EXECUTION COPY
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated as of April 3,
1998 between UNITED STATIONERS SUPPLY CO., a corporation duly organized and
validly existing under the laws of the State of Illinois (together with its
successors and assigns, the "COMPANY"); and THE CHASE MANHATTAN BANK, as
administrative agent for the lenders party to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
The Company, United Stationers Inc., the parent corporation of the
Company and a corporation duly organized and validly existing under the laws of
the State of Delaware (together with its successors and assigns, the
"GUARANTOR"); certain lenders; and the Agent are parties to a Credit Agreement
dated as of March 30, 1995 (as amended and restated as of October 31, 1996 and
again as of April ____, 1998 and thereafter amended, restated, modified and
supplemented and in effect from time to time, the "CREDIT AGREEMENT"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by making of loans and issuing letters of credit) to be made by said lenders to
the Company in an amount not exceeding on the date hereof $500,000,000.
The Company and the Administrative Agent are party to the Amended and
Restated Security Agreement dated as of October 31, 1996 (as hereto amended, the
"EXISTING SECURITY AGREEMENT");
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to amend and restate the Existing Security Agreement and to pledge and grant a
security interest in the Collateral (as hereinafter defined) as security for the
Secured Obligations (as hereinafter defined). Accordingly, the parties hereto
agree as follows:
Section 1. DEFINITIONS. Terms defined in the Credit Agreement are used
herein as defined therein. In addition, as used herein:
"ACCOUNTS" shall have the meaning ascribed thereto in Section 3(c)
hereof.
"COLLATERAL" shall have the meaning ascribed thereto in Section 3
hereof.
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"COLLATERAL ACCOUNT" shall have the meaning ascribed thereto in
Section 4.01 hereof.
"COPYRIGHT COLLATERAL" shall mean all Copyrights, whether now owned or
hereafter acquired by the Company, including each Copyright identified in
Annex 2 hereto.
"COPYRIGHTS" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"DOCUMENTS" shall have the meaning ascribed thereto in Section 3(i)
hereof.
"EQUIPMENT" shall have the meaning ascribed thereto in Section 3(g)
hereof.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary of the Company that is
not organized or created under the laws of the United States of America,
any State thereof or the District of Columbia.
"INSTRUMENTS" shall have the meaning ascribed thereto in Section 3(d)
hereof.
"INTELLECTUAL PROPERTY" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together
with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b)all licenses or user or other
agreements granted to the Company with respect to any of the foregoing, in
each case whether now or hereafter owned or used including, without
limitation, the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral, listed in
Annex 4 hereto, except to the extent that a security interest therein may
not be granted without the consent of a licensor; (c) all information,
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software
and programs; (d) all field repair data, sales data and other information
relating to sales or service of products now or hereafter manufactured; (e)
all accounting information and all media in which or on which any
information or knowledge or data or records may be recorded or stored and
all computer programs used for the compilation or printout of such
information, knowledge, records or data; (f) all licenses, consents,
permits, variances, certifications and approvals of governmental agencies
now or hereafter held by the Company, except to the extent that a security
interest therein may not be granted without the consent of a licensor; and
(g) all causes of action, claims or warranties now or hereafter owned or
acquired by the Company in respect of any of the items listed above.
"INVENTORY" shall have the meaning ascribed thereto in Section 3(e)
hereof.
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"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"PATENT COLLATERAL" shall mean all Patents, whether now owned or
hereafter acquired by the Company, including each Patent identified in
Annex 3 hereto.
"PATENTS" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"PLEDGED STOCK" shall have the meaning ascribed thereto in Section
3(a) hereof.
"SECURED OBLIGATIONS" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Lenders to, and the Note(s) held by
each Lender of, the Company and all other amounts from time to time owing
to the Lenders or the Agent by the Company under the Basic Documents
including, without limitation, all Reimbursement Obligations and interest
thereon, (b) the Company's obligations to any Lender under any Interest
Rate Protection Agreement required by the Existing Credit Agreement and (c)
all obligations of the Company to the Lenders and the Agent hereunder.
"TRADEMARK COLLATERAL" shall mean all Trademarks, whether now owned or
hereafter acquired by the Company, including each Trademark identified on
Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral
does not and shall not include any Trademark that would be rendered
invalid, abandoned, void or unenforceable by reason of its being included
as part of the Trademark Collateral.
"TRADEMARKS" shall mean all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for
trademark and service mark registrations, including, without limitation,
all renewals of trademark and service mark registrations, all rights
corresponding thereto throughout the world, the right to recover for all
past, present and future infringements thereof, all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together, in
each case, with the product lines and goodwill of the business connected
with the use of, and symbolized by, each such trade name, trademark and
service mark.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the State of New York.
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Section 2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Lenders and the Agent that:
(a) The Company is (or, at the time that the Company acquires any
interest therein, will be) the sole beneficial owner of the Collateral and
no Lien exists or will exist upon the Collateral at any time (and no right
or option to acquire the same exists in favor of any other Person), except
for Liens permitted under Section 9.06 of the Credit Agreement and except
for the pledge and security interest in favor of the Agent for the benefit
of the Lenders created or provided for herein, which pledge and security
interest will (subject to Section 5.11 hereof) constitute a perfected
pledge and security interest in and to all of the Collateral (other than
Intellectual Property registered or otherwise located outside of the United
States of America), subject to no equal or prior security interest or
pledge except as permitted under Section 9.06 of the Credit Agreement.
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the relevant issuer
thereof, upon the transfer of such Pledged Stock (except for any such
restriction contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes all of the issued and outstanding shares of
capital stock of each class of each issuer thereof on the date hereof(or,
in the case of any Foreign Subsidiary, not less than 65% of the issued and
outstanding shares of capital stock of each class of such Foreign
Subsidiary on the date hereof), and said Annex 1 correctly identifies, as
at the date hereof, the respective class and par value of the shares
comprising such Pledged Stock, the respective number of shares represented
by each such certificate, and the respective beneficial and registered
owner of such shares.
(d) Annexes 2, 3 and 4 hereto, respectively, set forth a complete and
correct list of all Copyrights, Patents and Trademarks owned by the Company
on the date hereof; except pursuant to licenses and other user agreements
entered into by the Company in the ordinary course of business, that are
listed in Annex 5 hereto, the Company owns and possesses the right to use,
and has done nothing to authorize or enable any other Person to use, any
Copyright, Patent or Trademark listed in said Annexes 2, 3 and 4, and all
registrations listed in said Annexes 2, 3 and 4 are valid and in full force
and effect; except as may be set forth in said Annex 5, the Company owns
and possesses the right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on
the date hereof.
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(f) To the Company's knowledge, (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of the Company with
respect to any Copyright, Patent or Trademark listed in Annexes 2, 3 and 4
hereto, respectively, and (ii) the Company is not infringing in any
material respect upon any Copyright, Patent or Trademark of any other
Person; and no proceedings which if adversely determined could reasonably
be expected to have a Material Adverse Effect have been instituted or are
pending against the Company or, to the Company's knowledge, threatened, and
no claim against the Company has been received by the Company, alleging any
such violation, except as may be set forth in said Annex 5.
(g) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
(h) Any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as
amended.
Section 3. COLLATERAL. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, the Company hereby pledges and grants to the Agent, for
the benefit of the Lenders as hereinafter provided, a security interest in all
of the Company's right, title and interest in the following Property, whether
now owned by the Company or hereafter acquired and whether now existing or
hereafter coming into existence (all being collectively referred to herein as
"COLLATERAL"):
(a) all shares of capital stock of whatever class of each Subsidiary
of the Company (other than United Business Computers, Inc., a Delaware
corporation ("UBC"), for so long as, and to the extent, the Stockholders'
Agreement dated July 1, 1993 between the Company, Theodore J. Crayne and
United Business Computers, Inc. prohibits transfer of the shares of UBC, as
described in Schedule Ill to the Credit Agreement) now or hereafter owned
by the Company or any other Subsidiary of the Company, including, without
limitation, from and after the effectiveness of the Mergers, the shares of
stock represented by the certificates identified in Annex l hereto, in each
case together with the certificates representing the same (collectively,
the "PLEDGED STOCK");
(b) all shares, securities, moneys or Property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock or resulting from a
split-up, revision, reclassification or other like change of the Pledged
Stock, or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in
respect of, the Pledged Stock;
(c) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances or for
Inventory or Equipment or other goods sold or
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leased or for services rendered, all moneys due and to become due to the
Company under any guarantee (including a letter of credit) of the purchase
price of Inventory or Equipment sold by the Company and all tax refunds
(such accounts, general intangibles and moneys due and to become due being
herein called collectively "ACCOUNTS");
(d) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "INSTRUMENTS");
(e) all inventory (as defined in the Uniform Commercial Code) of the
Company, all goods obtained by the Company in exchange for such inventory,
and any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto (herein
collectively called "INVENTORY");
(f) all Intellectual Property and all other accounts or general
intangibles not constituting Intellectual Property or Accounts;
(g) all equipment (as defined in the Uniform Commercial Code) of the
Company, including all Motor Vehicles (herein collectively called
"EQUIPMENT");
(h) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(i) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (herein collectively called "DOCUMENTS");
(j) all rights, claims and benefits of the Company against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by the Company, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;
(k) the balance from time to time in the Collateral Account and all
Investment Property (as defined in Section 9-115 of the Uniform Commercial
Code) held therein; and
(l) all other tangible and intangible personal Property and fixtures
of the Company, including, without limitation, all proceeds, products,
accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Company described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by the Company in respect of any of the
items listed above) and, to the extent related to any Property described in
said clauses or such
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proceeds, products and accessions, all books, correspondence, credit files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or
under the control of the Company or any computer bureau or service company
from time to time acting for the Company;
PROVIDED that Collateral shall not include (i) shares of capital stock of any
class issued by any Foreign Subsidiary to the extent that the percentage of
issued and outstanding shares of capital stock of such class subject to the Lien
of this Agreement would constitute more than 65% of the issued and outstanding
shares of capital stock of such class, (ii) any tangible personal Property
located outside the United States of America and (iii) any Receivables
transferred by the Company in connection with the Receivables Financing and not
sold, assigned, transferred or conveyed back to the Company in accordance with
the Receivables Financing Documents.
Section 4. CASH PROCEEDS OF COLLATERAL.
4.01 COLLATERAL ACCOUNT. The Agent shall establish with Chase a
"securities account" (as defined in Section 8-501 of the Uniform Commercial
Code; herein the "COLLATERAL ACCOUNT") in respect of which the Agent is the
"entitlement holder" (as defined in Section 8-102(a)(7) of the Uniform
Commercial Code), into which there shall be deposited from time to time the cash
proceeds of any of the Collateral (including proceeds of insurance thereon)
required to be delivered to the Agent pursuant hereto and into which the Company
may from time to time deposit any additional amounts that it wishes to pledge to
the Agent for the benefit of the Lenders as additional collateral security
hereunder or that, as provided in Sections 2.10 and 10 of the Credit Agreement,
it is required to pledge as additional collateral security hereunder. The
balance from time to time in the Collateral Account shall constitute part of the
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied as hereinafter provided. As promptly as possible after any amount
is deposited into the Collateral Account pursuant to the second or third
sentence of Section 4.02 hereof, the Agent shall remit the balance of such
amount (if any) to the Company's account (#910-2-668754) with Chase. However,
the Agent may (and, if instructed by the Lenders of the Credit Agreement shall)
at any time in its (or their) discretion apply or cause to be applied the
balance from time to time outstanding to the credit of the Collateral Account to
the repayment of the principal of the Revolving Credit Loans outstanding, to
accrued interest on the principal so repaid, and to the payment of any
commitment fees with respect to the Revolving Credit Commitments, in each case
in accordance with the Credit Agreement. Notwithstanding the above, at any time
following the occurrence and during the continuance of an Event of Default, the
Agent may (and, if instructed by the Lenders as specified in Section 11.03 of
the Credit Agreement, shall) in its (or their) discretion apply or cause to be
applied (subject to collection) the balance from time to time standing to the
credit of the Collateral Account to the payment of the Secured Obligations in
the manner specified in Section 5.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.
4.02 PROCEEDS OF ACCOUNTS. At any time after the occurrence and
during the continuance of an Event of Default, the Company shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make
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all payments in respect of the Accounts either (a) directly to the Agent (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of the Agent) or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of such other bank(s)) under arrangements, in form and substance satisfactory to
the Agent pursuant to which the Company shall have irrevocably instructed such
other bank(s) (and such other bank(s) shall have agreed) to remit all proceeds
of such payments (net of amounts applied by, or transferred to, such other
bank(s) at the instruction of the Company to be used for the payment of
operating expenses incurred by the Company in the ordinary course of its
business and due and owing at the time of such application) directly to the
Agent for deposit into the Collateral Account. All payments made to the Agent,
as provided in the preceding sentence, shall be immediately deposited in the
Collateral Account. In addition to the foregoing, the Company agrees that, at
any time after the occurrence and during the continuance of an Event of Default,
if the proceeds of any Collateral hereunder (including the payments made in
respect of Accounts) shall be received by it, the Company shall as promptly as
possible deposit such proceeds into the Collateral Account. Until so deposited,
all such proceeds shall be held in trust by the Company for and as the property
of the Agent and shall not be commingled with any other funds or property of the
Company.
4.03 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments constituting Investment Property as the Company (or, after the
occurrence and during the continuance of an Event of Default, the Agent) shall
determine, which Permitted Investments shall be held in the name and be under
the control of the Agent, PROVIDED that (i) at any time after the occurrence and
during the continuance of an Event of Default, the Agent may (and, if instructed
by the Lenders as specified in Section 11.03 of the Credit Agreement, shall) in
its (or their) discretion at any time and from time to time elect to liquidate
any such Permitted Investments and to apply or cause to be applied the proceeds
thereof to the payment of the Secured Obligations in the manner specified in
Section 5.09 hereof and (ii) if requested by the Company, such Permitted
Investments may be held in the name and under the control of one or more of the
Lenders (and in that connection each Lender, pursuant to Section 11.10 of the
Credit Agreement, has agreed that such Permitted Investments shall be held by
such Lender as a collateral sub-agent for the Agent hereunder).
4.04 COVER FOR LETTER OF CREDIT LIABILITIES. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(h) or Section 10 thereof shall be held
by the Agent in a separate sub-account (designated "LETTER OF CREDIT LIABILITIES
SUB-ACCOUNT") and all amounts held in such sub-account shall constitute
collateral security FIRST for the Letter of Credit Liabilities outstanding from
time to time and SECOND as collateral security for the other Secured Obligations
hereunder.
Section 5. FURTHER ASSURANCES; REMEDIES. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Lender and the Agent as follows:
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5.01 DELIVERY AND OTHER PERFECTION. The Company shall:
(a) if any of the shares, securities, moneys or other Property
required to be pledged by the Company under clauses (a) and (b) of Section
3 hereof are received by the Company, forthwith either (x) transfer and
deliver to the Agent such shares or securities so received by the Company
(together with the certificates for any such shares and securities duly
endorsed in blank or accompanied by undated stock powers duly executed in
blank), all of which thereafter shall be held by the Agent, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such other
action as the Agent shall deem necessary or appropriate to duly record the
Lien created hereunder in such shares, securities, moneys or Property in
said clauses (a) and (b);
(b) deliver and pledge to the Agent any and all Instruments, including
without limitation, any subordinated note delivered in connection with the
Receivables Financing, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as the Agent may
reasonably request; PROVIDED, that so long as no Event of Default shall
have occurred and be continuing, the Company may retain for collection in
the ordinary course any Instruments received by the Company in the ordinary
course of business and the Agent shall, promptly upon request of the
Company, make appropriate arrangements for making any Instrument pledged by
the Company available to the Company for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Agent, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, after the occurrence of an Event of Default, causing any or all
of the Stock Collateral to be transferred of record into the name of the
Agent or its nominee (and the Agent agrees that if any Stock Collateral is
transferred into its name or the name of its nominee, the Agent will
thereafter promptly give to the Company copies of any notices and
communications received by it with respect to the Stock Collateral),
PROVIDED that notices to account debtors in respect of any Accounts or
Instruments shall be subject to the provisions of clause (i) below;
(d) without limiting the obligations of the Company under Section
5.04(c) hereof, upon the acquisition after the date hereof by the Company
of any Equipment covered by a certificate of title or ownership, cause the
Agent to be listed as the lienholder on such certificate of title and
within 120 days of the acquisition thereof deliver evidence of the same to
the Agent;
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(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the security
interests granted by this Agreement;
(f) furnish to the Agent from time to time (but, unless an Event of
Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral, as the
Agent may reasonably request, all in reasonable detail;
(g) promptly upon request of the Agent, following receipt by the
Agent of any statements, schedules or reports pursuant to clause (f) above,
modify this Agreement by amending Annexes 2, 3 and/or 4 hereto, as the case
may be, to include any Copyright, Patent or Trademark that becomes part of
the Collateral under this Agreement;
(h) permit representatives of the Agent, upon reasonable prior
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Agent to be present at the Company's place of
business to receive copies of all communications and remittances relating
to the Collateral, and forward copies of any notices or communications
received by the Company with respect to the Collateral, all in such manner
as the Agent may require; and
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Agent, promptly notify (and the Company hereby
authorizes the Agent so to notify) each account debtor in respect of any
Accounts or Instruments that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent.
5.02 OTHER FINANCING STATEMENTS AND LIENS. Except for financing
statements securing Liens expressly permitted by Section 9.06 of the Credit
Agreement and protective filings filed against the Company in respect of
equipment, furniture or fixtures leased to or Property consigned with the
Company, without the prior written consent of the Agent (granted with the
authorization of the Lenders as specified in Section 11.09 of the Credit
Agreement), the Company shall not file or suffer to be on file, or authorize or
permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which the Agent
is not named as the sole secured party for the benefit of the Lenders.
5.03 PRESERVATION OF RIGHTS. The Agent shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
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5.04 SPECIAL PROVISIONS RELATING TO CERTAIN COLLATERAL.
(a) STOCK COLLATERAL.
(1) The Company will cause the Pledged Stock to constitute at all
times 100% (or, with respect to any issuer that is a Foreign Subsidiary, at
least 65%) of the total number of shares of each class of capital stock of each
Subsidiary of the Company then outstanding.
(2) Unless an Event of Default shall have occurred and be
continuing and the Agent shall have given notice to the Company of its intention
to exercise rights arising hereunder or under any other Basic Document with
respect to the Pledged Stock the Company shall have the right to exercise all
voting, consensual and other powers of ownership pertaining to the Pledged Stock
for all purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, PROVIDED that the Company agrees that it will not vote the Collateral
in any manner that is inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any such other instrument or agreement; and the Agent
shall execute and deliver to the Company or cause to be executed and delivered
to the Company all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Company may reasonably
request for the purpose of enabling the Company to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any Lender
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Credit Agreement, the Notes or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Pledged Stock shall be paid directly to the Agent and
retained by it as part of the Collateral, subject to the terms of this
Agreement, and, if the Agent shall so request in writing, the Company agrees to
execute and deliver to the Agent appropriate additional dividend, distribution
and other orders and documents to that end, PROVIDED that if such Event of
Default is cured, any such dividend or distribution theretofore paid to the
Agent shall, upon request of the Company (except to the extent theretofore
applied to the Secured Obligations), be returned by the Agent to the Company.
(b) INTELLECTUAL PROPERTY.
(1) For the purpose of enabling the Agent to exercise rights and
remedies under Section 5.05 hereof at such time as the Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, the
Company hereby grants to the Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or
SECURITY AGREEMENT
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other compensation to the Company) to use, assign, license or sublicense any of
the Intellectual Property now owned or hereafter acquired by the Company,
wherever the same may be located, including in such license reasonable access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 9.05 of the Credit Agreement that limit the
right of the Company to dispose of its Property, so long as no Event of Default
shall have occurred and be continuing, the Company will be permitted to exploit,
use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of the
business of the Company. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing the Agent shall from time to time,
upon the request of the Company, execute and deliver any instruments,
certificates or other documents, in the form so requested, that the Company
shall have certified are appropriate (in its judgment) to allow it to take any
action permitted above (including relinquishment of the license provided
pursuant to clause (1) immediately above as to any specific Intellectual
Property). Further, upon the payment in full of all of the Secured Obligations
and cancellation or termination of the Commitments and Letter of Credit
Liabilities or earlier expiration of this Agreement or release of the
Collateral, the license granted pursuant to clause (1) immediately above shall
expire by its own terms without further action on the part of the Company or the
Agent. The exercise of rights and remedies under Section 5.05 hereof by the
Agent shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Company in accordance with the first
sentence of this clause (2).
(c) MOTOR VEHICLES. At any time after the occurrence and during the
continuance of an Event of Default, the Company shall, upon the request of the
Agent, deliver to the Agent originals of the certificates of title or ownership
for the Motor Vehicles owned by it with the Agent listed as lienholder and take
such other action as the Agent shall deem appropriate to perfect the security
interest created hereunder in all such Motor Vehicles.
5.05 EVENTS OF DEFAULT, ETC. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably convenient to
both the Agent and the Company, designated in its request;
(b) the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend the
time of payment, arrange for payment in installments, or otherwise modify
the terms of, any of the Collateral;
(c) the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial
Code (whether or not said Code is in effect in the jurisdiction where the
rights and remedies are asserted) and such
SECURITY AGREEMENT
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additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the Agent were
the sole and absolute owner thereof(and the Company agrees to take all such
action as may be appropriate to give effect to such right);
(d) the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
other Property at any time payable or receivable on account of or in
exchange for any of the Collateral, but shall be under no obligation to do
so; and
(e) the Agent may, upon ten business days' prior written notice to
the Company of the time and place, with respect to the Collateral or any
part thereof that shall then be or shall thereafter come into the
possession, custody or control of the Agent, the Lenders or any of their
respective agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Agent deems best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any Lender or anyone else
may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free
from any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise), of the Company, any such demand,
notice and right or equity being hereby expressly waived and released. In
the event of any sale, assignment, or other disposition of any of the
Trademark Collateral, the goodwill connected with and symbolized by the
Trademark Collateral subject to such disposition shall be included, and the
Company shall supply to the Agent or its designee, for inclusion in such
sale, assignment or other disposition, all Intellectual Property relating
to such Trademark Collateral. The Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the Agent in
Section 5.04(b) hereof, shall be applied in accordance with Section 5.09 hereof
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Company
acknowledges that any such private sales may be at prices and on terms less
favorable to the Agent than those
SECURITY AGREEMENT
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obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that the Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective issuer
thereof to register it for public sale.
5.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
5.07 REMOVALS, ETC. Without at least 30 days' prior written notice
to the Agent, the Company shall not (i) maintain any of its books and records
with respect to the Collateral at any office or maintain its principal place of
business at any place, or permit any Inventory or Equipment to be located
anywhere, other than at 2200 East Golf Road, Des Plaines, Illinois, 60016-1267
or at one of the locations identified in Annex 6 hereto or in transit from one
of such locations to another or (ii) change its name, or the name under which it
does business, from the name shown on the signature pages hereto.
5.08 PRIVATE SALE. The Agent and the Lenders shall incur no liability
as a result of the sale of the Collateral, or any part thereof, at any private
sale pursuant to Section 5.05 hereof conducted in a commercially reasonable
manner. The Company hereby waives any claims against the Agent or any Lender
arising by reason of the fact that the price at which the Collateral may have
been sold at such a private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the Secured
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
5.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Agent under Section
4 hereof or this Section 5, shall be applied by the Agent:
FIRST, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the fees and expenses of its agents and counsel,
and all expenses incurred and advances made by the Agent in connection
therewith;
NEXT, to the payment in full of the Secured Obligations, in each case
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
FINALLY, to the payment to the Company, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
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Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied FIRST to the Letter of Credit
Liabilities outstanding from time to time and SECOND to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "PROCEEDS" of Collateral shall mean cash,
securities and other Property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Company or any issuer of or obligor on
any of the Collateral.
5.10 ATTORNEY-IN-FACT. Without limiting any rights or powers granted
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 5 to make collections in respect of the Collateral, the Agent shall
have the right and power to receive, endorse and collect all checks made payable
to the order of the Company representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.11 PERFECTION. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement and (ii) deliver to
the Agent all certificates listed in Annex 1 hereto, accompanied by undated
stock powers duly endorsed in executed in blank to the extent any of such
certificates have not previously been so delivered to the Agent.
5.12 TERMINATION. When all Secured Obligations shall have been paid
in full and the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Agent shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of the Company and to be released and
canceled all licenses and rights referred to in Section 5.04(b) hereof. The
Agent shall also execute and deliver to the Company upon such termination such
Uniform Commercial Code termination statements, certificates for terminating the
Liens on the Motor Vehicles and such other documentation as shall be reasonably
requested by the Company to effect the termination and release of the Liens on
the Collateral. The Liens granted to the Administrative Agent hereby shall also
be released in accordance with Sections 9.25 and 11.09 of the Credit Agreement.
5.13 FURTHER ASSURANCES. The Company agrees that, from time to time
upon the written request of the Agent, the Company will execute and deliver such
further documents and
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do such other acts and things as the Agent may reasonably request in order fully
to effect the purposes of this Agreement.
5.14 RELEASE OF MOTOR VEHICLES. So long as no Event of Default shall
have occurred and be continuing, upon the request of the Company, the Agent
shall execute and deliver to the Company such instruments as the Company shall
reasonably request to remove the notation of the Agent as lienholder on any
certificate -of title for any Motor Vehicle; PROVIDED that any such instruments
shall be delivered, and the release effective only upon receipt by the Agent of
a certificate from the Company stating that the Motor Vehicle the lien on which
is to be released is to be sold or has suffered a casualty loss (with title
thereto passing to the casualty insurance company (or its designee) therefor in
settlement of the claim for such loss) and any proceeds of such sale or casualty
loss to the extent required by the Credit Agreement being paid to the Agent
hereunder.
Section 6. MISCELLANEOUS.
6.01 NO WAIVER. No failure on the part of the Agent or any Lender to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Agent or any Lender of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein are cumulative
and are not exclusive of any remedies provided by law.
6.02 NOTICES. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.02.
6.03 EXPENSES. The Company agrees to reimburse each of the Lenders
and the Agent for all reasonable costs and expenses of the Lenders and the Agent
(including, without limitation, the reasonable fees and expenses of legal
counsel) in connection with (i) any Default and any enforcement or collection
proceeding resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (w) performance by the Agent of any
obligations of the Company in respect of the Collateral that the Company has
failed or refused to perform, (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting fights and claims of the Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, (y) judicial or
regulatory proceedings and (z) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
6.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 3 hereof.
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6.04 AMENDMENTS, ETC. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Agent (with the consent of the Lenders as specified in Section 11.09 of
the Credit Agreement). Any such amendment or waiver shall be binding upon the
Agent and each Lender each holder of any of the Secured Obligations and the
Company.
6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Agent, the Lenders and each holder of any of the Secured
Obligations (PROVIDED, however, that the Company shall not assign or transfer
its rights hereunder without the prior written consent of the Agent).
6.06 CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
6.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 AGENTS AND ATTORNEYS-IN-FACT. The Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.10 SEVERABILITY. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
SECURITY AGREEMENT