EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 25, 2003, among Monitronics
International, Inc., a Texas corporation (the "Borrower"), each of the
subsidiaries of the Borrower from time to time party hereto (each such
subsidiary, individually, a "Guarantor" and, collectively, the "Guarantors"; the
Guarantors and the Borrower are referred to herein individually as a "Grantor"
and collectively as the "Grantors") and Fleet National Bank, as Administrative
Agent for the Lenders from time to time party to the credit agreement referred
to below (in such capacity, the "Administrative Agent").
Reference is made to the Credit Agreement, dated August 25, 2003 (as the
same may be amended, restated, supplemented and/or otherwise modified from time
to time, the "Credit Agreement"), by and among the Borrower, the Lenders from
time to time party thereto, the Administrative Agent and Bank of America, N.A.,
as syndication agent.
The Lenders have agreed to make Loans to, and otherwise extend credit on
behalf of, the Borrower pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Each of the Guarantors has agreed
to guarantee, among other things, all the obligations of each Loan Party under
the Loan Documents. The obligations of the Lenders to make Loans and otherwise
extend credit are conditioned upon, among other things, the execution and
delivery by the Grantors of an agreement in the form hereof to secure the
Obligations.
Accordingly, the Grantors and the Administrative Agent hereby agree as
follows:
1. Definitions
(a) Unless the context otherwise requires, capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
the Credit Agreement.
(b) As used herein, the following terms shall have the following
meanings:
"Account Debtor": as defined in the NYUCC.
"Accounts": as defined in the NYUCC.
"Accounts Receivable": all Accounts and all right, title and interest
in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Chattel Paper": as defined in the NYUCC.
"Collateral": with respect to any Grantor, all personal property and
fixtures of every kind and nature, wherever located, whether now owned or
hereafter acquired or arising, and all Proceeds and products thereof, including,
without limitation, all (i) Accounts Receivable, (ii) Equipment, (iii) General
Intangibles, (iv) Inventory, (v) Instruments, (vi) Pledged Debt, (vii) Pledged
Equity owned by Grantor, (viii) Documents, (ix) Chattel Paper (whether tangible
or
electronic), (x) Deposit Accounts, (xi) Letter of Credit Rights (whether or not
the letter of credit is evidenced in writing), (xii) Commercial Tort Claims,
(xiii) Intellectual Property, (xiv) Supporting Obligations, (xv) Investment
Property, (xvi) any other contract rights or rights to the payment of money,
(xvii) insurance claims and proceeds, (xviii) tort claims and (xix) unless
otherwise agreed upon in writing by such Grantor and the Administrative Agent,
other property owned or held by or on behalf of such Grantor that may be
delivered to and held by the Administrative Agent pursuant to the terms hereof.
Notwithstanding anything to the contrary in any Loan Document, for purposes
hereof, the term "Collateral" shall not include (i) any right under any General
Intangible or Intellectual Property if the granting of a security interest
therein or an assignment thereof would violate any enforceable provision of such
General Intangible, Intellectual Property or applicable Laws, (ii) any
Commercial Tort Claim not existing on the date of this Agreement and (iii) any
Lien which is permitted by section 8.2(d) of the Credit Agreement to the extent
that the documentation providing for such Lien prohibits granting a Lien in such
property to the Administrative Agent.
"Commercial Tort Claims": as defined in the NYUCC.
"Copyright License": any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights": all of the following now owned or hereafter acquired by
any Grantor: (i) all copyright rights in any work subject to the copyright laws
of the United States or any other country, whether as author, assignee,
transferee or otherwise, and (ii) all registrations and applications for
registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office, including
those listed on Schedule III to the Perfection Certificate.
"Deposit Accounts": as defined in the NYUCC.
"Documents": as defined in the NYUCC.
"Equipment": as defined in the NYUCC, and shall include, without
limitation, all equipment, furniture and furnishings, and all tangible personal
property similar to any of the foregoing, including tools, parts and supplies of
every kind and description, and all improvements, accessions or appurtenances
thereto, that are now or hereafter owned by any Grantor.
"Equity Interests": with respect to (i) a corporation, the capital
stock thereof, (ii) a partnership, any partnership interest therein, including
all rights of a partner in such partnership, whether arising under the
partnership agreement of such partnership or otherwise, (iii) a limited
liability company, any membership interest therein, including all rights of a
member of such limited liability company, whether arising under the limited
liability company agreement of such limited liability company or otherwise, (iv)
any other firm, association, trust,
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business enterprise or other entity that is similar to any other Person listed
in clauses (i), (ii) and (iii), and this clause (iv), of this definition, any
equity interest therein or any other interest therein that entitles the holder
thereof to share in the net assets, revenue, income, earnings or losses thereof
or to vote or otherwise participate in any election of one or more members of
the managing body thereof and (v) all warrants and options in respect of any of
the foregoing and all other securities that are convertible or exchangeable
therefor.
"General Intangibles": as defined in the NYUCC, and shall include,
without limitation, all corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, interest rate protection agreements and other agreements),
Intellectual Property, goodwill, registrations, franchises, tax refund claims,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts Receivable
or payment by the relevant obligor of any of the Pledged Debt, in each case,
whether now existing or owned or hereafter arising or acquired by any Grantor.
"Instruments": as defined in the NYUCC.
"Intellectual Property": all intellectual and similar property of any
Grantor of every kind and nature now owned or hereafter acquired by any Grantor,
including, without limitation, inventions, designs, Patents, Copyrights,
Trademarks, Licenses, trade secrets, confidential or proprietary technical and
business information, customer lists, know-how, show-how or other data or
information, software and databases and all embodiments or fixations thereof and
related documentation, registrations and franchises, and all additions,
improvements and accessions to, and books and records describing or used in
connection with, any of the foregoing.
"Inventory": as defined in the NYUCC, and shall include, without
limitation, all goods of any Grantor, whether now owned or hereafter acquired,
held for sale or lease, or furnished or to be furnished by any Grantor under
contracts of service, or consumed in any Grantor's business, including raw
materials, intermediates, work in process, packaging materials, finished goods,
semi-finished inventory, scrap inventory, manufacturing supplies and spare
parts, and all such goods that have been returned to or repossessed by or on
behalf of any Grantor.
"Investment Property": as defined in the NYUCC.
"Letter of Credit Rights": as defined in the NYUCC.
"License": any Patent License, Trademark License, Copyright License or
other license or sublicense to which any Grantor is a party, including, without
limitation, those listed on Schedule III to the Perfection Certificate.
"NYUCC": the UCC as in effect from time to time in the State of New
York.
"Obligations": (i) the due and punctual payment of (x) principal of
and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon
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one or more dates set for prepayment or otherwise, and (y) all other monetary
obligations, including fees, commissions, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Borrower or any Guarantor to any Credit
Party, or that are otherwise payable to any Credit Party under the Credit
Agreement and/or the other Loan Documents, in each case, together with any
renewals, increases, refinancings and extensions thereof, (ii) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower or any Guarantor under or pursuant to the Credit Agreement and
the other Loan Documents and (iii) unless otherwise agreed upon in writing by
the Lenders, all obligations of the Borrower, monetary or otherwise, under each
Hedging Agreement entered into with any Lender (or an Affiliate thereof) as a
counterparty.
"Patent License": any written agreement, now or hereafter in effect,
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents": all of the following now owned or hereafter acquired by any
Grantor: (i) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent of
the United States or any other country, including registrations, recordings and
pending applications in the United States Patent and Trademark Office or any
similar offices in any other country, including those listed on Schedule III to
the Perfection Certificate, and (ii) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" means a certificate substantially in the form
of Annex 1, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by an authorized officer of the
Borrower.
"Pledged Debt" means all right, title and interest of any Grantor to
the payment of any loan, advance or other debt of every kind and nature (other
than Accounts Receivable and General Intangibles), whether due or to become due,
whether or not it has been earned by performance, and whether now or hereafter
acquired or arising in the future.
"Pledged Equity" means, with respect to the Borrower, all right, title
and interest in the Borrower's Capital Stock from time to time pledged to the
Administrative Agent, for the benefit of the Credit Parties in accordance with
the Credit Agreement and the other Security Documents, and with respect to any
Grantor, all right, title and interest of such Grantor in any of its Capital
Stock, whether now or hereafter acquired or arising in the future.
"Pledged Securities" means the Pledged Debt, the Pledged Equity and
all notes, chattel paper, instruments, certificates, files, records, ledger
sheets and documents covering,
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evidencing, representing or relating to any of the foregoing, in each case
whether now existing or owned or hereafter arising or acquired.
"Proceeds": as defined in the NYUCC, and shall include, without
limitation, any consideration received from the sale, exchange, license, lease
or other disposition of any asset or property that constitutes Collateral, any
value received as a consequence of the possession of Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property that constitutes Collateral, including (i) any
claim of any Grantor against any third party for (and the right to sue and
recover for and the rights to damages or profits due or accrued arising out of
or in connection with) past, present or future infringement or dilution of any
Intellectual Property now or hereafter owned by any Grantor, or licensed under
any license, (ii) subject to Section 6, all rights and privileges with respect
to, and all payments of principal or interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of, in exchange for or upon the conversion of, any of the Pledged
Securities and (iii) any and all other amounts from time to time paid or payable
under or in connection with the Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Secured Parties": collectively, the Credit Parties, and their
respective successors and assigns.
"Security Interest": as defined in Section 2(a).
"Supporting Obligations": as defined in the NYUCC.
"Trademark License": any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks": all of the following now owned or hereafter acquired by
any Grantor: (i) all trademarks, service marks, trade names, corporate names,
company names, business names, fictitious business names, domain names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule III to the Perfection Certificate, (ii) all
goodwill associated therewith or symbolized thereby and (iii) all other assets,
rights and interests that uniquely reflect or embody such goodwill.
"UCC": with respect to any jurisdiction, the Uniform Commercial Code
as in effect from time to time in such jurisdiction.
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(c) The principles of construction specified in Section 1.3 of the
Credit Agreement shall be applicable to this Security Agreement.
2. Grant of Security Interest; No Assumption of Liability
(a) As security for the payment or performance, as applicable, in
full of the Obligations, each of the Grantors hereby bargains, sells, conveys,
assigns, sets over, mortgages, pledges, hypothecates and transfers to the
Administrative Agent for the ratable benefit of the Secured Parties, and hereby
grants to the Administrative Agent for the ratable benefit of the Secured
Parties, a security interest in, all of the right, title and interest of such
Grantor in, to and under the Collateral (the "Security Interest"). Each Grantor
hereby irrevocably authorizes the Administrative Agent at any time and from time
to time to file in any filing office in any UCC jurisdiction one or more
financing statements and any amendments, continuations, assignments or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each of the Grantors, without the
signature of any Grantor, and naming any Grantor or the Grantors, as applicable,
as debtors and the Administrative Agent, for the ratable benefit of the Secured
Parties, as secured party. Each Grantor hereby ratifies its authorization for
the Administrative Agent to have filed in any UCC jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof.
Without limiting the foregoing, the Administrative Agent is hereby authorized to
make recordation filings with the United States Patent and Trademark Office or
the United States Copyright Office (or any successor office or any similar
office in any other country), including, but not limited to, the filing in
substantially the form of Annex 2, each such filing shall be duly executed and
delivered, as applicable, by each Grantor.
(b) The Security Interest is granted as security only and shall not
subject the any Secured Party to, or in any way alter or modify, any obligation
or liability of any Grantor with respect to or arising out of the Collateral.
3. Delivery of the Collateral
Each of the Grantors agrees promptly to deliver or cause to be
delivered to the Administrative Agent any and all notes, chattel paper,
instruments, and certificates evidencing any of the Pledged Securities (in
excess of $10,000 for any note evidencing Indebtedness or any chattel paper and
$200,000 in the aggregate) that become payable under or in connection with any
Collateral, owned or held by or on behalf of such Grantor, in each case
accompanied by stock powers duly executed in blank or other instruments of
transfer or assignment satisfactory to the Administrative Agent and such other
instruments and documents as the Administrative Agent may reasonably request
duly executed by such Grantor.
4. Representations and Warranties
Each of the Grantors, severally for itself represents and warrants to
the Secured Parties that:
(a) Such Grantor has good and valid rights in and title to the
Collateral provided or to be provided by such Grantor and has full power and
authority to grant to the Administrative Agent for the ratable benefit of the
Secured Parties the Security Interest in the
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Collateral provided or to be provided by such Grantor pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Security Agreement, without the consent or approval of any other person
other than any consent or approval which has been obtained.
(b) The Perfection Certificate, to the extent it relates to such
Grantor or any of its Property, has been duly prepared, completed and executed
and the information set forth therein is correct and complete.
(c) The Security Interest constitutes (i) a legal and valid Lien on
and security interest in all of the Collateral securing the payment and
performance of the Obligations, (ii) subject to (A) filing Uniform Commercial
Code financing statements, or other appropriate filings, recordings or
registrations containing a description of the Collateral owned or held by or on
behalf of such Grantor (including, without limitation, a counterpart or copy of
this Security Agreement) in each applicable governmental, municipal or other
office and (B) the delivery to the Lender of any instruments or certificated
securities included in such Collateral, a perfected security interest in such
Collateral to the extent that a security interest may be perfected by filing,
recording or registering a financing statement or analogous document, or by the
Administrative Agent's taking possession, in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the UCC or
other applicable law in such jurisdictions and (iii) subject to the receipt and
recording of this Agreement or other appropriate instruments or certificates
with the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, a security interest that shall be perfected in
all Collateral consisting of Intellectual Property in which a security interest
may be perfected by a filing or recordation with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable.
(d) The Security Interest is and shall be prior to any other Lien on
any of the Collateral owned or held by or on behalf of such Grantor other than
Liens expressly permitted pursuant to the Credit Agreement. The Collateral owned
or held by or on behalf of such Grantor is so owned or held by it free and clear
of any Lien, except for Permitted Liens.
(e) With respect to each Account Receivable: (i) no transaction
giving rise to such Account Receivable violated or will violate any applicable
federal, state or local law, rule or ordinance, the violation of which could
reasonably be expected to have a Material Adverse effect, (ii) each such Account
Receivable is not subject to terms prohibiting the assignment thereof or
requiring notice or consent to such assignment, except for notices and consents
that have been obtained and (iii) each such Account Receivable represents a bona
fide transaction which requires no further act (other than continued performance
by such Grantor under the relevant contract) on such Grantor's part to make such
Account Receivable payable by the account debtor with respect thereto, and, to
the Grantor's knowledge, such Account Receivable is not subject to any offsets,
deductions or counterclaims which individually or in the aggregate could
reasonably be expected to have a Material Adverse effect and does not represent
any consignment sales, guaranteed sale, sale or return or other similar
understanding or any obligation of any Affiliate of such Grantor.
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(f) With respect to all Inventory: (i) such Inventory is located on
the premises set forth in the Perfection Certificate, or is Inventory in transit
for sale in the ordinary course of business, and (ii) no such Inventory is on
consignment or is now stored or shall be stored any time after the Effective
Date with a bailee, warehouseman or similar Person.
5. Covenants
(a) Each of the Grantors shall provide the Administrative Agent with
not less than 30 Business Days prior written notice of any change (i) in its
legal name, (ii) in its jurisdiction of organization or formation, (iii) in the
location of its chief executive office or principal place of business, (iv) in
its identity or legal or organizational structure or (v) in its organization
identification number or its Federal Taxpayer Identification Number and shall
execute and deliver to the Administrative Agent such instruments, agreements and
documents as the Administrative Agent shall reasonably request so that the
Administrative Agent may make all filings under the UCC or otherwise that are
required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected first priority
security interest in all the Collateral (subject only to Permitted Liens). Each
Grantor shall promptly notify the Administrative Agent if any material portion
of the Collateral owned or held by or on behalf of such Grantor is damaged or
destroyed.
(b) Each of the Grantors shall maintain, at its own cost and expense,
such complete and accurate records with respect to the Collateral owned or held
by it or on its behalf as is consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which it is engaged, but in any event to
include complete accounting records indicating all payments and proceeds
received with respect to any part of such Collateral, and, at such time or times
as the Administrative Agent may reasonably request, promptly to prepare and
deliver to the Administrative Agent a duly certified schedule or schedules in
form and detail satisfactory to the Administrative Agent showing the identity
and amount of any and all such Collateral.
(c) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to Section 7.1(a) of the
Credit Agreement, the Borrower shall deliver to the Administrative Agent a
certificate executed by a Financial Officer of the Borrower setting forth the
information required pursuant to the Perfection Certificate or confirming that
there has been no change in such information since the date of the Perfection
Certificate or the date of the most recent certificate delivered pursuant to
this paragraph.
(d) Each of the Grantors shall, at its own cost and expense, take any
and all actions reasonably necessary to defend title to the Collateral owned or
held by it or on its behalf against all persons and to defend the Security
Interest of the Administrative Agent in such Collateral and the priority thereof
against any Lien not expressly permitted pursuant to the Loan Documents.
(e) Each of the Grantors shall, at its own expense, execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Administrative Agent may from time to
time reasonably request to preserve, protect and perfect the Security Interest
granted by it and the rights and remedies created hereby,
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including the payment of any fees and taxes required in connection with its
execution and delivery of this Security Agreement, the granting by it of the
Security Interest and the filing of any financing statements or other documents
in connection herewith or therewith.
(f) Each of the Grantors shall remain liable to observe and perform
all the conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and such Grantor shall, jointly with the
other Grantors and severally, indemnify and hold harmless the Secured Parties
from and against any and all liability for such performance.
(g) None of the Grantors shall make or permit to be made an
assignment, pledge or hypothecation of the Collateral owned or held by it or on
its behalf, or shall grant any other Lien in respect of such Collateral, except
as expressly permitted by the Loan Documents. Except for the Security Interest
and Permitted Liens, no Grantor shall make or permit to be made any transfer of
such Collateral, and each Grantor shall remain at all times in possession of
such Collateral and shall remain the direct owner, beneficially and of record,
of the Pledged Equity included in such Collateral, except that prior to the
occurrence and during the continuance of an Event of Default, the Grantors may
use and dispose of the Collateral in any lawful manner not inconsistent with the
provisions of this Security Agreement, the Credit Agreement or any other Loan
Document. Without limiting the generality of the foregoing, each Grantor shall
not permit any Inventory to be in the possession or control of any warehouseman,
bailee, agent or processor at any time unless such warehouseman, bailee, agent
or processor shall have been notified of the Security Interest and shall have
agreed in writing to hold such Inventory subject to the Security Interest and
the instructions of the Administrative Agent and to waive and release any Lien
held by it with respect to such Inventory, whether arising by operation of law
or otherwise.
(h) None of the Grantors will, without the Administrative Agent's
prior written consent, grant any extension of the time of payment of any
Accounts Receivable or any of the Pledged Debt, compromise, compound or settle
the same for less than the full amount thereof or allow any credit or discount
whatsoever thereon, other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business and consistent
with its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those in which
such Grantor is engaged.
(i) The Grantors, at their own expense, shall maintain or cause to be
maintained insurance covering physical loss or damage to the Inventory and
Equipment in accordance with Section 7.6 of the Credit Agreement. Each Grantor
irrevocably makes, constitutes and appoints the Administrative Agent (and all
officers, employees or agents designated by the Administrative Agent) as such
Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during
the continuance of an Event of Default, of making, settling and adjusting claims
in respect of Collateral under policies of insurance, endorsing the name of such
Grantor on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect thereto; all acts of such attorney being hereby ratified
and confirmed; such power, being coupled with an interest, is irrevocable. In
the event that any Grantor at any time or times shall fail to obtain or maintain
any of the policies of insurance required hereby or to pay any premium in whole
or part relating thereto, the Administrative Agent may, without waiving or
releasing any obligation or
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liability of the Grantors hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and pay such premium
and take any other actions with respect thereto as the Administrative Agent
deems advisable. All sums disbursed by the Administrative Agent in connection
with this paragraph, including reasonable attorneys' fees, court costs, expenses
and other charges relating thereto, shall be payable, upon demand, by the
Grantors to the Administrative Agent and shall be additional Obligations secured
hereby.
(j) After the occurrence of an Event of Default and during the
continuance, upon request of the Administrative Agent, each Grantor shall legend
its Accounts Receivable, its Pledged Debt and its books, records and documents
evidencing or pertaining thereto with an appropriate reference to the fact that
such Accounts Receivable have been assigned to the Administrative Agent for the
ratable benefit of the Secured Parties and that the Administrative Agent has a
security interest therein for the ratable benefit of the Secured Parties.
(k) Each Grantor shall: (i) not (and shall cause each of its
licensees not to) do any act, or omit to do any act, whereby any Patent that is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public; (ii) (and shall cause each of its licensees to)
continue to mark any products covered by a Patent material to the conduct of
such Grantor's business with the relevant patent number as necessary and
sufficient to establish and preserve its maximum rights under applicable patent
laws; (iii) for each Trademark material to the conduct of such Grantor's
business, (A) maintain (and shall cause each of its licensees to maintain) such
Trademark in full force free from any claim of abandonment or invalidity for
non-use, (B) maintain (and shall cause each of its licensees to maintain) the
quality of products and services offered under such Trademark, (C) display (and
shall cause each of its licensees to display) such Trademark with notice of
federal or foreign registration to the extent necessary and sufficient to
establish and preserve its rights under applicable law and (D) not knowingly use
or knowingly permit the use of such Trademark in violation of any third party's
valid and legal rights; (iv) for each work covered by a Copyright material to
the conduct of such Grantor's business, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws; (v) notify the Administrative Agent promptly if it knows or has
reason to know that any Intellectual Property material to the conduct of its
business may become abandoned, lost or dedicated to the public, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's ownership of any Intellectual Property,
its right to register the same, or to keep and maintain the same; (vi) promptly
inform the Administrative Agent in the event that it shall, either itself or
through any agent, employee, licensee or designee, file an application for any
Intellectual Property (or for the registration of any Trademark or copyright) in
each case material to its business, with the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, and, upon request of the Administrative Agent, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent's security interest in such Patent, Trademark or Copyright, and each
Grantor hereby appoints the Administrative Agent as its attorney-in-fact to
execute and file such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and
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confirmed; such power, being coupled with an interest, is irrevocable; and (vii)
take all necessary steps that are consistent with the practice in any proceeding
before the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, to maintain and
pursue each material application relating to the Patents, Trademarks or
Copyrights (and to obtain the relevant grant or registration) and to maintain
each issued Patent and each registration of the Trademarks and Copyrights that
is material to the conduct of such Grantor's business, including timely filings
of applications for renewal, affidavits of use, affidavits of incontestability
and payment of maintenance fees, and, if consistent with good business judgment,
to initiate opposition, interference and cancellation proceedings against third
parties. In the event that any Grantor has reason to believe that any Collateral
consisting of a Patent, Trademark or Copyright material to the conduct of any
Grantor's business has been or is about to be infringed, misappropriated or
diluted by a third party, which infringement, misappropriation or dilution could
reasonably be expected to have a Material Adverse effect, such Grantor promptly
shall notify the Administrative Agent and shall, if consistent with good
business judgment, promptly sue for infringement, misappropriation or dilution
and to recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as are appropriate under the circumstances
to protect such Collateral. Upon and during the continuance of an Event of
Default, each Grantor shall use its best efforts to obtain all requisite
consents or approvals by the licensor of each Copyright License, Patent License
or Trademark License to effect the assignment of all of such Grantor's right,
title and interest thereunder to the Administrative Agent or its designee.
6. Certain Rights as to the Collateral; Attorney-In-Fact
(a) Except as otherwise provided in the Credit Agreement, so long as
no Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Security
Agreement and the other Loan Documents, provided, that such Grantor shall not
exercise or refrain from exercising any such right without the prior written
consent of the Administrative Agent if such action or inaction would have a
material adverse effect on the value of the Collateral, or any part thereof, or
the validity, priority or perfection of the security interests granted hereby or
the remedies of the Secured Parties hereunder.
(ii) Subject to the terms, covenants and conditions of the
Credit Agreement, each Grantor shall be entitled to receive and retain any and
all dividends, principal, interest and other distributions paid in respect of
the Collateral to the extent not prohibited by this Security Agreement or the
other Loan Documents, provided, that any and all (A) dividends, principal,
interest and other distributions paid or payable other than in cash in respect
of, and instruments (other than checks in payment of cash dividends) and other
Property received, receivable or otherwise distributed in respect of, or in
exchange for, Collateral, (B) dividends and other distributions paid or payable
in cash in respect of any 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 redemption of,
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or in exchange for, any Collateral, shall, if required by the terms, covenants
or conditions of the Credit Agreement (i) be delivered to the Administrative
Agent to be held as Collateral or (ii) if received by such Grantor, be received
in trust for the benefit of the Administrative Agent and the other Secured
Parties, be segregated from the other Property of such Grantor, and be forthwith
delivered to the Administrative Agent as Collateral in the same form as so
received (with any necessary endorsement or assignment).
(iii) The Administrative Agent shall execute and deliver (or
cause to be executed and delivered) to the Grantors, at the Grantors' expense,
all such proxies and other instruments as the Grantors may reasonably request
for the purpose of enabling the Grantors to exercise the voting and other rights
which it is entitled to exercise pursuant to clause (i) above and to receive the
dividends, principal or interest payments, or other distributions which it is
authorized to receive and retain pursuant to clause (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) All rights of each Grantor to (A) exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) shall, upon notice to such Grantor by the
Administrative Agent, cease and (B) receive the dividends, principal and
interest payments and other distributions which it would otherwise be authorized
to receive and retain pursuant to Section 6(a)(ii) shall automatically cease,
and all such rights shall thereupon become vested in the Administrative Agent
for the ratable benefit of the Secured Parties, which shall thereupon have the
right, but not the obligation, to exercise such voting and other consensual
rights and to receive and hold as Collateral such dividends, principal or
interest payments and distributions.
(ii) All dividends, principal and interest payments and other
distributions which are received by any Grantor contrary to the provisions of
Section 6(b)(i) shall be received in trust for the benefit of the Administrative
Agent and the other Secured Parties, shall be segregated from other funds of
such Grantor and shall be forthwith paid over to the Administrative Agent as
Collateral in the same form as so received (with any necessary endorsement).
(c) In the event that all or any part of the securities or
instruments constituting the Collateral are lost, destroyed or wrongfully taken
while such securities or instruments are in the possession of the Administrative
Agent, the Grantors shall cause the delivery of new securities or instruments in
place of the lost, destroyed or wrongfully taken securities or instruments upon
request therefor by the Administrative Agent without the necessity of any
indemnity bond or other security other than the Secured Parties' agreement or
indemnity therefor customary for security agreements similar to this Security
Agreement.
(d) Each Grantor hereby irrevocably appoints the Administrative 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 at
any time when an Event of Default exists, in the Administrative Agent's
discretion, to take any action and to execute any instrument which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
of this Security Agreement, including, without limitation:
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(i) 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, and to receive, indorse, and collect any
drafts or other chattel paper, instruments and documents in connection
therewith,
(ii) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
the Administrative Agent or any of the other Secured Parties with respect to any
of the Collateral, and
(iii) to receive, indorse and collect all instruments made
payable to such Grantor representing any dividend, principal payment, interest
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same. The powers granted to the
Administrative Agent under this Section constitute a power coupled with an
interest which shall be irrevocable by such Grantor and shall survive until all
of the Obligations have been indefeasibly paid in full in cash and all
commitments to lend in respect of the Obligations have been terminated.
(e) If any Grantor fails to perform any agreement contained herein,
the Administrative Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Grantors under Section 9.
(f) The powers conferred on the Administrative Agent hereunder are
solely to protect its 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 Administrative Agent shall have no duty as to any Collateral.
The Administrative Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property.
7. Remedies upon Default
(a) Upon the occurrence and during the continuance of an Event of
Default, each of the Grantors shall deliver each item of Collateral to the
Administrative Agent on demand, and the Administrative Agent shall have in any
jurisdiction in which enforcement hereof is sought, in addition to any other
rights and remedies, the rights and remedies of a secured party under the NYUCC
or the UCC of any jurisdiction in which the Collateral is located, including,
without limitation, the right, with or without legal process and with or without
prior notice or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral (and
for that purpose the Administrative Agent may, so far as the Grantors can give
authority therefor, enter upon any premises on which the Collateral may be
situated and remove the Collateral therefrom) and, generally, to exercise any
and all rights afforded to a secured party under the UCC or other applicable
law. Without limiting the generality of the foregoing, each of the Grantors
agrees that the Administrative Agent shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of
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all or any part of the Collateral, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Lender shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely, free from any claim or right on
the part of any Grantor, and each of the Grantors hereby waives (to the extent
permitted by law) all rights of redemption, stay, valuation and appraisal which
such Grantor now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted.
(b) Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Administrative Agent shall give to the Borrower at least ten Business Days prior
written notice of the time and place of any public sale of Collateral or of the
time after which any private sale or any other intended disposition is to be
made. Each Grantor hereby acknowledges that ten Business Days prior written
notice of such sale or sales shall be reasonable notice. Each Grantor hereby
waives any and all rights that it may have to a judicial hearing in advance of
the enforcement of any of the Secured Parties' rights hereunder, including,
without limitation, the right of the Administrative Agent following an Event of
Default to take immediate possession of the Collateral and to exercise the
Secured Parties' rights with respect thereto.
(c) Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Administrative Agent
may fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Administrative Agent may (in its sole and
absolute discretion) determine. The Administrative Agent shall not be obligated
to make any sale of any Collateral if it shall reasonably determine not to do
so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Administrative Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Parties shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by applicable law, private)
sale made pursuant to this Section, any Secured Party may bid for or purchase,
free from any right of redemption, stay, valuation or appraisal on the part of
any Grantor (all said rights being also hereby waived and released), the
Collateral or any part thereof offered for sale and may make payment on account
thereof by using any claim then due and payable to such Secured Party from any
Grantor as a credit against the purchase price, and such Secured Party may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to any Grantor therefor. For purposes hereof, (i)
a written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof, (ii) such Secured Party shall be free to carry out
such sale pursuant to such agreement and (iii) none of the Grantors shall be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after such Secured Party shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full in cash and all commitments to lend in respect of the
Obligations terminated. As an
14
alternative to exercising the power of sale herein conferred upon it, the
Secured Parties may proceed by a suit or suits at law or in equity to foreclose
upon the Collateral and to sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
(d) Any sale pursuant to the provisions of this Section 7 shall be
deemed to conform to commercially reasonable standards as provided in Section
9-610 of the NYUCC or the UCC of any other jurisdiction in which Collateral is
located or any other requirement of applicable law. Without limiting the
foregoing, each Grantor agrees and acknowledges that, to the extent that
applicable law imposes duties on the Administrative Agent and the other Secured
Parties to exercise remedies in a commercially reasonable manner, it shall be
commercially reasonable for the Secured Parties to do any or all of the
following: (i) fail to incur expenses deemed significant by the Secured Parties
to prepare Collateral for disposition or otherwise to complete raw materials or
work in process into finished goods or other finished products for disposition;
(ii) fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) fail to exercise collection
remedies against Account Debtors or other persons obligated on Collateral or to
remove Liens on any Collateral, (iv) exercise collection remedies against
Account Debtors and other persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) contact other
Persons, whether or not in the same business as the Grantors, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (viii) dispose of
Collateral utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have reasonable capability of doing
so, or that match buyers and sellers of assets, (ix) disclaim dispositions of
warranties, (x) purchase (or fail to purchase) insurance or credit enhancements
to insure the Secured Parties against risk of loss, collection or disposition of
Collateral or to provide to the Secured Parties a guaranteed return from the
collection or disposition of Collateral, or (xi) to the extent deemed
appropriate by the Administrative Agent, obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the
Administrative Agent in the collection or disposition of any of the Collateral.
Nothing in this Section 7 shall be construed to grant any rights to the Grantors
or to impose any duties on the Secured Parties that would not have been granted
or imposed by this Security Agreement or applicable law in the absence of this
Section 7 and the parties hereto acknowledge that the purpose of this Section 7
is to provide non-exhaustive indications of what actions or omissions by the
Administrative Agent and the other Secured Parties would be deemed commercially
reasonable in the exercise by the Secured Parties of remedies against the
Collateral and that other actions or omissions by the Administrative Agent or
any other Secured Party shall not be deemed commercially unreasonable solely on
account of not being set forth in this Section 7.
(e) For the purpose of enabling the Administrative Agent to exercise
rights and remedies under this Section, each Grantor hereby grants to the
Administrative Agent an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to use, license or
sub-license any of the Collateral consisting of
15
licensed Intellectual Property not owned by such Grantor, so long as such right
to use, license or sub-license does not cause a termination or breach of such
licensed Intellectual Property, now held or hereafter acquired by such Grantor,
and wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation or printout
thereof. Each Grantor shall use reasonable efforts to obtain the Administrative
Agent's right to use, license or sub-license the licensed Intellectual Property
contemplated in the preceding sentence. The use of such license by the
Administrative Agent shall be exercised, at the option of the Administrative
Agent, upon the occurrence and during the continuation of an Event of Default;
provided that any license, sub-license or other transaction entered into by the
Administrative Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default. Any royalties and
other payments received by the Administrative Agent shall be applied in
accordance with Section 8.
(f) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING PROVISIONS OF
THIS SECTION AND WITHOUT DEROGATING FROM ANY RIGHT, REMEDY OR OTHER PROVISION
CONTAINED IN THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, AT ANY TIME FROM
AND AFTER SIXTY (60) DAYS AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER
SECTIONS 9.1(a) OR 9.1(b) OF THE CREDIT AGREEMENT, THE ADMINISTRATIVE AGENT
SHALL HAVE THE RIGHT TO APPLY FOR AND HAVE A RECEIVER APPOINTED BY A COURT OF
COMPETENT JURISDICTION IN ANY ACTION TAKEN BY THE ADMINISTRATIVE AGENT TO
ENFORCE THE SECURED PARTIES' RIGHTS AND REMEDIES HEREUNDER IN ORDER TO MANAGE,
PROTECT AND PRESERVE THE COLLATERAL AND CONTINUE THE OPERATION OF THE BUSINESS
OF THE BORROWER, OR TO SELL OR DISPOSE OF THE COLLATERAL, AND TO COLLECT ALL
REVENUES AND PROFITS THEREOF AND APPLY THE SAME TO THE PAYMENT OF ALL EXPENSES
AND OTHER CHARGES OF SUCH RECEIVERSHIP, INCLUDING THE COMPENSATION OF THE
RECEIVER, SAID EXPENSES TO CONSTITUTE PART OF THE OBLIGATIONS, AND TO THE
PAYMENT OF THE OBLIGATIONS AS AFORESAID.
8. Application of Proceeds of Sale
The Administrative Agent shall apply the proceeds of any collection or
sale of the Collateral, as well as any Collateral consisting of cash, first, to
the payment of all costs and expenses incurred by the Secured Parties in
connection with such collection or sale or otherwise in connection with this
Security Agreement, any other Loan Document or any of the Obligations, including
all court costs and the reasonable fees and expenses of their respective agents
and legal counsel, the repayment of all advances made by the Secured Parties
hereunder or under any other Loan Document on behalf of any Grantor and any
other costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any other Loan Document, second, to the payment of
fees owing to the Secured Parties and all accrued unpaid interest on the
principal amount of the Obligations, third, to the payment of the principal
amount of the Obligations (including any termination payment under any Hedging
Agreement constituting an Obligation) in accordance with the terms of the Credit
Agreement, and fourth, to the Grantors, their respective successors or assigns,
or as a court of competent jurisdiction may otherwise direct. The Secured
Parties shall have absolute discretion as to the time of application of any
16
such proceeds, moneys or balances in accordance with this Security Agreement.
Upon any sale of the Collateral by the Administrative Agent (including pursuant
to a power of sale granted by statute or under a judicial proceeding), the
receipt of the purchase money by the Administrative Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
9. Reimbursement of the Secured Parties
(a) Each of the Grantors shall, jointly with the other Grantors and
severally, pay upon demand to the Administrative Agent the amount of any and all
reasonable expenses, including the reasonable fees, other charges and
disbursements of counsel and of any experts or agents, that any Secured Party
may incur as provided in the Credit Agreement.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each of the Grantors shall, jointly with the other
Grantors and severally, indemnify each Secured Party and its directors,
officers, employees, advisors, agents, successors and assigns (each an
"Indemnitees") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, other charges and disbursements, incurred by or asserted against
any Indemnitee arising out of, in any way connected with, or as a result of (i)
the execution or delivery by such Grantor of this Security Agreement or any
other Loan Document or any agreement or instrument contemplated hereby or
thereby, the performance by such Grantor of its obligations under this Security
Agreement or any of the other Loan Documents and the other transactions
contemplated hereby or thereby or (ii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto, provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section shall remain operative and in full force and effect regardless
of the termination of this Security Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the termination of any commitment to lend in respect of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Security Agreement or any other Loan Document or any investigation made by
or on behalf of any of the Secured Parties. All amounts due under this Section
shall be payable on written demand therefor and shall bear interest at the rate
specified in Section 3.1(b) of the Credit Agreement.
10. Waivers; Amendment
(a) No failure or delay of the Secured Parties in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such
17
right or power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the exercise
of any other right or power. The rights and remedies of the Secured Parties
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Security Agreement or any other Loan Document or consent
to any departure by any Grantor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (c) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on any Grantor in any case shall
entitle such Grantor to any other or further notice or demand in similar or
other circumstances.
(b) The Grantors hereby waive presentment, demand, notice, protest
and, except as is otherwise provided herein, all other demands and notices in
connection with this Agreement or the enforcement of the Secured Parties' rights
hereunder or in connection with any Obligations or any Collateral; consent to
and waive notice of the granting of renewals, extensions of time for payment or
other indulgences to the Grantors or to any account debtor in respect of any
Account Receivable, or substitution, release or surrender of any Collateral, the
addition or release of persons primarily or secondarily liable on any Obligation
or on any Account Receivable or other Collateral, the acceptance of partial
payments on any Obligation or on any Account Receivable or other Collateral
and/or the settlement or compromise thereof. The Grantors also hereby waive any
rights and/or defenses the Grantors may have under any anti-deficiency laws or
other laws limiting, qualifying or discharging the Obligations and/or the
Secured Parties' remedies against the Grantors. The Grantors' waivers under this
section have been made voluntarily, intelligently and knowingly and after the
Grantors have been apprised and counseled by their attorneys as to the nature
thereof and their possible alternative rights. The Secured Parties shall not be
required to marshal any present or future collateral security (including but not
limited to the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of their rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights, however existing or arising.
To the extent that they lawfully may, the Grantors hereby agree that they will
not invoke any law relating to the marshaling of collateral which might cause
delay in or impede the enforcement of the Secured Parties' rights under this
Security Agreement or under any other instrument creating or evidencing any of
the Obligations or under which any of the Obligations is outstanding or by which
any of the Obligations is secured or payment thereof is otherwise assured, and,
to the extent that they lawfully may, the Grantors hereby irrevocably waive the
benefits of all such laws.
(c) Neither this Security Agreement nor any provision hereof may be
waived, amended or modified except pursuant to a written agreement entered into
by, between or among the Administrative Agent and the other parties hereto with
respect to which such waiver, amendment or modification is to apply and except
in accordance with the requirements of the Credit Agreement.
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11. Securities Laws
In view of the position of the Grantors in relation to the Pledged
Securities, or because of other current or future circumstances, a question may
arise under the Securities Act of 1933, as now or hereafter in effect, or any
similar statute hereafter enacted analogous in purpose or effect (such Act and
any such similar statute as from time to time in effect being called the
"Federal securities laws") with respect to any disposition of the Pledged
Securities permitted hereunder. Each of the Grantors understands that compliance
with the Federal securities laws might very strictly limit the course of conduct
of the Secured Parties if the Secured Parties were to attempt to dispose of all
or any part of the Pledged Securities, and might also limit the extent to which
or the manner in which any subsequent transferee of any Pledged Securities could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Secured Parties in any attempt to dispose of all or
part of the Pledged Securities under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. Each of the
Grantors recognizes that in light of such restrictions and limitations, the
Administrative Agent may, with respect to any sale of the Pledged Securities,
limit the purchasers to those who will agree, among other things, to acquire
such Pledged Securities for their own account, for investment, and not with a
view to the distribution or resale thereof. Each of the Grantors acknowledges
and agrees that in light of such restrictions and limitations, the
Administrative Agent, in its sole and absolute discretion, (i) may proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Securities, or any part thereof, shall have been filed
under the Federal securities laws and (ii) may approach and negotiate with a
single potential purchaser to effect such sale. Each of the Grantors
acknowledges and agrees that any such sale might result in prices and other
terms less favorable to the seller than if such sale were a public sale without
such restrictions. In the event of any such sale, the Administrative Agent and
the other Secured Parties shall incur no responsibility or liability for selling
all or any part of the Pledged Securities at a price that the Administrative
Agent, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were approached.
The provisions of this Section will apply notwithstanding the existence of a
public or private market upon which the quotations or sales prices may exceed
substantially the price at which the Administrative Agent sells.
12. Security Interest Absolute
All rights of the Administrative Agent and the other Secured Parties
hereunder, the Security Interest and all obligations of each of the Grantors
hereunder shall be absolute and unconditional, and to the extent such Grantor is
a surety of any other Grantor, irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document, any agreement
with respect to any of the Obligations or any other agreement or instrument
relating to any of the foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument relating
to any of the foregoing, (c) any exchange, release, subordination or
non-perfection of any Lien on any other collateral, or any release or amendment
or waiver of, or consent under, or departure from, any guaranty, securing or
guaranteeing all or any of the
19
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or in respect of this Security Agreement or any other Loan Document
other than the indefeasible payment of the Obligations in full in cash and
termination of all commitments to lend in respect of the Obligations.
13. Notices
All communications and notices hereunder shall be in writing and given
as provided in Section 11.2 of the Credit Agreement. All communications and
notices hereunder to the Borrower shall be given to it at the address for
notices set forth in such Section, and all communications and notices hereunder
to any other Grantor shall be given to it at the address for notices set forth
on Schedule I.
14. Binding Effect; Several Agreement; Assignments
Whenever in this Security Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of any Grantor that are contained in this Security Agreement shall bind
and inure to the benefit of each party hereto and its successors and assigns.
This Security Agreement shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor shall have been delivered
to the Administrative Agent and a counterpart hereof shall have been executed on
behalf of the Administrative Agent, and thereafter shall be binding upon such
Grantor, the Administrative Agent and the other Secured Parties and their
respective successors and assigns, and shall inure to the benefit of such
Grantor, the Administrative Agent and the other Secured Parties (as third party
beneficiaries) and their respective successors and assigns, except that none of
the Grantors shall have the right to assign its rights or obligations hereunder
or any interest herein or in the Collateral (and any such attempted assignment
shall be void), except as expressly contemplated by this Security Agreement or
the other Loan Documents. This Security Agreement shall be construed as a
separate agreement with respect to each of the Grantors and may be amended,
modified, supplemented, waived or released with respect to any Grantor without
the approval of any other Grantor and without affecting the obligations of any
other Grantor hereunder.
15. Survival of Agreement; Severability
(a) All covenants, agreements, representations and warranties made by
the Grantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Security Agreement or any other
Loan Document shall be considered to have been relied upon by the Secured
Parties and shall survive the execution and delivery of any Loan Documents and
the making of any Loan or other extension of credit, regardless of any
investigation made by the Secured Parties or on their behalf and notwithstanding
that any Secured Party may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended under
the Credit Agreement, and shall continue in full force and effect until all of
the Obligations have been indefeasibly paid in full in cash and all commitments
to lend in respect of the Obligations have been terminated.
20
(b) In the event any one or more of the provisions contained in this
Security Agreement or any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
(c) This Security Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by any of the
Secured Parties in respect of the Collateral is rescinded or must otherwise be
restored or returned by such Secured Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any of the Grantors or any other
Person from time to time liable in respect of the Obligations, or upon the
appointment of any intervenor or conservator of, or trustee or similar official
for, any of the Grantors or any such other Person or any substantial part of its
or their properties, or otherwise, all as though such payments had not been
made.
(d) Upon the payment in full of the Obligations and the termination
of the Commitments, the Administrative Agent, upon the request, and at the
expense, of the Borrower, shall execute and deliver all such documentation
necessary to release the liens created pursuant to this Agreement. In addition,
in connection with any disposition permitted by the terms of the Credit
Agreement, (i) the Collateral that is the subject of such disposition shall, if
the conditions regarding such disposition contained in the Credit Agreement are
satisfied, be deemed automatically released from the lien created by this
Agreement and (ii) the Administrative Agent, upon the request, and at the
expense, of the Borrower, shall execute and deliver all such documentation
necessary to release the liens created pursuant to this Agreement in such
Collateral.
16. GOVERNING LAW
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS, BUT INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK) AND DECISIONS OF THE STATE OF NEW YORK.
17. Counterparts
This Security Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one contract (subject to Section 14), and shall
become effective as provided in Section 14. Delivery of an executed counterpart
of this Security Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Security Agreement.
21
18. Headings
Section headings used herein are for convenience of reference only,
are not part of this Security Agreement and are not to affect the construction
of, or to be taken into consideration in interpreting, this Security Agreement.
19. Jurisdiction
(a) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Security Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that, to the extent
permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by applicable law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Security Agreement shall
affect any right that any party hereto may otherwise have to bring any action or
proceeding relating to this Security Agreement or the other Loan Documents in
the courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Security Agreement or
the other Loan Documents in any court referred to in paragraph (a) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
20. WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS SECURITY AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
21. Additional Grantors
Upon execution and delivery after the date hereof by the
Administrative Agent and a Subsidiary of an instrument in the form of Annex 3,
such Subsidiary shall become a
22
Grantor hereunder with the same force and effect as if originally named as a
Grantor herein. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of each
of the Grantors hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Security Agreement.
22. Specific Performance
The Grantors stipulate that the Secured Parties' remedies at law, in
the event of any demand, or Default or Event of Default by the Grantors in the
performance of or compliance with any of the terms and provisions of this
Security Agreement on their part to be observed or performed, are not and will
not be adequate, and that such terms may be specifically enforced by a decree
for the specific performance of any agreement or provision contained herein or
by an injunction against a violation of any of the terms of provisions hereof or
otherwise.
[Signature page follows]
23
IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.
MONITRONICS INTERNATIONAL, INC.
By: /s/ Michael Meyers
-----------------------------------
Name: Michael Meyers
Title: Vice President and CFO
FLEET NATIONAL BANK, as
Administrative Agent
By: /s/ John F. Lynch
------------------------------
Name: John F. Lynch
Title: Senior Vice President
24
SCHEDULE I TO SECURITY AGREEMENT
GRANTORS
Grantor Address for Notices
____________________________________ __________________________________________
__________________________________________
__________________________________________
With a copy to:
__________________________________________
__________________________________________
__________________________________________
____________________________________ __________________________________________
__________________________________________
__________________________________________
With a copy to:
__________________________________________
__________________________________________
__________________________________________
____________________________________ __________________________________________
__________________________________________
__________________________________________
With a copy to:
__________________________________________
__________________________________________
__________________________________________
25
ANNEX 1 TO SECURITY AGREEMENT
FORM OF PERFECTION CERTIFICATE
Reference is made to the Credit Agreement (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement") to
be entered into by and among MONITRONICS INTERNATIONAL, INC., as Borrower, the
Lenders from time to time party thereto, FLEET NATIONAL BANK, as Administrative
Agent for each of the Credit Parties thereto, and BANK OF AMERICA, N.A., as
Syndication Agent for the Credit Parties thereto.
The undersigned, a duly authorized officer of the Borrower, hereby
certifies to the Administrative Agent, the Syndication Agent and the Lenders as
follows:
1. The Borrower is the following type of entity:
2. The Borrower's federal employer identification number is:
3. The Borrower's state of formation or organization is:
4. According to its organizational documents (copies of which are attached
hereto as Schedule I), the complete legal name of the Borrower is:
5. According to its organizational documents, the organizational
identification number of the Borrower is:
6. Attached hereto as Schedule II is the information required in items 1
through 5 above for any other business or organization to which the
Borrower became the successor by merger, consolidation, acquisition, change
in form, nature or jurisdiction of organization or otherwise, now or at any
time during the past five years.
7. The Borrower is affiliated with, or has ownership or equity interests in,
the following entities (including subsidiaries):
Name of Entity Relationship to Borrower Ownership Percentage
-------------- ------------------------ --------------------
26
8. Following is a list and brief description of all real property owned or
leased by the Borrower, including all properties at which the Borrower
conducts business or maintains books and records or inventory (an asterisk
indicates property owned by the Borrower):
Street Address County City or Town State Zip Code
-------------- ------ ------------ ----- --------
9. Following is a brief description of each arrangement pursuant to which any
third party (such as an off-site storage facility, consignee, warehouseman
or purchaser of chattel paper) is or will be in possession of any of the
Borrower's instruments, inventory, chattel paper or equipment:
Name and Address of Third Party Description of Arrangement
------------------------------- --------------------------
10. Following is a list and brief description of each deposit account
maintained by the Borrower:
Name of Depository Institution Description of Account Account No.
------------------------------ ---------------------- -----------
11. Following is a list and brief description of all third-party loans,
advances or other indebtedness to the Borrower, other than indebtedness
incurred in the ordinary course of business:
Name of Obligee Description of Indebtedness
--------------- ---------------------------
12. Following is a list and brief description of all investment property owned
by the Borrower (other than the ownership interests described in item 6
above):
Name of Issuer Description of Property Certificate No.
-------------- ----------------------- ---------------
13. Following is the information required by (S)9-502(b) of the Uniform
Commercial Code as currently in effect in the State of New York (the "UCC")
of each state in which any of the assets or properties of the Borrower
consisting of fixtures are or are to be located and the name and address of
each real estate recording office where a mortgage on the real estate on
which such fixtures are or are to be located would be recorded:
Address County State
------- ------ -----
27
14. At the present time, there are no delinquent taxes due in respect of the
Borrower's operations, properties or assets, except as follows (explain):
15. Neither the Borrower, nor any of its subsidiaries or any of their
respective affiliates, have ever been involved in a bankruptcy or
reorganization or similar proceeding except (explain):
16. Attached hereto as Schedule III is a correct and complete list of each
patent, copyright, trademark, service mark, and each application and
license therefor, owned by or on behalf of the Borrower.
17. Miscellaneous.
(a) Terms used herein that are defined in the UCC shall have the meanings
ascribed to them in the UCC.
(b) The Borrower will provide the Administrative Agent, the Syndication
Agent and the Lenders prompt written notice of any change or amendment with
respect to any information provided herein.
(c) This Perfection Certificate is a "Loan Document" for purposes of the
Credit Agreement.
[Signature page follows]
28
IN WITNESS WHEREOF, the undersigned has duly executed this Perfection
Certificate on _______________, 2003.
MONITRONICS INTERNATIONAL, INC.
By:______________________________
Name:
Title:
29
Schedule I
Organizational Documents
Attached
30
Schedule II
Mergers, Consolidation, Acquisitions, Etc.
31
Schedule III
Intellectual Property
(i) Patents:
(a) Patents Issued
- --------------------------------------------------------------------------------
Patent No. Issue Date Inventor(s) Title
---------- ---------- ----------- -----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) Patents Pending
- --------------------------------------------------------------------------------
Serial No. Filing Date Inventor(s) Title
---------- ----------- ----------- -----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ii) Copyrights:
(a) Registered
- --------------------------------------------------------------------------------
Title Author(s) Copyright No. Registration Date
----- --------- ------------- -----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) Unregistered
- --------------------------------------------------------------------------------
Title Author(s)
----- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
(iii) Trademarks and Service Marks:
(a) Registrations
- --------------------------------------------------------------------------------
Trademark or Service Mark Registration Date Registration No.
------------------------- ----------------- ---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) Pending Applications
- --------------------------------------------------------------------------------
Trademark or Service Mark Filing Date Registration No.
------------------------- ----------- ---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(iv) Licenses:
33
ANNEX 2 TO SECURITY AGREEMENT
FORM OF COLLATERAL PATENT,
TRADEMARK, COPYRIGHT AND LICENSE ASSIGNMENT
COLLATERAL PATENT, TRADEMARK, COPYRIGHT AND LICENSE ASSIGNMENT, dated as of
August __, 2003, among Monitronics International, Inc., a Texas corporation (the
"Assignor"), to Fleet National Bank, as Administrative Agent for the Lenders
from time to time party to the credit agreement referred to below (in such
capacity, the "Assignee").
W I T N E S S E T H:
WHEREAS, the Assignor, the Assignee, Bank of America, N.A., as syndication
agent, and the Lenders from time to time party thereto have entered into a
Credit Agreement dated as of August __, 2003 (as amended, modified, supplemented
and/or extended from time to time, the "Credit Agreement"; capitalized terms
used herein and not otherwise defined shall have the same meanings herein as in
the Credit Agreement); and
WHEREAS, it is a condition to the effectiveness of the Credit Agreement
that, among other things, Assignor execute and deliver to the Assignee this
Agreement.
NOW, THEREFORE, in consideration of the willingness of the Lenders to enter
into the Credit Agreement and to agree, subject to the terms and conditions set
forth therein, to make the Loans to the Assignor pursuant thereto, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor agrees as follows:
1. Incorporation of Loan Documents. The Loan Documents and the terms and
provisions therein are hereby incorporated herein in their entirety by this
reference thereto.
2. Collateral Assignment of Patents, Trademarks, Copyrights and Licenses.
To secure the complete and timely satisfaction of all of the obligations of
Assignor to the Assignee under the Credit Agreement, the Notes and all other
documents, instruments and agreements delivered by Assignor in connection
therewith (collectively, the "Obligations"), the Assignor hereby mortgages,
pledges and assigns to the Assignee, for and on behalf of the Lenders, as and by
way of a mortgage and security interest having priority over all other security
interests, with power of sale upon the occurrence of an Event of Default, and
grants the Assignee, for and on behalf of the Lenders, a security interest in,
all of Assignor's right, title and interest in and to all of the following,
whether now existing or hereafter arising:
(i) patents and patent applications, including, without limitation,
the inventions and improvements described and claimed therein, and those
patents and patent applications listed on Schedule A attached hereto and
made a part hereof, and (a) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof, (b) all income,
royalties, damages and payments now and hereafter due and/or payable under
and with respect thereto, including, without limitation, damages and
payments for past or future infringements thereof, (c) the right to sue for
past, present and future infringements thereof, and (d) all rights
corresponding thereto throughout the world (all
34
of the foregoing patents and applications, together with the items
described in clauses (a) through (d), inclusive, in which Assignor now or
hereafter has any right, title or interest are sometimes hereinafter
individually and/or collectively referred to as the "Patents");
(ii) all service marks, trademarks, trademark or service mark
registrations, trademark or service mark applications, trade names,
copyrights, copyright registrations and copyright applications including,
without limitation, the trademarks, service marks, copyrights and
applications listed on Schedule B attached hereto and made a part hereof,
and (a) renewals thereof, (b) all income, royalties, damages and payments
now and hereafter due and/or payable with respect thereto, including,
without limitation, damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future infringements
thereof, and (d) all rights corresponding thereto throughout the world (all
of the foregoing service marks, trademarks, registrations, applications and
trade names, together with the items described in clauses (a) through (d),
inclusive, with respect thereto in which Assignor now or hereafter has any
right, title or interest are sometimes hereinafter individually and/or
collectively referred to as the "Marks" and all of the foregoing
copyrights, copyright registrations and copyright applications, together
with the items described in clauses (a) through (d), inclusive, in which
Assignor now or hereafter has any right, title or interest are sometimes
hereinafter individually and/or collectively referred to as the
"Copyrights");
(iii) all Assignor's rights and obligations pursuant to its license
agreements with any other Person or Persons with respect to any Patents,
Marks and Copyrights, whether Assignor is a licensor or licensee under any
such license agreements, including, without limitation, the licenses listed
on Schedule C attached hereto and made a part hereof, and, subject to the
terms of such licenses, the right to prepare for sale, sell and advertise
for sale, all Inventory now or hereafter owned by the Assignor and now or
hereafter covered by such licenses (all of the foregoing is hereinafter
referred to collectively as the "Licenses"); and
(iv) the goodwill of Assignor's business connected with and
symbolized by the Marks;
provided, however, that there shall be excluded from the foregoing collateral
assignment and grant of a security interest any of the existing Licenses to
which Assignor is a licensee (and any Patents, Marks and Copyrights currently
licensed by others to Assignor pursuant to such Licenses), in each case to the
extent (but only to the extent) that the applicable License lawfully prohibits
such collateral assignment or grant of a security interest; provided further,
however, that, upon the Assignee's request, Assignor will use its best efforts
to obtain any consent needed to subject any such property to this collateral
assignment and grant of a security interest.
3. Restrictions on Future Agreements. Assignor agrees and covenants that,
until the Obligations shall have been satisfied in full and the Credit Agreement
shall have been terminated, Assignor will not, without the Assignee's prior
written consent, take any action or enter into any agreement, including, without
limitation, entering into any license agreement, which is inconsistent with
Assignor's obligations under this Agreement, and Assignor further agrees and
covenants that without the Assignee's prior written consent it will not take any
action, or permit any action to be taken by others subject to its control,
including its licensees, or fail to
35
take any action which would affect the validity or enforcement or nature of the
rights transferred to the Assignee, for and on behalf of the Lenders under this
Agreement. Assignor agrees and covenants not to sell or assign its interest in,
or grant any license under, the Patents, Marks, Copyrights or Licenses without
receiving the prior written consent of the Assignee thereto.
4. Certain Covenants, Representations and Warranties of Assignor.
Assignor covenants, represents and warrants (to the best of Assignor's knowledge
with respect to any Patents, Marks and Copyrights which are licensed by third
parties to Assignor) that: (i) the Patents, Marks, Copyrights and Licenses are
subsisting, have not been adjudged invalid or unenforceable in whole or in part,
and, to the best of Assignor's knowledge, are not currently being challenged in
any way; (ii) none of the Patents, Marks, Copyrights and Licenses have lapsed or
expired or have been abandoned, whether due to any failure to pay any
maintenance or other fees or make any filing or otherwise; (iii) each of the
Patents, Marks, Copyrights and Licenses is valid and enforceable, and Assignor
is unaware of any invalidating prior act (including public uses and sales)
relative to the Patents, and is unaware of any impairments to the Patents,
Marks, Copyrights or Licenses which would have a material adverse effect on the
validity and/or enforceability of the Patents, Marks, Copyrights or Licenses;
(iv) to the best of Assignor's knowledge, no claim has been made that the use of
any of the Patents, Marks, Copyrights or Licenses constitutes an infringement;
(v) Assignor owns the entire right, title and interest in and to each of the
Patents, Marks and Copyrights (other than those being licensed to Assignor
pursuant to the Licenses), free and clear of any liens and encumbrances of every
kind and nature, and the Licenses are valid and subsisting licenses with respect
to the Patents, Marks, Copyrights described therein, free and clear of any liens
and encumbrances of every kind and nature arising by, through or under Assignor,
in each case except for (A) rights granted by Assignor pursuant to the
applicable licenses listed on Schedule C, (B) liens and encumbrances in favor of
the Assignee, for and on behalf of the Lenders, pursuant to this Agreement or
the other Loan Documents, and (C) liens and encumbrances otherwise permitted
under the Credit Agreement; (vi) the Patents, Marks and Copyrights and Licenses
listed on Schedules A, B and C, respectively, constitute all such items in which
Assignor has any right, title or interest; (vii) Assignor has the unqualified
right to enter into this Agreement and perform its terms; (viii) Assignor will
continue to use proper statutory notice in connection with its use of the
Patents, Marks and Copyrights; and (ix) Assignor will use standards of quality
in its manufacture of products sold under the Marks consistent with those
currently employed by it.
5. New Patents, Marks, Copyrights and Licenses. If, before the
Obligations shall have been satisfied in full and the Credit Agreement shall
have been terminated, Assignor shall (i) obtain rights to any new patentable
inventions, trademarks, service marks, trademark or service mark registrations,
copyrights, copyright registrations, trade names or licenses, or (ii) become
entitled to the benefit of any patent, trademark or service mark application,
trademark, service mark, trademark or service mark registration, copyrights,
copyright registrations, license or license renewal, or patent for any reissue,
division, continuation, renewal, extension, or continuation-in-part of any
Patent or any improvement on any Patent, the provisions of Section 2 above shall
automatically apply thereto, and Assignor shall give to the Assignee, for and on
behalf of the Lenders, prompt written notice thereof. Assignor hereby authorizes
the Assignee, for and on behalf of the Lenders, to modify this Agreement by
noting any future acquired Patents, Marks or Copyrights on Schedule A or B and
any Licenses and licensed Patents, Marks or Copyrights on Schedule C, as
applicable; provided, however, that the failure of the Assignee
36
to make any such notation shall not limit or affect the obligations of Assignor
or rights of the Assignee hereunder.
6. Royalties; Terms. Assignor hereby agrees that the use by the Assignee
of all Patents, Marks, Copyrights and Licenses as described above shall be
worldwide (or in the case of the Patents, Marks and Copyrights licensed to
Assignor such smaller geographic location if any is specified for Assignor's use
in the applicable License) and without any liability for royalties or other
related charges from the Assignee to Assignor. The term of the assignments
granted herein shall extend until the earlier of (i) the expiration of each of
the respective Patents, Marks, Copyrights and Licenses assigned hereunder, or
(ii) satisfaction in full of the Obligations and termination of the Credit
Agreement.
7. Grant of License to the Assignor. Unless and until an Event of Default
shall have occurred and notice given as provided in the following sentence, the
Assignee hereby grants to Assignor (but only to the extent the same was lawfully
granted to the Assignee by Assignor pursuant to this Agreement) the
royalty-free, exclusive, nontransferable right and license for Assignor's own
benefit and account and no other to use the Marks and all materials covered by
the Copyrights, to exercise the Assignee's rights under the Licenses, and to
make, have made, use and sell products conforming to the inventions disclosed
and claimed in the Patents for Assignor's own benefit and account and for none
other. Assignor agrees not to sell or assign its interest in, or grant any
sublicense under, the license granted to Assignor in this Section 7 without the
prior written consent of the Assignee, for and on behalf of the Lenders. From
and after the occurrence of an Event of Default and notice to such effect from
the Assignee to the Assignor, Assignor's license with respect to the Patents,
Marks, Copyrights and Licenses as set forth in this Section 7 shall terminate
forthwith.
8. Right to Inspect. The Assignee, for and on behalf of the Lenders,
shall have the right, at any time and from time to time, to inspect Assignor's
premises, books, records and operations to the extent permitted under the Credit
Agreement and the other Loan Documents.
9. Termination of the Assignor's Security Interest. This Agreement is
made for collateral purposes only. Upon satisfaction in full of the Obligations
and termination of the Credit Agreement, subject to any disposition thereof
which may have been made by the Assignee, for and on behalf of the Lenders,
pursuant hereto or pursuant to any of the other Loan Documents, title to the
Patents, Marks, Copyrights and Licenses shall automatically revert to Assignor.
The Assignee, for and on behalf of the Lenders shall, at Assignor's expense,
execute and deliver to Assignor all termination statements and other instruments
as may be necessary or proper to terminate the Assignee's security interest in,
and to revest in Assignor all right, title and interest in and to, the Patents,
Marks, Copyrights, and Licenses transferred to the Assignee, for and on behalf
of the Lenders pursuant to this Agreement, subject to any disposition thereof
which may have been made by the Assignee or the Lenders pursuant hereto or
pursuant to any of the other Loan Documents. Any such termination statements and
instruments shall be without recourse upon or warranty by the Assignee, for and
on behalf of the Lenders.
10. Duties of the Assignor. Assignor shall have the duty, in each case in
a manner consistent with reasonably responsible business and legal practices as
determined by Assignor, (i) to prosecute diligently any patent application of
the Patents, any application respecting the
37
Marks, and any copyright application of the Copyrights pending as of the date
hereof or thereafter, (ii) to make application on unpatented but patentable
inventions and on registerable but unregistered trademarks, service marks and
copyrights, and (iii) to preserve, maintain and enforce against infringement all
rights in patent applications and patents constituting the Patents, in trademark
or service mark applications, trademarks, service marks, and trademark or
service mark registrations constituting the Marks, and in copyright
applications, copyrights and copyright registrations constituting the
Copyrights. Any expenses incurred in connection with the foregoing shall be
borne by Assignor. Assignor shall not abandon any pending patent application,
trademark application, copyright application, service mark application, patent,
trademark, service mark or copyright without the written consent of the
Assignee, for and on behalf of the Lenders.
11. Assignee's Right to Sue. From and after the occurrence of an Event of
Default, the Assignee, for and on behalf of the Lenders, shall have the right,
but shall in no way be obligated, to bring suit in its own name to enforce the
Patents, the Marks, the Copyrights and the Licenses, and any licenses
thereunder, and, if the Assignee shall commence any such suit, Assignor shall,
at the request of the Assignee, do any and all lawful acts and execute any and
all proper documents reasonably requested by the Assignee in aid of such
enforcement, and Assignor shall promptly, upon demand, reimburse and indemnify
the Assignee for all reasonable costs and expenses incurred by the Assignee in
the exercise of its rights under this Section 11.
12. Waivers. No course of dealing between Assignor and the Assignee, for
and on behalf of the Lenders, nor any failure to exercise, nor any delay in
exercising, on the part of the Assignee, any right, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
13. Severability. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
14. Modification. This Agreement cannot be altered, amended or modified in
any way, except as specifically provided in Section 5 hereof or by a writing
signed by the Assignor and the Assignee.
15. Further Assurances. Assignor shall execute and deliver to the
Assignee, for and on behalf of the Lenders, at any time or times hereafter at
the request of the Assignee, all papers (including, without limitation, any as
may be deemed desirable by the Assignee for filing or recording with any Patent
and Trademark Office, and any successor thereto) and take all such actions
(including, without limitation, paying the cost of filing or recording any of
the foregoing in all public offices reasonably deemed desirable by the
Assignee), as the Assignee may request, to evidence the Assignee's interest in
the Patents, Marks, Copyrights and Licenses and the goodwill associated
therewith and enforce the Assignee's rights under this Agreement.
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16. Cumulative Remedies; Power of Attorney; Effect on Loan Documents. All
of the Assignee's rights and remedies with respect to the Patents, Marks,
Copyrights and Licenses, whether established hereby, by any of the Loan
Documents or otherwise, or by any other agreements or by law, shall be
cumulative and may be exercised singularly or concurrently. Assignor hereby
constitutes and appoints the Assignee as Assignor's true and lawful
attorney-in-fact, with full power of substitution in the premises, with power at
any time after the occurrence of an Event of Default, to (i) endorse Assignor's
name on all applications, documents, papers and instruments determined by the
Assignee, for and on behalf of the Lenders, in its sole discretion as necessary
or desirable for the Assignee in the use of the Patents, Marks, Copyrights and
Licenses, (ii) take any other actions with respect to the Patents, Marks,
Copyrights and Licenses as the Assignee deems in good faith to be in the best
interest of the Assignee, for and on behalf of the Lenders, (iii) grant or issue
any exclusive or non-exclusive license under the Patents, Marks or Copyrights to
any Person, or (iv) assign, pledge, convey or otherwise transfer title in or
dispose of the Patents, Marks, Copyrights or Licenses to any Person. Assignor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be irrevocable until the Obligations
shall have been satisfied in full and the Credit Agreement shall have been
terminated. Assignor acknowledges and agrees that this Agreement is not intended
to limit or restrict in any way the rights and remedies of the Assignee under
the Credit Agreement or any of the Loan Documents but rather is intended to
facilitate the exercise of such rights and remedies. The Assignee, for and on
behalf of the Lenders shall have, in addition to all other rights and remedies
given it by the terms of this Agreement, all rights and remedies allowed by law
and the rights and remedies of a secured party under the Uniform Commercial Code
as enacted in any jurisdiction in which the Patents, Marks, Copyrights or
Licenses may be enforced. Assignor hereby releases the Assignee and the Lenders
from any and all claims, causes of action and demands at any time arising out of
or with respect to any actions taken or omitted to be taken by the Assignees
under the powers of attorney granted herein.
17. Binding Effect; Benefits. This Agreement shall be binding upon the
Assignor and its respective successors and assigns and shall inure to the
benefit of the Assignee and the Lenders and their respective successors, assigns
and nominees.
18. Governing Law. THIS COLLATERAL PATENT, TRADEMARK, COPYRIGHT AND
LICENSE ASSIGNMENT AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (AS OPPOSED TO THE CONFLICTS OF
LAW PROVISIONS, BUT INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK ) AND DECISIONS OF THE STATE OF NEW
YORK.
[Signature page follows]
39
IN WITNESS WHEREOF, the undersigned has duly executed this Collateral
Patent, Trademark, Copyright and License Agreement as of the date first above
written.
MONITRONICS INTERNATIONAL, INC.
By:_____________________________
Name:
Title:
40
ACCEPTANCE
The undersigned, as aforesaid, accepts the foregoing Collateral Patent,
Trademark, Copyright and License Assignment as of the ______ day of August,
2003.
FLEET NATIONAL BANK, as
Administrative Agent
By:_______________________________
Name:
Title:
41
SCHEDULE A
42
SCHEDULE B
43
SCHEDULE C
44
ANNEX 3 TO SECURITY AGREEMENT
FORM OF SUPPLEMENT TO SECURITY AGREEMENT
Supplement No. __, dated as of ___________ ___, 200_, to the Security
Agreement, dated as of August __, 2003 (as amended, restated, supplemented or
otherwise modified from time to time, the "Security Agreement"), among
Monitronics International, Inc., a Texas corporation (the "Borrower"), the
subsidiaries of the Borrower party thereto and Fleet National Bank, as
Administrative Agent for the Lenders from time to time party to the credit
agreement referred to below (in such capacity, the "Administrative Agent").
A. Reference is made to the Credit Agreement, dated August __, 2003 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement"), by and among the Borrower, the Lenders from time to time
party thereto, the Administrative Agent and Bank of America, N.A., as
syndication agent. Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement and the
Security Agreement.
B. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and otherwise extend credit on behalf of the
Borrower. Section 21 of the Security Agreement provides that additional
Subsidiaries of the Borrower may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned subsidiary (the "New Grantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Grantor
under the Security Agreement in order to induce the Lenders to make additional
Loans and extensions of credit and as consideration for Loans and extensions of
credit previously made.
Accordingly, the Administrative Agent and the New Grantor agree as follows:
Section 1. In accordance with Section 21 of the Security Agreement, the New
Grantor by its signature below becomes a Grantor under the Security Agreement
with the same force and effect as if originally named therein as a Grantor, and
the New Grantor hereby agrees to all the terms and provisions of the Security
Agreement applicable to it as a Grantor thereunder. In furtherance of the
foregoing, the New Grantor, as security for the payment and performance in full
of the Obligations, does hereby create and grant to the Administrative Agent for
the ratable benefit of the Secured Parties a security interest in and lien on
all of the New Grantor's right, title and interest in and to the Collateral (as
defined in the Security Agreement) of the New Grantor. Each reference to a
"Grantor" in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is hereby incorporated herein by reference.
Section 2. The New Grantor represents and warrants to the Administrative
Agent that (a) it has all requisite organizational and other powers and
authority to execute, deliver and perform its obligations under this Supplement
and this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, (b) set forth on the Schedule attached hereto is a
true and complete schedule of all of the information that would have been
required to have been delivered
45
by or on behalf of the New Grantor pursuant to the Security Agreement, the
Schedules thereto and the Perfection Certificate if the New Grantor had been
originally named in the Security Agreement and (c) the representations and
warranties made by it as a Grantor under the Security Agreement, including,
without limitation, with respect to itself, its operations and its assets and
properties, are true and correct on and as of the date hereof based upon the
applicable information referred to in clause (b) of this Section.
Section 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one contract. This Supplement shall become effective when the
Administrative Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Grantor and the
Administrative Agent. Delivery of an executed counterpart of this Supplement by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart of this Supplement.
Section 4. Except as expressly supplemented hereby, the Security Agreement
shall remain unchanged and in full force and effect.
Section 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW
PROVISIONS, BUT INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK) AND DECISIONS OF THE STATE OF NEW YORK.
Section 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof or thereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
Section 7. All communications and notices hereunder shall be in writing and
given as provided in Section 13 of the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it at the address set
forth in the Schedule hereto.
Section 8. The New Grantor agrees to reimburse the Secured Parties for
their reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Administrative Agent.
[Signature page follows]
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IN WITNESS WHEREOF, the New Grantor and the Administrative Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name of New Grantor]
By:_______________________________
Name:
Title:
FLEET NATIONAL BANK, as
Administrative Agent
By:__________________________
Name:
Title:
47
SCHEDULE TO THE SUPPLEMENT
48