Exhibit 10.4
GUARANTEE AND SECURITY AGREEMENT
dated as of
September 10, 2003
among
CONSECO, INC.
THE SUBSIDIARY GUARANTORS PARTY HERETO
and
BANK OF AMERICA, N.A.
as Agent
TABLE OF CONTENTS
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PAGE
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Section 1. Definitions.......................................................1
Section 2. Guarantees by Subsidiary Guarantors..............................11
Section 3. Grant of Transaction Liens.......................................15
Section 4. General Representations and Warranties...........................17
Section 5. Further Assurances; General Covenants............................19
Section 6. Accounts.........................................................22
Section 7. Chattel Paper and Instruments....................................22
Section 8. Commercial Tort Claims...........................................23
Section 9. Equipment........................................................24
Section 10. Material Government Contracts....................................24
Section 11. Recordable Intellectual Property.................................26
Section 12. Proceeds of Letters of Credit....................................26
Section 13. Investment Property..............................................27
Section 14. Investment Property Collateral Accounts..........................30
Section 15. Controlled Deposit Accounts......................................31
Section 16. Cash Collateral Accounts.........................................31
Section 17. Operation of Collateral Accounts.................................32
Section 18. Transfer of Record Ownership.....................................34
Section 19. Right to Vote Securities.........................................35
Section 20. Certain Cash Distributions.......................................35
Section 21. Remedies upon Event of Default...................................36
Section 22. Application of Proceeds..........................................37
Section 23. Fees and Expenses; Indemnification...............................38
Section 24. Authority to Administer Collateral...............................40
Section 25. Limitation on Duty in Respect of Collateral......................40
Section 26. General Provisions Concerning the Agent..........................41
Section 27. Termination of Transaction Liens; Release of Collateral..........44
Section 28. Additional Subsidiary Guarantors and Lien Grantors...............45
Section 29. Notices..........................................................45
Section 30. No Implied Waivers; Remedies Not Exclusive.......................47
Section 31. Successors and Assigns...........................................47
Section 32. Amendments and Waivers...........................................47
Section 33. Choice of Law....................................................48
Section 34. Waiver of Jury Trial.............................................48
Section 35. Severability.....................................................48
SCHEDULES:
- ---------
Schedule 1 Equity Interests in Subsidiaries and Affiliates Owned
by Original Lien Grantors
Schedule 2 Other Investment Property Owned by Original Lien
Grantors
Schedule 3 Material Commercial Tort Claims
Schedule 4 1999 Facility Collateral
EXHIBITS:
- --------
Exhibit A Security Agreement Supplement
Exhibit B Copyright Security Agreement
Exhibit C Patent Security Agreement
Exhibit D Trademark Security Agreement
Exhibit E Perfection Certificate
Exhibit F Issuer Control Agreement
Exhibit G Securities Account Control Agreement
Exhibit H-1 List of Material Government Contracts
Exhibit H-2 Assignment of Government Contract
Exhibit H-3 Notice of Assignment of Government Contract
Exhibit I List of Letters of Credit
ii
GUARANTEE AND SECURITY AGREEMENT
AGREEMENT dated as of September 10, 2003 among CONSECO, INC., the
SUBSIDIARY GUARANTORS party hereto and BANK OF AMERICA, N.A., as Agent.
WHEREAS, the Company is entering into the Credit Agreement described in
Section 1 hereof in order to provide for the partial satisfaction of certain
pre-petition claims against the Company and certain of its Subsidiaries;
WHEREAS, the Company is willing to secure its obligations under the Credit
Agreement by granting Liens on substantially all of its assets to the Agent as
provided in the Security Documents;
WHEREAS, the Company is willing to cause each of its current and future
Domestic Subsidiaries (other than Insurance Subsidiaries, Subsidiaries of
Insurance Subsidiaries and Immaterial Subsidiaries) to guarantee the foregoing
obligations of the Company and to secure its guarantee thereof by granting Liens
on substantially all of its assets to the Agent as provided in the Security
Documents;
WHEREAS, the Banks are not willing to enter into the Credit Agreement
unless (i) the foregoing obligations of the Company are secured and guaranteed
as described above and (ii) each guarantee thereof is secured by Liens on
substantially all of the assets of the relevant Subsidiary Guarantor as provided
in the Security Documents; and
WHEREAS, upon any foreclosure or other enforcement of the Security
Documents, the net proceeds of, or other collections on, the relevant Collateral
are to be received by or paid over to the Agent and applied as provided in
Section 22 hereof;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. (a) Terms Defined in Credit Agreement. Terms
defined in the Credit Agreement and not otherwise defined in subsection (b) or
(c) of this Section have, as used herein, the respective meanings provided for
therein.
(b) Terms Defined in UCC. As used herein, each of the following terms has
the meaning specified in the UCC:
Term UCC
- ---- ---
Account 9-102
Authenticate 9-102
Certificated Security 8-102
Chattel Paper 9-102
Commercial Tort Claim 9-102
Commodity Account 9-102
Commodity Contract 9-102
Commodity Customer 9-102
Commodity Intermediary 9-102
Deposit Account 9-102
Document 9-102
Electronic Chattel Paper 9-102
Entitlement Holder 8-102
Entitlement Order 8-102
Equipment 9-102
Financial Asset 8-102 & 103
General Intangibles 9-102
Instrument 9-102
Inventory 9-102
Investment Property 9-102
Letter-of-Credit Right 9-102
Payment Intangible 9-102
Record 9-102
Securities Account 8-501
Securities Intermediary 8-102
Security 8-102 & 103
Security Entitlement 8-102
Supporting Obligations 9-102
Tangible Chattel Paper 9-102
Uncertificated Security 8-102
(c) Additional Definitions. The following additional terms, as used herein,
have the following meanings:
"Agent" means Bank of America, N.A., in its capacity as Agent under the
Loan Documents, and its successors and assigns in such capacity.
"Article 9" means Article 9 of the Uniform Commercial Code as set forth in
the 1998 Official Text thereof; provided that, when used with respect to any
jurisdiction on or after the date when such Article 9 (with or without local
changes therein) first becomes effective in such jurisdiction, "Article 9"
refers to Article 9 as in effect in such jurisdiction from time to time.
2
"Assignment of Claims Act" has the meaning specified in Section 10(e).
"Cash Collateral Account" has the meaning specified in Section 16.
"Cash Distributions" means dividends, interest and other distributions and
payments (including proceeds of liquidation, sale or other disposition) made or
received in cash upon or with respect to any Collateral.
"Collateral" means all property, whether now owned or hereafter acquired,
on which a Lien is granted or purports to be granted to the Agent pursuant to
the Security Documents. When used with respect to a specific Lien Grantor, the
term "Collateral" means all its property on which such a Lien is granted, or
purports to be granted, pursuant to the Security Documents.
"Collateral Accounts" means the Cash Collateral Accounts, the Controlled
Deposit Accounts, the Controlled Securities Accounts and the Investment Property
Collateral Accounts.
"Commodity Account Control Agreement" means, with respect to any Commodity
Account as to which a Lien Grantor is the Commodity Customer, an agreement by
such Lien Grantor, the Agent and the relevant Commodity Intermediary that the
Commodity Intermediary will apply any value distributed on account of the
Commodity Contracts carried in such Commodity Account as directed by the Agent
without further consent by such Lien Grantor. Each such agreement must be
reasonably satisfactory in form and substance to the Agent.
"Company" means Conseco, Inc., a Delaware corporation.
"Control" has the following meanings:
(a) when used with respect to any Security or Security Entitlement,
the meaning specified in UCC Section 8-106;
(b) when used with respect to any Deposit Account, the meaning
specified in UCC Section 9-104;
(c) when used with respect to any Electronic Chattel Paper, the
meaning specified in UCC Section 9-105;
(d) when used with respect to any Commodity Account or Commodity
Contract, the meaning specified in UCC Section 9-106(b); and
3
(e) when used with respect to any right to payment or performance by
the issuer or a Nominated Person in respect of a letter of credit, the
meaning specified in UCC Section 9-107.
"Controlled Commodity Account" means a Commodity Account as to which (i) a
Lien Grantor is the Commodity Customer and (ii) a Commodity Account Control
Agreement is in effect.
"Controlled Deposit Account" means a Deposit Account (i) that is subject to
a Deposit Account Control Agreement or (ii) as to which the Agent is the
Depositary Bank's "customer" (as defined in UCC Section 4-104).
"Controlled Securities Account" means a Securities Account that (i) is
maintained in the name of a Lien Grantor at an office of a Securities
Intermediary located in the United States and (ii) together with all Financial
Assets credited thereto and all related Security Entitlements, is subject to a
Securities Account Control Agreement among such Lien Grantor, the Agent and such
Securities Intermediary.
"Copyright License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor grants to
any other Person, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which a
Copyright is in existence or may come into existence, including any agreement
identified in Schedule 1 to any Copyright Security Agreement.
"Copyright Security Agreement" means a Copyright Security Agreement,
substantially in the form of Exhibit B, executed and delivered by a Lien Grantor
in favor of the Agent for the benefit of the Secured Parties.
"Copyrights" means all the following: (i) all copyrights under the laws of
the United States (whether or not the underlying works of authorship have been
published), all registrations and recordings thereof, all copyrightable works of
authorship (whether or not published), and all applications for copyrights under
the laws of the United States, including registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States or any State thereof, including those described in
Schedule 1 to any Copyright Security Agreement, (ii) all renewals of any of the
foregoing, (iii) all claims for, and rights to sue for, past or future
infringements of any of the foregoing and (iv) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
4
"Credit Agreement" means the Credit Agreement dated as of the date hereof
among Conseco, Inc., the Banks party thereto, and Bank of America, N.A., as
Agent.
"D&O Loan Collateral" means the right, title and interest of the Company
in, to and under the D&O Loans and all Proceeds thereof.
"Deposit Account Control Agreement" means, with respect to any Deposit
Account of any Lien Grantor, an agreement among such Lien Grantor, the Agent and
the relevant Depositary Bank, set forth in an Authenticated Record, (i) that
such Depositary Bank will comply with instructions originated by the Agent
directing disposition of the funds in such Deposit Account without further
consent by such Lien Grantor and (ii) subordinating to the relevant Transaction
Lien all claims of the Depositary Bank to such Deposit Account (except its right
to deduct its customary operating charges and any uncollected funds previously
credited thereto).
"Depositary Bank" means a bank at which a Controlled Deposit Account is
maintained.
"Equity Interest" means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof,
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition or (vi) any Security Entitlement in respect of any Equity
Interest described in this definition.
"Federal Government" means the federal government of the United States or
any agency or instrumentality thereof.
"Intellectual Property Filing" means (i) with respect to any Patent, Patent
License, Trademark or Trademark License, the filing of the applicable Patent
Security Agreement or Trademark Security Agreement with the United States Patent
and Trademark Office, together with an appropriately completed recordation form
and (ii) with respect to any Copyright or Copyright License, the filing of the
applicable Copyright Security Agreement with the United States Copyright Office,
together with an appropriately completed recordation form, in each case
sufficient to record the Transaction Lien granted to the Agent in such
Recordable Intellectual Property.
"Intellectual Property Security Agreement" means a Copyright Security
Agreement, a Patent Security Agreement or a Trademark Security Agreement.
5
"Investment Property Collateral Account" has the meaning specified in
Section 14.
"Issuer Control Agreement" means an Issuer Control Agreement substantially
in the form of Exhibit F (with any changes that the Agent shall have approved).
"Lien Grantors" means the Company and the Subsidiary Guarantors.
"Liquid Investment" means a Cash Equivalent (other than commercial paper)
that matures within 30 days after it is first included in the Collateral.
"LLC Interest" means a membership interest or similar interest in a limited
liability company.
"Material Commercial Tort Claim" means a Commercial Tort Claim involving a
claim for more than $500,000.
"Material Government Contract" means a contract, between a Lien Grantor and
either (i) the Federal Government or (ii) a state or local government or any
agency or instrumentality thereof, that provides (or can reasonably be expected
to provide) for payments to such Lien Grantor in an aggregate amount exceeding
$250,000.
"1999 Facility Collateral" has the meaning specified in Schedule 4.
"Nominated Person" means a Person whom the issuer of a letter of credit (i)
designates or authorizes to pay, accept, negotiate or otherwise give value under
such letter of credit and (ii) undertakes by agreement or custom and practice to
reimburse.
"Opinion of Counsel" means a written opinion of legal counsel (who may be
counsel to a Lien Grantor or other counsel, in either case reasonably acceptable
to the Agent) addressed and delivered to the Agent.
"Original Lien Grantor" means any Lien Grantor that grants a Lien on any of
its assets hereunder on the Effective Date.
"own" refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and "acquire"
refers to the acquisition of any such rights.
"Partnership Interest" means a partnership interest, whether general or
limited.
6
"Patent License" means any agreement now or hereafter in existence granting
to any Lien Grantor, or pursuant to which any Lien Grantor grants to any other
Person, any right with respect to any Patent or any invention now or hereafter
in existence, whether patentable or not, whether a patent or application for
patent is in existence on such invention or not, and whether a patent or
application for patent on such invention may come into existence or not,
including any agreement identified in Schedule 1 to any Patent Security
Agreement.
"Patent Security Agreement" means a Patent Security Agreement,
substantially in the form of Exhibit C, executed and delivered by a Lien Grantor
in favor of the Agent for the benefit of the Secured Parties.
"Patents" means (i) all letters patent and design letters patent of the
United States and all applications for letters patent or design letters patent
of the United States, including applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States or any
State thereof, including those described in Schedule 1 to any Patent Security
Agreement, (ii) all reissues, divisions, continuations, continuations in part,
revisions and extensions of any of the foregoing, (iii) all claims for, and
rights to sue for, past or future infringements of any of the foregoing and (iv)
all income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including damages and payments for past or
future infringements thereof.
"Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit E, completed and supplemented
with the schedules contemplated thereby to the satisfaction of the Agent, and
signed by an officer of such Lien Grantor.
"Permitted Liens" means (i) the Transaction Liens and (ii) any other Liens
on the Collateral permitted to be created or assumed or to exist pursuant to
Section 7.02 of the Credit Agreement.
"Pledged", when used in conjunction with any type of asset, means at any
time an asset of such type that is included (or that creates rights that are
included) in the Collateral at such time. For example, "Pledged Equity Interest"
means an Equity Interest that is included in the Collateral at such time and
"Pledged letter of credit" means a letter of credit that creates rights to
payment or performance that are included in the Collateral at such time.
"Post-Petition Interest" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company (or would accrue but for the
operation of applicable bankruptcy or insolvency laws), whether or not such
interest is allowed or allowable as a claim in any such proceeding.
7
"Proceeds" means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Collateral, including all claims of the relevant Lien Grantor against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral.
"Recordable Intellectual Property" means (i) Patents, (ii) Patent Licenses,
(iii) Trademarks, (iv) Trademark Licenses, (v) Copyrights and (vi) Copyright
Licenses, and all rights in or under any of the foregoing.
"Regulated Subsidiary" means a Subsidiary as to which the consent of a
governmental body or official is required for any acquisition of control or
change of control thereof.
"Release Conditions" means the following conditions for releasing all the
Secured Guarantees and terminating all the Transaction Liens:
(i) all Commitments under the Credit Agreement shall have expired or
been terminated; and
(ii) all Secured Obligations (other than contingent indemnification
obligations not yet due and payable) shall have been paid in full.
"Required D&O Banks" means Banks then holding at least 50.1% of the
aggregate unpaid principal amount of the Tranche A-2 Term Loans, the Tranche A-3
Term Loans, the Tranche B-2 Term Loans and the Tranche B-3 Term Loans.
"Required 1999 D&O Banks" means Banks then holding at least 50.1% of the
aggregate unpaid principal amount of the Tranche A-2 Term Loans and the Tranche
B-2 Term Loans.
"Secured Agreement", when used with respect to any Secured Obligation,
refers collectively to each instrument, agreement or other document that sets
forth obligations of the Company, obligations of a Subsidiary Guarantor and/or
rights of the holder with respect to such Secured Obligation.
"Secured Guarantee" means, with respect to each Subsidiary Guarantor, its
guarantee of the Secured Obligations under Section 2 hereof or Section 1 of a
Security Agreement Supplement.
8
"Secured Obligations" means all principal of all Loans outstanding from
time to time under the Credit Agreement (as the same may be amended, restated,
extended, supplemented, refinanced or otherwise modified from time to time), all
interest (including Post-Petition Interest) on such Loans and all other amounts
now or hereafter payable by the Company pursuant to the Loan Documents (as the
same may be amended, restated, extended, supplemented, refinanced or otherwise
modified from time to time).
"Secured Parties" means the holders from time to time of the Secured
Obligations.
"Secured Party Requesting Notice" means, at any time, a Secured Party that
has, at least five Business Days prior thereto, delivered to the Agent a written
notice (i) stating that it holds one or more Secured Obligations and wishes to
receive copies of the notices referred to in Section 26(i) and (ii) setting
forth its address, facsimile number and electronic mail address to which copies
of such notices should be sent.
"Securities Account Control Agreement" means, when used with respect to a
Securities Account, a Securities Account Control Agreement substantially in the
form of Exhibit G (with any changes that the Agent shall have approved) or in
any other form reasonably satisfactory to the Agent among the relevant
Securities Intermediary, the relevant Lien Grantor and the Agent to the effect
that such Securities Intermediary will comply with Entitlement Orders originated
by the Agent with respect to such Securities Account without further consent by
the relevant Lien Grantor.
"Security Agreement Supplement" means a Security Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the Agent for
the purpose of adding a Subsidiary as a party hereto pursuant to Section 28
and/or adding additional property to the Collateral.
"Security Documents" means this Agreement, the Security Agreement
Supplements, the Commodity Account Control Agreements, the Deposit Account
Control Agreements, the Issuer Control Agreements, the Securities Account
Control Agreements, the Intellectual Property Security Agreements and all other
supplemental or additional security agreements, control agreements, mortgages or
similar instruments delivered pursuant to the Loan Documents.
"Subsidiary Guarantor" means each Subsidiary listed on the signature pages
hereof under the caption "Subsidiary Guarantors" and each Subsidiary that shall,
at any time after the date hereof, become a "Subsidiary Guarantor" pursuant to
Section 28.
9
"Supporting Letter of Credit" means a letter of credit that supports the
payment or performance of one or more items included in the Collateral.
"Trademark License" means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor grants to
any other Person, any right to use any Trademark, including any agreement
identified in Schedule 1 to any Trademark Security Agreement.
"Trademark Security Agreement" means a Trademark Security Agreement,
substantially in the form of Exhibit D, executed and delivered by a Lien Grantor
in favor of the Agent for the benefit of the Secured Parties.
"Trademarks" means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and all other
source or business identifiers, and all general intangibles of like nature, and
the rights in any of the foregoing which arise under applicable law, (ii) the
goodwill of the business symbolized thereby or associated with each of them,
(iii) all registrations and applications in connection therewith, including
registrations and applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States or any State thereof,
including those described in Schedule 1 to any Trademark Security Agreement,
(iv) all renewals of any of the foregoing, (v) all claims for, and rights to sue
for, past or future infringements of any of the foregoing and (vi) all income,
royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including damages and payments for past or future
infringements thereof.
"Transaction Liens" means the Liens granted by the Lien Grantors under the
Security Documents.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "UCC" means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
(d) Terms Generally. The definitions of terms herein (including those
incorporated by reference to the UCC or to another document) apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
10
forms. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". The word "will" shall be construed
to have the same meaning and effect as the word "shall". Unless the context
requires otherwise, (i)any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii)any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (iv) all references herein to
Sections, Exhibits and Schedules shall be construed to refer to Sections of, and
Exhibits and Schedules to, this Agreement and (v) the word "property" shall be
construed to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
Section 2. Guarantees by Subsidiary Guarantors. (a) Secured Guarantees.
Each Subsidiary Guarantor unconditionally guarantees the full and punctual
payment of each Secured Obligation when due (whether at stated maturity, upon
acceleration or otherwise). If the Company fails to pay any Secured Obligation
punctually when due, each Subsidiary Guarantor agrees that it will forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the relevant Secured Agreement.
(b) Secured Guarantees Unconditional. The obligations of each Subsidiary
Guarantor under its Secured Guarantee shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company, any other Subsidiary Guarantor
or any other Person under any Secured Agreement, by operation of law or
otherwise;
(ii) any modification or amendment of or supplement to any Secured
Agreement;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Company, any other
Subsidiary Guarantor or any other Person under any Secured Agreement;
(iv) any change in the corporate existence, structure or ownership of
the Company, any other Subsidiary Guarantor or any other
11
Person or any of their respective subsidiaries, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Company, any other Subsidiary Guarantor or any other Person or any of their
assets or any resulting release or discharge of any obligation of the
Company, any other Subsidiary Guarantor or any other Person under any
Secured Agreement;
(v) the existence of any claim, set-off or other right whatsoever (in
any case, whether based on contract, tort or any other theory) that such
Subsidiary Guarantor may have at any time against the Company, any other
Subsidiary Guarantor, any Secured Party or any other Person, whether in
connection with the Loan Documents or any unrelated transactions, provided
that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Company, any other Subsidiary Guarantor or any other Person for any reason
of any Secured Agreement, or any provision of applicable law or regulation
purporting to prohibit the payment of any Secured Obligation by the
Company, any other Subsidiary Guarantor or any other Person; or
(vii) other than satisfaction of the Release Conditions, any other act
or omission to act or delay of any kind by the Company, any other
Subsidiary Guarantor, any other party to any Secured Agreement, any Secured
Party or any other Person, or any other circumstance whatsoever that might,
but for the provisions of this clause (vii), constitute a legal or
equitable discharge of or defense to any obligation of any Subsidiary
Guarantor hereunder.
(c) Release of Secured Guarantees. (i) All the Secured Guarantees will be
released when all the Release Conditions are satisfied. If at any time any
payment of a Secured Obligation is rescinded or must be otherwise restored or
returned upon the insolvency or receivership of the Company or otherwise, the
Secured Guarantees shall be reinstated with respect thereto as though such
payment had been due but not made at such time.
(ii) If all the capital stock of a Subsidiary Guarantor or all the
assets of a Subsidiary Guarantor are sold to a Person other than the
Company or one of its Subsidiaries in a transaction permitted by the Credit
Agreement (any such sale, a "Sale of Subsidiary Guarantor"), the Secured
Guarantee of such Subsidiary Guarantor shall automatically be discharged
and released without any further action by the Agent or any other Secured
Party effective as of the time of such Sale of Subsidiary Guarantor;
provided that, if such sale is an Asset Sale, arrangements
12
reasonably satisfactory to the Agent have been made to apply the Net
Proceeds thereof as required by the Credit Agreement. Such release shall
not require the consent of any Secured Party, and the Agent shall be fully
protected in relying on a certificate of the Company as to whether any
particular sale constitutes a Sale of Subsidiary Guarantor.
(iii) The Secured Guarantee of CIHC shall automatically be discharged
and released without any further action by the Agent or any other Secured
Party effective upon the consummation of the Proposed CIHC Transactions;
provided that concurrently with the consummation of the Proposed CIHC
Transactions, New HoldCo shall have satisfied the Collateral and Guarantee
Requirement with respect to all property distributed or otherwise
transferred to it in connection with the Proposed CIHC Transactions and
shall have become an "Obligor", a "Subsidiary Guarantor" and a "Lien
Grantor" for all purposes of the Loan Documents. Such release shall not
require the consent of any Secured Party, and the Agent shall be fully
protected in relying on a certificate of the Company as to whether the
Proposed CIHC Transactions have been consummated.
(iv) In addition to any release permitted by subsection (ii) or (iii),
the Agent may release any Secured Guarantee with the prior written consent
of the Required Banks; provided that any release of all or substantially
all the Secured Guarantees shall require the consent of all the Banks.
(d) Waiver by Subsidiary Guarantors. Each Subsidiary Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Company, any other Subsidiary Guarantor or any
other Person.
(e) Subrogation. A Subsidiary Guarantor that makes a payment with respect
to a Secured Obligation hereunder shall be subrogated to the rights of the payee
against the Company with respect to such payment; provided that no Subsidiary
Guarantor shall enforce any payment by way of subrogation against the Company,
or by reason of contribution against any other Subsidiary Guarantor of such
Secured Obligation, until all the Release Conditions have been satisfied.
(f) Stay of Acceleration. If acceleration of the time for payment of any
Secured Obligation by the Company is stayed by reason of the insolvency or
receivership of the Company or otherwise, all Secured Obligations otherwise
subject to acceleration under the terms of any Secured Agreement shall
nonetheless be payable by the Subsidiary Guarantors hereunder forthwith on
demand by the Agent.
13
(g) Right of Set-Off. In addition to any rights and remedies of the Secured
Parties provided by law, if any Secured Obligation is not paid promptly when
due, each of the Secured Parties and their respective Affiliates is authorized
at any time and from time to time, without prior notice to any Subsidiary
Guarantor, any such notice being waived by each Subsidiary Guarantor, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Secured Party or Affiliate to
or for the credit or the account of any Subsidiary Guarantor against the
obligations of such Subsidiary Guarantor under its Secured Guarantee,
irrespective of whether or not such Secured Party shall have made any demand
thereunder and although such obligations may be contingent or unmatured;
provided that neither any Secured Party nor any of its Affiliates shall be
entitled to exercise any such set off with respect to any account that is
certified by a Responsible Officer pursuant to a certificate delivered to such
Secured Party (with a copy to the Agent) as being a trust account of the type
described in Section 6.15(c)(w) of the Credit Agreement; and provided further
that until such time as all outstanding Loans have become due and payable
(whether pursuant to Article 8 of the Credit Agreement or otherwise), neither
any Secured Party nor any of its Affiliates shall be entitled to exercise any
such set off with respect to any account that is certified by a Responsible
Officer pursuant to a certificate (which certificate may be included in any
account control agreement required by the terms hereof and applicable to such
account) delivered to such Secured Party (with a copy to the Agent) as being a
payroll account if the aggregate amount of cash and Cash Equivalents in all such
accounts does not exceed $15,000,000. Each Secured Party agrees promptly to
notify the Company and the Agent after any such set off and application made by
such Secured Party; provided, however, that the failure to give such notice
shall not affect the validity of such set off and application.
(h) Continuing Guarantee. Each Secured Guarantee is a continuing guarantee,
shall be binding on the relevant Subsidiary Guarantor and its successors and
assigns, and shall be enforceable by the Agent or the Secured Parties. If all or
part of any Secured Party's interest in any Secured Obligation is assigned or
otherwise transferred, the transferor's rights under each Secured Guarantee, to
the extent applicable to the obligation so transferred, shall automatically be
transferred with such obligation.
(i) Limitation on Obligations of Subsidiary Guarantor. Notwithstanding
anything to the contrary herein, it is the intention of the parties hereto that
the Secured Guarantee of each Subsidiary Guarantor not constitute a fraudulent
conveyance under applicable fraudulent conveyance provisions of the United
States Bankruptcy Code or any comparable provision of state law. To effectuate
that intention, the parties hereto hereby agree that the obligations of each
Subsidiary Guarantor under its Secured Guarantee are limited to the
14
maximum amount that would not render the Subsidiary Guarantor's obligations
subject to avoidance under applicable fraudulent conveyance provisions of the
United States Bankruptcy Code or any comparable provision of state law.
Section 3. Grant of Transaction Liens. (a) The Company, in order to secure
the Secured Obligations, and each Subsidiary Guarantor listed on the signature
pages hereof, in order to secure its Secured Guarantee, grants to the Agent for
the benefit of the Secured Parties a continuing security interest in all right,
title and interest of the Company or such Subsidiary Guarantor, as the case may
be, in, to and under the following property of the Company or such Subsidiary
Guarantor, as the case may be, whether now owned or existing or hereafter
acquired or arising and regardless of where located:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) the Commercial Tort Claims described in Schedule 3;
(iv) all Deposit Accounts;
(v) all Documents;
(vi) all Equipment;
(vii) all General Intangibles (including any Equity Interests in
other Persons that do not constitute Investment Property and any payments
or other collections received in respect of the D&O Loans);
(viii) all Instruments;
(ix) all Inventory;
(x) all Investment Property;
(xi) all Letter-of-Credit Rights;
(xii) all books and records (including customer lists, credit files,
computer programs, printouts and other computer materials and records) of
such Original Lien Grantor pertaining to any of its Collateral;
(xiii) such Original Lien Grantor's ownership interest in (1)its
Collateral Accounts, (2) all Financial Assets credited to its Collateral
Accounts from time to time and all Security Entitlements in respect
15
thereof, (3) all cash held in its Collateral Accounts from time to time and
(4) all other money in the possession of the Agent; and
(xiv) all Proceeds of the Collateral described in the foregoing
clauses (i) through (xiii);
provided that the following property is excluded from the foregoing security
interests: (A) motor vehicles the perfection of a security interest in which is
excluded from the Uniform Commercial Code in the relevant jurisdiction, (B)
voting Equity Interests in any Foreign Subsidiary, to the extent (but only to
the extent) required to prevent the Collateral from including more than 65% of
all voting Equity Interests in such Foreign Subsidiary, (C) Equipment leased by
an Original Lien Grantor under a lease that prohibits the granting of a Lien on
such Equipment, (D) Deposit Accounts and Securities Accounts that satisfy the
applicable conditions set forth in the proviso to the first sentence of Section
6.15(c) of the Credit Agreement and (E) any general intangibles or other rights
arising under any contract, instrument, license or other document if (but only
to the extent that) the grant of a security interest therein would constitute a
material violation of a valid and enforceable restriction in favor of a third
party, unless and until all required consents shall have been obtained. Each
Original Lien Grantor shall use commercially reasonable efforts to obtain any
such required consent that is reasonably obtainable.
(b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
(c) The Transaction Liens are granted as security only and shall not
subject the Agent or any other Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of any Lien Grantor with respect
to any of the Collateral or any transaction in connection therewith.
(d) If the governmental body or official having jurisdiction over any
Regulated Subsidiary determines that the pledge of the shares of capital stock
of such Regulated Subsidiary hereunder constitutes the acquisition of or a
change of control with respect to such Regulated Subsidiary as to which the
prior approval of such governmental body or official was required, then,
immediately upon the relevant Lien Grantor's (1) written memorialization of oral
notice or (2) receipt of written notice from such governmental body or official
of such determination and without any action on the part of the Agent or any
other Person, such pledge shall be rendered void ab initio and of no effect.
Upon any such occurrence, (i) the Agent shall, at such Lien Grantor's written
request and expense, return all
16
certificates representing such capital stock to such Lien Grantor and
execute and deliver such documents as such Lien Grantor shall reasonably request
to evidence such Lien Grantor's retention of all rights in such capital stock
and (ii) such Lien Grantor shall, if requested by the Agent or the Required
Banks, promptly submit a request to the relevant governmental body or official
for approval of the pledge of such shares to the Agent hereunder and, upon
receipt of such approval, shall forthwith deliver to the Agent certificates
representing all the outstanding shares of capital stock of such Regulated
Subsidiary (subject to the limitation in Section 13(m) if such Regulated
Subsidiary is a Foreign Subsidiary) to be held as Collateral hereunder.
Section 4. General Representations and Warranties. Each Original Lien
Grantor represents and warrants that:
(a) Such Lien Grantor is duly organized, validly existing and in good
standing under the laws of the jurisdiction identified as its jurisdiction of
organization in its Perfection Certificate.
(b) Schedule 1 lists all Equity Interests in Subsidiaries and Affiliates
directly owned by such Lien Grantor as of the Effective Date. Such Lien Grantor
holds all such Equity Interests directly (i.e., not through a Subsidiary, a
Securities Intermediary or any other Person).
(c) Schedule 2 lists, as of the Effective Date, (i) all Securities owned by
such Lien Grantor (except Securities evidencing Equity Interests in Subsidiaries
and Affiliates), (ii) all Securities Accounts to which Financial Assets are
credited in respect of which such Lien Grantor owns Security Entitlements and
(iii) all Commodity Accounts in respect of which such Lien Grantor is the
Commodity Customer.
(d) All Pledged Equity Interests owned by such Lien Grantor are owned by it
free and clear of any Lien other than Permitted Liens. All shares of capital
stock included in such Pledged Equity Interests (including shares of capital
stock in respect of which such Lien Grantor owns a Security Entitlement) have
been duly authorized and validly issued and are fully paid and non-assessable.
None of such Pledged Equity Interests is subject to any option to purchase or
similar right of any Person. Such Lien Grantor is not and will not become a
party to or otherwise bound by any agreement (except the Loan Documents) which
restricts in any manner the rights of any present or future holder of any
Pledged Equity Interest with respect thereto.
(e) Such Lien Grantor has good record and marketable title in fee simple
to, or valid leasehold interests in, all its Collateral, except for such defects
in title or interests as could not, individually or in the aggregate with
respect to all
17
Lien Grantors, reasonably be expected to have a Material Adverse Effect. The
property of such Lien Grantor is subject to no Liens, other than Permitted
Liens.
(f) Such Lien Grantor has not performed any acts that could reasonably be
expected to prevent the Agent from enforcing any of the provisions of the
Security Documents or that would limit the Agent in any such enforcement. No
financing statement, security agreement, mortgage or similar or equivalent
document or instrument covering all or part of the Collateral owned by such Lien
Grantor is on file or of record in any jurisdiction in which such filing or
recording would be effective to perfect or record a Lien on such Collateral,
except financing statements, mortgages or other similar or equivalent documents
with respect to Permitted Liens. After the Effective Date, no Collateral owned
by such Lien Grantor will be in the possession or under the Control of any other
Person having a claim thereto or security interest therein, other than a
Permitted Lien.
(g) The Transaction Liens on all Collateral owned by such Lien Grantor (i)
have been validly created, (ii) will attach to each item of such Collateral on
the Effective Date (or, if such Lien Grantor first obtains rights thereto on a
later date, on such later date) and (iii) when so attached, will secure all the
Secured Obligations or such Lien Grantor's Secured Guarantee, as the case may
be.
(h) Such Lien Grantor has delivered a Perfection Certificate to the Agent.
The information set forth therein is correct and complete as of the Effective
Date. Within 60 days after the Effective Date, such Lien Grantor will furnish
(or cause to be furnished) to the Agent a file search report from each UCC
filing office listed in its Perfection Certificate, showing the filing made at
such filing office to perfect the Transaction Liens on its Collateral.
(i) When UCC financing statements describing the Collateral as set forth in
Schedule 3 to such Lien Grantor's Perfection Certificate have been filed in the
offices specified in such Perfection Certificate, the Transaction Liens will
constitute perfected security interests in the Collateral owned by such Lien
Grantor to the extent that a security interest therein may be perfected by
filing pursuant to the UCC, prior to all Liens and rights of others therein
except Permitted Liens. When, in addition to the filing of such UCC financing
statements, the applicable Intellectual Property Filings have been made with
respect to such Lien Grantor's Recordable Intellectual Property (including any
future filings required pursuant to Sections 5(a) and 11(a)), the Transaction
Liens will constitute perfected security interests in all right, title and
interest of such Lien Grantor in its Recordable Intellectual Property to the
extent that security interests therein may be perfected by such filings, prior
to all Liens and rights of others therein except Permitted Liens. Except for (i)
the filing of such UCC financing statements and (ii) such Intellectual Property
Filings, no registration, recordation or filing with any governmental body,
agency or official is required in
18
connection with the execution or delivery of the Security Documents or is
necessary for the validity or enforceability thereof or for the perfection or
due recordation of the Transaction Liens or (except with respect to the capital
stock of any Regulated Subsidiary) for the enforcement of the Transaction Liens.
(j) Such Lien Grantor has taken, and will continue to take, all actions
necessary under the UCC to perfect its interest in (i) any Accounts or Chattel
Paper purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors and (ii) any Payment Intangibles or promissory notes
purchased or otherwise acquired by it, as against its assignors and creditors of
its assignors.
(k) Such Lien Grantor's Collateral is insured as required by the Credit
Agreement.
(l) If such Lien Grantor is also a Subsidiary Guarantor, in executing and
delivering this Agreement (including providing its Secured Guarantee), such Lien
Grantor has (i) without reliance on the Agent or any other Secured Party or any
information received from the Agent or any other Secured Party and based upon
such documents and information it deems appropriate, made an independent
investigation of the transactions contemplated by the Loan Documents and the
Company, the Company's business, assets, operations, prospects and condition,
financial or otherwise, and any circumstances which may bear upon such
transactions, the Company or the obligations and risks undertaken herein with
respect to the Secured Obligations, (ii) adequate means to obtain from the
Company on a continuing basis information concerning the Company, (iii) full and
complete access to the Loan Documents and any other documents executed in
connection with the Loan Documents and (iv) not relied and will not rely upon
any representations or warranties of the Agent or any other Secured Party not
embodied herein or any acts heretofore or hereafter taken by the Agent or any
other Secured Party (including any review by the Agent or any other Secured
Party of the affairs of the Company).
Section 5. Further Assurances; General Covenants. Each Lien Grantor
covenants as follows:
(a) Such Lien Grantor will, from time to time, at the Company's expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
Intellectual Property Filing and any filing of financing or continuation
statements under the UCC) that from time to time may be necessary, or that the
Agent may reasonably request, in order to:
(i) create, preserve, perfect, confirm or validate the Transaction
Liens on such Lien Grantor's Collateral;
19
(ii) in the case of Pledged Deposit Accounts, Pledged Letter-of-Credit
Rights, Pledged Electronic Chattel Paper and Pledged Investment Property,
cause the Agent to have Control thereof;
(iii) enable the Agent and the other Secured Parties to obtain the
full benefits of the Security Documents; or
(iv) enable the Agent to exercise and enforce any of its rights,
powers and remedies with respect to any of such Lien Grantor's Collateral.
To the extent permitted by applicable law, such Lien Grantor authorizes the
Agent to execute and file such financing statements or continuation statements
without such Lien Grantor's signature appearing thereon. Such Lien Grantor
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
Such Lien Grantor constitutes the Agent its attorney-in-fact to execute and file
all Intellectual Property Filings and other filings required or so requested for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; and such power, being coupled with an interest, shall be irrevocable
until all the Transaction Liens granted by such Lien Grantor terminate pursuant
to Section 27. The Company will pay the costs of, or incidental to, any
Intellectual Property Filings and any recording or filing of any financing or
continuation statements or other documents recorded or filed pursuant hereto.
(b) Such Lien Grantor will not (i) change its name or corporate structure,
(ii) change its location (determined as provided in UCC Section 9-307) or (iii)
become bound, as provided in UCC Section 9-203(d) or otherwise, by a security
agreement entered into by another Person, unless it shall have given the Agent
prior notice thereof and, if requested by the Agent pursuant to Section 5(c),
delivered an Opinion of Counsel with respect thereto in accordance with Section
5(c); provided that no such opinion shall be required to be delivered in
connection with any such action that is necessary to effect the Proposed CIHC
Transactions or in connection with the change of the name of Conseco Capital
Management, Inc. to 40/86 Advisors, Inc.
(c) At least 30 days before it takes any action contemplated by Section
5(b) (other than any action contemplated by the proviso thereto), such Lien
Grantor will, if reasonably requested by the Agent, at the Company's expense,
cause to be delivered to the Agent an Opinion of Counsel, in form and substance
reasonably satisfactory to the Agent, to the effect that (i) all financing
statements and amendments or supplements thereto, continuation statements and
other documents required to be filed or recorded in order to perfect and protect
the Transaction Liens against all creditors of and purchasers from such Lien
Grantor
20
after it takes such action (except any continuation statements specified in such
Opinion of Counsel that are to be filed more than six months after the date
thereof) have been filed or recorded in each office necessary for such purpose,
(ii) all fees and taxes, if any, payable in connection with such filings or
recordations have been paid in full and (iii) except as otherwise agreed by the
Required Banks, such action will not adversely affect the perfection or priority
of the Transaction Lien on any Collateral to be owned by such Lien Grantor after
it takes such action or the accuracy of such Lien Grantor's representations and
warranties herein relating to such Collateral.
(d) If any of its Collateral is in the possession or control of a
warehouseman, bailee or agent at any time, such Lien Grantor will (i) notify
such warehouseman, bailee or agent of the relevant Transaction Liens, (ii)
instruct such warehouseman, bailee or agent to hold all such Collateral for the
Agent's account subject to the Agent's instructions (which shall permit such
Collateral to be removed by such Lien Grantor in the ordinary course of business
until the Agent notifies such warehouseman, bailee or agent that an Event of
Default has occurred and is continuing), (iii) cause such warehouseman, bailee
or agent to Authenticate a Record acknowledging that it holds possession of such
Collateral for the Agent's benefit and (iv) make such Authenticated Record
available to the Agent.
(e) Such Lien Grantor will not sell, lease, exchange, assign or otherwise
dispose of, or grant any option with respect to, any of its Collateral; provided
that such Lien Grantor may do any of the foregoing unless (i) doing so would
violate a covenant in the Credit Agreement or (ii) an Event of Default shall
have occurred and be continuing and the Agent shall have notified such Lien
Grantor that its right to do so is terminated, suspended or otherwise limited.
(f) Such Lien Grantor will, promptly upon request, provide to the Agent all
information and evidence concerning such Lien Grantor's Collateral that the
Agent may reasonably request from time to time to enable it to enforce the
provisions of the Security Documents.
(g) From time to time upon request by the Agent, such Lien Grantor will, at
the Company's expense, cause to be delivered to the Secured Parties an Opinion
of Counsel reasonably satisfactory to the Agent as to such matters relating to
the transactions contemplated hereby as the Agent may reasonably request;
provided that such Lien Grantor shall not be required to cause more than one
such Opinion of Counsel to be delivered during any calendar year unless (i) an
Event of Default has occurred and is continuing or (ii) a change in Article 9
(or any other applicable law governing the creation, perfection or priority of
security interests) occurs and the Required Banks request such an Opinion of
Counsel.
21
Section 6. Accounts. Each Lien Grantor represents, warrants and covenants
as follows:
(a) Such Lien Grantor will use commercially reasonable efforts to cause to
be collected from its account debtors, when due, all amounts owing under its
Accounts (including delinquent Accounts, which will be collected in accordance
with lawful collection procedures) and will apply all amounts collected thereon,
forthwith upon receipt thereof, to the outstanding balances of such Accounts.
Subject to the rights of the Agent and the other Secured Parties hereunder if an
Event of Default shall have occurred and be continuing, such Lien Grantor may
allow in the ordinary course of business as adjustments to amounts owing under
its Accounts (i) any extension or renewal of the time or times for payment, or
settlement for less than the total unpaid balance, that such Lien Grantor finds
appropriate in accordance with sound business judgment and (ii) refunds or
credits, all in the ordinary course of business and consistent with such Lien
Grantor's historical collection practices. The costs and expenses (including
attorney's fees) of collection, whether incurred by such Lien Grantor or the
Agent, shall be paid by such Lien Grantor.
(b) If payments with respect to any of such Lien Grantor's Accounts are
received in a lockbox or similar account, such Lien Grantor will (i) at all
times cause such account to be a Controlled Deposit Account and (ii) use
commercially reasonable efforts to cause the relevant depositary bank to
subordinate to the relevant Transaction Lien all its claims to such account
(except its right to deduct its customary operating charges and any uncollected
funds previously credited thereto). The Agent will instruct the relevant
depositary bank to transfer funds credited to any such account, as promptly as
practicable after receipt thereof, to a Controlled Deposit Account designated by
such Lien Grantor; provided that, if an Event of Default shall have occurred and
be continuing, the Agent may designate the Controlled Deposit Account to which
such funds are transferred.
(c) If an Event of Default shall have occurred and be continuing, such Lien
Grantor will, if requested to do so by the Agent, promptly notify (and such Lien
Grantor authorizes the Agent so to notify) each account debtor in respect of any
of its Accounts that such Accounts have been assigned to the Agent hereunder,
and that any payments due or to become due in respect of such Accounts are to be
made directly to the Agent or its designee.
Section 7. Chattel Paper and Instruments. Except as to actions to be taken
by the Agent, each Lien Grantor represents, warrants and covenants as follows:
(a) On the Effective Date (in the case of an Original Lien Grantor) or the
date on which it signs and delivers its first Security Agreement Supplement
22
(in the case of any other Lien Grantor), such Lien Grantor will deliver to the
Agent as Collateral hereunder all Pledged Tangible Chattel Paper and Pledged
Instruments then owned by such Lien Grantor. Thereafter, whenever such Lien
Grantor acquires any other Pledged Tangible Chattel Paper or Pledged Instrument,
such Lien Grantor will immediately deliver such Pledged Tangible Chattel Paper
or Pledged Instrument to the Agent as Collateral hereunder.
(b) So long as no Event of Default shall have occurred and be continuing,
the Agent will, promptly upon request by the relevant Lien Grantor, make
appropriate arrangements for making any Pledged Tangible Chattel Paper or
Pledged Instrument available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Agent, against trust receipt or like document).
(c) All Pledged Tangible Chattel Paper and Pledged Instruments owned by
such Lien Grantor, when delivered to the Agent, will be indorsed to the order of
the Agent, or accompanied by duly executed instruments of assignment, all in
form and substance reasonably satisfactory to the Agent.
(d) Upon the delivery of any Pledged Tangible Chattel Paper or Pledged
Instrument owned by such Lien Grantor to the Agent, the Transaction Lien on such
Collateral will be perfected, subject to no prior Liens or rights of others.
(e) Each Lien Grantor will take (or cause others to take) all actions
required under UCC Section 9-105 to cause the Agent to obtain and maintain
Control of any and all Electronic Chattel Paper owned by such Lien Grantor from
time to time.
Section 8. Commercial Tort Claims. Each Lien Grantor represents, warrants
and covenants as follows:
(a) In the case of an Original Lien Grantor, Schedule 3 accurately
describes, with the specificity required to satisfy Official Comment 5 to UCC
Section 9-108, each Material Commercial Tort Claim with respect to which such
Original Lien Grantor is the claimant as of the Effective Date. In the case of
any other Lien Grantor, Schedule 3 to its first Security Agreement Supplement
will accurately describe, with the specificity required to satisfy said Official
Comment 5, each Material Commercial Tort Claim with respect to which such Lien
Grantor is the claimant as of the date on which it signs and delivers such
Security Agreement Supplement.
(b) If any Lien Grantor acquires a Material Commercial Tort Claim after the
Effective Date (in the case of an Original Lien Grantor) or the date on which it
signs and delivers its first Security Agreement Supplement (in the case of
23
any other Lien Grantor), such Lien Grantor will promptly sign and deliver to the
Agent a Security Agreement Supplement granting a security interest in such
Commercial Tort Claim (which shall be described therein with the specificity
required to satisfy said Official Comment 5) to the Agent for the benefit of the
Secured Parties.
(c) Upon the filing of a UCC financing statement in the jurisdiction under
the laws of which the relevant Lien Grantor is organized, the Transaction Lien
on each Commercial Tort Claim described pursuant to subsection (a) or (b) above
will be perfected, subject to no prior Liens or rights of others.
Section 9. Equipment. (a) Each Lien Grantor covenants that it will (i)
within 30 days after it becomes a party hereto, in the case of Pledged Equipment
now owned by it, and (ii) within 10 days after it acquires any other Pledged
Equipment, deliver to the Agent any and all certificates of title, applications
for title or similar evidence of ownership of such Equipment and will cause the
Agent to be named as lienholder on any such certificate of title or other
evidence of ownership. Such Lien Grantor will promptly inform the Agent of any
additions to or deletions from its Pledged Equipment and will not permit any of
its Pledged Equipment to become a fixture to real estate or an accession to any
personal property that is not included in the Collateral.
(b) The Lien Grantors have the right not to comply with subsection (a) with
respect to Pledged Equipment having a fair market value that does not at any
time exceed $250,000 in the aggregate for all Lien Grantors. However, if an
Event of Default occurs and is continuing, the Agent may terminate the foregoing
right not to comply, or reduce the amount thereof, by giving at least five
Business Days' notice of such termination or reduction to the relevant Lien
Grantor.
Section 10. Material Government Contracts. Except as to actions to be
taken by the Agent, each Lien Grantor represents, warrants and covenants as
follows:
(a) In the case of an Original Lien Grantor, Exhibit H-1 lists all Material
Government Contracts to which such Lien Grantor is a party as of the Effective
Date. On or before the Effective Date such Lien Grantor will execute and deliver
to the Agent assignments and notices of assignment, substantially in the forms
of Exhibits H-2 and H-3, with respect to each of its Material Government
Contracts with the Federal Government.
(b) In the case of any other Lien Grantor, Exhibit K-1 to its first
Security Agreement Supplement will list all Material Government Contracts to
which such Lien Grantor is a party as of the date on which its signs and
delivers such Security Agreement Supplement. On or before such date such Lien
Grantor
24
will execute and deliver to the Agent assignments and notices of assignment,
substantially in the forms of Exhibits H-2 and H-3 hereto, with respect to each
of its Material Government Contracts with the Federal Government.
(c) Each Lien Grantor will, from time to time, amend and supplement the
relevant Exhibit H-1 or K-1 to include each Material Government Contract entered
into by it after the Effective Date (in the case of an Original Lien Grantor) or
the date on which it signs and delivers its first Security Agreement Supplement
(in the case of any other Lien Grantor), by delivering to the Agent a
supplemental schedule of Material Government Contracts. Concurrently therewith,
such Lien Grantor will execute and deliver to the Agent assignments and notices
of assignment, substantially in the forms of Exhibits H-2 and H-3, with respect
to each Material Government Contract with the Federal Government listed on such
supplemental schedule.
(d) Each Lien Grantor will, from time to time, execute and deliver to the
Agent all assignments, notices of assignment and other documents required to be
filed with any state or local government or agency to insure that such Lien
Grantor's Material Government Contracts with such government or agency are
validly assigned to the Agent to the extent that such validity is governed by
applicable provisions of state or local law.
(e) If an Event of Default shall have occurred and be continuing for at
least 10 days (or if the maturity of the Loans shall have been accelerated
pursuant to Article 8 of the Credit Agreement), the Agent may, at the Company's
expense:
(i) file, deliver and record with the Federal Government in accordance
with the Assignment of Claims Act of 1940, as amended, 31 U.S.C. Section
3727 and 41 U.S.C. Section 15 (the "Assignment of Claims Act") any or all
assignments and/or notices of assignment executed and delivered to the
Agent pursuant to subsection (a), (b) or (c) above; and
(ii) file, deliver and/or record with the relevant state or local
government or agency any or all assignments, notices of assignment and/or
other documents executed and delivered to the Agent pursuant to subsection
(d) above.
(f) When the Agent files any notice of assignment referred to in subsection
(a), (b) or (c) above with the governmental authority or agency or other office
described therein, the relevant Transaction Lien will constitute a valid
assignment of the Material Government Contract identified therein, to the extent
that such validity is governed by the Assignment of Claims Act.
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Section 11. Recordable Intellectual Property. Each Lien Grantor covenants
as follows:
(a) On the Effective Date (in the case of an Original Lien Grantor) or the
date on which it signs and delivers its first Security Agreement Supplement (in
the case of any other Lien Grantor), such Lien Grantor will sign and deliver to
the Agent Intellectual Property Security Agreements with respect to all
Recordable Intellectual Property then owned by it. Within 30 days after each
March 31 thereafter, it will sign and deliver to the Agent any Intellectual
Property Security Agreement necessary to grant Transaction Liens on all
Recordable Intellectual Property owned by it on such March 31 that is not
covered by any previous Intellectual Property Security Agreement so signed and
delivered by it. In each case, it will promptly make all Intellectual Property
Filings necessary to record the Transaction Liens on such Recordable
Intellectual Property.
(b) Such Lien Grantor will notify the Agent promptly if it knows that any
application or registration relating to any Recordable Intellectual Property
owned or licensed by it may become abandoned or dedicated to the public, or of
any adverse determination or development (including the institution of, or any
adverse determination or development in, any proceeding in the United States
Copyright Office, the United States Patent and Trademark Office or any court)
regarding such Lien Grantor's ownership of such Recordable Intellectual
Property, its right to register or patent the same, or its right to keep and
maintain the same; provided that the foregoing shall not apply to the extent
that any such event, individually or together with all such events, could not
reasonably be expected to interfere with the ordinary course of business of the
Company and its Subsidiaries. If any of such Lien Grantor's rights to any
Recordable Intellectual Property are infringed, misappropriated or diluted by a
third party, such Lien Grantor will notify the Agent within 30 days after it
learns thereof and will, unless such Lien Grantor shall reasonably determine
that such action would be of negligible value, economic or otherwise, 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 such Lien Grantor shall reasonably deem appropriate under the
circumstances to protect such Recordable Intellectual Property.
Section 12. Proceeds of Letters of Credit. Except as to actions to be
taken by the Agent, each Lien Grantor represents, warrants and covenants as
follows:
(a) On the Effective Date (in the case of an Original Lien Grantor) or the
date on which it signs and delivers its first Security Agreement Supplement (in
the case of any other Lien Grantor), such Lien Grantor will deliver to the Agent
each letter of credit listed in Exhibit I (or in an exhibit to such Security
Agreement Supplement) (the "Specified Letters of Credit").
26
(b) Notwithstanding the foregoing, so long as no Event of Default shall
have occurred and be continuing, the Agent will, promptly upon request by any
Lien Grantor, make appropriate arrangements for making any Specified Letter of
Credit delivered to the Agent pursuant to subsection (a) above available to such
Lien Grantor to facilitate the administration thereof or the exercise of its
rights thereunder (any such arrangement to be effected, to the extent deemed
appropriate by the Agent, against trust receipt or like document).
(c) Such Lien Grantor, by granting a security interest in its
Letter-of-Credit Rights to the Agent, intends to (and hereby does) assign to the
Agent its rights (including its contingent rights) to the proceeds of all
letters of credit of which it is or hereafter becomes a beneficiary. If any such
letter of credit is not a Supporting Letter of Credit, such Lien Grantor will
promptly (i) use commercially reasonable efforts to cause the issuer of such
letter of credit and each Nominated Person (if any) with respect thereto to
consent to such assignment of the proceeds thereof and (ii) deliver written
evidence of such consent to the Agent.
(d) The Transaction Lien on the relevant Lien Grantor's rights to the
proceeds of each letter of credit under which such Lien Grantor is a beneficiary
will be perfected, subject to no prior Liens or rights of others, if either (i)
such letter of credit is a Supporting Letter of Credit and the Transaction Lien
on the item of Collateral supported thereby has been perfected or (ii) the
relevant issuing bank and each relevant Nominated Person (if any) shall have
consented to the assignment of the proceeds thereof set forth in subsection (c)
above.
(e) If an Event of Default shall have occurred and be continuing, such Lien
Grantor will, promptly upon request by the Agent, notify (and such Lien Grantor
authorizes the Agent to notify) the issuer and each Nominated Person with
respect to each of its Pledged letters of credit that (i) the proceeds thereof
have been assigned to the Agent hereunder and (ii) any payments due or to become
due in respect thereof are to be made directly to the Agent or its designee.
Section 13. Investment Property. Each Lien Grantor represents, warrants and
covenants as follows:
(a) Certificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will deliver to the Agent as Collateral hereunder all certificates
representing Pledged Certificated Securities then owned by such Lien Grantor.
Thereafter, whenever such Lien Grantor acquires any other certificate
representing a Pledged Certificated Security, such Lien Grantor will promptly
deliver such certificate to the Agent as Collateral hereunder. The provisions of
this subsection are subject to
27
the limitation in Section 13(m) in the case of voting Equity Interests in a
Foreign Subsidiary.
(b) Uncertificated Securities. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will enter into (and, if the relevant issuer is a Subsidiary, cause, or
if the relevant issuer is not a Subsidiary, use commercially reasonable efforts
to cause, the relevant issuer to enter into) an Issuer Control Agreement in
respect of each Pledged Uncertificated Security then owned by such Lien Grantor
and deliver such Issuer Control Agreement to the Agent (which shall enter into
the same). Thereafter, whenever such Lien Grantor acquires any other Pledged
Uncertificated Security, such Lien Grantor will enter into (and, if the relevant
issuer is a Subsidiary, cause, or if the relevant issuer is not a Subsidiary,
use commercially reasonable efforts to cause, the relevant issuer to enter into)
an Issuer Control Agreement in respect of such Pledged Uncertificated Security
and deliver such Issuer Control Agreement to the Agent (which shall enter into
the same). The provisions of this subsection are subject to (i) the limitation
in Section 13(m) in the case of voting Equity Interests in a Foreign Subsidiary
and (ii) Sections 13(n) and 18(c).
(c) Security Entitlements. On the Effective Date (in the case of an
Original Lien Grantor) or the date on which it signs and delivers its first
Security Agreement Supplement (in the case of any other Lien Grantor), such Lien
Grantor will, with respect to each Security Entitlement then owned by it, enter
into (and use commercially reasonable efforts to cause the relevant Securities
Intermediary to enter into) a Securities Account Control Agreement in respect of
such Security Entitlement and the Securities Account to which the underlying
Financial Asset is credited and will deliver such Securities Account Control
Agreement to the Agent (which shall enter into the same). Thereafter, whenever
such Lien Grantor acquires any other Security Entitlement, such Lien Grantor
will, as promptly as practicable, cause the underlying Financial Asset to be
credited to a Controlled Securities Account. The provisions of this subsection
are subject to Section 18(c).
(d) Commodity Accounts. On the Effective Date (in the case of an Original
Lien Grantor) or the date on which it signs and delivers its first Security
Agreement Supplement (in the case of any other Lien Grantor), such Lien Grantor
will enter into (and use commercially reasonable efforts to cause the relevant
Commodity Intermediary to enter into) a Commodity Account Control Agreement in
respect of each Commodity Account owned by it and will deliver such Commodity
Account Control Agreement to the Agent (which shall enter into the same).
Thereafter, such Lien Grantor will cause each Commodity Contract owned by it to
be carried at all times in a Controlled Commodity Account.
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(e) Regulated Subsidiaries. If the Collateral includes any capital stock of
a Regulated Subsidiary that is not represented by certificates, the relevant
Lien Grantor shall exercise its commercially reasonable efforts to cause such
capital stock to be represented by certificates and, promptly upon receipt
thereof, comply with Section 13(a) with respect thereto. No Lien Grantor shall
hold any capital stock of a Regulated Subsidiary in a Securities Account.
(f) Perfection as to Certificated Securities. When such Lien Grantor
delivers the certificate representing any Pledged Certificated Security owned by
it to the Agent and complies with Section 13(k) in connection with such
delivery, (i) the Transaction Lien on such Pledged Certificated Security will be
perfected, subject to no prior Liens or rights of others, (ii) the Agent will
have Control of such Pledged Certificated Security and (iii) the Agent will be a
protected purchaser (within the meaning of UCC Section 8-303) thereof.
(g) Perfection as to Uncertificated Securities. When such Lien Grantor, the
Agent and the issuer of any Pledged Uncertificated Security owned by such Lien
Grantor enter into an Issuer Control Agreement with respect thereto, (i) the
Transaction Lien on such Pledged Uncertificated Security will be perfected,
subject to no prior Liens or rights of others, (ii) the Agent will have Control
of such Pledged Uncertificated Security and (iii) the Agent will be a protected
purchaser (within the meaning of UCC Section 8-303) thereof.
(h) Perfection as to Security Entitlements. So long as the Financial Asset
underlying any Security Entitlement owned by such Lien Grantor is credited to a
Controlled Securities Account or to its Investment Property Collateral Account,
(i) the Transaction Lien on such Security Entitlement will be perfected, subject
to no prior Liens or rights of others (except Liens and rights of the relevant
Securities Intermediary that are Permitted Liens), (ii) the Agent will have
Control of such Security Entitlement and (iii) no action based on an adverse
claim to such Security Entitlement or such Financial Asset, whether framed in
conversion, replevin, constructive trust, equitable lien or other theory, may be
asserted against the Agent or any other Secured Party.
(i) Perfection as to Commodity Accounts. So long as any Commodity Account
is subject to a Commodity Account Control Agreement, (i) the Transaction Liens
on such Commodity Account and all Commodity Contracts carried therein will be
perfected, subject to no prior Liens or rights of others (except Liens and
rights of the relevant Commodity Intermediary permitted by such Commodity
Account Control Agreement) and (ii) the Agent will have Control of such
Commodity Account and all Commodity Contracts carried therein from time to time.
29
(j) Agreement as to Applicable Jurisdiction. In respect of all Security
Entitlements owned by such Lien Grantor, and all Securities Accounts to which
the related Financial Assets are credited, the Securities Intermediary's
jurisdiction (determined as provided in UCC Section 8-110(e)) will at all times
be located in the United States. In respect of all Commodity Contracts owned by
such Lien Grantor and all Commodity Accounts in which such Commodity Contracts
are carried, the Commodity Intermediary's jurisdiction (determined as provided
in UCC Section 9-305(b)) will at all times be located in the United States.
(k) Delivery of Pledged Certificates. All Pledged Certificates, when
delivered to the Agent, will be in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to the Agent.
(l) Communications. Each Lien Grantor will promptly give to the Agent
copies of any notices and other communications received by it with respect to
(i) Pledged Securities registered in the name of such Lien Grantor or its
nominee and (ii) Pledged Security Entitlements as to which such Lien Grantor is
the Entitlement Holder.
(m) Foreign Subsidiaries. A Lien Grantor will not be obligated to comply
with the provisions of this Section at any time with respect to any voting
Equity Interest in a Foreign Subsidiary if and to the extent (but only to the
extent) that such voting Equity Interest is excluded from the Transaction Liens
at such time pursuant to clause (B) of the proviso at the end of Section 3(a)
and/or the comparable provisions of one or more Security Agreement Supplements.
(n) Compliance with Applicable Foreign Laws. If and so long as the
Collateral includes (i) any Equity Interest in, or other Investment Property
issued by, a Subsidiary (other than an Immaterial Subsidiary) organized under
the laws of a jurisdiction outside the United States or (ii) any Security
Entitlement in respect of a Financial Asset issued by such a Subsidiary (other
than an Immaterial Subsidiary), the relevant Lien Grantor will take all such
action as may be required under the laws of such foreign jurisdiction to ensure
that the Transaction Lien on such Collateral ranks prior to all Liens and rights
of others therein. If and so long as the Collateral includes any Pledged
Uncertificated Security issued by such a Subsidiary (other than an Immaterial
Subsidiary), the relevant Lien Grantor will comply with this subsection, and
will not be required to comply with Section 13(b), with respect thereto.
Section 14. Investment Property Collateral Accounts. (a) At any time when
an Event of Default has occurred and is continuing, the Agent will establish, at
an office located in the United States, a Securities Account with respect to
each Lien Grantor (such Lien Grantor's "Investment Property Collateral
Account"),
30
in the name and under the exclusive control of the Agent, to which there shall
be credited from time to time (i) all Securities that are to be credited thereto
pursuant to Section 18(a) or any other provision of any Security Document, (ii)
any other Financial Assets that underlie Security Entitlements included in such
Lien Grantor's Collateral and (iii) the cash proceeds thereof. Each Investment
Property Collateral Account will be operated as provided in Section 17.
(b) The Agent and each Lien Grantor agree (and will use commercially
reasonable efforts to cause the relevant Securities Intermediary, if other than
the Agent, to agree) that (i) such Lien Grantor's Investment Property Collateral
Account will be a Securities Account, (ii) the Agent will be the Entitlement
Holder with respect thereto and (iii) all property (whether Investment Property,
financial asset, security, instrument, cash or other property) credited to such
account will be treated as Financial Assets.
Section 15. Controlled Deposit Accounts. Each Lien Grantor represents,
warrants and covenants as follows:
(a) Subject to paragraph (d), all cash owned by such Lien Grantor will be
deposited, upon or promptly after the receipt thereof, in one or more Controlled
Deposit Accounts. Each Controlled Deposit Account will be operated as provided
in Section 17.
(b) In respect of each Controlled Deposit Account, the Depositary Bank's
jurisdiction (determined as provided in UCC Section 9-304) will at all times be
a jurisdiction in which Article 9 is in effect.
(c) So long as the Agent has Control of a Controlled Deposit Account, the
Transaction Lien on such Controlled Deposit Account will be perfected, subject
to no prior Liens or rights of others (except the Depositary Bank's right to
deduct its customary operating charges and any uncollected funds previously
credited thereto).
(d) The Lien Grantors have the right not to comply with the foregoing
provisions of this Section to the extent (but only to the extent) the Company is
not required to comply with the first sentence of Section 6.15(c) of the Credit
Agreement as a result of the operation of the proviso thereto.
Section 16. Cash Collateral Accounts. (a) If and when required for purposes
hereof or of any other Loan Document, the Agent will establish with respect to
each Lien Grantor one or more accounts (each such account, its "Cash Collateral
Account"), in the name and under the exclusive control of the Agent, into which
all amounts owned by such Lien Grantor that are to be deposited therein pursuant
to the Loan Documents shall be deposited from time to time. Each Cash Collateral
Account will be operated as provided in this Section and Section 17.
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(b) The Agent shall deposit the following amounts, as and when received by
it, in the Company's Cash Collateral Account:
(i) each Cash Distribution required by Section 20 to be deposited
therein; and
(ii) each amount realized or otherwise received by the Agent with
respect to assets of the Company upon any exercise of remedies pursuant to
any Security Document.
(c) The Agent shall deposit in the Cash Collateral Account of each Lien
Grantor (other than the Company):
(i) each Cash Distribution required by Section 20 to be deposited
therein; and
(ii) each amount realized or otherwise received by the Agent with
respect to assets of such Lien Grantor upon any exercise of remedies
pursuant to any Security Document.
(d) The Agent shall maintain such records and/or establish such accounts or
sub-accounts as shall be required to enable it to identify the amounts held in
each Cash Collateral Account from time to time pursuant to each clause of
subsection (b) or (c) of this Section, as applicable, or to enable it to
segregate any proceeds of or collections on 1999 Facility Collateral or D&O Loan
Collateral.
(e) Unless (x) an Event of Default shall have occurred and be continuing
and the Required Banks shall have instructed the Agent to stop withdrawing
amounts from the Cash Collateral Accounts pursuant to this subsection or (y) the
maturity of the Loans shall have been accelerated pursuant to Article 8 of the
Credit Agreement, any Cash Distribution deposited pursuant to Section 20 shall,
at the relevant Lien Grantor's request, (x) be withdrawn and applied to pay
Secured Obligations that are then due and payable or (y) if no Event of Default
has occurred and is continuing, be withdrawn and returned to such Lien Grantor.
Section 17. Operation of Collateral Accounts. (a) All Cash Distributions
received with respect to assets held in any Collateral Account established in
accordance with the terms hereof shall be deposited therein promptly upon
receipt thereof.
32
(b) Funds held in any Controlled Securities Account or Investment Property
Collateral Account may, until withdrawn, be invested and reinvested in such Cash
Equivalents as the relevant Lien Grantor shall request from time to time;
provided that, if an Event of Default shall have occurred and be continuing, the
Agent may select such Cash Equivalents.
(c) Funds held in any Controlled Deposit Account or Cash Collateral Account
may, until withdrawn, be invested and reinvested in such Liquid Investments as
the relevant Lien Grantor shall request from time to time; provided that (i) if
an Event of Default shall have occurred and be continuing, the Agent may select
such Liquid Investments and (ii) if such Liquid Investments are to be held in a
Securities Account, either (x) the Agent is the Entitlement Holder with respect
to such Liquid Investments or (y) the relevant Entitlement Holder and the
relevant Securities Intermediary shall have theretofore entered into a
Securities Account Control Agreement with respect to such Securities Account and
delivered it to the Agent (which shall enter into the same).
(d) With respect to each Collateral Account (except a Cash Collateral
Account, as to which Section 16 applies), the Agent will instruct the relevant
Securities Intermediary or Depositary Bank that the relevant Lien Grantor may
withdraw, or direct the disposition of, funds held therein unless and until the
Agent rescinds such instruction. The Agent will not rescind such instructions
(or provide any other instructions to the applicable Securities Intermediary or
Depositary Bank) unless an Event of Default shall have occurred and be
continuing and, upon the cure or waiver thereof, the Agent will again instruct
the relevant Securities Intermediary or Depositary Bank that the relevant Lien
Grantor may withdraw, or direct the disposition of, funds held therein unless
and until the Agent rescinds such instruction.
(e) No Lien Grantor will cause funds to be transferred from a Collateral
Account to any other account owned by the Company or any of its Subsidiaries or
Affiliates unless (i) such other account is a Collateral Account or (ii) such
transfer is permitted by the Credit Agreement.
(f) If an Event of Default shall have occurred and be continuing, the Agent
may (i) retain, or instruct the relevant Securities Intermediary or Depositary
Bank to retain, all cash and investments then held in any Collateral Account,
(ii) liquidate, or instruct the relevant Depositary Bank to liquidate, any or
all investments held therein and/or (iii) withdraw any amounts held therein and
apply such amounts as provided in Section 22.
(g) If immediately available cash on deposit in all Collateral Accounts is
not sufficient to make any distribution or withdrawal to be made pursuant
hereto, the Agent will cause to be liquidated, as promptly as practicable, such
33
investments held in or credited to one or more such Collateral Account as shall
be required to obtain sufficient cash to make such distribution or withdrawal
and, notwithstanding any other provision hereof, such distribution or withdrawal
shall not be made until such liquidation has taken place.
Section 18. Transfer of Record Ownership. (a) At any time when an Event of
Default shall have occurred and be continuing, the Agent may (and to the extent
that action by it is required, the relevant Lien Grantor, if directed to do so
by the Agent, will as promptly as practicable):
(i) cause each of the Pledged Securities (or any portion thereof
specified in such direction) to be (x) transferred of record into the name
of the Agent or its nominee or (y) credited to the relevant Lien Grantor's
Investment Property Collateral Account; and
(ii) cause the Financial Asset underlying each Pledged Security
Entitlement to be credited to the relevant Lien Grantor's Investment
Property Collateral Account;
provided that no such action shall be taken with respect to any capital stock of
any Regulated Subsidiary unless any and all regulatory approvals required under
applicable law shall have been obtained. Each Lien Grantor will take any and all
actions reasonably requested by the Agent to facilitate compliance with this
subsection.
(b) Perfection upon Transfer of Record Ownership. If and when any Pledged
Security (whether certificated or uncertificated) owned by such Lien Grantor is
transferred of record into the name of the Agent or its nominee pursuant to
Section 18(a), (i) the Transaction Lien on such Pledged Security will be
perfected, subject to no prior Liens or rights of others, (ii) the Agent will
have Control of such Pledged Security and (iii) the Agent will be a protected
purchaser (within the meaning of UCC Section 8-303) thereof. If and when any
Pledged Security owned by such Lien Grantor is credited to its Investment
Property Collateral Account pursuant to Section 18(a), Section 13(h) will apply
to the resulting Security Entitlement.
(c) Provisions Inapplicable after Transfer of Record Ownership. If the
provisions of Section 18(a) are implemented, Sections 13(b) and 13(c) shall not
thereafter apply to (i) any Pledged Security that is registered in the name of
the Agent or its nominee or (ii) any Security Entitlement in respect of which
the Agent or its nominee is the Entitlement Holder.
(d) Communications after Transfer of Record Ownership. The Agent will
promptly give to the relevant Lien Grantor copies of any notices and other
34
communications received by the Agent with respect to (i) Pledged Securities
registered in the name of the Agent or its nominee and (ii) Pledged Security
Entitlements as to which the Agent or its nominee is the Entitlement Holder.
Section 19. Right to Vote Securities. (a) Unless an Event of Default shall
have occurred and be continuing, each Lien Grantor will have the right, from
time to time, to vote and to give consents, ratifications and waivers with
respect to any Pledged Security owned by it and the Financial Asset underlying
any Pledged Security Entitlement owned by it, and the Agent will, upon receiving
a written request from such Lien Grantor, promptly deliver (or cause to be
delivered) to such Lien Grantor or as specified in such request such proxies,
powers of attorney, consents, ratifications and waivers in respect of any such
Pledged Security that is registered in the name of the Agent or its nominee or
any such Pledged Security Entitlement as to which the Agent or its nominee is
the Entitlement Holder, in each case as shall be specified in such request and
be in form and substance reasonably satisfactory to the Agent. Unless an Event
of Default shall have occurred and be continuing, the Agent will have no right
to take any action which the owner of a Pledged Partnership Interest or Pledged
LLC Interest is entitled to take with respect thereto, except the right to
receive payments and other distributions to the extent provided herein.
(b) If an Event of Default shall have occurred and be continuing, the Agent
will have the right to the extent permitted by law (and, in the case of a
Pledged Partnership Interest or Pledged LLC Interest, by the relevant
partnership agreement, limited liability company agreement, operating agreement
or other governing document) to vote, to give consents, ratifications and
waivers and to take any other action with respect to the Pledged Investment
Property, the other Pledged Equity Interests (if any) and the Financial Assets
underlying the Pledged Security Entitlements, with the same force and effect as
if the Agent were the absolute and sole owner thereof, and each Lien Grantor
will take all such action as the Agent may reasonably request from time to time
to give effect to such right; provided that the Agent will not have the right to
vote, to give consents, ratifications or waivers or to take any other action
with respect to the capital stock of any Regulated Subsidiary, in each case to
the extent that such action would require prior regulatory approval under
applicable law, unless such approval shall have been granted.
Section 20. Certain Cash Distributions. Cash Distributions with respect to
assets held in a Collateral Account shall be deposited and held therein, or
withdrawn therefrom, as provided in Section 17. Cash Distributions with respect
to any Pledged Equity Interest or Pledged Debt that is not held in a Collateral
Account (whether held in the name of a Lien Grantor or in the name of the Agent
or its nominee) shall be deposited, promptly upon receipt thereof, in a
Controlled Deposit Account of the relevant Lien Grantor; provided that, if an
Event of
35
Default shall have occurred and be continuing, the Agent may deposit, or direct
the recipient thereof to deposit, each such Cash Distribution in the relevant
Lien Grantor's Cash Collateral Account.
Section 21. Remedies upon Event of Default. (a) If an Event of Default
shall have occurred and be continuing, the Agent may exercise (or cause its
sub-agents to exercise) any or all of the remedies available to it (or to such
sub-agents) under the Security Documents.
(b) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Agent may exercise on behalf
of the Secured Parties all the rights of a secured party under the UCC (whether
or not in effect in the jurisdiction where such rights are exercised) with
respect to any Collateral and, in addition, the Agent may, without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, withdraw all cash held in the Collateral Accounts
and apply such cash as provided in Section 22 and, if there shall be no such
cash or if such cash shall be insufficient to pay all the Secured Obligations in
full, sell, lease, license or otherwise dispose of the Collateral or any part
thereof; provided that the right of the Agent to sell or otherwise dispose of
the capital stock of any Regulated Subsidiary shall be subject to the Agent or
the relevant Lien Grantor obtaining, to the extent necessary under applicable
law, the prior approval of such sale or other disposition by the governmental
body or official having jurisdiction with respect to such Regulated Subsidiary.
Notice of any such sale or other disposition shall be given to the relevant Lien
Grantor(s) as required by Section 24.
(c) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing:
(i) the Agent may license or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any Pledged
intellectual property (including any Pledged Recordable Intellectual
Property) throughout the world for such term or terms, on such conditions
and in such manner as the Agent shall in its sole discretion determine;
provided that such licenses or sublicenses do not conflict with any
existing license of which the Agent shall have received a copy;
(ii) the Agent may (without assuming any obligation or liability
thereunder), at any time and from time to time, in its sole and reasonable
discretion, enforce (and shall have the exclusive right to enforce) against
any licensee or sublicensee all rights and remedies of any Lien Grantor in,
to and under any of its Pledged intellectual property and take or refrain
from taking any action under any thereof, and each Lien Grantor releases
the Agent and each other Secured Party from liability for, and agrees to
36
hold the Agent and each other Secured Party free and harmless from and
against any claims and expenses arising out of, any lawful action so taken
or omitted to be taken with respect thereto, except for claims and expenses
arising from the Agent's or such Secured Party's gross negligence or
willful misconduct; and
(iii) upon request by the Agent (which shall not be construed as
implying any limitation on its rights or powers), each Lien Grantor will
execute and deliver to the Agent a power of attorney, in form and substance
satisfactory to the Agent, for the implementation of any sale, lease,
license or other disposition of any of such Lien Grantor's Pledged
intellectual property or any action related thereto. In connection with any
such disposition, but subject to any confidentiality restrictions imposed
on such Lien Grantor in any license or similar agreement, such Lien Grantor
will supply to the Agent its know-how and expertise relating to the
relevant intellectual property or the products or services made or rendered
in connection with such intellectual property, and its customer lists and
other records relating to such intellectual property and to the
distribution of said products or services.
Section 22. Application of Proceeds. (a) If an Event of Default shall have
occurred and be continuing, the Agent may apply (i) any cash held in the
Collateral Accounts and (ii) the proceeds of any sale or other disposition of,
or any collections (including in the form of interest, dividends, redemption
payments and other distributions in respect of any D&O Loan Collateral or any
Equity Interests) on, all or any part of the Collateral, in the following order
of priorities:
first, to pay the expenses of such sale or other disposition or
collection, including reasonable compensation to agents of and counsel for
the Agent, and all expenses, liabilities and advances incurred or made by
the Agent in connection with the Security Documents, and any other amounts
then due and payable to the Agent pursuant to Section 23 or pursuant to
Sections 10.04 or 10.05 of the Credit Agreement;
second, (x) if such proceeds or collections are received in respect of
all or any part of the 1999 Facility Collateral, to pay the unpaid Secured
Obligations in respect of the Tranche A-2 Term Borrowings and Tranche B-2
Term Borrowings, ratably to the extent of proceeds or collections so
received until payment in full of all such Secured Obligations shall have
been made and (y) if such proceeds or collections are received in respect
of any of the D&O Loan Collateral, to pay the unpaid Secured Obligations in
respect of the Tranche A-2 Term Borrowings, Tranche A-3 Term Borrowings,
Tranche B-2 Term Borrowings and Tranche B-3 Term Borrowings, ratably to the
extent of proceeds or collections so received
37
until payment in full of all such Secured Obligations shall have been made;
third, until such time as the Tranche A-2 Term Borrowings and the
Tranche B-2 Term Borrowings shall have been repaid in an aggregate
principal amount equal to $32,500,000 pursuant to Section 2.08(d) of the
Credit Agreement or pursuant to this clause third, to pay unpaid Secured
Obligations in respect of the Tranche A-2 Term Borrowings and Tranche B-2
Term Borrowings ratably to the extent of proceeds so received until payment
in full of such Secured Obligations shall have been made;
fourth, to pay the unpaid principal of the Secured Obligations
ratably, until payment in full of the principal of all Secured Obligations
shall have been made;
fifth, to pay ratably all interest (including Post-Petition Interest)
on the Secured Obligations;
sixth, to pay all other Secured Obligations ratably, until payment in
full of all such other Secured Obligations shall have been made; and
finally, to pay to the relevant Lien Grantor, or as a court of
competent jurisdiction may direct, any surplus then remaining from the
proceeds of the Collateral owned by it;
provided that Collateral owned by a Subsidiary Guarantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses first, second, third,
fourth, fifth and sixth only to the extent permitted by the limitation in
Section 2(i). The Agent may make such distributions hereunder in cash or in kind
or, on a ratable basis, in any combination thereof.
(b) In making the payments and allocations required by this Section, the
Agent may rely upon information supplied to it pursuant to Section 26(h). All
distributions made by the Agent pursuant to this Section shall be final (except
in the event of manifest error) and the Agent shall have no duty to inquire as
to the application by any Secured Party of any amount distributed to it.
Section 23. Fees and Expenses; Indemnification. (a) The Company will
promptly upon demand (together with, in the case of clauses (i), (ii) and (iv)
below, if requested by the Company, backup documentation supporting such demand)
pay to the Agent:
(i) the amount of any taxes that the Agent may have been required to
pay by reason of the Transaction Liens or to free any Collateral from any
other Lien thereon;
38
(ii) the amount of any and all reasonable out-of-pocket expenses,
including transfer taxes and reasonable fees and expenses of counsel and
other experts, that the Agent may incur in connection with (x) the
administration or enforcement of the Security Documents, including such
expenses as are incurred to preserve the value of the Collateral or the
validity, perfection, rank or value of any Transaction Lien, (y) the
collection, sale or other disposition of any Collateral or (z) the exercise
by the Agent of any of its rights or powers under the Security Documents;
(iii) the amount of any fees that the Company shall have agreed in
writing to pay to the Agent and that shall have become due and payable in
accordance with such written agreement; and
(iv) the amount required to indemnify the Agent for, or hold it
harmless and defend it against, any loss, liability or expense (including
the reasonable fees and expenses of its counsel and any experts or
sub-agents appointed by it hereunder) incurred or suffered by the Agent in
connection with the Security Documents, except to the extent that such
loss, liability or expense arises from the Agent's gross negligence or
willful misconduct or a breach of any duty that the Agent has under this
Agreement (after giving effect to Sections 25 and 26).
Any such amount not paid to the Agent on demand will bear interest for each day
thereafter until paid at a rate per annum equal to 5.25% plus the Base Rate.
(b) If any transfer tax, documentary stamp tax or other tax is payable in
connection with any transfer or other transaction provided for in the Security
Documents, the Company will pay such tax and provide any required tax stamps to
the Agent or as otherwise required by law.
(c) The Company shall indemnify each of the Secured Parties, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all liabilities, losses, damages, costs and
expenses of any kind (including reasonable expenses of investigation by
engineers, environmental consultants and similar technical personnel and
reasonable fees and disbursements of counsel) arising out of, or in connection
with any and all Environmental Claims. Without limiting the generality of the
foregoing, each Lien Grantor waives all rights for contribution and all other
rights of recovery with respect to liabilities, losses, damages, costs and
expenses arising under or related to Environmental Laws that it might have by
statute or otherwise against any Indemnitee.
39
Section 24. Authority to Administer Collateral. Each Lien Grantor
irrevocably appoints the Agent its true and lawful attorney, with full power of
substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the Company's
expense, to the extent permitted by law to exercise, at any time and from time
to time while an Event of Default shall have occurred and be continuing, all or
any of the following powers with respect to all or any of such Lien Grantor's
Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, lease, license or otherwise dispose of the same or the
proceeds or avails thereof, as fully and effectually as if the Agent were
the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance or other adjustment with reference thereto;
provided that, except in the case of Collateral that is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, the Agent will give the relevant Lien Grantor at least ten days' prior
written notice of the time and place of any public sale thereof or the time
after which any private sale or other intended disposition thereof will be made.
Any such notice shall (i) contain the information specified in UCC Section
9-613, (ii) be Authenticated and (iii) be sent to the parties required to be
notified pursuant to UCC Section 9-611(c); provided that, if the Agent fails to
comply with this sentence in any respect, its liability for such failure shall
be limited to the liability (if any) imposed on it as a matter of law under the
UCC.
Section 25. Limitation on Duty in Respect of Collateral. Beyond the
exercise of reasonable care in the custody and preservation thereof, the Agent
will have no duty as to any Collateral in its possession or control or in the
possession or control of any sub-agent or bailee or any income therefrom or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent will be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession or control
if such Collateral is accorded treatment substantially equal to that which it
accords its own property, and will not be liable or responsible for any loss or
damage to any Collateral, or for any diminution in the value thereof, by reason
of any act or omission of any sub-agent or bailee selected by the Agent in good
faith, except to the extent that such liability arises from the Agent's gross
negligence or willful misconduct.
40
Section 26. General Provisions Concerning the Agent. (a) Appointment and
Authorization; "Agent". The Agent is hereby irrevocably appointed, designated
and authorized to take such actions under the provisions of this Agreement and
each other Security Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Security Document, together with such actions and powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary contained
elsewhere herein or in any other Security Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Secured
Party, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Security Document or otherwise exist against the Agent. Without limiting the
generality of the foregoing sentence, the use of the term "agent" herein and in
the other Security Documents with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
(b) Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Security Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct. The exculpatory provisions of Section 25 and this Section shall
apply to any such agent, employee or attorney-in-fact.
(c) Liability of Agent. No Agent-Related Person shall (i) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Security Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct in connection
with its duties expressly set forth herein) or (ii) be responsible in any manner
to any Secured Party for any recital, statement, representation or warranty made
by the Company or any Subsidiary or Affiliate thereof, or any officer thereof,
contained herein or in any other Security Document, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Security
Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Security Document, or for any failure
of the Company or any Subsidiary or Affiliate thereof or any other party to any
Security Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Secured Party to
ascertain or
41
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Security Document,
or to inspect the properties, books or records of the Company or any Subsidiary
or Affiliate thereof. The Agent shall not be responsible for the existence,
genuineness or value of any Collateral or for the validity, perfection, priority
or enforceability of any Transaction Lien, whether impaired by operation of law
or by reason of any action or omission to act on its part under the Security
Documents.
(d) Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, communication, signature,
resolution, representation, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, electronic mail message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company or any Subsidiary), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or refusing to take
any action under any Security Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Secured
Parties against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Security Document in accordance with a request or consent
of the Required Banks (or such other number of Banks as may be expressly
required hereby or by the Credit Agreement in any instance) and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Secured Parties.
(e) Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to the Agent for the
account of the Banks, unless the Agent shall have received written notice from a
Secured Party or the Company referring to the Credit Agreement, describing such
Default and stating that such notice is a "notice of default." The Agent will
notify the Secured Parties of its receipt of any such notice. The Agent shall
take such action with respect to such Default as may be directed by the Required
Banks in accordance with Article 8 of the Credit Agreement; provided, however,
that unless and until the Agent has received any such direction, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable or in the best
interest of the Secured Parties.
(f) Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
42
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company or any of
its Subsidiaries and their respective Affiliates as though BofA were not the
Agent hereunder and without notice to or consent of the Secured Parties. The
Secured Parties acknowledge that, pursuant to such activities, BofA or its
Affiliates may receive information regarding the Company or its Subsidiaries or
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company, such Subsidiary or such Affiliate) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Secured Party and may exercise such
rights and powers as though it were not the Agent, and the terms "Secured Party"
and "Secured Parties" include BofA in its individual capacity.
(g) Successor Agent. The Agent may resign as Agent upon 30 days' notice to
the Banks. If the Agent resigns under this Agreement, the Required Banks shall
appoint from among the Banks a successor administrative agent for the Secured
Parties, which successor administrative agent shall be consented to by the
Company at all times other than during the existence of an Event of Default
(which consent of the Company shall not be unreasonably withheld or delayed). If
no successor administrative agent is appointed prior to the effective date of
the resignation of the Agent, the Agent may appoint, after consulting with the
Banks and the Company, a successor administrative agent from among the Banks.
Upon the acceptance of its appointment as successor administrative agent
hereunder, the Person acting as such successor administrative agent shall
succeed to all the rights, powers and duties of the retiring Agent and the term
"Agent" shall mean such successor administrative agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Section, Article
9 of the Credit Agreement and Section 10.04 and 10.05 of the Credit Agreement
shall inure to its benefit and to the benefit of the Agent-Related Persons as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor administrative agent has accepted appointment as
Agent by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Required Banks appoint a successor
agent as provided for above.
(h) Information as to Secured Obligations and Actions by Secured Parties.
For all purposes of the Security Documents, including determining the amounts of
the Secured Obligations or whether any action has been taken under any Secured
Agreement, the Agent will be entitled to rely on information from (i) its own
records for information as to the Banks, their Secured Obligations and actions
taken by them; (ii) any Secured Party for information as to its Secured
43
Obligations and actions taken by it, to the extent that the Agent has not
obtained such information from the foregoing sources; and (iii) the Company, to
the extent that the Agent has not obtained information from the foregoing
sources.
(i) Within two Business Days after it receives or sends any notice referred
to in this subsection, the Agent shall send to the Banks and each Secured Party
Requesting Notice, copies of any notice given by the Agent to any Lien Grantor,
or received by it from any Lien Grantor, pursuant to Section 21, 22, 24, 26(g),
or 27.
(j) The Agent may refuse to act on any notice, consent, direction or
instruction from any Secured Parties or any agent, trustee or similar
representative thereof that, in the Agent's opinion, (i) is contrary to law or
the provisions of any Security Document, (ii) may expose the Agent to liability
(unless the Agent shall have been indemnified, to its reasonable satisfaction,
for such liability by the Secured Parties that gave such notice, consent,
direction or instruction) or (iii) is unduly prejudicial to Secured Parties not
joining in such notice, consent, direction or instruction.
Section 27. Termination of Transaction Liens; Release of Collateral. (a)
The Transaction Liens granted by each Subsidiary Guarantor shall terminate when
its Secured Guarantee is released pursuant to Section 2(c).
(b) The Transaction Liens granted by the Company shall terminate when all
the Release Conditions are satisfied.
(c) At any time before the Transaction Liens granted by the Company
terminate, the Agent may, at the written request of the Company, (i) release any
Collateral (but not all or any substantial part of the Collateral) with the
prior written consent of the Required Banks or (ii) release all or any
substantial part of the Collateral with the prior written consent of each Bank;
provided that (w) any release of any 1999 Facility Collateral (but not all or
any substantial part of the 1999 Facility Collateral) shall also require the
prior written consent of the Required 1999 D&O Banks (provided that no such
consent shall be required in connection with the Proposed CIHC Transactions),
(x) any release of all or any substantial part of the 1999 Facility Collateral
shall also require the prior written consent of each Tranche A-2 Bank and
Tranche B-2 Bank, (y) any release of any D&O Loan Collateral (but not all or any
substantial part of the D&O Loan Collateral) shall also require the prior
written consent of the Required D&O Banks and (z) any release of all or any
substantial part of the D&O Loan Collateral shall also require the prior written
consent of each Tranche A-2 Bank, Tranche A-3 Bank, Tranche B-2 Bank and Tranche
B-3 Bank.
44
(d) Concurrently with any sale, lease or other disposition (except a sale
or disposition to another Lien Grantor or a lease) permitted by the proviso to
Section 5(e), the Transaction Liens on the assets sold or disposed of (but not
in any Proceeds arising from such sale or disposition) will cease immediately
without any action by the Agent or any other Secured Party.
(e) Upon any termination of a Transaction Lien or release of Collateral,
the Agent will, at the expense of the relevant Lien Grantor, execute and deliver
to such Lien Grantor such documents as such Lien Grantor shall reasonably
request to evidence the termination of such Transaction Lien or the release of
such Collateral, as the case may be.
Section 28. Additional Subsidiary Guarantors and Lien Grantors. Any
Subsidiary may become a party hereto by signing and delivering to the Agent a
Security Agreement Supplement, whereupon such Subsidiary shall become a
"Subsidiary Guarantor" and a "Lien Grantor" as defined herein.
Section 29. Notices. (a) Unless otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). All such written notices shall be mailed,
faxed or delivered to the applicable address, facsimile number (provided that
any matter transmitted by the Company by facsimile (1) shall be immediately
confirmed by a telephone call to the recipient at the number specified below and
(2) shall be followed promptly by delivery of a hard copy original thereof) or
(subject to subsection (c) below) electronic mail address, and all notices and
other communications expressly permitted hereunder to be given by telephone
shall be made to the applicable telephone number, as follows:
(i) if to the Company or the Agent, to the address, facsimile number,
electronic mail address or telephone number specified for such Person on
Schedule 10.02 of the Credit Agreement or to such other address, facsimile
number, electronic mail address or telephone number as shall be designated
by such party in a notice to the other parties;
(ii) if to any Bank, to the Agent to be forwarded to such Bank at its
address, facsimile number, electronic mail address or telephone number
specified in its administrative questionnaire or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to the Company and the Agent;
(iii) if to any Subsidiary Guarantor listed on the signature pages
hereof, to the Company as set forth above to be forwarded to such
Subsidiary Guarantor at its address, facsimile number, electronic mail
45
address or telephone number designated by such party in a notice to the
Company;
(iv) if to any other Subsidiary Guarantor, to the address, facsimile
number, electronic mail address or telephone number specified for such
Person in its first Security Agreement Supplement or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to the other parties; and
(v) if to any Secured Party Requesting Notice, to such address,
facsimile number, electronic mail address or telephone number as such party
may hereafter specify for the purpose by notice to the Agent.
All such notices and other communications shall be deemed to be given or
made upon the earlier to occur of (i) actual receipt by the relevant party
hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on
behalf of the relevant party hereto; (B) if delivered by mail, four Business
Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile,
when sent and receipt has been confirmed by telephone; and (D) if delivered by
electronic mail (which form of delivery is subject to the provisions of
subsection (c) below), when delivered. In no event shall a voicemail message be
effective as a notice, communication or confirmation hereunder.
(b) This Agreement and the other Security Documents may be transmitted
and/or signed by facsimile. The effectiveness of any such documents and
signatures shall, subject to applicable law, have the same force and effect as
manually-signed originals and shall be binding on the Company, all Subsidiary
Guarantors, the Secured Parties and the Agent. The Agent may also require that
any such documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or deliver the same
shall not limit the effectiveness of any facsimile document or signature.
(c) Electronic mail and Internet and intranet websites may be used only to
distribute routine communications and to distribute this Agreement and other
Security Documents for execution by the parties thereto, and may not be used for
any other purpose.
(d) The Agent and the Banks shall be entitled to rely and act upon any
notices purportedly given by or on behalf of the Company or any Subsidiary
Guarantor even if (i) such notices were not made in a manner specified herein,
were incomplete or were not preceded or followed by any other form of notice
specified herein or (ii) the terms thereof, as understood by the recipient,
varied from any confirmation thereof. The Company and the Subsidiary Guarantors
46
shall jointly and severally indemnify each Agent-Related Person and each Secured
Party from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the
Company or any Subsidiary Guarantor; provided that such indemnity shall not, as
to any Person, be available to the extent that such losses, costs, expenses or
liabilities 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 Person. All telephonic notices to and other communications
with the Agent may be recorded by the Agent, and each of the parties hereto
hereby consents to such recording.
Section 30. No Implied Waivers; Remedies Not Exclusive. No failure by the
Agent or any Secured Party to exercise, and no delay in exercising and no course
of dealing with respect to, any right or remedy under any Security Document
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Agent or any Secured Party of any right or remedy under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right or remedy. The rights and remedies specified in the Loan Documents are
cumulative and are not exclusive of any other rights or remedies provided by
law.
Section 31. Successors and Assigns. This Agreement is for the benefit of
the Agent and the Secured Parties. If all or any part of any Secured Party's
interest in any Secured Obligation is assigned or otherwise transferred, the
transferor's rights hereunder, to the extent applicable to the obligation so
transferred, shall be automatically transferred with such obligation. This
Agreement shall be binding on the Lien Grantors and their respective successors
and assigns.
Section 32. Amendments and Waivers. Neither this Agreement nor any
provision hereof may be waived, amended, modified or terminated except pursuant
to an agreement or agreements in writing entered into by the parties hereto,
with the consent of such Banks as are required to consent thereto under Section
10.01 of the Credit Agreement; provided that in no event shall any waiver,
amendment, modification or termination change any provision hereof in a manner
that (i) by its terms adversely affects the rights of the Tranche A-2 Banks or
Tranche B-2 Banks in respect of the 1999 Facility Collateral or pursuant to
clause third of Section 22(a) without the prior written consent of the Required
1999 D&O Banks and (ii) by its terms adversely affects the rights of the Tranche
A-2 Banks, Tranche A-3 Banks, Tranche B-2 Banks or Tranche B-3 Banks in respect
of the D&O Loan Collateral without the prior written consent of the Required D&O
Banks.
47
Section 33. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law and except to the extent that remedies
provided by the laws of any jurisdiction other than the State of New York are
governed by the laws of such jurisdiction.
Section 34. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY SECURITY DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY SECURITY DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER SECURITY DOCUMENTS.
Section 35. Severability. If any provision of any Security Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions of the Security Documents shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Agent and the Secured Parties in order to carry out
the intentions of the parties thereto as nearly as may be possible and (ii) the
invalidity or unenforceability of such provision in such jurisdiction shall not
affect the validity or enforceability thereof in any other jurisdiction.
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CONSECO, INC.
By:/s/William J. Shea
--------------------------------------------
Name: William J. Shea
Title: President and Chief Executive Officer
BANK OF AMERICA, N.A., as Agent
By:/s/Molly J. Oxford
-----------------------------------------
Name: Molly J. Oxford
Title: Vice President
Subsidiary Guarantors:
AMERICAN LIFE AND CASUALTY MARKETING
DIVISION CO.
CDOC, INC.
CFIHC, INC.
CIHC, INCORPORATED
CONSECO GROUP RISK MANAGEMENT
COMPANY
CONSECO MANAGEMENT SERVICES
COMPANY
CONSECO MARKETING, L.L.C.
CONSECO SERVICES,
By:/s/ William J. Shea
---------------------------------
Name: William J. Shea
Title: President
CODELINKS, LLC
By: CIHC, Incorporated, its Manager
By:/s/ William J. Shea
---------------------------------
Name: William J. Shea
Title: President
CONSECO CAPITAL MANAGEMENT, INC.
CONSECO MORTGAGE CAPITAL, INC.
By:/s/ Maxwell E. Bublitz
----------------------------------
Name: Maxwell E. Bublitz
Title: President and Chief Executive Officer
CONSECO EQUITY SALES, INC.
PERFORMANCE MATTERS ASSOCIATES, INC.
PERFORMANCE MATTERS ASSOCIATES OF
TEXAS, INC.
By:/s/ Daniel J. Murphy
----------------------------------
Name: Daniel J. Murphy
Title: Senior Vice President and Treasurer
CONSECO SERVICES, LLC
By: Conseco Management Services Company, its
Manager
By:/s/ William J. Shea
----------------------------------
Name: William J. Shea
Title: President
SCHEDULE 1
EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY ORIGINAL LIEN GRANTORS
(as of the Effective Date)
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
American Life and Casualty None N/A N/A
Marketing Division Co. (IA)
CDOC, Inc. (DE) CIHC, Incorporated of Texas 1,000 shares common stock 100
(TX)
CFIHC, Inc. (DE) Conseco Global Investments, 100 shares common stock 100
Inc. (DE)
Conseco Mortgage Capital, 100 shares common stock 100
Inc. (DE)
Conseco Private Capital 100 shares common stock 100
Group, Inc. (IN)
Marketing Distribution 3,000 shares common stock 100
Systems Consulting Group,
Inc. (DE)
Performance Matters 1,000 shares common stock 100
Associates, Inc. (DE)
CIHC, Incorporated (DE) Administrators Service 1,000 shares common stock 100
Corporation (IL)
American Life and Casualty 1,000 shares common stock 100
Marketing Division Co. (IA)
Automobile Underwriters 438,000 shares common stock 100
Corporation (IA)
Bankers National Life 250,000 shares common stock 100
Insurance Company (TX)
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
Business Information Group, 100,000 shares 100
Inc. (IL) common stock
CFIHC, Inc. (DE) 100 shares common 100
stock
CNC Entertainment Nevada, 500 shares common 100
Inc. (NV) stock
CNC Real Estate, Inc. (DE) 100 shares common 100
stock
CTIHC, Inc. (DE) 100 shares common 100
stock
Codelinks Data Services 499,980 equity shares(3) 99.006
Private Limited (India)(7)
Codelinks, LLC (IN) Uncertificated 100
Conseco Entertainment L.L.C. Uncertificated 1
(IN)(1)
Conseco Group Risk 1,000 shares common 100
Management Company (MS) stock
Conseco Health Services, 100 shares common stock 100
Inc. (PA)
Conseco L.L.C. (DE)(2) Uncertificated 90
Conseco Life Insurance 250,000 shares common 100
(Bermuda) Limited (Bermuda) stock(3)
<FN>
- -------------------------
1 CIHC, Incorporated holds 1% of the outstanding equity interests in Conseco
Entertainment L.L.C. The remaining 99% is held by Conseco Entertainment,
Inc., an Immaterial Subsidiary.
2 CIHC, Incorporated holds 90% of the outstanding equity interests in Conseco
L.L.C. The remaining 10% is held by Conseco, Inc.
3 Under the terms of the Loan Documents, the Agent will only receive a pledge
of 65% of the outstanding stock of this entity.
</FN>
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
Conseco Life Insurance 700,000 shares 100
Company of Texas (TX) common stock
Conseco Management Services 48,150 shares common 100
Company (TX) stock
Conseco Securities, Inc. (DE) 1,500 shares common 100
stock
Conseco Services, LLC (IN)(4) Uncertificated 89.1
Conseco Teleservices, Inc. 1,000 shares common 100
(DE) stock
Conseco Travel and Event 1,000 shares common 100
Services, Inc. (CO) stock
Consumer Acceptance 22,522,000 shares 100
Corporation (IN) common stock
Design Benefit Plans, Inc. 1,000,000 shares of 100
(IL) voting common stock
Design Securities 26,000 shares of 100
Corporation (DE) common stock
Direct Financial Services, 1,000 shares common 100
Inc. (IL) stock
Eagles' National Corporation 164,191 shares 100
(KY) common stock
Geneva International 100,000 shares of 100
Insurance Company (Turks & common stock(3)
Caicos)
Hawthorne Advertising Agency 1,000 shares common 100
Incorporated (PA) stock
Independent Processing 1,000 shares common 100
Services, Inc. (DE) stock
<FN>
- ---------------------
4 CIHC, Incorporated holds 89.1% of the outstanding equity interests in
Conseco Services LLC. The remaining 10.9% of the interests are held by
Conseco, Inc. (9.9%) and Conseco Management Services Company holds (1%).
</FN>
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
Integrated Networks, Inc. 1,000 shares common 100
(IL) stock
K.F. Agency, Inc. (IL) 500 shares common 100
stock
K.F. Insurance Agency of 1,000 shares common 100
Massachusetts, Inc. (MA) stock
NAL Financial Group, Inc. 1,000 shares class A 100
(DE) common stock
1,000 shares class B
common stock
5,000,000 shares Series
A preferred stock
PL Holdings, Inc. (NV) 1000 shares common 100
stock
ResortPort Holding of 100 shares common 100
Delaware, Inc. (DE) stock
Target Ad Group, Inc. (IL) 1,000 shares of common 100
stock
Codelinks, LLC (IN) None N/A N/A
Conseco Capital None N/A N/A
Management, Inc. (DE)
Conseco Equity Sales, Inc. None N/A N/A
(TX)
Conseco Group Risk None N/A N/A
Management Company (MS)
Conseco Management Conseco Services, LLC Uncertificated 1
Services Company (IN)(4)
(TX)
Conseco Marketing, L.L.C. Uncertificated 1
(IN)(5)
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
Conseco Marketing, L.L.C. None N/A N/A
(IN)
Conseco Mortgage Capital, None N/A N/A
Inc. (DE)
Conseco Services, LLC (IN) Conseco Marketing, L.L.C. Uncertificated 90
(IN)(5)
Conseco, Inc. (DE) CDOC, Inc. (DE) 100 shares common stock 100
CIHC, Incorporated (DE)(6) 1,000 shares common *6
stock
Codelinks Data Services 20 equity shares(3) .004
Private Limited (India) (7)
Conseco Capital Management, 100 shares common stock 100
Inc. (DE)
Conseco Entertainment Inc. 100 shares common stock 100
(IN)
Conseco Equity Sales, Inc. 10,000 shares common 100
(TX) stock
Conseco HPLP, L.L.C. (IN)(8) Uncertificated 99
Conseco L.L.C. (DE)(2) Uncertificated 10
<FN>
- ---------------------------
5 Conseco Management Services Company holds 1% of the outstanding equity
interests in Conseco Marketing, L.L.C. The remaining 10% of the interests
are held by Conseco, Inc. (9%) and Conseco Services, LLC (90%).
6 Conseco, Inc. (DE) holds 1,000 of the 1,001.041 shares of the outstanding
common stock in CIHC, Incorporated. The remaining 1.041 shares of common
stock are owned by Conseco Annuity Assurance Company. The following
entities own preferred stock in CIHC, Incorporated: Bankers Life and
Casualty Company; Conseco Annuity Assurance Company; Conseco Life Insurance
Company; and, Washington National Insurance Company.
7 CIHC, Incorporated holds 99.006% of the outstanding equity interests in
Codelinks Data Services Private Limited. The remaining .004% is held by
Conseco, Inc. (DE).
8 Conseco, Inc. holds 99% of the outstanding equity interests in Conseco HPLP,
L.L.C. The remaining 1% is held by Conseco Entertainment, Inc., an
Immaterial Subsidiary.
</FN>
Number of Shares/Units Percentage Owned by
Original Lien Grantor Issuer (jurisdiction) Held By Lien Grantor Lien Grantor
- ---------------------------- ------------------------------ ------------------------- -------------------------
Conseco Marketing, L.L.C. Uncertificated 9
(IN)(5)
Conseco Risk Management, 100 shares common stock 100
Inc. (IN)
Conseco Services, LLC (IN)(4) Uncertificated 9.9
Design Benefit Plans, Inc. Continental Marketing 1,000 shares common stock 100
(IL) Corporation of Illinois,
Inc. (IL)
Performance Matters Performance Matters 20,000 shares common 100
Associates, Inc. (DE) Associates of Kansas, Inc. stock
(KS)
Performance Matters 1,000 shares common stock 100
Associates of Ohio, Inc. (OH)
Performance Matters 1,000 shares common stock 100
Associates of Texas, Inc.
(TX)
Performance Matters None N/A N/A
Associates of Texas, Inc.
(TX)
Specialty Planners, Inc. None N/A N/A
(CA)
SCHEDULE 2
OTHER INVESTMENT PROPERTY
(other than Equity Interests in Subsidiaries and Affiliates)
OWNED BY ORIGINAL LIEN GRANTORS
(as of the Effective Date)
PART 1 -- Securities
Location of
Owner of Securities Issuer Security
----------------------------- ------------------------ -----------------
Conseco Capital Conseco Fund Group Book entry at
Management, Inc. Mutual Funds Transfer Agent
(US Bancorp)
Conseco Capital Conseco StockCar Book entry at
Management, Inc. Stock Fund Transfer Agent
(US Bankcorp)
Conseco, Inc. Conseco Strategic Book entry at
Income Fund Transfer Agent
(PFPC)
PART 2 -- Securities Accounts
The Original Lien Grantors own Security Entitlements with respect to Financial
Assets credited to the following Securities Accounts:
Owner Securities Intermediary Account Type
- ------------------------------------- ------------------------------------ ---------------------
American Life and Casualty The Bank of New York Custody
Marketing Division Co.
American Life & Casualty Marketing Mellon Bank, N.A. Custody
Division Co.
CDOC, Inc. The Bank of New York Custody
CFIHC, Inc. The Bank of New York Custody
CIHC, Incorporated The Bank of New York Custody
CIHC, Incorporated Mellon Bank, N.A. Custody
Conseco Capital Management, Inc. The Bank of New York Custody
Conseco Capital Management, Inc. Mellon Bank, N.A. Custody
Conseco Group Risk Management The Bank of New York Custody
Company
Conseco Mortgage Capital, Inc. The Bank of New York Custody
Conseco Mortgage Capital, Inc. Mellon Bank, N.A. Custody
Conseco Services, LLC The Bank of New York Custody
Conseco Services, LLC Mellon Bank, N.A. Custody
Conseco, Inc. The Bank of New York Custody
Design Benefit Plans, Inc. BNY Midwest Trust Company Custody
(formerly known as CTC Illinois
Trust Company)
PART 3 -- Commodity Accounts
The Original Lien Grantors are Commodity Customers with respect to the following
Commodity Accounts:
None.
SCHEDULE 3
MATERIAL COMMERCIAL TORT CLAIMS
None.
SCHEDULE 4
1999 FACILITY COLLATERAL
"1999 Facility Collateral" means:
(i) all right, title and interest of the Company in, to and under the
following property of the Company, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
(a) prior to the consummation of the Proposed CIHC Transactions,
all Equity Interests in CIHC;
(b) following the consummation of the Proposed CIHC Transactions,
all Equity Interests in New Holdco; and
(c) all Equity Interests in Conseco Capital Management, Inc.
("CCM").
(ii) all right, title and interest of CCM in, to and under the following
property of CCM, whether now owned or existing or hereafter acquired or
arising and regardless of where located: all Accounts, Chattel Paper,
any Commercial Tort Claims described in Schedule 3 to the Security
Agreement, Deposit Accounts, Documents, Equipment, General Intangibles
(including any Equity Interests in other Persons that do not constitute
Investment Property), Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, books and records (including customer lists,
credit files, computer programs, printouts and other computer materials
and records) of CCM pertaining to any of its Collateral and CCM's
ownership interest in (A) its Collateral Accounts, (B) all Financial
Assets credited to its Collateral Accounts from time to time and all
Security Entitlements in respect thereof, (C) all cash held in its
Collateral Accounts from time to time and (D) all other money of CCM in
the possession of the Agent; and
(iii) all Proceeds of the Collateral described in the foregoing clauses (i)
and (ii);
provided that any property that is excluded from the security interests pursuant
to the proviso at the end of Section 3(a) of the Security Agreement shall also
be excluded from the definition of "1999 Facility Collateral".