as hereinafter
defined).
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties;
NOW, THEREFORE, in consideration of the premises and to induce
the Arrangers, the Administrative Agent and the Lenders to enter into the Credit
Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1. Definitions. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms which are defined
in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New
York on the date hereof are used herein as so defined: Accounts, Account Debtor,
Authenticate, Certificated Security, Chattel Paper, Commodity Account, Commodity
Contract, Commodity Intermediary, Documents, Electronic Chattel Paper,
Entitlement Order, Equipment, Farm Products, Financial Asset, Fixtures, Goods,
Instruments, Inventory, Letter of Credit Rights, Money, Payment Intangibles,
Securities Account, Securities Intermediary, Security, Security Entitlement,
Supporting Obligations, Tangible Chattel Paper and Uncertificated Security.
(b) The following terms shall have the following meanings:
"Agreed Unperfected Collateral": (a) deposit accounts holding
(i) cash deposits permitted by Section 7.3(d) of the Credit Agreement,
(ii) collection and disbursement accounts maintained as provided in
Section 5.12(b) and (c), (b) solely to the extent not required to be
perfected pursuant to Section 5.11, Vehicles, (c) Intellectual Property
owned by any Grantor which is registered in a country other than the
United States to the extent that perfection in such Intellectual
Property requires filing in such other country provided and (d) as of
any date of determination, any other Collateral which cannot be
perfected by the filing of a financing statement under the UCC as to
which the Administrative Agent has agreed in writing that it does not
at such time require the perfection of its security interest therein,
however, that it is understood and agreed that regardless of whether
constituting Agreed Unperfected Collateral, the Administrative Agent
shall have a valid security interest in the property described in (a),
(b), (c) and (d) above and such security interest shall be perfected to
the extent such property constitutes Proceeds of any other Collateral
and such Proceeds are perfected under Section 9-315 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.
"Agreement": this Guarantee and Collateral Agreement, as the
same may be amended, supplemented, replaced or otherwise modified from
time to time.
"Borrower Obligations": the collective reference to the
Obligations (as defined in the Credit Agreement).
"Collateral": as defined in Section 3.
"Collateral Account": any collateral deposit account
established by the Administrative Agent to hold cash pending
application to the Obligations.
"Copyright Licenses": any written agreement providing for the
granting by or to any Grantor of any right in or to any Copyright,
including, without limitation, those listed in Schedule 6.
"Copyrights": (i) all United States and foreign copyrights,
whether or not the underlying works of authorship have been published,
including but not limited to copyrights in software and databases, all
Mask Works (as defined in 17 U.S.C. 901 of the U.S. Copyright Act) and
all works of authorship and other intellectual property rights therein,
all right, title and interest to make and exploit all derivative works
based on or adopted from works covered by such copyrights, and all
copyright registrations, copyright applications, mask works
registrations and mask works applications, and any renewals or
extensions thereof, including, without limitation, each registration
and application identified in Schedule 6, (ii) the rights to print,
publish and distribute any of the foregoing, (iii) the right to sue or
otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iv) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto, and (v) all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Deposit Account": (i) all "deposit accounts" as defined in
Article 9 of the Uniform Commercial Code in effect in the state of New
York on the date hereof, (ii) all other accounts maintained with any
financial institution (other than Securities Accounts or Commodity
Accounts) and (iii) shall include, without limitation, all of the
accounts listed on Schedule 2 hereto under the heading "Deposit
Accounts" (as such schedule may be amended from time to time) and all
Collateral Accounts together, in each case, with all funds held therein
and all certificates or instruments representing any of the foregoing.
"Excluded Assets": (i) any lease, license, contract, property
right or agreement to which any Grantor is a party or any of its rights
or interests or other General Intangibles arising thereunder if and
only for so long as the grant of a security interest hereunder (x) is
prohibited by any Requirement of Law of a Governmental Authority or (y)
shall constitute or result in a breach, termination or default under
any such lease, license, contract, property right or agreement (other
than to the extent that any such Requirement of Law or term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409
of the UCC of any relevant jurisdiction or any other applicable law or
principles of equity); provided, however, that such security interest
shall attach immediately to any portion of such lease, license,
contract, property rights or agreement that does not result in any of
the consequences specified in (i)(y) above, (ii) 35% of the total
outstanding Excluded Foreign Subsidiary Voting Stock issued by each
entity not organized under the laws of any jurisdiction within the
United States of America that is (or is treated for United States
federal tax purposes as) either (i) a corporation or (ii) any entity
owned directly or indirectly by another entity not organized under the
laws of any jurisdiction within the United States of America that is
(or is treated as) a corporation, owned by any Grantor and (iii)
account number S039839W0-00 DR 288 at Mellon Financial Markets, LLC for
so long as such account secures the letters of credit issued by Mellon
Bank, N.A. outstanding on the Closing Date.
"Excluded Foreign Subsidiary Voting Stock": the voting Capital
Stock of any entity not organized under the laws of any jurisdiction
within the United States of America that is (or is treated for United
States federal tax purposes as) either (i) a corporation or (ii) any
entity owned directly or indirectly by another entity not organized
under the laws of any jurisdiction within the United States of America
that is (or is treated as) a corporation.
"General Intangibles": all "general intangibles" as such term
is defined in Section 9-102(a)(42) of the Uniform Commercial Code in
effect in the State of New York on the date hereof and, in any event,
including, without limitation, with respect to any Grantor, all rights
of such Grantor to receive any tax refunds, all Hedge Agreements and
all contracts, agreements, instruments and indentures and all licenses,
permits, concessions, franchises and authorizations issued by
Governmental Authorities in any form, and portions thereof, to which
such Grantor is a party or under which such Grantor has any right,
title or interest or to which such Grantor or any property of such
Grantor is subject, as the same may from time to time be amended,
supplemented, replaced or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights
of such Grantor to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect thereto, (iii) all rights of such
Grantor to damages arising thereunder, and (iv) all rights of such
Grantor to terminate and to perform, compel performance and to exercise
all remedies thereunder.
"Governmental Authority": a federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantor Obligations": with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or
in connection with this Agreement (including, without limitation,
Section 2) or any other Loan Document to which such Guarantor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to any Secured Party that are required to be paid by such
Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
"Guarantors": the collective reference to each Grantor other
than the Borrower.
"Insurance": shall mean: (i) all insurance policies covering
any or all of the Collateral (regardless of whether the Administrative
Agent is the loss payee thereof) and (ii) any key man life insurance
policies.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks, the
Trademark Licenses, the Trade Secrets and the Trade Secret Licenses,
and all rights to sue at law or
in equity for any past, present and future infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"Intercompany Note": any promissory note evidencing loans made
by any Grantor to Holdings or any of its Subsidiaries, including,
without limitation, the subordinated Intercompany Note in the form
attached as Exhibit C (the "Subordinated Intercompany Note").
"Investment Property": the collective reference to (i) all
"investment property" as such term is defined in Section 9-102(a)(49)
of the Uniform Commercial Code in effect in the State of New York on
the date hereof, (ii) security entitlements, in the case of any United
States Treasury book-entry securities, as defined in 31 C.F.R. section
357.2, or, in the case of any United States federal agency book-entry
securities, as defined in the corresponding United States federal
regulations governing such book-entry securities, and (iii) whether or
not constituting "investment property" as so defined, all Pledged
Securities, all Pledged Security Entitlements and all Pledged Commodity
Contracts.
"Issuers": the collective reference to each issuer of a
Pledged Security.
"Material Contracts": Senior Subordinated Notes Documentation
and any other contract, lease, license, indenture, agreement,
commitment or other arrangement (other than the Credit Agreement and
Security Documents), whether or not in writing, to which the Borrower
or any Guarantor is a party with respect to which breaches,
performances, nonperformances, cancellations or failures to review by
any party thereto singly or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
"New York UCC": the Uniform Commercial Code as from time to
time in effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"Patent License": all agreements, whether written or oral,
providing for the granting by or to any Grantor of any right in or to a
Patent, including, without limitation, any of the foregoing referred to
in Schedule 6.
"Patents": (i) all United States and foreign patents, patent
applications and patentable inventions, including, without limitation,
each issued patent and patent application identified in Schedule 6, and
all certificates of invention or similar property rights (ii) all
inventions and improvements described and claimed therein, (iii) the
right to sue or otherwise recover for any and all past, present and
future infringements and misappropriations thereof, (iv) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto, and (v) all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon and all other rights of
any kind whatsoever accruing thereunder or pertaining thereto.
"Pledged Capital Stock": shall mean all shares or other equity
interests constituting Capital Stock now owned or hereafter acquired by
such Grantor, including, without limitation, all shares of Capital
Stock described on Schedule 2 hereto (as such schedule may be amended
from time to time), and the certificates, if any, representing such
Capital Stock and any interest of such Grantor in the entries on the
books of the issuer of such Capital Stock 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 Capital Stock and any other warrant, right or option to acquire
any of the foregoing.
"Pledged Commodity Contracts": all commodity contracts listed
on Schedule 2 (as such Schedule may be amended from time to time) and
all other commodity contracts to which any Grantor is party from time
to time.
"Pledged Debt Securities": all debt securities now owned or
hereafter acquired by any Grantor, including, without limitation, the
debt securities listed on Schedule 2, (as such Schedule may be amended
from time to time) together with any other certificates, options,
rights or security entitlements of any nature whatsoever in respect of
the debt securities of any Person that may be issued or granted to, or
held by, any Grantor while this Agreement is in effect.
"Pledged Notes": all promissory notes now owned or hereafter
acquired by any Grantor including, without limitation, those listed on
Schedule 2 (as such Schedule may be amended from time to time) and all
Intercompany Notes at any time issued to any Grantor.
"Pledged Securities": the collective reference to the Pledged
Debt Securities, the Pledged Notes and the Pledged Capital Stock.
"Pledged Security Entitlements": all security entitlements
with respect to the financial assets listed on Schedule 2 (as such
Schedule may be amended from time to time) and all other security
entitlements of any Grantor.
"Proceeds": all "proceeds" as such term is defined in Section
9-102(a)(64) of the Uniform Commercial Code in effect in the State of
New York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged Securities,
collections thereon or distributions or payments with respect thereto.
"Receivable": all Accounts and any other right to payment for
goods or other property sold, leased, licensed or otherwise disposed of
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper or classified as a Payment Intangible and
whether or not it has been earned by performance. References herein to
Receivables shall include any Supporting Obligation or collateral
securing such Receivable.
"Secured Parties": collectively, the Arrangers, the
Administrative Agent, the Syndication Agent, the Lenders and, with
respect to any Specified Hedge Agreement, any Qualified Counterparty
that has agreed to be bound by the provisions of Section 7.2
hereof as if it were a party hereto and by the provisions of Section 9
of the Credit Agreement as if it were a Lender party thereto; provided
that no Qualified Counterparty shall have any rights in connection with
the management or release of any Collateral or the obligations of any
Guarantor under this Agreement.
"Securities Act": the Securities Act of 1933, as amended.
"Trademark License": any agreement, whether written or oral,
providing for the granting by or to any Grantor of any right in or to
any Trademark, including, without limitation, any of the foregoing
referred to in Schedule 6.
"Trademarks": (i) all United States, state and foreign
trademarks, service marks, trade names, corporate names, company names,
business names, trade dress, trade styles, logos, or other indicia of
origin or source identification, Internet domain names, trademark and
service mark registrations, and applications for trademark or service
mark registrations and any renewals thereof, including, without
limitation, each registration and application identified in Schedule 6,
(ii) the right to sue or otherwise recover for any and all past,
present and future infringements and misappropriations thereof, (iii)
all income, royalties, damages and other payments now and hereafter due
and/or payable with respect thereto, and (iv) all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together in
each case with the goodwill of the business connected with the use of,
and symbolized by, each of the above.
"Trade Secret License": any agreement, whether written or
oral, providing for the granting by or to any Grantor of any right in
or to any Trade Secret, including, without limitation, any of the
foregoing referred to in Schedule 6.
"Trade Secrets": (i) all trade secrets and all confidential
and proprietary information, including know-how, manufacturing and
production processes and techniques, inventions, research and
development information, technical data, financial, marketing and
business data, pricing and cost information, business and marketing
plans, and customer and supplier lists and information, (ii) the right
to sue or otherwise recover for any and all past, present and future
infringements and misappropriations thereof, (iii) all income,
royalties, damages and other payments now and hereafter due and/or
payable with respect thereto, and (iv) all other rights of any kind
whatsoever of any Grantor accruing thereunder or pertaining thereto.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other Equipment of any nature covered by a
certificate of title law of any jurisdiction and all tires and other
appurtenances to any of the foregoing.
1.2. Other Definitional Provisions. (a)The words "hereof",
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
(d) The expressions "payment in full," "paid in full" and any
other similar terms or phrases when used herein with respect to the Obligations
shall mean the indefeasible payment in full, in immediately available funds, of
all of the Obligations (excluding Obligations in respect of any Specified Hedge
Agreements and contingent reimbursement and indemnification obligations in each
case that are not due and payable at or prior to the time the Commitments have
expired or have been terminated, the Loans and Reimbursement Obligations have
been paid in full and all Letters of Credit have been discharged or cash
collateralized or backed with other letters of credit in accordance with Section
10.15(c) of the Credit Agreement).
SECTION 2. GUARANTEE
2.1. Guarantee.
(a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the
ratable benefit of the Secured Parties and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) If and to the extent required in order for the Obligations
of any Guarantor to be enforceable under applicable federal, state and other
laws relating to the insolvency of debtors, the maximum liability of such
Guarantor hereunder shall be limited to the greatest amount which can lawfully
be guaranteed by such Guarantor under such laws, after giving effect to any
rights of contribution, reimbursement and subrogation arising under Section 2.2.
Each Guarantor acknowledges and agrees that, to the extent not prohibited by
applicable law, (i) such Guarantor (as opposed to its creditors, representatives
of creditors or bankruptcy trustee, including such Guarantor in its capacity as
debtor in possession exercising any powers of a bankruptcy trustee) has no
personal right under such laws to reduce, or request any judicial relief that
has the effect of reducing, the amount of its liability under this Agreement,
(ii) such Guarantor (as opposed to its creditors, representatives of creditors
or bankruptcy trustee, including such Guarantor in its capacity as debtor in
possession exercising any powers of a bankruptcy trustee) has no personal right
to enforce the limitation set forth in this Section 2.1(b) or to reduce, or
request judicial relief reducing, the amount of its liability under this
Agreement, and (iii) the limitation set forth in this Section 2.1(b) may be
enforced only to the extent required under such laws in order for the
obligations of such Guarantor under this Agreement to be enforceable under such
laws and only by or for the benefit of a creditor, representative of creditors
or bankruptcy trustee of such Guarantor or other Person entitled, under such
laws, to enforce the provisions thereof.
(c) Each Guarantor agrees that Borrower Obligations may at any
time and from time to time be incurred or permitted in an amount exceeding the
maximum liability of such Guarantor under Section 2.1(b) without impairing the
guarantee contained in this Section 2 or affecting the rights and remedies of
any Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until payment in full of the Obligations, notwithstanding
that from time to time during the term of the Credit Agreement the Borrower may
be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by any Secured
Party from the Borrower, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations (other than Obligations in respect of any Specified Hedge Agreement)
are paid in full, no Letter of Credit shall be outstanding (unless such Letter
of Credit has been cash collateralized or backed with another letter of credit
in accordance with Section 10.15(c) of the Credit Agreement) and the Commitments
are terminated or have expired.
2.2. Rights of Reimbursement, Contribution and
Subrogation. In case any payment is made on account of the Obligations by any
Grantor or is received or collected on account of the Obligations from any
Grantor or its property:
(a) If such payment is made by the Borrower or from its
property, then, if and to the extent such payment is made on account of
Obligations arising from or relating to a Loan made to the Borrower or a Letter
of Credit issued for account of the Borrower, the Borrower shall not be entitled
(A) to demand or enforce reimbursement or contribution in respect of such
payment from any other Grantor or (B) to be subrogated to any claim, interest,
right or remedy of any Secured Party against any other Person, including any
other Grantor or its property.
(b) If such payment is made by a Guarantor or from its
property, such Guarantor shall be entitled, subject to and upon payment in full
of the Obligations, (A) to demand and enforce reimbursement for the full amount
of such payment from the Borrower and (B) to demand and enforce contribution in
respect of such payment from each other Guarantor which has not paid its fair
share of such payment, as necessary to ensure that (after giving effect to any
enforcement of reimbursement rights provided hereby) each Guarantor pays its
fair share of the unreimbursed portion of such payment. For this purpose, the
fair share of each Guarantor as to any unreimbursed payment shall be determined
based on an equitable apportionment of such unreimbursed payment among all
Guarantors based on the relative value of their assets and any other equitable
considerations deemed appropriate by the court.
(c) If and whenever (after payment in full of the Obligations)
any right of reimbursement or contribution becomes enforceable by any Grantor
against any other Grantor under Sections 2.2(a) and 2.2(b), such Grantor shall
be entitled, subject to and upon payment in full of the Obligations, to be
subrogated (equally and ratably with all other Grantors entitled to
reimbursement or contribution from any other Grantor as set forth in this
Section 2.2) to any security interest that may then be held by the
Administrative Agent upon any Collateral granted
to it in this Agreement. Such right of subrogation shall be enforceable solely
against the Grantors, and not against the Secured Parties, and neither the
Administrative Agent nor any other Secured Party shall have any duty whatsoever
to warrant, ensure or protect any such right of subrogation or to obtain,
perfect, maintain, hold, enforce or retain any Collateral for any purpose
related to any such right of subrogation. If subrogation is demanded by any
Grantor, then (after payment in full of the Obligations) the Administrative
Agent shall deliver to the Grantors making such demand, or to a representative
of such Grantors or of the Grantors generally, an instrument satisfactory to the
Administrative Agent transferring, on a quitclaim basis without any recourse,
representation, warranty or obligation whatsoever, whatever security interest
the Administrative Agent then may hold in whatever Collateral may then exist
that was not previously released or disposed of by the Administrative Agent.
(d) All rights and claims arising under this Section 2.2 or
based upon or relating to any other right of reimbursement, indemnification,
contribution or subrogation that may at any time arise or exist in favor of any
Grantor as to any payment on account of the Obligations made by it or received
or collected from its property shall be fully subordinated in all respects to
the prior payment in full of all of the Obligations. Until payment in full of
the Obligations, no Grantor shall demand or receive any collateral security,
payment or distribution whatsoever (whether in cash, property or securities or
otherwise) on account of any such right or claim. If any such payment or
distribution is made or becomes available to any Grantor in any bankruptcy case
or receivership, insolvency or liquidation proceeding, such payment or
distribution shall be delivered by the person making such payment or
distribution directly to the Administrative Agent, for application to the
payment of the Obligations. If any such payment or distribution is received by
any Grantor, it shall be held by such Grantor in trust, as trustee of an express
trust for the benefit of the Secured Parties, and shall forthwith be transferred
and delivered by such Grantor to the Administrative Agent, in the exact form
received and, if necessary, duly endorsed.
(e) The obligations of the Grantors under the Loan Documents,
including their liability for the Obligations and the enforceability of the
security interests granted thereby, are not contingent upon the validity,
legality, enforceability, collectibility or sufficiency of any right of
reimbursement, contribution or subrogation arising under this Section 2.2. The
invalidity, insufficiency, unenforceability or uncollectibility of any such
right shall not in any respect diminish, affect or impair any such obligation or
any other claim, interest, right or remedy at any time held by any Secured Party
against any Guarantor or its property. The Secured Parties make no
representations or warranties in respect of any such right and shall have no
duty to assure, protect, enforce or ensure any such right or otherwise relating
to any such right.
(f) Each Grantor reserves any and all other rights of
reimbursement, contribution or subrogation at any time available to it as
against any other Grantor, but (i) the exercise and enforcement of such rights
shall be subject to Section 2.2(d) and (ii) neither the Administrative Agent nor
any other Secured Party shall ever have any duty or liability whatsoever in
respect of any such right, except as provided in Section 2.2(c).
2.3. Amendments, etc. with respect to the Borrower
Obligations. Each Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against any Guarantor and without notice
to or further assent by any Guarantor, any demand for payment of any of the
Borrower Obligations made by any Secured Party may be
rescinded by such Secured Party and any of the Borrower Obligations continued,
and the Borrower Obligations, or the liability of any other Person upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, increased, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by any Secured Party, and the Credit Agreement
and the other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the requisite Lenders under
the Credit Agreement or all Lenders, as the case may be) may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by any Secured Party for the payment of the Borrower Obligations may
be sold, exchanged, waived, surrendered or released. No Secured Party shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Borrower Obligations or for the guarantee contained in
this Section 2 or any property subject thereto.
2.4. Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by any Secured
Party upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Secured Parties, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the Guarantors with respect to the
Borrower Obligations. Each Guarantor understands and agrees that the guarantee
contained in this Section 2 shall be construed as a continuing, absolute and
unconditional guarantee of payment and performance without regard to (a) the
validity or enforceability of the Credit Agreement or any other Loan Document,
any of the Borrower Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by any Secured Party, (b) any defense, set-off or counterclaim (other
than a defense of payment or performance hereunder) which may at any time be
available to or be asserted by the Borrower or any other Person against any
Secured Party, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Borrower or such Guarantor) which constitutes, or might
be construed to constitute, an equitable or legal discharge of the Borrower for
the Borrower Obligations, or of such Guarantor under the guarantee contained in
this Section 2, in bankruptcy or in any other instance other than the express
written release of such Guarantor from this Agreement by the Administrative
Agent pursuant to and to the extent set forth in Section 10.15(b) of the Credit
Agreement. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against any Guarantor, any Secured Party may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such rights
and remedies as it may have against the Borrower, any other Guarantor or any
other Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by any
Secured Party to make any such demand, to pursue such other rights or remedies
or to collect any payments from the Borrower, any other Guarantor or any
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower, any other
Guarantor or any other Person or any such collateral security, guarantee or
right of offset, shall not relieve any Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of any Secured Party against
any Guarantor. For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
2.5. Reinstatement. The guarantee contained in this
Section 2 shall continue to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any of the Borrower Obligations
is rescinded or must otherwise be restored or returned by any Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.6. Payments. Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars in immediately available funds at the office of the
Administrative Agent located at the Payment Office specified in the Credit
Agreement.
SECTION 3. GRANT OF SECURITY INTEREST;
CONTINUING LIABILITY UNDER COLLATERAL
(a) Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, for the
ratable benefit of the Secured Parties, a security interest in, all of such
Grantor's right, title and interest in and to all of its personal property,
including, without limitation, the following property, in each case, wherever
located and whether now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest (collectively, the "Collateral"), as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of such Grantor's
Obligations:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Deposit Accounts;
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) Insurance;
(ix) all Intellectual Property;
(x) all Inventory;
(xi) all Investment Property;
(xii) all Letter of Credit Rights;
(xiii) all Money;
(xiv) all Vehicles;
(xv) all Goods not otherwise described above;
(xvi) any Collateral Account;
(xvii) all books, records, ledger cards, files,
correspondence, customer lists, blueprints, technical specifications,
manuals, computer software, computer printouts, tapes, disks and other
electronic storage media and related data processing software and
similar items that at any time evidence or contain information relating
to any of the Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon; and
(xviii) to the extent not otherwise included, all
other property of the Grantor and all Proceeds, products, accessions,
rents and profits of any and all of the foregoing and all collateral
security, Supporting Obligations and guarantees given by any Person
with respect to any of the foregoing.
Notwithstanding anything to the contrary in this Agreement,
none of the Excluded Assets shall constitute Collateral.
(b) Notwithstanding anything herein to the contrary, (i) each
Grantor shall remain liable for all obligations under the Collateral and nothing
contained herein is intended or shall be a delegation of duties to the
Administrative Agent or any Secured Party, (ii) each Grantor shall remain liable
under and each of the agreements included in the Collateral, to perform all of
the obligations undertaken by it thereunder all in accordance with and pursuant
to the terms and provisions thereof and neither the Administrative Agent nor any
Secured Party shall have any obligation or liability under any of such
agreements by reason of or arising out of this Agreement or any other document
related thereto nor shall the Administrative Agent nor any Secured Party have
any obligation to make any inquiry as to the nature or sufficiency of any
payment received by it or have any obligation to take any action to collect or
enforce any rights under any agreement included in the Collateral and (iii) the
exercise by the Administrative Agent of any of its rights hereunder shall not
release any Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Arrangers, the Administrative Agent, the
Syndication Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby represents and warrants to the Secured Parties
that:
4.1. Representations in Credit Agreement. In the case of
each Guarantor, the representations and warranties set forth in Section 4 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, in all material respects, except for
representations and warranties expressly stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date, and the Secured
Parties shall be entitled to rely on each of them as if they were fully set
forth herein, provided that each reference in each such representation and
warranty to the Borrower's or Holdings' knowledge shall, for the purposes of
this Section 4.l, be deemed to be a reference to such Guarantor's knowledge.
4.2. Title; No Other Liens. Such Grantor owns each item of
the Collateral free and clear of any and all Liens or claims, including, without
limitation, liens arising as a result of such Grantor becoming bound (as a
result of merger or otherwise) as Grantor under a security agreement entered
into by another Person except for Permitted Liens. No financing statement,
mortgage or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, pursuant to this Agreement or as are permitted by the Credit
Agreement.
4.3. Perfected First Priority Liens. The security
interests granted pursuant to this Agreement constitute valid security interests
in all of the Collateral in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof and, other then
with respect to Agreed Unperfected Collateral, upon completion of the filings
and other actions specified on Schedule 3 (all of which, in the case of all
filings and other documents referred to on said Schedule, have been delivered to
the Administrative Agent in duly completed and duly executed form, as
applicable, and may be filed by the Administrative Agent at any time) and
payment of all filing fees, will be perfected and are prior to all other Liens
on the Collateral except for Permitted Liens. Without limiting the foregoing,
each Grantor has taken all actions necessary, including without limitation those
specified in Section 5.2 to: (i) establish the Administrative Agent's "control"
(within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of
the Investment Property constituting Certificated Securities, Uncertificated
Securities, Securities Accounts, Securities Entitlements or Commodity Accounts
(each as defined in the UCC), (ii) establish the Administrative Agent's
"control" (within the meaning of Section 9-104 of the UCC) over all Deposit
Accounts (except Deposit Accounts constituting Agreed Unperfected Collateral),
(iii) establish the Administrative Agent's "control" (within the meaning of
Section 9-107 of the UCC) over all Letter of Credit Rights, (iv) establish the
Administrative Agent's control (within the meaning of Section 9-105 of the UCC)
over all Electronic Chattel Paper and (v) establish the Administrative Agent's
"control" (within the
meaning of Section 16 of the Uniform Electronic Transaction Act as in effect in
the applicable jurisdiction "UETA") over all "transferable records" (as defined
in UETA).
4.4. Name; Jurisdiction of Organization, etc. On the date
hereof, such Grantor's exact legal name (as indicated on the public record of
such Grantor's jurisdiction of formation or organization), jurisdiction of
organization, organizational i.d. number, if any, and the location of such
Grantor's chief executive office or sole place of business are specified on
Schedule 4. Each Grantor is organized solely under the law of the jurisdiction
so specified and has not filed any certificates of domestication, transfer or
continuance in any other jurisdiction. Except as otherwise indicated on Schedule
4, the jurisdiction of each such Grantor's organization of formation is required
to maintain a public record showing the Grantor to have been organized or
formed. Except in connection with the Restructuring and the Acquisition or as
specified on Schedule 4, it has not changed its name, jurisdiction of
organization, chief executive office or sole place of business or its corporate
structure in any way (e.g. by merger, consolidation, change in corporate form or
otherwise) within the past five years and has not within the last five years
become bound (whether as a result of merger or otherwise) as Grantor under a
security agreement entered into by another Person, which has not heretofore been
terminated.
4.5. Inventory and Equipment.(a) (a) On the date hereof,
the Inventory and the Equipment (other than mobile goods) are kept at the
locations listed on Schedule 5. Within the five years preceding execution of
this agreement, such Grantor has not changed the location of any warehouses or
distribution centers or the location of any of its material Equipment and
Inventory except (i) in connection with the opening, closing or relocation of
stores in the ordinary course of business or (ii) as disclosed on Schedule 5;
(b) any Inventory now or hereafter produced by any Grantor
included in the Collateral have been and will be produced in compliance with the
requirements of the Fair Labor Standards Act, as amended; and
(c) None of the Inventory or Equipment with a fair market
value in excess of $500,000 is in the possession of an issuer of a negotiable
document (as defined in Section 7-104 of the UCC) therefor or is otherwise in
the possession of any bailee or warehouseman, other than such Inventory as to
which the Administrative Agent has been provided with written notice thereof
pursuant to Section 5.7(a) and as to which such Grantor has complied with its
obligations under Section 6.13 of the Credit Agreement.
4.6. Farm Products. None of the Collateral constitutes, or
is the Proceeds of, Farm Products.
4.7. Investment Property. (a) Schedule 2 hereto (as such
schedule may be amended from time to time) sets forth under the heading "Pledged
Capital Stock" all of the Pledged Capital Stock owned by any Grantor and such
Pledged Capital Stock constitutes the percentage of issued and outstanding
shares of stock, percentage of membership interests, percentage of partnership
interests or percentage of beneficial interest of the respective issuers thereof
indicated on such Schedule. Schedule 2 hereto (as such schedule may be amended
from time to time) sets forth under the heading "Pledged Debt Securities" or
"Pledged Notes" all of the Pledged Debt Securities and Pledged Notes owned by
any Grantor and, to the Grantors'
knowledge, all of such Pledged Debt Securities and Pledged Notes (i) are the
legal, valid and binding obligation of the issuers thereof enforceable in
accordance with their terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, and other similar laws
relating to or affecting creditors' rights generally and general equitable
principals (whether considered in a proceeding in equity or at law) and (ii) are
not in default, except for defaults which individually or in the aggregate would
not have a material adverse effect on the value of the Pledged Debt Securities
and Pledged Notes, taken as a whole; and such Pledged Debt Securities and
Pledged Notes constitute all of the issued and outstanding inter-company
indebtedness evidenced by an instrument or certificated security of the
respective issuers thereof owing to such Grantor. Schedule 2 hereto (as such
schedule may be amended from time to time) sets forth under the headings
"Securities Accounts," "Commodities Accounts," and "Deposit Accounts"
respectively, all of the Securities Accounts, Commodities Accounts and Deposit
Accounts (other than Deposit Accounts constituting Agreed Unperfected
Collateral) in which each Grantor (other than Holdings) has an interest. Each
Grantor is the sole entitlement holder or customer of each such account, and
such Grantor has not consented to, and is not otherwise aware of, any Person
(other than the Administrative Agent pursuant hereto) having "control" (within
the meanings of Sections 8-106, 9-106 and 9-104 of the UCC) over, or any other
interest in, any such Securities Account, Commodity Account or Deposit Account
or any securities, commodities or other property credited thereto;
(b) The shares of Pledged Capital Stock pledged by such
Grantor hereunder constitute all of the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor or, in the
case of Excluded Foreign Subsidiary Voting Stock, if less, 65% of the
outstanding Excluded Foreign Subsidiary Voting Stock of each relevant Issuer.
(c) All the shares of the Pledged Capital Stock have been duly
and validly issued and are fully paid and nonassessable.
(d) None of the Pledged Capital Stock consisting of
partnership interests or limited liability company interests are or represent
interests in issuers that are: (a) registered as investment companies, (b) are
dealt in or traded on securities exchanges or markets or (c) have opted for
their interests to be treated as securities under the UCC.
(e) Such Grantor is the record and beneficial owner of, and
has good and marketable title to, the Investment Property and Deposit Accounts
pledged by it hereunder, free of any and all Liens or options in favor of, or
claims of, any other Person, except Permitted Liens and there are no outstanding
warrants, options or other rights to purchase, or shareholder, voting trust or
similar agreements outstanding with respect to, or property that is convertible
into, or that requires the issuance or sale of, any Pledged Capital Stock.
(f) Each Issuer that is not a Grantor hereunder has executed
and delivered to the Administrative Agent an Acknowledgment and Agreement, in
substantially the form of Exhibit A, to the pledge of the Pledged Securities
pursuant to this Agreement.
4.8. Receivables. (a) No amount payable to such Grantor
under or in connection with any Receivable is evidenced by any Instrument or
Tangible Chattel Paper which has not been delivered to the Administrative Agent
or constitutes Electronic Chattel Paper that
has not been subjected to the control (within the meaning of Section 9-105 of
the New York UCC) of the Administrative Agent.
(b) None of the obligors in excess of $10,000,000 in the
aggregate on any Receivables is a Governmental Authority.
(c) To such Grantor's knowledge, each Receivable is and will
be (i) the legal, valid and binding obligation of the Account Debtor in respect
thereof, representing an unsatisfied obligation of such Account Debtor and (ii)
enforceable in accordance with its terms.
(d) The amounts represented by such Grantor to the Secured
Parties from time to time as owing to such Grantor in respect of the Receivables
will at such times be accurate in all material respects.
4.9. Contracts. Each Material Contract is in full force
and effect and constitutes a valid and legally enforceable obligation of the
Grantor party thereto and (to the best of such Grantor's knowledge) each other
party thereto, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
4.10. Intellectual Property. (a) Schedule 6 lists (i) all
issued patents and pending patent applications, all registered copyrights and
pending copyright applications, and all Trademarks owned by such Grantor in its
own name on the date hereof, and (ii) all material Patent Licenses, Copyright
Licenses, and Trademark Licenses. Except as set forth in Schedule 6, as of the
date hereof such Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to all of the material Intellectual Property
owned by such Grantor, and is otherwise entitled to use all such Intellectual
Property, without limitation, subject only to Permitted Liens and to the terms
of the licensing or franchise agreements referred to in paragraph (c) below.
(b) On the date hereof, to such Grantor's knowledge, all
material Intellectual Property owned by such Grantor is valid, subsisting,
unexpired and enforceable, and has not been abandoned and, to such Grantor's
knowledge, neither the operation of such Grantor's business as currently
conducted nor the use of any Intellectual Property by such Grantor in connection
therewith conflicts with, infringes upon, misappropriates, dilutes, misuses or
otherwise violates the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6: (i) no material
Intellectual Property owned by such Grantor is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor, and (ii) to such Grantor's knowledge, as of the date hereof there
are no other agreements, obligations, orders or judgments which affect the use
of any material Intellectual Property owned by such Grantor.
(d) To such Grantor's knowledge, no holding, decision or
judgment has been rendered by any Governmental Authority which would limit,
cancel or question the validity or enforceability of, or such Grantor's rights
in, any Intellectual Property owned by such Grantor in
any respect that could reasonably be expected to have a material adverse effect
on the value of such Intellectual Property.
(e) Except as set forth on Schedule 6, no action or proceeding
is pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any material
Intellectual Property owned by such Grantor or such Grantor's ownership interest
therein, (ii) alleging that any services provided by, processes used by, or
products manufactured or sold by such Grantor infringe any patent, trademark,
copyright, or any other right of any third party or (iii) alleging that any
material Intellectual Property owned by such Grantor is being licensed,
sublicensed or used in violation of any patent, trademark, copyright or any
other right of any third party which, if adversely determined, would have a
material adverse effect on the value of any Intellectual Property owned by such
Grantor. To the knowledge of such Grantor, no Person is engaging in any activity
that infringes upon the Intellectual Property owned by such Grantor or upon the
rights of such Grantor therein. Except as set forth in Schedule 6 hereto, such
Grantor has not granted any license, release, covenant not to sue, non-assertion
assurance, or other right to any person with respect to any part of the material
Intellectual Property owned by such Grantor. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the material Intellectual Property owned by such Grantor
or used by such Grantor in the operation of its business.
(f) With respect to each material Copyright License, Trademark
License and Patent License to which such Grantor is a party: (i) such license is
valid and binding and in full force and effect in all material respects; (ii)
such license will not cease to be valid and binding and in full force and effect
in all material respects on terms identical to those currently in effect as a
result of the rights and interests granted herein, nor will the grant of such
rights and interests constitute a breach or default under such license or
otherwise give the licensor or licensee a right to terminate such license; (iii)
such Grantor has not received any notice of termination or cancellation under
such license; (iv) such Grantor has not received any notice of a breach or
default under such license, which breach or default has not been cured; (v) such
Grantor has not granted to any other third party any rights, adverse or
otherwise, under such license; and (vi) such Grantor is not in breach or default
in any material respect, and no event has occurred that, with notice or lapse of
time, would constitute such a breach or default or permit termination,
modification or acceleration under such license.
(g) Except as set forth in Schedule 6, such Grantor has
performed all acts, has made all necessary filings and recordations, and has
paid all required fees and taxes to adequately protect and maintain each and
every item of material Intellectual Property owned by such Grantor in full force
and effect and to protect and maintain the registrations and applications for
registration thereof.
(h) Such Grantor has taken reasonable measures to protect the
confidentiality of its material Trade Secrets in accordance with industry
standards to protect rights of like importance.
(i) Such Grantor has taken all steps to use consistent
standards of quality in the manufacture, distribution and sale of all products
sold and provision of all services provided
under or in connection with any item of material Intellectual Property owned by
such Grantor and has taken all steps necessary to ensure that all licensed users
of any kind of material Intellectual Property owned by such Grantor use such
consistent standards of quality.
4.11. Vehicles. As of the Closing Date, the aggregate book
value of all Vehicles owned by all Grantors is less than $1,000,000.
4.12. Letter of Credit Rights. As of the Closing Date, no
Grantor is a beneficiary or assignee under any letter of credit.
4.13. Commercial Tort Claims. As of the Closing Date, no
Grantor has any commercial tort claims.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Secured Parties
that, from and after the date of this Agreement until the Obligations (other
than Obligations in respect of any Specified Hedge Agreement) shall have been
paid in full, no Letter of Credit shall be outstanding (unless such Letter of
Credit has been cash collateralized or backed with another letter of credit in
accordance with Section 10.15(c) of the Credit Agreement) and the Commitments
shall have terminated or expired:
5.1. Covenants in Credit Agreement. Each Subsidiary
Guarantor agrees to be bound by the covenants contained in the Credit Agreement
and in furtherance thereof, shall take, or shall refrain from taking, as the
case may be, each action that is necessary to be taken or not taken, as the case
may be, so that no Default or Event of Default occurs.
5.2. Delivery and Control of Instruments, Chattel Paper,
Negotiable Documents, Investment Property and Deposit Accounts. (a) If any of
the Collateral is or shall become evidenced or represented by any Instrument,
Certificated Security, Negotiable Document or Tangible Chattel Paper, such
Instrument (other than checks received in the ordinary course of business and
Pledged Notes issued in connection with the extension of trade credit by a
Grantor in the ordinary course of business), Certificated Security, Negotiable
Documents or Tangible Chattel Paper shall be promptly delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.
(b) If any of the Collateral is or shall become "Electronic
Chattel Paper" such Grantor shall take all reasonable and necessary steps to
establish the Administrative Agent's "control" (within the meaning of Section
9-105 of the New York UCC) over such Electronic Chattel Paper.
(c) If any of the Collateral is or shall become evidenced or
represented by an Uncertificated Security, such Grantor shall cause the Issuer
thereof either (i) to register the Administrative Agent as the registered owner
of such Uncertificated Security, upon original issue or registration of transfer
or (ii) to agree in writing with such Grantor and the Administrative Agent that
such Issuer will comply with instructions with respect to such Uncertificated
Security originated by the Administrative Agent without further consent of such
Grantor, such agreement to be in form and substance reasonably satisfactory to
the Administrative Agent.
(d) Each Grantor (other than Holdings) shall maintain
Securities Entitlements, Securities Accounts and Deposit Accounts (except
Deposit Accounts constituting Agreed Unperfected Collateral) only with financial
institutions that have agreed to comply with entitlement orders and instructions
issued or originated by the Administrative Agent without further consent of such
Grantor, such agreement to be in form and substance reasonably satisfactory to
the Administrative Agent.
(e) If any of the Collateral is or shall become evidenced or
represented by a Commodity Contract, such Grantor shall cause the Commodity
Intermediary with respect to such Commodity Contract to agree in writing with
such Grantor and the Administrative Agent that such Commodity Intermediary will
apply any value distributed on account of such Commodity Contract as directed by
the Administrative Agent without further consent of such Grantor, such agreement
to be in form and substance reasonably satisfactory to the Administrative Agent.
(f) In addition to and not in lieu of the foregoing, if any
Issuer of any Investment Related Property is organized under the law of, or has
its chief executive office in, a jurisdiction outside of the United States, each
Grantor shall take such additional actions, including, without limitation,
causing the issuer to register the pledge on its books and records, as may be
necessary or advisable or as may be reasonably requested by the Administrative
Agent, under the laws of such jurisdiction to insure the validity, perfection
and priority of the security interest of the Administrative Agent.
5.3. Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable insurance companies, insurance on
all its property (including, without limitation, all Inventory, Equipment and
Vehicles) as required by Section 6.5 of the Credit Agreement; and furnish to the
Administrative Agent with copies for each Secured Party, upon written request,
full information as to the insurance carried; provided that in any event, and
without limiting the requirements of Section 6.5 of the Credit Agreement, such
Grantor will maintain to the extent obtainable on commercially reasonable terms,
(i) property and casualty insurance on all real and personal property on an all
risks basis (including the perils of flood and quake and loss by fire, explosion
and theft), covering the repair or replacement cost of all such property and
consequential loss coverage for business interruption and extra expense (which
shall include construction expenses and such other business interruption
expenses as are otherwise generally available to similar businesses), and (ii)
public liability insurance. All such insurance with respect to such Grantor
shall be provided by insurers or reinsurers which (x) in the case of United
States insurers and reinsurers, have an A.M. Best policyholders rating of not
less than A- with respect to primary insurance and B+ with respect to excess
insurance and (y) in the case of non-United States insurers or reinsurers, the
providers of at least 80% of such insurance have either an ISI policyholders
rating of not less than A, an A.M. Best policyholders rating of not less than A-
or a surplus of not less than $500,000,000 with respect to primary insurance,
and an ISI policyholders rating of not less than BBB with respect to excess
insurance, or, if the relevant insurance is not available from such insurers,
such other insurers as the Administrative Agent may approve in writing. All
insurance shall (i) provide that no cancellation, material reduction in amount
or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) if reasonably requested by the Administrative
Agent, include a breach of warranty clause and (iii) be reasonably satisfactory
in all other respects to the Administrative Agent.
(b) Such Grantor will deliver to the Administrative Agent on
behalf of the Secured Parties, (i) on the Closing Date, a certificate dated such
date showing the amount and types of insurance coverage as of such date, (ii)
upon request of any Secured Party from time to time, full information as to the
insurance carried, (iii) promptly following receipt of notice from any insurer,
a copy of any notice of cancellation or material change in coverage from that
existing on the Closing Date, (iv) forthwith, notice of any cancellation or
nonrenewal of coverage by such Grantor, and (v) promptly after such information
is available to such Grantor, full information as to any claim for an amount in
excess of $5,000,000 with respect to any property and casualty insurance policy
maintained by such Grantor. Each Secured Party shall be named as additional
insured on all such liability insurance policies of such Grantor and the
Administrative Agent shall be named as loss payee on all property and casualty
insurance policies of such Grantor.
(c) The Borrower shall deliver to the Secured Parties a report
of a reputable insurance broker with respect to such insurance substantially
concurrently with the delivery by the Borrower to the Administrative Agent of
its audited financial statements for each fiscal year and such supplemental
reports with respect thereto as the Administrative Agent may from time to time
reasonably request.
5.4. Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings,
reserves in conformity with GAAP with respect thereto have been provided on the
books of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the Collateral
or any interest therein.
5.5. Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement on the Collateral as a perfected security interest having at
least the priority described in Section 4.3 until the Collateral is released
from such security interest pursuant to the terms of Section 10.15 of the Credit
Agreement or by operation of law and shall defend such security interest against
the claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Secured Parties from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral of such
Grantor as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly authorize, execute and deliver, and have
recorded, such further instruments and documents and take such further actions
as the Administrative Agent may reasonably request for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) the filing of any financing
or continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property, Deposit Accounts
(except Deposit Accounts constituting Agreed Unperfected Collateral) and any
other relevant Collateral, taking any actions necessary to enable the
Administrative Agent to obtain "control" (within the meaning of the applicable
Uniform Commercial Code) with respect thereto, including without limitation,
executing and delivering and causing the relevant depositary bank or securities
intermediary to execute and deliver a Control Agreement in form and substance
reasonably satisfactory to the Administrative Agent.
5.6. Changes in Locations, Name, Jurisdiction of
Incorporation, etc. Such Grantor will not (i) without limiting or expanding the
prohibitions on mergers involving the Grantors contained in the Credit
Agreement, change its legal name, jurisdiction of organization or the location
of its chief executive office or sole place of business from that referred to in
Section 4.4; or (ii) change its legal name, identity or structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading except, in each case,
unless such Grantor has provided 15 days' prior written notice to the
Administrative Agent and delivered to the Administrative Agent duly authorized
and, where required, executed copies of all additional financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein.
5.7. Notices. Such Grantor will advise the Secured Parties
promptly, in reasonable detail, of:
(a) (i) any commercial tort claims that it may acquire after
the Closing Date, (ii) if it becomes the beneficiary or assignee under any
letter of credit, (iii) if any of the Inventory or Equipment with a fair market
value in excess of $500,000 is in the possession of an issuer of a negotiable
document (as defined in Section 7-104 of the UCC) therefor or is otherwise in
the possession of any bailee or warehouseman or (iv) if it becomes aware that
more than 10% of the Pledged Debt Securities and Pledged Notes are in default;
(b) any Lien (other than any Permitted Lien) on any of the
Collateral which would materially adversely affect the ability of the
Administrative Agent to exercise any of its remedies hereunder; and
(c) the occurrence of any event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8. Investment Property. (a) If such Grantor shall become
entitled to receive or shall receive any stock or other ownership certificate
(including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of or other ownership interests
in the Pledged Capital Stock, or otherwise in respect thereof, such Grantor
shall accept the same as the agent of the Secured Parties, hold the same in
trust for the Secured Parties and deliver the same forthwith to the
Administrative Agent in the exact form received, duly endorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor to be held by
the Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Secured Parties, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, such Grantor will not (i) vote to enable, or take any other action to
permit, any Issuer to issue any Capital Stock or to issue any other securities
convertible into or granting the right to purchase or exchange for any Capital
Stock of any Issuer (except as expressly permitted by the Credit Agreement),
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, any of the Investment Property or Proceeds thereof or
any interest therein (except, in each case, pursuant to a transaction not
prohibited by the Credit Agreement), (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Investment Property or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement and Permitted Liens (iv) enter
into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the
Investment Property or Proceeds thereof or any interest therein (except as
expressly permitted by the Credit Agreement) or (v) without the prior written
consent of the Administrative Agent, cause or permit any Issuer of any Pledged
Capital Stock consisting of partnership interests or limited liability company
interests which are not securities (for purposes of the UCC) on the date hereof
to elect or otherwise take any action to cause such Pledged Capital Stock to be
treated as securities for purposes of the UCC; provided, however,
notwithstanding the foregoing, if any issuer of any Pledged Capital Stock
consisting of partnership interests or limited liability company interests takes
any such action in violation of the foregoing in this clause (v), such Grantor
shall promptly notify the Administrative Agent in writing of any such election
or action and, in such event, shall take all steps necessary or advisable to
establish the Administrative Agent's "control" thereof.
(c) In the case of each Grantor which is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement relating
to the Pledged Securities issued by it and will comply with such terms insofar
as such terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in Section
5.8(a) with respect to the Pledged Securities issued by it and (iii) the terms
of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with
respect to the Pledged Securities issued by it. In addition, each Grantor which
is either an Issuer or an owner of any Pledged Security hereby consents to the
grant by each other Grantor of the security interest hereunder in favor of the
Administrative Agent and to the transfer of any Pledged Security to the
Administrative Agent or its nominee following an Event of Default and to the
substitution of the Administrative Agent or its nominee as a partner, member or
shareholder of the Issuer of the related Pledged Security.
5.9. Receivables. (a) Other than in the ordinary course of
business consistent with its past practice and so long as no Event of Default
shall have occurred and be continuing, such Grantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that questions
or calls into doubt the validity or enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables.
5.10. Intellectual Property. (a) With respect to each
material Trademark owned by such Grantor, such Grantor (either itself or through
licensees) will (i) continue to use such Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use consistent with Section
5.10(i) below, (ii) maintain the quality of products and services offered under
such Trademark and take all necessary steps to ensure that all licensed users of
such Trademark maintain such quality at a level at least substantially
consistent with such quality as of the date hereof, (iii) not adopt or use any
mark which is confusingly similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable benefit of the Secured Parties,
shall obtain a perfected security interest in such mark pursuant to this
Agreement and the Intellectual Property Security Agreement, and (iv) not (and
not permit any licensee or sublicense thereof to) do any act or knowingly omit
to do any act whereby such Trademark may become invalidated or impaired in any
way, other than acts taken in the ordinary course of such Grantor's business,
consistent with past practice.
(b) Such Grantor will not (and will not permit any licensee or
sublicensee thereof to) do any act, or omit to do any act, whereby any material
Patent owned by such Grantor may become forfeited, abandoned or dedicated to the
public.
(c) Such Grantor will not (and will require all licensees and
sublicensees thereof not to) do any act or knowingly omit to do any act whereby
any material Copyrights may
become invalidated or otherwise dedicated to the public. Such Grantor will not
(and will require that all licensees and sublicensees thereof will not) do any
act whereby any material Copyrights may fall into the public domain.
(d) Such Grantor will not (and will require all licensees and
sublicensees thereof not to) do any act that knowingly uses any material
Intellectual Property to infringe the intellectual property rights of any other
Person.
(e) Such Grantor will use commercially reasonable efforts to
use (and will use commercially reasonable efforts to require all licensees and
sublicensees thereof to use) proper statutory notice in connection with the use
of each material Patent, Trademark and Copyright owned by such Grantor.
(f) Such Grantor will notify the Secured Parties immediately
if it knows, or has reason to know, that any application or registration
relating to any material Intellectual Property may become forfeited, abandoned
or dedicated to the public, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court or tribunal in any country)
regarding such Grantor's ownership of, or the validity of, any material
Intellectual Property or such Grantor's right to register the same or to own and
maintain the same.
(g) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such Grantor
shall report such filing to the Administrative Agent in accordance with Section
6.2(b) of the Credit Agreement. Upon request of the Administrative Agent, such
Grantor shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Administrative Agent may reasonably
request to evidence the Secured Parties' security interest in any Copyright,
Patent, Trademark or other Intellectual Property of such Grantor and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
(h) Unless such Grantor can demonstrate to the Administrative
Agent's reasonable satisfaction that the economic benefit to such Grantor of not
taking such reasonable and necessary steps exceeds the economic benefit to such
Grantor of taking such reasonable and necessary steps, such Grantor will take
all reasonable and necessary steps, including, without limitation, in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of
material Intellectual Property owned by such Grantor, including, without
limitation, the payment of all required fees and taxes, the filing of
applications for renewal or extension, affidavits of use and incontestability,
and the participation in interference, reexamination, opposition, cancellation,
infringement and misappropriation proceedings.
(i) Such Grantor (either itself or through licensees) will
not, without the prior written consent of the Administrative Agent, discontinue
use of or otherwise abandon any Intellectual Property owned by such Grantor, or
abandon any application or any right to file an application for letters patent,
trademark, or copyright, unless such Grantor shall have previously determined
that such use or the pursuit or maintenance of such Intellectual Property is no
longer desirable in the conduct of such Grantor's business and that the loss
thereof could not reasonably be expected to have a Material Adverse Effect.
(j) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and institute proceedings with
respect to such infringement, misappropriation or dilution, and/or seek
injunctive relief where appropriate and/or recover damages for such
infringement, misappropriation or dilution.
(k) Such Grantor agrees to execute an Intellectual Property
Security Agreement with respect to its Intellectual Property in substantially
the form of Exhibit B-1 in order to record the security interest granted herein
to the Administrative Agent for the ratable benefit of the Secured Parties with
the United States Patent and Trademark Office, the United States Copyright
Office, and any other applicable Governmental Authority.
(l) Such Grantor agrees that, should it obtain an ownership
interest in any item of intellectual property which is not now a part of the
Intellectual Property Collateral (the "After-Acquired Intellectual Property"),
(i) the provisions of Section 3 shall automatically apply thereto and (ii) any
such After-Acquired Intellectual Property, and in the case of trademarks, the
goodwill of the business connected therewith or symbolized thereby, shall
automatically become part of the Intellectual Property Collateral. At such time
as the Borrower provides the Administrative Agent with notice of any newly
acquired, created or developed registered Intellectual Property owned by such
Grantor pursuant to Section 6.2(b) of the Credit Agreement, such Grantor agrees
to execute an After-Acquired Intellectual Property Security Agreement with
respect to its After-Acquired Intellectual Property in substantially the form of
Exhibit B-2 in order to record the security interest granted herein to the
Administrative Agent for the ratable benefit of the Secured Parties with the
United States Patent and Trademark Office, the United States Copyright Office,
and any other applicable Governmental Authority.
(m) Such Grantor shall take all steps reasonably necessary to
protect the secrecy of all material Trade Secrets, including, without
limitation, entering into confidentiality agreements with employees and labeling
and restricting access to secret information and documents.
5.11. Vehicles. At any time after the fair market value of
all Vehicles owned by the Grantors exceeds $10,000,000 in the aggregate, the
Borrower shall promptly so notify the Administrative Agent and, upon the request
of the Administrative Agent, the Borrower shall promptly deliver to the
Administrative Agent, with respect to each such Vehicle, all applications for
certificates of title or ownership indicating the Administrative Agent's first
priority security interest in the Vehicle covered by such certificate and any
other necessary documentation shall
be filed in each office in each jurisdiction which the Administrative Agent
shall deem advisable to perfect its security interests in the Vehicles.
5.12. Cash and Bank Deposits. With respect to the Borrower
and the Subsidiary Guarantors only, (a) except as provided in Sections 5.12(b)
and (c), deposit all checks and other payment remittances received by it, and
keep all of its cash (except store cash and cash deposits permitted by Sections
7.2(d), (n) and (o) of the Credit Agreement) and bank deposits, only in Deposit
Accounts that are, at all times, subject to agreements which establish the
Administrative Agent's "control" (within the meaning of Section 9-104 of the
UCC) over such deposit accounts (each such subject deposit account, a
"Controlled Account");
(b) Promptly deposit all cash and checks received from store sales to a
Controlled Account or to a collection account which automatically clears good
funds on deposit (net of any minimum balance maintained in the ordinary course
of business not to exceed $15,000,000 in the aggregate for all such collection
accounts) to a Controlled Account when the store sales linked to such collection
account exceed $1,500; and
(c) Maintain its disbursement accounts so that deposits therein are
made only from Controlled Accounts and only as and when checks are presented for
payment from such accounts.
SECTION 6. REMEDIAL PROVISIONS
6.1. Certain Matters Relating to Receivables. (a) If a
Default or Event of Default has occurred and is continuing, the Administrative
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications. At any time and
from time to time, upon the Administrative Agent's reasonable request and at the
expense of the relevant Grantor, such Grantor shall cause independent public
accountants or others reasonably satisfactory to the Administrative Agent to
furnish to the Administrative Agent reports showing reconciliations, aging and
test verifications of, and trial balances for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor's Receivables; provided, however, that the Administrative
Agent may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default. If required by the
Administrative Agent at any time after the occurrence and during the continuance
of an Event of Default, any payments of Receivables, when collected by any
Grantor, (i) shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly endorsed by such
Grantor to the Administrative Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the Secured
Parties only as provided in Section 6.5, and (ii) until so turned over, shall be
held by such Grantor in trust for the Secured Parties, segregated from other
funds of such Grantor. Each such deposit of Proceeds of Receivables shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.
(c) If an Event of Default has occurred and is continuing, at
the Administrative Agent's reasonable request, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
6.2. Communications with Obligors; Grantors Remain Liable.
(a) The Administrative Agent in its own name or in the name of others may at any
time after an Event of Default has occurred and is continuing communicate with
obligors under the Receivables to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Receivables.
(b) The Administrative Agent may at any time after an Event of
Default has occurred and is continuing require any Grantor to notify the Account
Debtor or counterparty on any Receivable of the security interest of the
Administrative Agent therein. In addition, after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may require any
Grantor to notify the Account Debtor or counterparty to make all payments under
the Receivables directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. No Secured Party shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by any Secured Party of any payment relating
thereto, nor shall any Secured Party be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Receivable (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
6.3. Pledged Securities. (a) Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall have
given notice to the relevant Grantor of the Administrative Agent's intent to
exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall
be permitted to receive all cash dividends paid in respect of the Pledged
Capital Stock and all payments made in respect of the Pledged Notes, in each
case paid in the normal course of business of the relevant Issuer and consistent
with past practice, to the extent permitted in the Credit Agreement, and to
exercise all voting and corporate rights with respect to the Pledged Securities;
provided, however, that no vote shall be cast or corporate or other ownership
right exercised or other action taken which, in the Administrative Agent's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, this
Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing: (i)
all rights of each Grantor to exercise or refrain from exercising the voting and
other consensual rights which it
would otherwise be entitled to exercise pursuant hereto shall cease and all such
rights shall thereupon become vested in the Administrative Agent who shall
thereupon have the sole right, but shall be under no obligation, to exercise or
refrain from exercising such voting and other consensual rights and (ii) the
Administrative Agent shall have the right, without notice to any Grantor, to
transfer all or any portion of the Investment Property to its name or the name
of its nominee or agent. In addition, the Administrative Agent shall have the
right at any time, without notice to any Grantor, to exchange any certificates
or instruments representing any Investment Related Property for certificates or
instruments of smaller or larger denominations. In order to permit the
Administrative Agent to exercise the voting and other consensual rights which it
may be entitled to exercise pursuant hereto and to receive all dividends and
other distributions which it may be entitled to receive hereunder each Grantor
shall promptly execute and deliver (or cause to be executed and delivered) to
the Administrative Agent all proxies, dividend payment orders and other
instruments as the Administrative Agent may from time to time reasonably request
and EACH Grantor acknowledges that the Administrative Agent may utilize the
power of attorney set forth herein.
(c) Each Grantor hereby authorizes and instructs each Issuer
of any Pledged Securities pledged by such Grantor hereunder to (i) comply with
any instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Administrative Agent.
6.4. Proceeds to be Turned Over To Administrative Agent.
In addition to the rights of the Secured Parties specified in Section 6.1 with
respect to payments of Receivables, if an Event of Default shall occur and be
continuing, all Proceeds received by any Grantor consisting of cash, Cash
Equivalents, checks and other near-cash items shall be held by such Grantor in
trust for the Secured Parties, segregated from other funds of such Grantor, and
shall, forthwith upon receipt by such Grantor, be turned over to the
Administrative Agent in the exact form received by such Grantor (duly endorsed
by such Grantor to the Administrative Agent, if required). All Proceeds received
by the Administrative Agent hereunder shall be held by the Administrative Agent
in a Collateral Account maintained under its sole dominion and control. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by
such Grantor in trust for the Secured Parties) shall continue to be held as
collateral security for all the Obligations and shall not constitute payment
thereof until applied as provided in Section 6.5.
6.5. Application of Proceeds. At such intervals as may be
agreed upon by the Borrower and the Administrative Agent, or, if an Event of
Default shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may, notwithstanding the provisions
of Section 2.12 of the Credit Agreement, apply all or any part of the net
Proceeds (after deducting fees and expenses as provided in Section 6.6)
constituting Collateral realized through the exercise by the Administrative
Agent of its remedies hereunder, whether or not held in any Collateral Account,
and any proceeds of the guarantee set forth in Section 2, in payment of the
Obligations in the following order:
First, to the Administrative Agent, to pay incurred and unpaid
fees and expenses of the Secured Parties under the Loan Documents;
Second, to the Administrative Agent, for application by it
towards payment of amounts then due and owing and remaining unpaid in
respect of the Obligations, pro rata among the Secured Parties
according to the amounts of the Obligations then due and owing and
remaining unpaid to the Secured Parties;
Third, to the Administrative Agent, for application by it
towards prepayment of the Obligations, pro rata among the Lenders
according to the amounts of the Obligations then held by the Lenders;
and
Fourth, any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding (unless such Letter of Credit has been cash collateralized
or backed with another letter of credit in accordance with Section
10.15(c) of the Credit Agreement) and the Commitments shall have
terminated or expired shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
6.6. Code and Other Remedies. (a) If an Event of Default
shall occur and be continuing, the Administrative Agent, on behalf of the
Secured Parties, may exercise, in addition to all other rights and remedies
granted to them in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of
a secured party under the New York UCC (whether or not the New York UCC applies
to the affected Collateral) or its rights under any other applicable law or in
equity. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, license,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of any Secured Party or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk,
it being understood that a Secured Party will be subject to the commercially
reasonable requirements under the UCC with respect to any disposition of
Collateral. Each Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in any Grantor, which right or equity is hereby waived
and released. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Each Grantor agrees that, to the extent notice of sale shall be required by law,
at least ten (10) days notice to such Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification.
The Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Administrative Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Administrative Agent may
sell the Collateral without giving any warranties as to the Collateral. The
Administrative Agent may specifically disclaim or modify any warranties of title
or the like. This procedure will not be considered to adversely effect the
commercial reasonableness of any sale of the Collateral. Each Grantor agrees
that it would not be commercially unreasonable for the Administrative Agent to
dispose of the Collateral or any portion thereof by using Internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capability of doing so, or that match buyers and
sellers of assets. Each Grantor hereby waives any claims against the
Administrative Agent arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than the price
which 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. Each Grantor further agrees, at the Administrative
Agent's request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor's premises or elsewhere. Subject to any
applicable landlord consents, the Administrative Agent shall have the right to
enter onto the property where any Collateral is located and take possession
thereof with or without judicial process.
(b) The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Parties hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-615(a) of the New York UCC, need the Administrative Agent account for the
surplus, if any, to any Grantor. If the Administrative Agent sells any of the
Collateral upon credit, the Grantor will be credited only with payments actually
made by the purchaser and received by the Administrative Agent and applied to
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, the Administrative Agent may resell the Collateral and the Grantor
shall be credited with proceeds of the sale. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may
acquire against any Secured Party arising out of the exercise by them of any
rights hereunder.
(c) In the event of any Disposition of any of the Intellectual
Property, the goodwill of the business connected with and symbolized by any
Trademarks subject to such Disposition shall be included, and the applicable
Grantor shall supply the Administrative Agent or its designee with such
Grantor's know-how and expertise, and with documents and things embodying the
same, relating to the manufacture, distribution, advertising and sale of
products or the provision of services relating to any Intellectual Property
subject to such Disposition, and such Grantor's customer lists and other records
and documents relating to such Intellectual Property and to the manufacture,
distribution, advertising and sale of such products and services.
6.7. Registration Rights. (a) If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged Capital
Stock or the Pledged Debt Securities pursuant to Section 6.6, and if in the
opinion of the Administrative Agent it is necessary to have the Pledged Capital
Stock or the Pledged Debt Securities, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant Grantor will
cause the Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Administrative Agent, necessary to register the Pledged Capital
Stock or the Pledged Debt Securities, or that portion thereof to be sold, under
the provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Capital Stock or the Pledged Debt Securities, or that portion
thereof to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Administrative Agent, are necessary, all
in conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto. Each Grantor agrees to cause such
Issuer to comply with the provisions of the securities or "Blue Sky" laws of any
and all jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Capital Stock or the
Pledged Debt Securities, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no obligation to
delay a sale of any of the Pledged Capital Stock or the Pledged Debt Securities
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Capital Stock or the Pledged Debt Securities
pursuant to this Section 6.7 valid and binding and in compliance with any and
all other applicable Requirements of Law. Each Grantor further agrees that a
breach of any of the covenants contained in this Section 6.7 will cause
irreparable injury to the Secured Parties, that the Secured Parties have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing under the Credit Agreement or a defense of payment.
6.8. Waiver; Deficiency. Each Grantor shall remain liable
for any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay its Obligations and the fees and
disbursements of any attorneys employed by any Secured Party to collect such
deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1. Administrative Agent's Appointment as
Attorney-in-Fact, etc. (a) Each Grantor hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, each Grantor hereby gives the Administrative Agent the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name,
or otherwise, take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any Receivable or with respect to any other Collateral
and file any claim or take any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under
any Receivable or with respect to any other Collateral whenever
payable;
(ii) in the case of any Intellectual Property,
execute and deliver, and have recorded, any and all agreements,
instruments, documents and papers as the Administrative Agent may
request to evidence the Secured Parties' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, effect any repairs or
any insurance called for by the terms of this Agreement and pay all or
any part of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale
provided for in Section 6.6 or 6.7, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the
Collateral; and
(v) (1) direct any party liable for any payment
under any of the Collateral to make payment of any and all moneys due
or to become due thereunder directly to the Administrative Agent or as
the Administrative Agent shall direct; (2) ask or demand for, collect,
and receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising
out of any Collateral; (3) sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (4)
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral
or any portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against
such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent
may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (8) generally, sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Secured Parties' security interests
therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary
notwithstanding, the Administrative Agent agrees that, except as provided in
Section 7.1(b), it will not exercise any rights under the power of attorney
provided for in this Section 7.1(a) unless an Event of Default shall have
occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement; provided, however, that unless
and Event of Default has occurred and is continuing or time is of the essence,
the Administrative Agent shall not exercise this power without first making
demand on the Grantor and the Grantor failing to immediately comply therewith.
(c) The expenses of the Administrative Agent incurred in
connection with actions undertaken as provided in this Section 7.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest would then be payable on past due Revolving Credit Loans that are Base
Rate Loans under the Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.
(d) All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are released.
7.2. Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the New
York UCC or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, nor any other Secured Party nor any of their
respective
officers, directors, partners, employees, agents, attorneys and other advisors,
attorneys-in-fact or affiliates shall be liable for failure to demand, collect
or realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Secured Parties hereunder are solely to protect the Secured
Parties' interests in the Collateral and shall not impose any duty upon any
Secured Party to exercise any such powers. The Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
partners, employees, agents, attorneys and other advisors, attorneys-in-fact or
affiliates shall be responsible to any Grantor for any act or failure to act
hereunder, except to the extent that any such act or failure to act is found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted directly from their own gross negligence or willful misconduct.
7.3. Execution of Financing Statements. Each Grantor
acknowledges that pursuant to Section 9-509(b) of the New York UCC and any other
applicable law, the Administrative Agent is authorized to file or record
financing or continuation statements, and amendments thereto, and other filing
or recording documents or instruments with respect to the Collateral in such
form and in such offices as the Administrative Agent reasonably determines
appropriate to perfect or maintain the perfection of the security interests of
the Administrative Agent under this Agreement. Each Grantor agrees that such
financing statements may describe the collateral in the same manner as described
in the Security documents or as "all assets" or "all personal property" of the
undersigned, whether now owned or hereafter existing or acquired by the
undersigned or such other description as the Administrative Agent, in its sole
judgment, determines is necessary or advisable. A photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or
other filing or recording document or instrument for filing or recording in any
jurisdiction.
7.4. Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the other Secured Parties, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Grantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
7.5. Appointment of Co-Collateral Agents. At any time or
from time to time, in order to comply with any Requirement of Law, the
Administrative Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or agents on behalf of the Secured
Parties with such power and authority as may be necessary for the effectual
operation of the provisions hereof and which may be specified in the instrument
of appointment (which may, in the discretion of the Administrative Agent,
include provisions for indemnification and similar protections of such co-agent
or separate agent).
SECTION 8. MISCELLANEOUS
8.1. Amendments in Writing. None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 10.1 of the Credit Agreement.
8.2. Notices. All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 10.2 of the Credit Agreement; provided that any
such notice, request or demand to or upon any Guarantor shall be addressed to
such Guarantor at its notice address set forth on Schedule 1.
8.3. No Waiver by Course of Conduct; Cumulative Remedies.
No Secured Party shall by any act (except by a written instrument pursuant to
Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any Default or Event of
Default. No failure to exercise, nor any delay in exercising, on the part of any
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which such Secured Party would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4. Enforcement Expenses; Indemnification. (a) Each
Grantor agrees to pay or reimburse each Secured Party for all its costs and
expenses incurred in collecting against such Grantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Grantor is a party,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and expenses of in-house counsel) to each Secured Party and
of counsel to the Administrative Agent to the extent the Borrower would be
required to do so pursuant to Section 10.5 of the Credit Agreement.
(b) Each Grantor agrees to pay, and to save each Secured Party
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement, except
to the extent such liabilities are found by a final and non-appealable decision
of a court of competent jurisdiction to have resulted directly from the gross
negligence or willful misconduct of such Secured Party.
(c) Each Grantor agrees to pay, and to save the Secured
Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 10.5 of the Credit Agreement.
(d) The agreements in this Section shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
(e) Each Grantor agrees that the provisions of Section 2.20 of
the Credit Agreement are hereby incorporated herein by reference, mutatis
mutandis, and each Secured Party shall be entitled to rely on each of them as if
they were fully set forth herein.
8.5. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of each Grantor and shall inure to the
benefit of the Secured Parties and their successors and assigns; provided that
no Grantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Administrative
Agent.
8.6. Set-Off. Each Grantor hereby irrevocably authorizes
each Secured Party at any time and from time to time, while an Event of Default
pursuant to Section 8(a) of the Credit Agreement shall have occurred and be
continuing, without notice to such Grantor or any other Grantor, any such notice
being expressly waived by each Grantor, to set-off and appropriate and apply any
and all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Secured Party to or for the credit
or the account of such Grantor, or any part thereof in such amounts as such
Secured Party may elect, against and on account of the obligations and
liabilities of such Grantor to such Secured Party hereunder and claims of every
nature and description of such Secured Party against such Grantor, in any
currency, whether arising hereunder, under the Credit Agreement, any other Loan
Document or otherwise, as such Secured Party may elect, whether or not any
Secured Party has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. Each Secured Party shall
notify such Grantor promptly of any such set-off and the application made by
such Secured Party of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Secured Party under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Secured Party may have.
8.7. Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.8. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.9. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.10. Integration. This Agreement and the other Loan
Documents represent the agreement of the Grantors, the Administrative Agent and
the other Secured Parties with respect to the subject matter hereof and thereof,
and there are no promises, undertakings, representations or warranties by any
Secured Party relative to subject matter hereof and thereof not expressly set
forth or referred to herein or in the other Loan Documents.
8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
8.12. Submission to Jurisdiction; Waivers. Each Grantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and enforcement of
any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary, punitive
or consequential damages.
8.13. Acknowledgments. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents to which
it is a party;
(b) no Secured Party has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Grantors, on the
one hand, and the Secured Parties, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Secured Parties or among the Grantors and the Secured Parties.
8.14. Additional Grantors. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to Section 6.10 of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of an Assumption Agreement in the
form of Annex 1 hereto.
8.15. Releases. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations (other than Obligations in
respect of any Specified Hedge Agreement) shall have been paid in full, the
Commitments have been terminated or expired and no Letters of Credit shall be
outstanding (unless such Letters of Credit have been cash collateralized or
backed with another letter of credit in accordance with Section 10.15(c) of the
Credit Agreement), the Collateral shall be released from the Liens created
hereby, and this Agreement and all obligations (other than those expressly
stated to survive such termination) of the Administrative Agent and each Grantor
hereunder (including all guarantee obligations) shall terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantors. At the request and sole
expense of any Grantor following any such termination, the Administrative Agent
shall deliver to such Grantor any Collateral held by the Administrative Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be Disposed of by any
Grantor in a transaction permitted by the Credit Agreement, then the
Administrative Agent, at the request and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral. At the request and sole expense of the Borrower, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be Disposed of in a
transaction permitted by the Credit Agreement; provided that the Borrower shall
have delivered to the Administrative Agent, at least ten Business Days prior to
the date of the proposed release (or such shorter period as the Administrative
Agent may agree to), a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the Disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by the Borrower stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents and that the
Proceeds of such Disposition will be applied in accordance therewith.
(c) Each Grantor acknowledges that it is not authorized to
file any financing statement or amendment or termination statement with respect
to any financing statement originally filed in connection herewith without the
prior written consent of the Administrative Agent subject to such Grantor's
rights under Section 9-509(d)(2) of the New York UCC.
8.16. WAIVER OF JURY TRIAL. EACH GRANTOR AND THE
ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
(signature pages follow)
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
GENERAL NUTRITION CENTERS HOLDING COMPANY
By: /s/ Andrew Jhawar
-------------------------------------
Name: Andrew Jhawar
Title: Vice President and Treasurer
GENERAL NUTRITION CENTERS, INC.
GENERAL NUTRITION INCORPORATED
GENERAL NUTRITION CORPORATION
NUTRICIA MANUFACTURING USA, INC.
GNC FRANCHISING, INC.
GENERAL NUTRITION INTERNATIONAL, INC.
GENERAL NUTRITION INVESTMENT COMPANY
GENERAL NUTRITION SYSTEMS, INC.
GENERAL NUTRITION DISTRIBUTION COMPANY
GNC, LIMITED
GNC (CANADA) HOLDING COMPANY
INFORMED NUTRITION, INC.
GENERAL NUTRITION GOVERNMENT SERVICES,
INC.
GN INVESTMENT, INC.
GENERAL NUTRITION SALES CORPORATION
GNC US DELAWARE, INC.
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary for each of the
above named Credit Parties
GENERAL NUTRITION DISTRIBUTION, L.P.
By: General Nutrition Incorporated, its
general partner
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary
GENERAL NUTRITION COMPANIES, INC.
By: /s/ James Sander
-------------------------------------
Name: James Sander
Title: Senior Vice President and
Secretary
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
By: /s/ Francis Chang
-------------------------------------
Name: Francis Chang
Title: Vice President