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EXHIBIT 10.1
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") dated as of November 24,
2000 is made by Midway Games Inc., a Delaware corporation (the "COMPANY"), the
other Persons listed on the signature pages hereof and the Additional Grantors
(as defined in Section 22) (the Company, the Persons so listed and the
Additional Grantors being, collectively, the "GRANTORS"), in favor of Bank of
America, N.A., as agent (together with any successors and assigns, the "AGENT")
for the Banks defined in the Credit Agreement referred to below. The Agent, the
Banks, the Issuing Bank (as defined in the Credit Agreement), the beneficiaries
of each indemnification obligation undertaken by any Grantor under any Loan
Document (as defined in the Credit Agreement) and the successors and assigns of
each of the foregoing are herein referred to collectively as the "SECURED
PARTIES."
PRELIMINARY STATEMENTS.
(1) The Company has entered into a Credit Agreement dated as of
September 20, 2000 (said Agreement, as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being the
"CREDIT AGREEMENT") with the Agent, the Banks and Banc of America Securities LLC
as Arranger.
(2) Pursuant to Section 7.15 of the Credit Agreement, the Grantors are
entering into this Agreement in order to grant to the Agent for the benefit of
the Secured Parties a security interest in all of its personal property and
fixtures now owned or hereafter acquired.
(3) Each Grantor is the owner of the shares (the "INITIAL PLEDGED
SHARES") of stock set forth opposite such Grantor's name on and as otherwise
described in Part I of Schedule I hereto and issued by the corporations named
therein and of the indebtedness (the "INITIAL PLEDGED DEBT") set forth opposite
such Grantor's name on and as otherwise described in Part II of Schedule I
hereto and issued by the obligors named therein.
(4) The Company has authorized the Agent to open a collateral
securities account (the "COLLATERAL ACCOUNT"), with Bank of America, N.A. at its
office at 231 South LaSalle Street, Chicago, Illinois 60697 (or at such other
location as the Agent shall have designated to the Company), in the name of the
Agent and under the sole control and dominion of the Agent and subject to the
terms of this Agreement.
(5) The Company has authorized the Agent to open collateral securities
account (the "L/C COLLATERAL ACCOUNT"), with Bank of America, N.A. at its office
at 231 South LaSalle Street, Chicago, Illinois 60697 (or at such other location
as the Agent shall have designated to the Company), in the name of the Agent and
under the sole control and dominion of the Agent and subject to the terms of
this Agreement.
(6) The Company and certain Grantors have opened cash concentration
deposit accounts set forth on Schedule XI hereto (the "CASH CONCENTRATION
ACCOUNTS"), with Bank of America, N.A., with respect to which the Company and
the applicable Grantors have
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entered into letter agreements substantially in the form of Exhibit G hereto.
The Company and each of the applicable Grantors hereby authorize the Agent to
designate each Cash Concentration Account (whether before or after the Trigger
Event referred to in the Credit Agreement) in such manner as shall be acceptable
to the Agent.
(7) Each Grantor will derive substantial direct and indirect benefit
from the transactions contemplated by the Loan Documents.
(9) Terms defined in the Credit Agreement and not otherwise defined in
this Agreement are used in this Agreement as defined in the Credit Agreement.
Further, unless otherwise defined in this Agreement or in the Credit Agreement,
terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the
State of Illinois ("ILLINOIS UNIFORM COMMERCIAL CODE") and/or defined in the
Federal Book Entry Regulations (as defined below) are used in this Agreement as
such terms are defined in such Article 8 or 9 and/or the Federal Book Entry
Regulations. The term "FEDERAL BOOK ENTRY REGULATIONS" means (a) the federal
regulations contained in Subpart B ("Treasury/Reserve Automated Debt Entry
System (TRADES)") governing book-entry securities consisting of U.S. Treasury
bonds, notes and bills and Subpart D ("Additional Provisions") of 31 C.F.R. Part
357, 31 C.F.R. ss. 357.2, ss. 357.10 through ss. 357.14 and ss. 357.41 through
ss. 357.44 and (b) to the extent substantially identical to the federal
regulations referred to in clause (a) above (as in effect from time to time),
the federal regulations governing other book-entry securities.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Banks to make Credit Extensions under the Credit Agreement, each
Grantor hereby agrees with the Agent as follows:
Section 1. Grant of Security.
Effective upon the occurrence of the earlier of (a) a Trigger Event or
(b) a Default or an Event of Default, each Grantor hereby assigns and pledges to
the Agent for the benefit of the Secured Parties, and hereby grants to the Agent
for the benefit of the Secured Parties a security interest in, such Grantor's
right, title and interest in and to the following, in each case, as to each type
of property described below, whether now owned or hereafter acquired by such
Grantor, wherever located, and whether now or hereafter existing or arising
(collectively, the "COLLATERAL"):
(a) all equipment in all of its forms (including, without limitation,
all machinery, equipment, furnishings, tools, parts and supplies) all
fixtures and all parts thereof and all accessions thereto (any and all such
equipment, fixtures, parts and accessions being the "EQUIPMENT");
(b) (i) all inventory in all of its forms and raw materials and work
in process therefor, finished goods thereof and materials used or consumed
in the manufacture, production, preparation or shipping thereof, (ii) goods
in which such Grantor has an interest in mass or a joint or other interest
or right of any kind (including, without limitation, goods in which such
Grantor has an interest or right as consignee) and (iii) goods that are
returned to or repossessed or stopped in transit by such Grantor), and
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all accessions thereto and products thereof and documents therefor (any and
all such inventory, accessions, products and documents being the
"INVENTORY");
(c) all accounts, chattel paper, instruments, deposit accounts,
general intangibles and other obligations of any kind owed to such Grantor,
whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all
security agreements, leases, guaranties, indemnities and other contracts
securing or otherwise relating to any such accounts, chattel paper,
instruments, deposit accounts, general intangibles or obligations (any and
all such accounts, chattel paper, instruments, deposit accounts, general
intangibles and obligations, to the extent not included in clause (d), (e),
(f) or (g) below, being the "RECEIVABLES", and any and all such security
agreements, guaranties, indemnities, leases and other contracts being the
"RELATED CONTRACTS");
(d) the following (the "SECURITY COLLATERAL"):
(i) the Initial Pledged Shares and the certificates, if any,
representing the Initial Pledged Shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of the Initial Pledged Shares;
(ii) the Initial Pledged Debt and the instruments, if any,
evidencing the Initial Pledged Debt (including, without limitation,
the master promissory note in the form of Exhibit H attached hereto)
and all interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Initial Pledged Debt;
(iii) all additional shares of stock of any issuer of the Pledged
Shares from time to time acquired by such Grantor in any manner (such
shares, together with the Initial Pledged Shares, being the "PLEDGED
SHARES"), and the certificates, if any, representing such additional
shares, and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares;
(iv) all additional indebtedness from time to time owed to such
Grantor (such indebtedness, together with the Initial Pledged Debt,
being the "PLEDGED DEBT") and the instruments, if any, evidencing such
indebtedness, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness;
(v) the securities accounts, all securities entitlements with
respect to all financial assets from time to time credited to the any
of the Company's accounts (the "PLEDGED SECURITY ENTITLEMENTS"), and
all financial assets from time to time credited to the any of the
Company's accounts (the "PLEDGED FINANCIAL ASSETS"), and all
dividends, interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in
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exchange for any or all of such Pledged Security Entitlements or such
Pledged Financial Assets;
(vi) the commodities accounts, all of the Company's rights in and
to all commodity contracts (the "PLEDGED COMMODITY CONTRACTS") from
time to time carried in any of the Company's commodities accounts (the
"COMMODITY ACCOUNTS"), and all value, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
Pledged Commodity Contracts; and
(vii) all other investment property (including, without
limitation, all (A) securities, whether certificated or
uncertificated, (B) security entitlements, (C) securities accounts,
(D) commodity contracts and (E) commodity accounts) in which such
Grantor has now, or acquires from time to time hereafter, any right,
title or interest in any manner, and the certificates or instruments,
if any, representing or evidencing such investment property, and all
dividends, interest, distributions, value, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
investment property;
(e) the following (collectively, the "ACCOUNT COLLATERAL"):
(i) the Collateral Account, all financial assets from time to
time credited to the Collateral Account (including, without
limitation, all Cash Equivalents1 from time to time credited to the
Collateral Account), and all dividends, interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
financial assets;
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(1) "CASH EQUIVALENTS" means any of the following, to the extent owned by the
Company or any of its Subsidiaries free and clear of all Liens other than Liens
created in favor of the Agent and the Banks and having a maturity of not greater
than 180 days from the date of acquisition thereof: (a) readily marketable
direct obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the full
faith and credit of the Government of the United States, (b) insured
certificates of deposit of or time deposits with any commercial bank that is a
Bank or a member of the Federal Reserve System, which issues (or the parent of
which issues) commercial paper rated as described in clause (c) below, is
organized under the laws of the United States or any State thereof and has
combined capital and surplus of at least $1 billion, or (c) commercial paper
issued by any corporation organized under the laws of any State of the United
States and rated at least "Prime-1" (or the then equivalent grade) by Moody's
Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or (d)
Investments in money market or mutual funds that invest solely in Cash
Equivalents of the types described in clauses (a), (b) and (c) above.
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(ii) the L/C Collateral Account, all financial assets from time
to time credited to the L/C Collateral Account (including, without
limitation, all Cash Equivalents from time to time credited to the L/C
Collateral Account), and all dividends, interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
financial assets;
(iii) the Cash Concentration Accounts, all financial assets from
time to time credited to the Cash Concentration Accounts (including,
without limitation, all Cash Equivalents from time to time credited to
the Cash Concentration Accounts), and all dividends, interest, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such financial assets, and all funds held therein and all
certificates and instruments, if any, from time to time representing
or evidencing the Cash Concentration Accounts;
(iv) all Pledged Accounts (as defined in Section 5(a)) from time
to time, all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing the Pledged
Accounts;
(v) all other deposit accounts of such Grantor from time to time
(including, without limitation, all other demand, time, savings,
passbook accounts), all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing such
deposit accounts;
(vi) all notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time delivered to or otherwise
possessed by the Agent or the Banks for or on behalf of such Grantor,
including, without limitation, those delivered or possessed in
substitution for or in addition to any or all of the then existing
Account Collateral; and
(vii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral;
(f) the following (collectively, the "INTELLECTUAL PROPERTY
COLLATERAL"):
(i) all United States, international and foreign patents, patent
applications, utility models, and statutory invention registrations,
including, without limitation, the patents and patent applications set
forth in Schedule II hereto (as such Schedule II may be supplemented
from time to time by supplements to this Agreement, each such
supplement being in substantially the form of Exhibit F hereto (an "IP
SECURITY AGREEMENT SUPPLEMENT"), executed and delivered by such
Grantor to the Agent from time to time), together with all reissues,
divisions, continuations, continuations-in-part, extensions and
reexaminations thereof, all inventions therein, all rights therein
provided by international treaties or conventions and all improvements
thereto, and all other
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rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto (the "PATENTS");
(ii) all trademarks (including, without limitation, service
marks), certification marks, collective marks, trade dress, logos,
domain names, product configurations, trade names, business names,
corporate names and other source identifiers, whether or not
registered, whether currently in use or not, including, without
limitation, all common law rights and registrations and applications
for registration thereof, including, without limitation, the trademark
registrations and trademark applications set forth in Schedule II
hereto (as such Schedule II may be supplemented from time to time by
IP Security Agreement Supplements executed and delivered by such
Grantor to the Agent from time to time), and all other marks
registered in the U.S. Patent and Trademark Office or in any office or
agency of any State or Territory of the United States or any foreign
country (but excluding any United States intent-to-use trademark
application prior to the filing and acceptance of a Statement of Use
or an Amendment to allege use in connection therewith to the extent
that a valid security interest may not be taken in such an
intent-to-use trademark application under applicable law), and all
rights therein provided by international treaties or conventions, all
reissues, extensions and renewals of any of the foregoing, together in
each case with the goodwill of the business connected therewith and
symbolized thereby, and all rights corresponding thereto throughout
the world and all other rights of any kind whatsoever of such Grantor
accruing thereunder or pertaining thereto (the "TRADEMARKS");
(iii) all copyrights, copyright applications, copyright
registrations and like protections in each work of authorship, whether
statutory or common law, whether published or unpublished, any
renewals or extensions thereof, all copyrights of works based on,
incorporated in, derived from, or relating to works covered by such
copyrights, including, without limitation, the copyright registrations
and copyright applications set forth in Schedule II hereto (as such
Schedule II may be supplemented from time to time by IP Security
Agreement Supplements executed and delivered by such Grantor to the
Agent from time to time), together with all rights corresponding
thereto throughout the world and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto
(the "COPYRIGHTS");
(iv) all confidential and proprietary information, including,
without limitation, know-how, trade secrets, 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 (the "TRADE
SECRETS");
(v) all computer software programs and databases (including,
without limitation, source code, object code and all related
applications and data files), firmware, and documentation and
materials relating thereto, and all rights with
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respect to the foregoing, together with any and all options,
warranties, service contracts, program services, test rights,
maintenance rights, improvement rights, renewal rights and
indemnifications and any substitutions, replacements, additions or
model conversions of any of the foregoing (the "COMPUTER SOFTWARE");
(vi) to the extent the following are assignable under the terms
thereof and appropriate consents can be obtained through the best
efforts of the Grantors, all license agreements, permits,
authorizations and franchises, whether with respect to the Patents,
Trademarks, Copyrights, Trade Secrets or Computer Software, or with
respect to the patents, trademarks, copyrights, trade secrets,
computer software or other proprietary right of any other Person,
including, without limitation, the license agreements set forth in
Schedule II hereto (as such Schedule II may be supplemented from time
to time by IP Security Agreement Supplements executed and delivered by
such Grantor to the Agent from time to time), and all income,
royalties and other payments now or hereafter due and/or payable with
respect thereto, subject, in each case, to the terms of such license
agreements, permits, authorizations and franchises, (the "LICENSES");
and
(vii) any and all claims for damages for past, present and future
infringement, misappropriation or breach with respect to the Patents,
Trademarks, Copyrights, Trade Secrets, Computer Software or Licenses,
with the right, but not the obligation, to sue for and collect, or
otherwise recover, such damages;
(g) all general intangibles of every description and in any event
including, without limitation: (i) all tax and other refunds, rebates or
credits of every kind and nature to which such Grantor is now or hereafter
may become entitled; (ii) all good will, choses in action and causes of
action, whether legal or equitable, whether in contract or tort and however
arising; (iii) all interests in limited and general partnerships to the
extent not included in the Security Collateral; (iv) all rights of stoppage
in transit, replevin and reclamation; (v) all licenses, permits, consents,
indulgences and rights of whatever kind issued in favor of or otherwise
recognized as belonging to such Grantor by any governmental authority; and
(vi) all indemnity agreements, guaranties, insurance policies and other
contractual, equitable and legal rights of whatever kind or nature;
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(h) all books, records and other written, electronic or other
documentation in whatever form maintained now or hereafter by or for
such Grantor in connection with the ownership of its assets or the
conduct of its business or evidencing or containing information
relating to the Collateral, including, without limitation: (i)
ledgers; (ii) records indicating, summarizing, or evidencing such
Grantor's assets (including Inventory and Receivables), business
operations or financial condition; (iii) computer programs and
software; (iv) computer discs, tapes, files, manuals, spreadsheets;
(v) computer printouts and output of whatever kind; (vi) any other
computer prepared or electronically stored, collected or reported
information and equipment of any kind; and (vii) any and all other
rights now or hereafter arising out of any contract or agreement
between such Grantor and any service bureau, computer or data
processing company or other Person charged with preparing or
maintaining any of such Grantor's books or records or with credit
reporting, including with regard to the Grantor's accounts (all of the
foregoing being the "BOOKS"); and
(i) all proceeds of any and all of the Collateral (including,
without limitation, proceeds that constitute property of the types
described in clauses (a) through (h) of this Section 1 and this clause
(i)) and, to the extent not otherwise included, all (i) payments under
insurance (whether or not the Agent is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage
to or otherwise with respect to any of the foregoing Collateral; (ii)
payments (in any form whatsoever) made or due and payable to such
Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part
of the Collateral by any governmental authority (or any Person acting
under color of governmental authority); (iii) other amounts from time
to time paid or payable under or in connection with any of the
Collateral or for an account of any damage or injury to or conversion
of any Collateral by any Person; (iv) cash and (v) proceeds of
proceeds.
Section 2. Security for Obligations. The Collateral granted by
each Grantor pursuant to this Agreement jointly and severally secures the
payment and performance of all Obligations (as defined in the Credit
Agreement), all Liabilities (as defined in the Guaranties), all obligations
of Guarantors under the Guaranties and all other obligations of Grantors
now or hereafter existing under the Loan Documents, in each case whether
direct or indirect, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether for principal, reimbursement
obligations, interest, fees, premiums, penalties, indemnifications,
contract causes of action, costs, expenses or otherwise (all of the
foregoing being, collectively, the "SECURED OBLIGATIONS").
Section 3. Grantors Remain Liable. Anything herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in such Grantor's Collateral to the
extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed,
(b) the exercise by the Agent of any of the rights hereunder shall not
release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral and (c) no Secured
Party shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement or any
other Loan Document, nor shall any Secured
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Party be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
Section 4. Delivery and Control of Security Collateral.
(a) All certificates or instruments representing or evidencing
Security Collateral shall be delivered to and held by or on behalf of the
Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to the
Agent. For the better perfection of the Agent's rights in and to the
Security Collateral, if requested by the Banks, each Grantor shall
forthwith, upon the pledge hereunder of any Security Collateral pursuant to
Section 1 hereof in which it has any right, title or interest, cause such
Security Collateral to be registered in the name of the Agent or such of
its nominees as the Agent may direct, subject only to the revocable rights
specified in Section 15(a). In addition, the Agent shall have the right at
any time after the occurrence of an Event of Default or a Trigger Event to
exchange certificates or instruments representing or evidencing Security
Collateral for certificates or instruments of smaller or larger
denominations. Also, the Agent shall have the right at any time to convert
Security Collateral consisting of financial assets credited to the
Securities Account to Security Collateral consisting of financial assets
held directly by the Agent, and to convert Security Collateral consisting
of financial assets held directly by the Agent to Security Collateral
consisting of financial assets credited to the Securities Account.
(b) With respect to any Security Collateral in which any Grantor
has any right, title or interest and that constitutes an uncertificated
security, such Grantor will cause the issuer thereof either (i) to register
the Agent as the registered owner of such security or (ii) to agree in
writing with such Grantor and the Agent that such issuer will comply with
instructions with respect to such security originated by the Agent without
further consent of such Grantor, such agreement to be in form and substance
satisfactory to the Agent. Each Grantor which has issued any Pledged Shares
pledged hereunder to any other Grantor hereby agrees that it will follow
and comply with the instructions of the Agent with respect to such Pledged
Shares without any further consent of such other Grantor.
(c) With respect to any Security Collateral in which any Grantor
has any right, title or interest and that constitutes a security
entitlement, such Grantor will cause the securities intermediary with
respect to such security entitlement either (i) to identify in its records
the Agent as the entitlement holder of such security entitlement against
such securities intermediary or (ii) to agree in writing with such Grantor
and the Agent that such securities intermediary will comply with
entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to
which such Grantor has a security entitlement) originated by the Agent
without further consent of such Grantor, such agreement to be in
substantially the form of Exhibit C hereto or otherwise in form and
substance satisfactory to the Agent (such agreement being a "SECURITIES
ACCOUNT CONTROL AGREEMENT").
(d) With respect to any Security Collateral in which any Grantor
has any right, title or interest and that constitutes 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 Agent that
such commodity intermediary will apply any value distributed on
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account of such commodity contract as directed by the Agent without further
consent of such Grantor, such agreement to be in substantially the form of
Exhibit D hereto or otherwise in form and substance satisfactory to the
Agent (such agreement being a "COMMODITY ACCOUNT CONTROL AGREEMENT", and
all such agreements, together with all Securities Account Control
Agreements being, collectively, "CONTROL AGREEMENTS").
(e) No Grantor will change or add any securities intermediary or
commodity intermediary that maintains any securities account or commodity
account in which any of the Collateral is credited or carried, or change or
add any such securities account or commodity account, in each case without
first complying with the above provisions of this Section 4 in order to
perfect the security interest granted hereunder in such Collateral.
Section 5. Maintaining the Pledged Accounts. So long as any
Credit Extension or any other Obligation of any Credit Party under any Loan
Document shall remain unpaid, any Letter of Credit shall be outstanding, or
any Bank shall have any Commitment under the Credit Agreement:
(a) Each Grantor will maintain lockboxes and deposit accounts
(collectively, the "PLEDGED ACCOUNTS") only with banks (the "PLEDGED
ACCOUNT BANKS") that have entered into letter agreements in
substantially the form of Exhibit B hereto or otherwise in form and
substance satisfactory to the Agent with such Grantor and the Agent
(the "PLEDGED ACCOUNT LETTERS"), other than the Cash Concentration
Accounts and other than deposit accounts which, together with all
other deposit accounts of the Grantors, have an average daily balance
not exceeding $50,000 in the aggregate.
(b) Each Grantor will (i) immediately instruct each Person
obligated at any time to make any payment to such Grantor for any
reason (an "OBLIGOR") to make such payment to a Pledged Account of
such Grantor or to the Cash Concentration Accounts and (ii) deposit in
a Pledged Account or pay to the Agent for deposit in the Cash
Concentration Accounts, at the end of each Business Day, all proceeds
of Collateral and all other cash of such Grantor in excess of $500,000
in the aggregate.
(c) Concurrently with or promptly after entering into a Pledged
Account Letter with any Pledged Account Bank, each Grantor will
instruct such Pledged Account Bank to transfer to the Cash
Concentration Accounts, at the end of each Business Day, in same day
funds, an amount equal to the credit balance of the Pledged Account in
such Pledged Account Bank. If any Grantor shall fail to give any such
instructions to any Pledged Account Bank, the Agent may do so without
further notice to any Grantor.
(d) Each Grantor agrees that it will not add any bank as a
Pledged Account Bank or add any account as a Pledged Account to those
listed in Schedule IX hereto, unless the Agent shall have received at
least 10 days' prior written notice of such addition and shall have
received a Pledged Account Letter executed by such new Pledged Account
Bank and such Grantor or a supplement to an existing Pledged Account
Letter covering such new Pledged Account, as the case may be (and,
upon the receipt by the Agent of such Pledged Account Letter or
supplement, Schedule IX hereto shall be automatically amended to
include such Pledged Account Bank or Pledged Account). Each Grantor
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agrees that it will not terminate any bank as a Pledged Account Bank
or terminate any account as a Pledged Account, unless the Agent shall
have received at least 10 days' prior written notice of such
termination (and, upon such termination, Schedule IX hereto shall be
automatically amended to delete such Pledged Account Bank or Pledged
Account).
(e) Upon any termination of any Pledged Account Letter or other
agreement with respect to the maintenance of a Pledged Account by any
Grantor or any Pledged Account Bank, such Grantor will immediately
notify all Obligors that were making payments to such Pledged Account
to make all future payments to another Pledged Account or to the Cash
Concentration Accounts. Each Grantor agrees to terminate any or all
Pledged Accounts and Pledged Account Letters upon request by the
Agent.
(f) The Company will draw checks on, and otherwise withdraw
amounts from, the Pledged Accounts in such amounts as may be required
in the ordinary course of business (including, without limitation, to
pay or prepay Indebtedness outstanding under the Loan Documents). So
long as no Event of Default shall have occurred and be continuing, the
Agent will direct the applicable Collateral Bank (as hereinafter
defined) to transfer amounts on deposit in the Cash Concentration
Accounts to the Pledged Accounts to the extent necessary to pay all
checks drawn on, and all amounts otherwise withdrawn from, the Pledged
Accounts.
(g) Each Grantor agrees that it will not add any account as an
unblocked account to those listed in Schedule X hereto (the "UNBLOCKED
ACCOUNTS") and will not terminate any account as an Unblocked Account,
unless the Agent shall have received at least 10 days' prior written
notice of such addition or termination (and, upon such addition or
termination, Schedule X hereto shall be automatically amended to add
or delete such account, as applicable) Each Grantor further agrees
that the funds deposited in any Unblocked Account shall not exceed
$100,000 at any time.
Section 6. Maintaining the Cash Concentration Accounts, the
Collateral Account and the L/C Collateral Account. So long as any Credit
Extension or any other Obligation of any Credit Party under any Loan
Document shall remain unpaid, any Letter of Credit shall be outstanding, or
any Bank shall have any Commitment under the Credit Agreement:
(a) The Company will maintain the Cash Concentration Accounts,
the Collateral Account and the L/C Collateral Account with the Agent
or another commercial bank acceptable to the Agent and that, in the
case of the Cash Concentration Accounts, the Collateral Account and
the L/C Collateral Account, has entered into a Securities Account
Control Agreement (the Agent or any bank with which the Cash
Concentration Accounts, the Collateral Account or the L/C Collateral
Account are maintained being a "COLLATERAL BANK").
(b) It shall be a term and condition of each of the Cash
Concentration Accounts, the Collateral Account and the L/C Collateral
Account, notwithstanding any term or condition to the contrary in any
other agreement relating to the Cash Concentration Accounts, the
Collateral Account or the L/C Collateral Account, as the case may be,
and except as otherwise provided by the provisions of Sections 5, 8
and 20, that no amount
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(including interest on Cash Equivalents credited thereto) will be paid
or released to or for the account of, or withdrawn by or for the
account of, the Company or any other Person from the Cash
Concentration Accounts, the Collateral Account or the L/C Collateral
Account, as the case may be.
Section 7. Investing of Amounts in the Cash Concentration
Accounts, the Collateral Account and the L/C Collateral Account. The Agent
will, subject to the provisions of Sections 5, 8 and 20, from time to time
direct the applicable Collateral Bank to (a) invest amounts received with
respect to the Cash Concentration Accounts, the Collateral Account and the
L/C Collateral Account in such Cash Equivalents credited to the Cash
Concentration Accounts, the Collateral Account and the L/C Collateral
Account, respectively, as the Company may select and the Agent may approve
and (b) invest interest paid on the Cash Equivalents referred to in clause
(a) above, and reinvest other proceeds of any such Cash Equivalents that
may mature or be sold, in each case in such Cash Equivalents credited to
the Cash Concentration Accounts, the Collateral Account and the L/C
Collateral Account, respectively, as the Company may select and the Agent
may approve. Interest and proceeds that are not invested or reinvested in
Cash Equivalents as provided above shall be deposited and held in a deposit
account with the applicable Collateral Bank in the name of the Agent and
under the sole control and dominion of the Agent, such deposit account to
be deemed to constitute part of the Cash Concentration Accounts, the
Collateral Account or the L/C Collateral Account, as the case may be. In
addition, the Agent shall have the right at any time to direct the
applicable Collateral Bank to exchange such Cash Equivalents for similar
Cash Equivalents of smaller or larger determinations, or for other Cash
Equivalents, credited to the Cash Concentration Accounts, the Collateral
Account or the L/C Collateral Account, as the case may be.
Section 8. Release of Amounts. So long as no Default under
Sections 10.1(a), (f) or (g) of the Credit Agreement or Event of Default
shall have occurred and be continuing, the Agent will direct the applicable
Collateral Bank to pay and release to the Company or at its order or, at
the request of the Company, to the Agent to be applied to the Obligations
of the Company under the Loan Documents, in the case of the L/C Collateral
Account, such amount, if any, as is then on deposit in the L/C Collateral
Account to the extent permitted to be released under the terms of the
Credit Agreement governing Cash Collateralized amounts (as such term is
defined in the Credit Agreement) and, in the case of the Collateral
Account, the amount, if any, by which the aggregate principal amount of the
Cash Equivalents credited to the Collateral Account exceeds all amounts
then due and payable under the Loan Documents together with all accrued and
unpaid interest and fees under the Credit Agreement.
Section 9. Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) Except for Collateral in transit, all of the Equipment and
Inventory of such Grantor are located at the places specified therefor
in Schedule III hereto, as such Schedule III may be amended from time
to time pursuant to Section 11(a).
(b) The chief executive office of such Grantor, the state of
incorporation or formation and the original copies of Related Contract
to which such Grantor is a party, all Books and all originals of all
chattel paper that evidence Receivables of such Grantor, are
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located at the address specified therefor in Schedule IV hereto, as
such Schedule IV may be amended from time to time pursuant to Section
13(a).
(c) Such Grantor's federal tax identification number are set
forth opposite such Grantor's name in Schedule V hereto.
(d) All Security Collateral consisting of certificated securities
and instruments have been delivered to the Agent (except for the
treasury shares). None of the Receivables is evidenced by a promissory
note or other instrument that has not been delivered to the Agent.
(e) Except for Collateral in transit, such Grantor is the legal
and beneficial owner of the Collateral of such Grantor free and clear
of any Lien, claim, option or right of others, except for the security
interest created under this Agreement or Permitted Liens. No effective
financing statement or other instrument similar in effect covering all
or any part of such Collateral or listing such Grantor or any trade
name of such Grantor as debtor is on file in any recording office,
except such as may have been filed in favor of the Agent relating to
the Loan Documents or Permitted Liens.
(f) Such Grantor has the trade names listed on Schedule VI hereto
as such Schedule VI may be amended from time to time pursuant to
Section 10(d). Except as set forth in Schedule VI, such Grantor has
not, at any time during the preceding five years: (i) been known as or
used any other corporate, trade or fictitious name; (ii) changed its
name; (iii) been the surviving or resulting corporation in a merger or
consolidation; or (iv) acquired through asset purchase or otherwise
any business of any Person.
(g) Except for Collateral in transit and subject to Permitted
Liens, such Grantor has exclusive possession and control of the
Equipment and Inventory and no Inventory is stored with any bailee,
warehouseman or similar Person or on any premises leased to such
Grantor, nor has any inventory been consigned to such Grantor or
consigned by such Grantor to any Person or is held by such Grantor for
any Person under any "bill and hold" or other arrangement, other than
Inventory stored at leased premises or warehouse set forth on Schedule
VII for which a landlord's or warehouseman's agreement, in form and
substance satisfactory to the Agent, is or will be in effect within 90
days from the effective date hereof, as such Schedule VII may be
amended from time to time pursuant to Section 10(d).
(h) (i) None of the Equipment or other Collateral is affixed to
real property, except Collateral with respect to which such Grantor
has supplied the Collateral Agent with all information and
documentation necessary to make all fixture filings required to
perfect and protect the priority of the Collateral Agent's security
interest in all such Collateral which may be fixtures as against all
Persons having an interest in the premises to which such property may
be affixed; and (ii) none of the Equipment is leased from or to any
Person, except as set forth in Schedule VIII.
(i) The Pledged Shares pledged by such Grantor hereunder have
been duly authorized and validly issued and are fully paid and
non-assessable. The Pledged Debt
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pledged by such Grantor hereunder has been duly authorized,
authenticated or issued and delivered, is the legal, valid and binding
obligation of the issuers thereof, is evidenced by one or more
promissory notes (which notes have been delivered to the Agent) and is
not in default.
(j) The Initial Pledged Shares constitute the percentage of the
issued and outstanding shares of stock of the issuers thereof
indicated on Schedule I hereto, as such Schedule I may be amended from
time to time pursuant to Section 10(d). The Initial Pledged Debt
constitutes all of the outstanding indebtedness owed to such Grantor
by the issuers thereof and is outstanding, as of the date hereof, in
the principal amount indicated on Schedule I hereto, as such Schedule
I may be amended from time to time pursuant to Section 10(d).
(k) All of the investment property constituting Pledged Shares or
Pledged Debt owned by such Grantor as of the date hereof is listed on
Schedule I hereto.
(l) Such Grantor has no Pledged Accounts or other deposit
accounts other than the Pledged Accounts, the Unblocked Accounts
listed on Schedule X hereto, and the Cash Concentration Accounts
listed on Schedule XI hereto, as such Schedule IX or Schedule X may be
amended from time to time pursuant to Section 5(d) or 5(g) and the
permitted Unblocked Accounts aggregate average daily balance does not
exceed the amounts referred to in Section 5(g) hereto. Such Grantor
has instructed all existing Obligors to make all payments to either a
Pledged Account or the Cash Concentration Accounts.
(m) All financing statements, other documents for filings and
other actions necessary or desirable to perfect and protect the
security interest in the Collateral of such Grantor created under this
Agreement have been executed and delivered to the Agent or have been
(or are in the process of being) made or taken or, in the case of
future-acquired Collateral, will be executed and delivered to the
Agent or will be made or taken;
(n) This Agreement creates in favor of the Agent for the benefit
of the Secured Parties a valid and, together with such filings and
other actions, perfected first priority security interest in the
Collateral of such Grantor, securing the payment of the Secured
Obligations.
(o) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body or any other third party is required for (i) the grant by such
Grantor of the assignment, pledge and security interest granted
hereunder or for the execution, delivery or performance of this
Agreement by such Grantor, (ii) the perfection or maintenance of the
assignment, pledge and security interest created hereunder (including
the first priority nature of such assignment, pledge or security
interest), except for the filing of financing and continuation
statements under the Uniform Commercial Code, which financing
statements have been executed and delivered to the Agent, the
recordation of the Intellectual Property Security Agreements referred
to in Section 14(f) with the U.S. Patent and Trademark Office and the
U.S. Copyright Office, which Agreements have been executed and
delivered to the Agent or,
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in the case of future-acquired Collateral, will be executed and
delivered to the Agent and the actions described in Section 4 with
respect to Security Collateral will be taken no later than 10 days of
the grant of the security interest under this Agreement becoming
effective pursuant to Section 1, or (iii) for the exercise by the
Agent of its voting or other rights provided for in this Agreement or
the remedies in respect of the Collateral pursuant to this Agreement,
except as may be required in connection with the disposition of any
portion of the Security Collateral by laws affecting the offering and
sale of securities generally.
(p) The Inventory that has been produced or distributed by such
Grantor has been produced in compliance in all material respects with
all requirements of applicable law, including, without limitation, the
Fair Labor Standards Act.
(q) As to itself and its Intellectual Property Collateral, except
with respect to Intellectual Property Collateral which is not material
to the Company's business:
(i) To the Grantor's knowledge, the rights of such Grantor
in or to the Intellectual Property Collateral do not
misappropriate or infringe the intellectual property rights of
any third party, and no claim has been asserted that the use of
such Intellectual Property Collateral does or may infringe the
intellectual property rights of any third party.
(ii) To the Grantor's best knowledge, such Grantor is the
exclusive owner of the entire and unencumbered right, title and
interest in and to the Intellectual Property Collateral and is
entitled to use all such Intellectual Property Collateral without
limitation, subject only to the license terms of the Licenses.
(iii) The Intellectual Property Collateral set forth on
Schedule II hereto includes all of the patents, patent
applications, trademark registrations and applications, copyright
registrations and applications of such Grantor to the extent such
Intellectual Property Collateral is material to the business of
the Company and its Subsidiaries taken as a whole.
(iv) The Intellectual Property Collateral is subsisting and
has not been adjudged invalid or unenforceable in whole or part,
and is valid and enforceable. Such Grantor is not aware of any
uses of any item of Intellectual Property Collateral that could
be expected to lead to such item becoming invalid or
unenforceable.
(v) Such Grantor has made or performed or will make or
perform within a commercially reasonable time after the effective
date of this Agreement, all filings, recordings and other acts
and has paid all required fees and taxes to maintain and protect
its interest in each and every item of Intellectual Property
Collateral in full force and effect throughout the world, and to
protect and maintain its interest therein including, without
limitation, recordations of any of its interests in the Patents
and Trademarks with the U.S. Patent and Trademark
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Office and recordation of any of its interests in the Copyrights
with the U.S. Copyright Office.
(vi) No action, suit, investigation, litigation or
proceeding has been asserted or is pending or, to the best of
such Grantor's knowledge, threatened against such Grantor (i)
based upon or challenging or seeking to deny or restrict the use
of any of the Intellectual Property Collateral, or (ii) alleging
that any services provided by, processes used by, or products
manufactured or sold by, such Grantor infringe or misappropriate
any patent, trademark, copyright or any other proprietary right
of any third party, except to the extent the foregoing would not
have a Material Adverse Effect. To the best of such Grantor's
knowledge, no Person is engaging in any activity that infringes
upon or misappropriates the Intellectual Property Collateral or
upon the rights of such Grantor therein, except to the extent the
foregoing would not have a Material Adverse Effect. Except as set
forth on Schedule II 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
Intellectual Property Collateral. The consummation of the
transactions contemplated by the Transaction Documents will not
result in the termination or impairment of any of the
Intellectual Property Collateral, except to the extent the
foregoing would not have a Material Adverse Effect.
(vii) With respect to each License: (A) such License is
valid and binding and in full force and effect and represents the
entire agreement between the respective licensor and licensee
with respect to the subject matter of such License; (B) such
License will not cease to be valid and binding and in full force
and effect on terms identical to those currently in effect as a
result of the rights and interest granted herein, nor will the
grant of such rights and interest constitute a breach or default
under such License or otherwise give the licensor or licensee a
right to terminate such License; (C) such Grantor has not
received any notice of termination or cancellation under such
License; (D) such Grantor has not received any notice of a breach
or default under such License, which breach or default has not
been cured; (E) such Grantor has not granted to any other third
party any rights, adverse or otherwise, under such License; and
(F) neither such Grantor nor any other party to such License is
in breach or default in any material respect, and no event has
occurred that, with notice or lapse of time or both, would
constitute such a breach or default or permit termination,
modification or acceleration under such License.
(viii) To the Grantor's knowledge, (A) none of the Trade
Secrets of such Grantor has been used, divulged, disclosed or
appropriated to the detriment of such Grantor for the benefit of
any other Person other than such Grantor; (B) no employee,
independent contractor or agent of such Grantor has
misappropriated any trade secrets of any other Person in the
course of the performance of his or her duties as an employee,
independent contractor or agent of such Grantor; and (C) no
employee, independent contractor or agent of such Grantor is in
default or breach of any term of any employment agreement,
non-disclosure agreement, assignment of inventions agreement or
similar agreement or contract relating in
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any way to the protection, ownership, development, use or
transfer of such Grantor's Intellectual Property Collateral.
(ix) None of the Intellectual Property Collateral is subject
to any outstanding decree, order, injunction, judgement or ruling
restricting the use of such Intellectual Property Collateral or
that would impair the validity or enforceability of such
Intellectual Property Collateral.
Section 10. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense of
such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may request, in order to perfect
and protect any pledge, assignment or security interest granted or
purported to be granted by such Grantor hereunder or to enable the Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral of such Grantor. Without limiting the generality of the
foregoing, each Grantor will promptly with respect to Collateral of such
Grantor: (i) upon the occurrence of Default or an Event of Default or as
the Agent may request, promptly mark conspicuously its Inventory
documentation, each chattel paper included in Receivables, each Related
Contract, and, at the request of the Agent, its records pertaining to such
Collateral with a legend, in form and substance reasonably satisfactory to
the Agent, indicating that such document, chattel paper, Related Contract,
or Collateral is subject to the security interest granted hereby; (ii) if
any such Collateral shall be evidenced by a promissory note or other
instrument or chattel paper, deliver and pledge to the Agent hereunder such
note or instrument or chattel paper duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Agent; (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments,
notices or documents as may be necessary or desirable, or as the Agent may
request, in order to perfect and preserve the security interest granted or
purported to be granted by such Grantor hereunder (including financing
statements and documents in anticipation of the revised Article 9 of the
Uniform Commercial Code); (iv) deliver and pledge to the Agent for benefit
of the Secured Parties certificates representing Security Collateral that
constitutes certificated securities, accompanied by undated stock or bond
powers executed in blank; and (v) deliver to the Agent evidence that all
other action that the Agent may deem reasonably necessary or desirable in
order to perfect and protect the security interest created by such Grantor
under this Agreement has been taken.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral of such Grantor without the signature of
such Grantor where permitted by law. A photocopy or other reproduction of
this Agreement or any financing statement covering the Collateral or any
part thereof shall be sufficient as a financing statement where permitted
by law.
(c) Each Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral
of such Grantor and such other reports in connection with such Collateral
as the Agent may reasonably request, all in reasonable detail.
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(d) Each Grantor will (i) notify the Agent, upon 40 days' prior
written notice, of any change in the content of Schedule I, VI or VII as
the case may be and (ii) provide the Agent a revised Schedule I, VI or VII
which shall amend Schedule I, VI, or VII as the case may be, provided,
however that such change shall be in compliance with the terms and
conditions of the Loan Documents including without limitation the terms and
conditions of Section 12.1 of the Credit Agreement.
Section 11. As to Equipment and Inventory.
(a) Each Grantor will keep the Equipment and Inventory of such
Grantor (other than Inventory in transit or sold in the ordinary course of
business) at the places therefor specified in Section 9(a) or, upon 30
days' prior written notice to the Agent, at such other places in a
jurisdiction where all action required by Section 10 shall have been taken
with respect to such Equipment and Inventory (and, upon the taking of such
action in such jurisdiction, Schedule III hereto shall be automatically
amended to include such other places).
(b) Each Grantor will cause the Equipment of such Grantor to be
maintained and preserved in the same condition, repair and working order as
when new, ordinary wear and tear excepted, and in accordance with any
manufacturer's manual, and will forthwith, or in the case of any loss or
damage to any of such Equipment as soon as practicable after the occurrence
thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith that are reasonably necessary or
desirable to such end. Each Grantor will promptly furnish to the Agent a
statement respecting any loss or damage exceeding $100,000 to any of the
Equipment or Inventory of such Grantor.
(c) Each Grantor will pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including, without limitation, claims for labor, materials
and supplies) against, the Equipment and Inventory of such Grantor, except
for claims which such Grantor is actively and in good faith disputing. In
producing its Inventory, each Grantor will comply in all material respects
with all requirements of applicable law, including, without limitation, the
Fair Labor Standards Act.
Section 12. Insurance.
(a) Upon the occurrence of the earlier of an Event of Default or a Trigger
Event, each Grantor will, at its own expense, maintain insurance with
respect to the Equipment and Inventory of such Grantor in such amounts,
against such risks, in such form and with such insurers, as shall be
reasonably satisfactory to the Agent from time to time. Each policy of each
Grantor for liability insurance shall provide for all losses to be paid on
behalf of the Agent and such Grantor as their interests may appear, and
each policy for property damage insurance shall provide for all losses
(except for losses of less than $1,000,000 per occurrence) to be paid
directly to the Agent. Each such policy shall in addition (i) name such
Grantor and the Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent) as their
interests may appear, (ii) contain the agreement by the insurer that
(except for amounts permitted to be paid directly to the Company pursuant
to Sections 12(b) and 12(c)), any loss thereunder shall be payable to the
Agent notwithstanding any action, inaction or breach of representation or
warranty by such Grantor, (iii) provide that there shall be no recourse
against
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the Agent for payment of premiums or other amounts with respect thereto and
(iv) provide that at least 10 days' prior written notice of cancellation or
of lapse shall be given to the Agent by the insurer. Each Grantor will
deliver to the Agent a certificate for such insurance and, if so requested
by the Agent, deliver to the Agent duplicate policies of such insurance
and, as often as the Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Further, each Grantor
will, at the request of the Agent, duly execute and deliver instruments of
assignment of such insurance policies to comply with the requirements of
Section 10 and cause the insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 12 may be paid directly to the Person who
shall have incurred liability covered by such insurance. In case of any
loss involving damage to Equipment or Inventory when subsection (c) of this
Section 12 is not applicable, the applicable Grantor will make or cause to
be made the necessary repairs to or replacements of such Equipment or
Inventory, and any proceeds of insurance properly received by or released
to such Grantor shall be used by such Grantor, except as otherwise required
hereunder or by the Credit Agreement, to pay or as reimbursement for the
costs of such repairs or replacements.
(c) So long as no Default or Event of Default shall have occurred
and be continuing, all insurance payments received by the Agent in
connection with any loss, damage or destruction of any Inventory or
Equipment will be released by the Agent to the applicable Grantor for the
repair, replacement or restoration thereof, subject to such terms and
conditions with respect to the release thereof as the Agent may reasonably
require. Upon the occurrence of any Default or Event of Default or the
actual or constructive total loss (in excess of $1,000,000 per occurrence)
of any Equipment or Inventory, all insurance payments in respect of such
Equipment or Inventory shall be paid to the Agent and shall, in the Agent's
sole discretion, (i) be released to the applicable Grantor to be applied as
set forth in the first sentence of this subsection (c) or (ii) be held as
additional Collateral hereunder or applied as specified in Section 20(b).
Section 13. Place of Perfection; Records; Collection of
Receivables.
(a) Each Grantor will keep its chief executive office, and
originals of the Related Contracts to which such Grantor is a party and all
originals of all chattel paper that evidence Receivables of such Grantor,
at the location therefor specified in Section 9(b) or, upon 30 days' prior
written notice to the Agent, at such other location in a jurisdiction where
all actions required by Section 10 shall have been taken with respect to
the Collateral of such Grantor (and, upon the taking of such action in such
jurisdiction, Schedule IV hereto shall be automatically amended to include
such other location). Each Grantor will hold and preserve its records
relating to the Collateral, the Related Contracts and chattel paper and
will permit representatives of the Agent at any time during normal business
hours and upon notice given reasonably in advance to inspect and make
abstracts from such records and other documents.
(b) Except as otherwise provided in this subsection (b), each
Grantor will continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables and the Related Contracts. In
connection with such collections, such Grantor may take (and, at the
Agent's direction, will take) such action as such Grantor or the Agent may
deem necessary or advisable to enforce collection of the Receivables and
the Related Contracts;
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provided, however, that so long as an Event of Default shall exist the
Agent shall have the right at any time, in the event that the Agent in good
faith it believes that the prospect of payment of the Secured Obligations
in the normal course, or the performance or collection of the Receivables
or the Related Contracts of such Grantor, is impaired and upon written
notice to such Grantor of its intention to do so, to notify the Obligors
under any Receivables or Related Contracts of the assignment of such
Receivables or Related Contracts to the Agent and to direct such Obligors
to make payment of all amounts due or to become due to such Grantor
thereunder directly to the Agent and, upon such notification and at the
expense of such Grantor, to enforce collection of any such Receivables or
Related Contracts, and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such Grantor
might have done. After receipt by any Grantor of the notice from the Agent
referred to in the proviso to the preceding sentence, (i) all amounts and
proceeds (including instruments) received by such Grantor in respect of the
Receivables and the Related Contracts of such Grantor shall be received in
trust for the benefit of the Agent hereunder, shall be segregated from
other funds of such Grantor and shall be forthwith paid over to the Agent
in the same form as so received (with any necessary indorsement) to be
deposited in the Collateral Account and either (A) released to such Grantor
on the terms set forth in Section 8 so long as no Event of Default shall
have occurred and be continuing or (B) if any Event of Default shall have
occurred and be continuing, applied as provided in Section 20(b) and (ii)
such Grantor will not adjust, settle or compromise the amount or payment of
any Receivable, release wholly or partly any Obligor thereof, or allow any
credit or discount thereon. No Grantor will permit or consent to the
subordination of its right to payment under any of the Receivables or the
Related Contracts to any other indebtedness or obligations of the Obligor
thereof.
Section 14. As to Intellectual Property Collateral.
(a) With respect to each material item of its Intellectual
Property Collateral (other than in respect of any Intellectual Property
Collateral that, in the judgment of such Grantor, is no longer desirable in
the conduct of the business of the Company and its Subsidiaries taken as a
whole), each Grantor agrees to take, at its expense, all necessary steps,
including, without limitation, in the U.S. Patent and Trademark Office, the
U.S. Copyright Office and any other governmental authority, to (i) maintain
the validity and enforceability of each such item of Intellectual Property
Collateral and maintain each such item of Intellectual Property Collateral
in full force and effect, and (ii) pursue the registration and maintenance
of each patent, trademark, or copyright registration or application, now or
hereafter included in the Intellectual Property Collateral of such Grantor,
including, without limitation, the payment of required fees and taxes, the
filing of responses to office actions, the filing of applications for
renewal or extension, the filing of affidavits under Sections 8 and 15 of
the U.S. Trademark Act, the filing of divisional, continuation,
continuation-in-part, reissue and renewal applications or extensions, the
payment of maintenance fees and the participation in interference,
reexamination, opposition, cancellation, infringement and misappropriation
proceedings. No Grantor shall, without the written consent of the Agent,
discontinue use of or otherwise abandon any Intellectual Property
Collateral, or abandon 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 Collateral is no longer desirable in the conduct of such Grantor's
business and that the loss thereof would not be reasonably likely to have a
Material Adverse
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Effect, in which case, such Grantor will give prompt notice of any such
abandonment to the Agent.
(b) Each Grantor agrees promptly to notify the Agent if such
Grantor learns (i) that any item of the Intellectual Property Collateral
may have become abandoned, placed in the public domain, invalid or
unenforceable, or of any adverse determination or development regarding
such Grantor's ownership of any of the Intellectual Property Collateral or
its right to register the same or to keep and maintain and enforce the
same, or (ii) of any adverse determination or the institution of any
proceeding (including, without limitation, the institution of any
proceeding in the U.S. Patent and Trademark Office or any court) regarding
any item of the Intellectual Property Collateral, except to the extent the
foregoing could not reasonably be expected to have a Material Adverse
Effect.
(c) In the event that any Grantor becomes aware that any item of
the material Intellectual Property Collateral is being infringed or
misappropriated by a third party such Grantor shall promptly notify the
Agent and shall take such actions, at its expense, as such Grantor or the
Agent deems reasonable and appropriate under the circumstances to protect
such Intellectual Property Collateral, including, without limitation, suing
for infringement or misappropriation and for an injunction against such
infringement or misappropriation, except to the extent the foregoing could
not reasonably be expected to have a Material Adverse Effect.
(d) Each Grantor shall use proper statutory notice in connection
with its use of each item of its Intellectual Property Collateral. No
Grantor shall do or permit any act or knowingly omit to do any act whereby
any of its material Intellectual Property Collateral may lapse or become
invalid or unenforceable or placed in the public domain, except to the
extent the foregoing could not reasonably be expected to have a Material
Adverse Effect.
(e) Each Grantor shall take all steps which it or the Agent deems
reasonable and appropriate under the circumstances to preserve and protect
each item of its material Intellectual Property Collateral, including,
without limitation, maintaining the quality of any and all products or
services used or provided in connection with any of the Trademarks,
consistent with the quality of the products and services as of the date
hereof, and taking all steps necessary to ensure that all licensed users of
any of the Trademarks use such consistent standards of quality, except to
the extent the foregoing could not reasonably be expected to have a
Material Adverse Effect.
(f) With respect to its Intellectual Property Collateral, each
Grantor agrees to execute an agreement, in substantially the form set forth
in Exhibit E hereto (an "INTELLECTUAL PROPERTY SECURITY AGREEMENT"), for
recording the security interest granted hereunder to the Agent in such
Intellectual Property Collateral with the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other governmental authorities necessary
to perfect the security interest hereunder in such Intellectual Property
Collateral.
(g) Each Grantor agrees that, should it obtain an ownership
interest in any item of the type set forth in Section 1(f) which is not on
the date hereof a part of the Intellectual Property Collateral (the
"AFTER-ACQUIRED INTELLECTUAL PROPERTY"), (i) the provisions of Section 1
shall automatically apply thereto, (ii) any such After-Acquired
Intellectual Property and, in the case of trademarks, the goodwill of the
business connected therewith or symbolized thereby, shall
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automatically become part of the Intellectual Property Collateral subject
to the terms and conditions of this Agreement and of the Credit Agreement
with respect thereto, (iii) at the end of each calendar quarter, such
Grantor shall notify the Agent of any and all After-Acquired Intellectual
Property obtained during such calendar quarter and provide the Agent with a
revised Schedule II amending it no later than 30 days after the end of such
calendar quarter, and (iv) such Grantor shall execute and deliver to the
Agent an IP Security Agreement Supplement covering such After-Acquired
Intellectual Property as "Additional Collateral" thereunder and as defined
therein, for recordation with the U.S. Patent and Trademark Office, the
U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such After-Acquired Intellectual
Property.
Section 15. Voting Rights; Dividends; Etc.
(a) So long as no Default under Sections 10.1(a), (f) or (g) of
the Credit Agreement or Event of Default has occurred:
(i) Each Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral of
such Grantor or any part thereof for any purpose other than originate
Entitlement Orders (as defined in any Control Agreement) with respect
to the Securities Account or the Commodity Accounts; provided however,
that such Grantor will not exercise or refrain from exercising any
such right if such action would have a material adverse effect on the
value of the Security Collateral or any part thereof.
(ii) Each Grantor shall be entitled to receive and retain any and
all dividends, interest and other distributions paid in respect of the
Security Collateral of such Grantor if and to the extent that the
payment thereof is not otherwise prohibited by the terms of the Loan
Documents; provided, however, that any and all
(A) dividends, interest and other distributions paid or
payable other than in cash in respect of, and instruments and
other property received, receivable or otherwise distributed in
respect of, or in exchange for, any Security Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Security Collateral in connection with a
partial or total liquidation or dissolution or in connection with
a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any
Security Collateral
shall be, and shall be forthwith delivered to the Agent to hold as,
Security Collateral and shall, if received by such Grantor, be
received in trust for the benefit of the Agent, be segregated from the
other property or funds of such Grantor and be forthwith delivered to
the Agent as Security Collateral in the same form as so received (with
any necessary indorsement).
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(iii) The Agent will execute and deliver (or cause to be executed
and delivered) to each Grantor all such proxies and other instruments
as such Grantor may reasonably request for the purpose of enabling
such Grantor to exercise the voting and other rights that it is
entitled to exercise pursuant to paragraph (i) above and to receive
the dividends or interest payments that it is authorized to receive
and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence of a Default under Sections 10.1(a), (f)
or (g) or an Event of Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 15(a)(i) shall,
upon notice to such Grantor by the Agent, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 15(a)(ii) shall
automatically cease, and all such rights shall thereupon become vested
in the Agent, which shall thereupon have the sole right to exercise or
refrain from exercising such voting and other consensual rights and to
receive and hold as Security Collateral such dividends, interest and
other distributions.
(ii) All dividends, interest and other distributions that are
received by any Grantor contrary to the provisions of paragraph (i) of
this Section 15(b) shall be received in trust for the benefit of the
Agent, shall be segregated from other funds of such Grantor and shall
be forthwith paid over to the Agent as Security Collateral in the same
form as so received (with any necessary indorsement).
(iii) The Agent shall be authorized to send to each Securities
Intermediary or Commodity Intermediary as defined in and under any
Control Agreement a Notice of Exclusive Control as defined in and
under such Control Agreement.
Section 16. Transfers and Other Liens; Additional Shares.
(a) Each Grantor agrees that it will not (i) sell, assign or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, other than sales, assignments and other dispositions of
Collateral, and options relating to Collateral, permitted under the terms
of the Credit Agreement, or (ii) create or suffer to exist any Lien upon or
with respect to any of the Collateral of such Grantor except for the
pledge, assignment and security interest created under this Agreement and
Liens permitted under the Credit Agreement.
(b) Each Grantor agrees that it will (i) cause each issuer of the
Pledged Shares pledged by such Grantor not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued
by such issuer, except to such Grantor, and (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and
all additional shares of stock or other securities of each issuer of the
Pledged Shares.
Section 17. Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such
Grantor or otherwise, from time to time, upon the
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occurrence and during the continuance of an Event of Default, in the
Agent's discretion, to take any action and to execute any instrument that
the Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Agent pursuant to Section 12,
(b) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(a) or (b) above, and
(d) to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Agent with respect to any of the Collateral.
Section 18. Agent May Perform. If any Grantor fails to perform
any agreement contained herein, the Agent may, as the Agent deems necessary
to protect the security interest granted hereunder in the Collateral or to
protect the value thereof, but without any obligation to do so and without
notice, itself perform, or cause performance of, such agreement, and the
expenses of the Agent incurred in connection therewith shall be payable by
such Grantor under Section 21(b).
Section 19. The Agent's Duties.
(a) The powers conferred on the Agent hereunder are solely to
protect the Secured Parties' interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not any Secured Party has or is deemed to have
knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to have exercised reasonable care in
the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which it
accords its own property.
(b) Anything contained herein to the contrary notwithstanding,
the Agent may from time to time, when the Agent deems it to be necessary,
appoint one or more subagents (each a "SUBAGENT") for the Agent hereunder
with respect to all or any part of the Collateral. In the event that the
Agent so appoints any Subagent with respect to any Collateral, (i) the
assignment and pledge of such Collateral and the security interest granted
in such Collateral by each Grantor hereunder shall be deemed for purposes
of this Agreement to have been made to such Subagent, in addition to the
Agent, for the benefit of the Secured Parties, as security for the Secured
Obligations of such Grantor, (ii) such Subagent shall automatically be
vested, in addition to the Agent, with all rights, powers, privileges,
interests and remedies of the Agent
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hereunder with respect to such Collateral, and (iii) the term "Agent," when
used herein in relation to any rights, powers, privileges, interests and
remedies of the Agent with respect to such Collateral, shall include such
Subagent; provided, however, that no such Subagent shall be authorized to
take any action with respect to any such Collateral unless and except to
the extent expressly authorized in writing by the Agent.
Section 20. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party upon
default under the Illinois Uniform Commercial Code (whether or not the
Illinois Uniform Commercial Code applies to the affected Collateral)
and also may: (i) require each Grantor to, and each Grantor hereby
agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the
Agent and make it available to the Agent at a place and time to be
designated by the Agent that is reasonably convenient to both parties;
(ii) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at
any of the Agent's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Agent may deem
commercially reasonable; (iii) occupy any premises owned or leased by
any of the Grantors where the Collateral or any part thereof is
assembled or located for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to
such Grantor in respect of such occupation; and (iv) exercise any and
all rights and remedies of any of the Grantors under or in connection
with the Receivables and the Related Contracts or otherwise in respect
of the Collateral, including, without limitation, any and all rights
of such Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of the Receivables and the
Related Contracts. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten 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 Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The 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.
(b) Any cash held by or on behalf of the Agent and all cash
proceeds received by or on behalf of the Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent
as Collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Agent pursuant to Section
21) in whole or in part by the Agent for the benefit of the Secured
Parties against, all or any part of the Secured Obligations, in the
following manner:
(i) first, to the Agents for any amounts owing to the Agents
pursuant to Section 12.4 of the Credit Agreement or otherwise
under the Loan Documents, ratably in accordance with such
respective amounts then owing to the Agents;
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(ii) second, deposited as Collateral in the L/C Collateral
Account up to an amount equal to 100% of the aggregate L/C
Obligations of all outstanding Letters of Credit, provided that
in the event that any such Letter of Credit is drawn, the Agent
shall pay to the Issuing Bank that issued such Letter of Credit
the amount held in the L/C Collateral Account in respect of such
Letter of Credit, provided further that, to the extent that any
such Letter of Credit shall expire or terminate undrawn and as a
result thereof the amount of the Collateral in the L/C Collateral
Account shall exceed the aggregate L/C Obligations of all then
outstanding Letters of Credit, such excess amount of such
Collateral shall be applied in accordance with the order of
priority set out in this Section 20(b);
(iii) third, to the Issuing Banks for any amounts then owing
to them, in their capacities as such, under the Loan Documents
ratably in accordance with such respective amounts then owing to
the Issuing Banks; and
(iv) fourth, to the Banks for any amount then owing to them,
in their capacities as such, under the Loan Documents ratably in
accordance with such respective amounts then owing to the Banks.
Any surplus of such cash or cash proceeds held by or on the behalf of
the Agent and remaining after payment in full of all the Secured
Obligations shall be paid over to the applicable Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
(c) All payments received by any Grantor in respect of the
Collateral shall be received in trust for the benefit of the Agent,
shall be segregated from other funds of such Grantor and shall be
forthwith paid over to the Agent in the same form as so received (with
any necessary indorsement).
(d) The Agent may, without notice to any Grantor except as
required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Secured Obligations against
any funds held in the Cash Concentration Accounts, the Collateral
Account or the L/C Collateral Account or in any deposit account
related thereto.
(e) In the event of any sale or other disposition of any of the
Intellectual Property Collateral of any Grantor, the goodwill of the
business connected with and symbolized by any Trademarks subject to
such sale or other disposition shall be included therein, and such
Grantor shall supply to the Agent or its designee such Grantor's
know-how and expertise, and documents and things relating to any
Intellectual Property Collateral subject to such sale or other
disposition, and such Grantor's customer lists and other records and
documents relating to such Intellectual Property Collateral and to the
manufacture, distribution, advertising and sale of products and
services of such Grantor.
Section 21. Indemnity and Expenses.
(a) Each Grantor agrees to indemnify, defend and save and hold
harmless each Secured Party and each of their Affiliates and their
respective officers, directors, employees, agents and advisors (each, an
"INDEMNIFIED PARTY") from and against, and shall pay on demand,
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any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except to
the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
misconduct.
(b) Each Grantor will upon demand pay to the Agent the amount of
any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of its counsel and of any experts and agents,
that the Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale
of, collection from or other realization upon, any of the Collateral of
such Grantor, (iii) the exercise or enforcement of any of the rights of the
Agent or the other Secured Parties hereunder or (iv) the failure by such
Grantor to perform or observe any of the provisions hereof.
Section 22. Amendments; Waivers; Additional Grantors; Etc.
(a) No amendment or waiver of any provision of this Agreement,
and no consent to any departure by any Grantor herefrom, shall in any event
be effective unless the same shall be in writing and signed by the Agent,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the
part of the Agent or any other Secured Party to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other
or further exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a
"SECURITY AGREEMENT SUPPLEMENT"), (i) such Person shall be referred to as
an "ADDITIONAL Grantor" and shall be and become a Grantor hereunder and
each reference in this Agreement and the other Loan Documents to "Grantor"
shall also mean and be a reference to such Additional Grantor, and (ii) the
supplemental schedules I, II, III, IV, V, VI, VII, VIII and IX attached to
each Security Agreement Supplement shall be incorporated into and become a
part of and supplement Schedules I, II, III, IV, V, VI, VII, VIII and IX
respectively, hereto, and the Agent may attach such supplemental schedules
to such Schedules; and each reference to such Schedules shall mean and be a
reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.
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Section 23. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic or
telecopier) and mailed, telegraphed, telecopied or delivered to, in the
case of the Company or the Agent, addressed to it at its address specified
in the Credit Agreement and, in the case of each Grantor other than the
Company, addressed to it at its address set forth opposite such Grantor's
name on the signature pages hereto or on the signature page to the Security
Agreement Supplement pursuant to which it became a party hereto; or, as to
any party, at such other address as shall be designated by such party in a
written notice to the other parties. All such notices and other
communications shall, when mailed, telegraphed or telecopied, be effective
when deposited in the mails, delivered to the telegraph company,
telecopied, respectively, addressed as aforesaid; except that notices and
other communications to the Agent shall not be effective until received by
the Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of
an original executed counterpart thereof.
Section 24. Continuing Security Interest; Assignments Under the
Credit Agreement. This Agreement shall create a continuing security
interest in the Collateral and shall (a) remain in full force and effect
until the latest of (i) the payment in full in cash of the Secured
Obligations, (ii) the Revolving Termination Date and (iii) the termination
or expiration of all Letters of Credit, (b) be binding upon each Grantor,
its successors and assigns and (c) inure, together with the rights and
remedies of the Agent hereunder, to the benefit of the Secured Parties and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Bank may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its
Commitments, the Credit Extensions and the Note or Notes, if any, held by
it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Banks
herein or otherwise, in each case as provided in the Credit Agreement.
Section 25. Release; Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral of any Grantor in accordance with the terms of the Loan
Documents (other than sales of Inventory in the ordinary course of
business), the Agent will, at such Grantor's expense, execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence the release of such item of Collateral from the assignment and
security interest granted hereby; provided, however, that (i) at the time
of such request and such release no Default shall have occurred and be
continuing, (ii) such Grantor shall have delivered to the Agent, at least
ten Business Days prior to the date of the proposed release, a written
request for release describing the item of Collateral and the terms of the
sale, lease, transfer or other disposition in reasonable detail, including,
without limitation, the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Agent and a
certificate of such Grantor to the effect that the transaction is in
compliance with the Loan Documents and as to such other matters as the
Agent may request and (iii) the proceeds of any such sale, lease, transfer
or other disposition required to be applied, or any payment to be made in
connection therewith, in accordance with Article II of the Credit Agreement
shall, to the extent so required, be paid or
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made to, or in accordance with the instructions of, the Agent when and as
required under Article II of the Credit Agreement.
(b) Upon the latest of (i) the payment in full in cash of the
Secured Obligations, (ii) the Revolving Termination Date and (iii) the
termination or expiration of all Letters of Credit, the pledge, assignment
and security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the applicable Grantor. Upon any such
termination, the Agent will, at the applicable Grantor's expense, execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
Section 26. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this Agreement by telecopier shall be effective as
delivery of an original executed counterpart of this Agreement.
Section 27. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Illinois,
notwithstanding the conflicts or choice of law principles thereof.
Section 28. Forum Selection and Consent to Jurisdiction. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR OF THE
UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR AND THE AGENT CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. THE GRANTORS AND THE COLLATERAL AGENT EACH IRREVOCABLY WAIVE ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE GRANTORS AND THE AGENT
EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
Section 29. Waiver of Jury Trial. THE GRANTORS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE GRANTORS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED
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BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
Section 30. Right of Recovery. Anything contained in the Loan
Documents, including Guaranties to the contrary notwithstanding, the right
of recovery against each Grantor that is a Guarantor shall be limited to a
maximum aggregate amount equal to the greatest amount that would not render
such Grantor's obligations under its Guaranty or this Agreement subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title
11 of the United States Code or any provisions of applicable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving
effect to all other liabilities of such Grantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically
excluding, however, any liabilities of such Grantor (a) in respect of
intercompany indebtedness to the Company or Affiliates of the Company to
the extent that such indebtedness would be discharged in an amount equal to
the amount paid by such Grantor under its Guaranty or this Agreement and
(b) under any guaranty of senior unsecured indebtedness or indebtedness
subordinated in right of payment to the Secured Obligations which guaranty
contains a limitation as to maximum amount similar to that set forth in
this Section, pursuant to which the liability of such Grantor hereunder is
included in the liabilities taken into account in determining such maximum
amount) and after giving effect as assets to the value (as determined under
the applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights of
such Grantor pursuant to (i) applicable law or (ii) any agreement providing
for an equitable allocation among such Grantors and other Affiliates of the
Company of obligations under guaranties by such parties (including this
Agreement).
Section 31. Subrogation, Contribution, Etc.
(a) In addition to all such rights of indemnity and subrogation
as the Grantors may have under applicable law (but subject to Section
31(c)), the Company agrees that (i) in the event any Grantor that is a
Guarantor makes a payment under any of its Guaranty, the Company shall
indemnify such Grantor for the full amount of such payment and such Grantor
shall be subrogated to the rights of the person to whom such payment is
made to the extent of such payment and (ii) in the event any assets of any
Grantor that is a Domestic Subsidiary are sold pursuant to any Loan
Document to satisfy a claim of any Secured Party, the Company shall
indemnify such Grantor in an amount equal to the greater of the book value
or the fair market value of the assets so sold.
(b) Each Grantor that is a Domestic Subsidiary (a "CONTRIBUTING
GRANTOR") agrees (subject to Section 31(c)) that, in the event any other
Grantor that is a Guarantor makes a payment under any of its Guaranty or
any assets of any other Grantor that is a Guarantor are sold pursuant to
any Loan Document to satisfy a claim of any Secured Party and such other
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Subsidiary Grantor (the "CLAIMING GRANTOR") has not been fully indemnified
by the Company as provided in Section 31), the Contributing Grantor shall
indemnify the Claiming Grantor in an amount equal to the amount of such
payment or the greater of the book value or the fair market value of such
assets, as the case may be, in each case multiplied by a fraction of which
the numerator shall be the net worth of the Contributing Grantor on the
date hereof and the denominator shall be the net worth of all Grantors on
the date hereof (or, in the case of any Grantor pursuant to Section 22, the
date of the Security Agreement Supplement hereto executed) and any
Contributing Grantor making a payment to a Claiming Grantor pursuant to
this Section shall be subrogated to the rights of such Claiming Grantor
under Section 31(a) to the extent of such payment.
(c) Notwithstanding any provision of this Agreement to the
contrary, all rights of the Grantors under Sections 31(a) and 31(b) and all
other rights of indemnity, contribution or subrogation under applicable law
or otherwise shall be fully subordinated to the indefeasible payment in
full in cash of the Secured Obligations. No failure on the part of the
Company or any other Grantor to make the payments required by 31(a) and
31(b) (or any other payments required under applicable law or otherwise)
shall in any respect limit the obligations and liabilities of any Grantor
with respect to its obligations hereunder and under the other Loan
Documents, and each Grantor shall remain liable for the full amount of the
obligations of such Grantor hereunder and under the other Loan Documents.
Section 32. Certain Third-Party Agreements.
(a) This Agreement is absolute, unconditional and irrevocable and
is in no way conditioned or contingent on the Company's or any Grantor's
performance of any obligation hereunder or under any other Loan Document,
any attempt to enforce in whole or in part any of the Company's liabilities
and obligations to any Secured Party or the existence or continuance of the
Company or any other Person as a legal entity, nor shall this Agreement or
the Grantors' respective obligations hereunder be limited, impaired,
restricted or otherwise affected by the consolidation or merger of the
Company with or into any other entity, the sale, lease or other disposition
by the Company of all or substantially all of its assets to any other
entity (whether or not effected in compliance with the Loan Documents), or
the bankruptcy or insolvency of the Company, the admission in writing by
the Company of its inability to pay its debts as they mature, or its making
of a general assignment for the benefit of, or entering into a composition
or arrangement with, creditors.
(b) The Collateral Agent and the other Secured Parties may, at
any time and from time to time, without the consent of or notice to the
Grantors, except such notice as may be required by applicable statute which
cannot be waived, without incurring responsibility to the Grantors, and
without impairing or releasing the obligations of the Grantors hereunder,
upon or without any terms or conditions and in whole or in part, (i) to the
extent permitted by the Loan Documents, change the manner, place and terms
of payment or change or extend the time of payment of, renew or alter any
obligation of the Company hereby secured, or in any manner modify, amend or
supplement the terms of the Loan Documents (other than this Agreement) or
any documents, instruments or agreements executed in connection therewith
(other than this Agreement), and this Agreement shall apply to the
obligations and liabilities of the Company, as changed, extended, renewed,
modified, amended, supplemented or altered in any manner, (ii)
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exercise or refrain from exercising any rights against the Company or
others (including the other Grantors) or otherwise act or refrain from
acting, (iii) settle or compromise any obligations and liabilities herein
secured or any obligations and liabilities (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof,
and may subordinate the payment of all or any part thereof to the payment
of any obligations and liabilities which may be due to the Collateral
Agent, the other Secured Parties or others, (iv) in the manner permitted by
the Loan Documents, sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner or in any order any property pledged or
mortgaged by anyone to secure or in any manner securing the Secured
Obligations, any liabilities or obligation (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof or
any other obligations or liabilities of the Company or the other Grantors
to the Secured Parties or any offset there against, (v) take and hold
security or additional security for any or all of the Secured Obligations,
(vi) apply any sums by whomsoever paid or howsoever realized to any
obligations and liabilities of the Company to the Secured Parties
regardless of what obligations and liabilities remain unpaid, and (vii) in
accordance with the Loan Documents, assign their rights and interests under
this Agreement or the other Loan Documents, in whole or in part. Without
limiting the generality of the foregoing, each Grantor hereby specifically
waives such Grantor's rights and benefits under any statute, regulation,
judicial decision or other law which purports to exonerate or reduce the
liability of a surety if the underlying obligation is altered in any
respect or if the rights and remedies of the creditor against the principal
in respect of a secured obligation are in any way altered, impaired or
suspended and agrees that, by so doing, such Grantor's obligations
hereunder shall continue even if the Secured Parties alter any obligations
under the Loan Documents (other than this Agreement) in any respect or the
Secured Parties' remedies or rights against the Company are in any way
impaired or suspended without such Grantor's consent.
(c) No invalidity, irregularity or unenforceability of the
obligations or liabilities of the Company under the Credit Agreement or any
other Loan Document shall affect, impair or be a defense to this Agreement.
Each Grantor hereby waives any and all benefits and defenses under any
statute, regulation, judicial decision or other law which purports to
exonerate or reduce the liability of a surety as a result of any disability
or absence of liability of the principal or any defense to liability or
enforcement which the principal may have and agrees that, by so doing, such
Grantor's obligations and the security interests granted hereunder shall
continue even if the Company had no liability at the time of execution of
the Credit Agreement or thereafter ceased or ceases to be liable. Each
Grantor also waives any and all benefits and defenses under any statute,
regulation, judicial decision or other law which purports to limit the
liability of a surety to that of the principal or to reduce the liability
of a surety in proportion to any reduction in the liability of the
principal and agrees that, by so doing, such Grantor's obligations
hereunder may be more burdensome than that of the Company.
(d) Each Grantor, to the extent permitted under applicable law,
hereby waives any right, whether arising under any statute, regulation,
judicial decision or otherwise, to require the Collateral Agent or any
other Secured Party to (i) proceed against the Company or any other Person
acting as surety, guaranteeing or providing collateral or other credit
support for the Company's obligations under the Loan Documents (each a
"THIRD PARTY CREDIT SUPPORT PROVIDER"), (ii) proceed against or exhaust any
security received from the Company or any Third Party Credit Support
Provider, or (iii) pursue any other right or remedy in the Collateral
Agent's or the other Secured Parties' power whatsoever.
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(e) Each Grantor further waives, to the extent permitted under
applicable law: (i) any defense resulting from the absence, impairment or
loss of any right of reimbursement, subrogation, contribution or other
right or remedy of such Grantor against the Company, any Third Party Credit
Support Provider or any security, whether resulting from an election by the
Collateral Agent and the other Secured Parties to foreclose upon security
by judicial or nonjudicial sale or otherwise; (ii) any setoff or
counterclaim of the Company or any defense of any kind (including defenses
resulting from any disability) or the cessation or stay of enforcement from
any cause whatsoever of the liability of the Company (including without
limitation the lack of validity or enforceability of the Loan Documents);
(iii) any right to exoneration, in whole or in part, of sureties or Third
Party Credit Support Providers which would otherwise be applicable; (iv)
except as required under the respective Loan Documents, all presentments,
demands for performance, notices of non-performance, protests, notice of
dishonor, notices of acceptance of this Agreement or of the existence,
creation or incurring of new or additional obligations under the Loan
Documents, or any other notices of any kind; and (v) all valuation,
appraisal, extension or redemption laws now or hereafter in effect.
(f) Each Grantor acknowledges that it has the ability, and hereby
assumes the obligation and responsibility, to keep informed of the
financial condition of the Company and any Third Party Credit Support
Provider and of other matters or circumstances affecting the ability of any
of them to pay or perform their respective obligations thereunder or the
risk of nonpayment and nonperformance. Each Grantor hereby waives any
obligation on the part of the Collateral Agent or any other Secured Party
to inform such Grantor of the financial condition, or any changes in
financial condition, of the Company or any Third Party Credit Support
Provider or of any other matter or circumstance which might effect the
ability of the Company to pay and perform under the Loan Documents, or the
risk of nonpayment or nonperformance.
[SIGNATURES ON THE FOLLOWING PAGES]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
MIDWAY GAMES INC.
Address for Notices for Each Signatory: By: /s/ Harold H. Bach, Jr.
- -------------------------------------- -----------------------------------------------
c/o Midway Games Inc. Name: Harold H. Bach, Jr.
3401 North California Avenue Title: Executive Vice President - Finance,
Chicago, Illinois 60618 Treasurer and Chief Financial Officer
Attn: Chief Financial Officer
Telephone: 773/961-2222
Facsimile: 773/961-1099
MIDWAY INTERACTIVE INC.
With a copy to: By: /s/ Harold H. Bach, Jr.
-----------------------------------------------
Name: Harold H. Bach, Jr.
Title: Senior Vice President - Finance,
Deborah K. Fulton Treasurer and Chief Financial Officer
Vice President, Secretary and
General Counsel
Midway Games Inc.
3401 North California Avenue MIDWAY HOME ENTERTAINMENT INC.
Chicago, Illinois 60618
Telephone: 773/961-1667
Facsimile: 773/961-1020 By: /s/ Harold H. Bach, Jr.
-----------------------------------------------
Name: Harold H. Bach, Jr.
Title: Vice President - Finance and Treasurer
MIDWAY GAMES WEST INC.
By: /s/ Harold H. Bach, Jr.
-----------------------------------------------
Name: Harold H. Bach, Jr.
Title: Senior Vice President - Finance
MIDWAY AMUSEMENT GAMES, LLC
By: /s/ Harold H. Bach, Jr.
-----------------------------------------------
Name: Harold H. Bach, Jr.
Title: Vice President - Finance, Treasurer
and Chief Financial Officer
MIDWAY SALES COMPANY, LLC
By: /s/ Harold H. Bach, Jr.
-----------------------------------------------
Name: Harold H. Bach, Jr.
Title: Vice President - Finance, Treasurer
and Chief Financial Officer
Accepted by:
BANK OF AMERICA, N.A., AS AGENT
By: /s/ David A. Johanson
---------------------------------
Print Name: David A. Johanson
Title: Vice President
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LIST OF EXHIBITS
Exhibit A Form of Security Agreement Supplement
Exhibit B Form of Pledged Account Letter
Exhibit C Form of Control Agreement (Securities Account)
Exhibit D Form of Control Agreement (Commodity Account)
Exhibit E Form of Intellectual Property Security Agreement
Exhibit F Form of Intellectual Property Security Agreement Supplement
Exhibit G Form of Cash Concentration Account Letter
Exhibit H Intercompany Note
LIST OF SCHEDULES
Schedule I Pledged Shares and Pledged Debt
Schedule II Patents, Trademarks, Trade Names, Copyrights and Licenses
Schedule III Locations of Equipment and Inventory
Schedule IV Chief Executive Office, State of Incorporation or Formation, and
Location of Books, Records and Original Chattel Paper Pertaining to Receivables
Schedule V Federal Tax Identification Number
Schedule VI Trade Names and Trade Styles; Other Corporate, Trade or Fictitious Names
Schedule VII Inventory Stored with Warehousemen or on Leased Premises
Schedule VIII Leased Equipment
Schedule IX Pledged Accounts (Deposit Accounts and Lockbox Accounts)
Schedule X Permitted Unblocked Accounts
Schedule XI Cash Concentration Accounts
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