EXHIBIT 4.3
AMENDED AND RESTATED SECURITY AGREEMENT
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THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of September 30, 1998
(as amended and modified, the "Security Agreement" or this "Agreement") amends
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and restates that certain Security Agreement dated as of June 9, 1998, by and
among the Administrative Agent and the Credit Parties party thereto, and is by
and among SCHOOL SPECIALTY, INC., a Delaware corporation (the "Borrower"), the
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subsidiaries and affiliates identified on the signature pages hereto and such
other subsidiaries and affiliates as may hereafter join this Security Agreement
(the "Guarantors" and collectively with the Borrower, the "Credit Parties") and
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NATIONSBANK, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent") for the Lenders under the Credit Agreement described
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below and any Affiliates of Lenders which provide interest rate or currency
protection agreements as hereafter provided (collectively, the "Lenders").
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WITNESSETH
WHEREAS, the Lenders have severally agreed to make loans and extensions of
credit to the Borrower upon the terms and conditions provided in the terms of
that Amended and Restated Credit Agreement dated as of the date hereof (as
amended and modified, the "Credit Agreement") among the Borrower, the Guarantors
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and Lenders identified therein and NationsBank, N.A., as Administrative Agent;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligation of the Lenders to make their respective loans and
extensions of credit to the Borrower thereunder that the Credit Parties shall
have executed and delivered this Security Agreement to the Administrative Agent
for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective loans and extensions of credit
thereunder, the Credit Parties hereby agree with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
1. Defined Terms.
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1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
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the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Fixtures, General Intangibles, Instruments, Inventory, Investment
Property and Proceeds. For purposes of this Agreement, the term "Lender" shall
include any Affiliate of any Lender which has entered into a Hedging Agreement
with a Credit Party to the extent permitted by the Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Security Agreement, as the same may be amended,
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supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in effect in
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the State of New York.
"Collateral": as defined in Section 2 of this Agreement; provided
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that Collateral shall not include any property which is subject to a Lien
permitted under Section 8.2 of the Credit Agreement securing Indebtedness
permitted under Section 8.1 of the Credit Agreement to the extent that the
grant of a security interest hereunder would be prohibited by such Lien or
by the terms of such Indebtedness.
"Collateral Account": any collateral account established by the
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Administrative Agent as provided in subsection 3.3 or subsection 7.2.
"Contracts": all contracts and agreements to which a Credit Party is
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a party, as each may be amended, supplemented or otherwise modified from
time to time, including, without limitation, (a) all rights of a Credit
Party to receive moneys due and to become due to it thereunder or in
connection therewith, (b) all rights of a Credit Party to damages arising
out of or for breach or default in respect thereof and (c) all rights of a
Credit Party to exercise all remedies thereunder.
"Copyright Licenses": any written agreement, naming any Credit Party
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as licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 3 hereto.
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"Copyrights": (i) all registered United States copyrights in all
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Works, now existing or hereafter created or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and applications
in the United States Copyright office including, without limitation, any
thereof referred to in Schedule 3 hereto, and (ii) all renewals thereof
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including, without limitation, any thereof referred to in Schedule 3
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hereto.
"Patent License": all agreements, whether written or oral, providing
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for the grant by or to a Credit Party of any right to manufacture, use or
sell any invention covered by a Patent, including without limitation, any
thereof referred to in Schedule 4 hereto.
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"Patents": (a) all letters patent of the United States or any other
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country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 4 hereto, and (b) all
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applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 4
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hereto.
"Secured Obligations": the collective reference to the following:
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(a) All unpaid principal of and interest on (including, without
limitation, interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and other
obligations owing under the Credit Agreement and interest accruing at
the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to
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the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the Administrative
Agent and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the
Credit Agreement, any Notes, this Security Agreement, the other Credit
Documents, any Hedging Agreements with a Lender or an Affiliate of a
Lender to the extent permitted under the Credit Agreement or any other
document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of the Credit Agreement,
this Security Agreement, any other Credit Document or any Hedging
Agreements with a Lender or an Affiliate of a Lender to the extent
permitted under the Credit Agreement); and
(b) The prompt payment, performance and observance by the
Guarantors under the Credit Agreement of all obligations of the
Guarantors thereunder and under this Security Agreement and the other
Credit Documents to which the Guarantors are a party (including,
without limitation, payment of their guaranty obligations under the
Credit Agreement), or under any Hedging Agreement with a Lender or an
Affiliate of a Lender to the extent permitted under the Credit
Agreement, to which such Guarantor is a party or any guaranty is given
by it in connection therewith; and
(c) All other indebtedness, liabilities and obligations of any
kind or nature, now existing or hereafter arising, owing by the Credit
Parties to any Lender or the Administrative Agent, arising under this
Security Agreement or any of the other Credit Documents, whether
primary, secondary, direct, contingent, or joint and several; and
(d) All liabilities and obligations, now existing or hereafter
arising, owing by the Borrower to any Lender or any Affiliate of a
Lender arising under Hedging Agreements with a Lender or an Affiliate
of a Lender to the extent permitted under the Credit Agreement.
"Trademark License": means any agreement, written or oral, providing
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for the grant by or to a Credit Party of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 5
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hereto.
"Trademarks": (a) all trademarks, trade names, corporate names,
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company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any
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other country or any political subdivision thereof, or otherwise,
including, without limitation, any thereof referred to in Schedule 5
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hereto, and (b) all renewals thereof.
"Work": any work which is subject to copyright protection pursuant to
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Title 17 of the United States Code.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein" and
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"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the prompt and
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complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, each of the Credit
Parties hereby grants to the Administrative Agent, for the ratable benefit of
the Lenders, a security interest in all of the following property now owned or
at any time hereafter acquired by such Credit Party or in which such Credit
Party now has or at any time in the future may acquire any right, title or
interest (collectively, the "Collateral"):
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(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Copyrights;
(e) all Copyright Licenses;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles, including the Contracts;
(j) all Instruments;
(k) all Inventory;
(l) all Investment Property;
(m) all Patents;
(n) all Patent Licenses;
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(o) all Trademarks;
(p) all Trademark Licenses;
(q) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software
(owned by such Borrower or in which it has an interest) that at
any time evidence or contain information relating to any
Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon; and
(r) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing;
provided that this Agreement shall not constitute an assignment of, or a grant
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of a security interest in or lien on, any contract or other agreement to which
any Credit Party is a party if such assignment or grant of a security interest
or lien is prohibited by the terms of such contract or agreement.
This Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until all the Secured Obligations, now
existing or hereafter arising, shall have been paid in full, the commitments
relating thereto shall have been terminated and the Credit Agreement or the
Security Documents shall no longer be in effect.
3. Provisions Relating to Accounts.
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3.1 Credit Parties Remain Liable under Accounts. Anything herein to the
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contrary notwithstanding, each of the Credit Parties shall remain liable under
each of the Accounts to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with the terms
of any agreement giving rise to each such Account. Neither the Administrative
Agent nor any Lender shall have any obligation or liability under any Account
(or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Administrative Agent or any Lender of any
payment relating to such Account pursuant hereto, nor shall the Administrative
Agent or any Lender be obligated in any manner to perform any of the obligations
of a Credit Party under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
3.2 Analysis of Accounts. The Administrative Agent shall have the right,
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after the occurrence and during the continuation of an Event of Default, to make
test verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the Credit Parties shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time, upon the
Administrative Agent's request and at the expense of the Credit Parties, the
Credit Parties shall cause independent public accountants or others satisfactory
to the Administrative Agent to furnish to the Administrative Agent reports
showing reconciliations, aging and test verifications
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of, and trial balances for, the Accounts. The Administrative Agent in its own
name or in the name of others may communicate with account debtors on the
Accounts to verify with them to the Administrative Agent's satisfaction the
existence, amount and terms of any Accounts.
3.3 Collections on Accounts. (a) The Administrative Agent hereby
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authorizes the Credit Parties to collect the Accounts, provided that the
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Administrative Agent may curtail or terminate said authority at any time after
the occurrence and during the continuation of an Event of Default. If required
by the Administrative Agent at any time after the occurrence and during the
continuation of an Event of Default, any payments of Accounts, when collected by
the Credit Parties, (i) shall be forthwith (and, in any event, within two
Business Days) deposited by the Credit Parties in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the Lenders
only as provided in subsection 7.3, and (ii) until so turned over, shall be held
by the Credit Parties in trust for the Administrative Agent and the Lenders,
segregated from other funds of the Credit Parties.
(b) Each such deposit of Proceeds of Accounts shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(c) At the Administrative Agent's request after the occurrence and during
the continuation of an Event of Default, the Borrowers shall deliver to the
Administrative Agent all original and other documents in their possession or
control (or which they have a right or ability to get) evidencing, and relating
to, the agreements and transactions which gave rise to the Accounts.
4. Provisions Relating to Contracts.
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4.1 Credit Parties Remain Liable under Contracts. Anything herein to the
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contrary notwithstanding, each of the Credit Parties shall remain liable under
each of the Contracts to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance with and
pursuant to the terms and provisions of each Contract. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Contract by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any such Lender of any payment relating to such Contract
pursuant hereto, nor shall the Administrative Agent or any Lender be obligated
in any manner to perform any of the obligations of a Credit Party under or
pursuant to any Contract, to make any payment, to make any inquiry as to the
nature or the sufficiency of any payment received by it or as to the sufficiency
of any performance by any party under any Contract, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
4.2 Communication with Contracting Parties. The Administrative Agent in
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its own name or in the name of others, at any time after the occurrence and
during the continuation of an Event of Default, may communicate with parties to
the Contracts to verify with them to the Administrative Agent's satisfaction the
existence, amount and terms of any Contract.
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5. Representations and Warranties. Each of the Credit Parties hereby
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represents and warrants that:
5.1 Title; No Other Liens. Except for the security interest granted to
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the Administrative Agent, for the ratable benefit of the Lenders, pursuant to
this Agreement and the other Liens permitted to exist on the Collateral pursuant
to the Credit Agreement, the Credit Party owns each item of the Collateral free
and clear of any and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Lenders, pursuant to this Agreement or as are permitted pursuant to the Credit
Agreement.
5.2 Perfected First Priority Liens. The security interests granted
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pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 2 attached hereto, and possession of such Collateral with
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respect to which perfection is required by possession, will constitute perfected
security interests in the Collateral in favor of the Administrative Agent, for
the ratable benefit of the Lenders and (b) are prior to all other Liens on the
Collateral in existence on the date hereof except for Liens permitted to exist
pursuant to the Credit Agreement. Each Credit Party shall use best efforts to
secure landlord lien waivers in form and content reasonably satisfactory to the
Administrative Agent for each location where the fair market value of Inventory
and Equipment kept at such location in the aggregate exceeds $1,000,000.
5.3 Inventory and Equipment. The Inventory and the Equipment of the
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Credit Party are kept at the locations listed on Schedule 1 hereto.
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5.4 Chief Executive Office. The Credit Party's chief executive office and
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chief place of business, and the place where it keeps its books and records, is
located at the address shown on Schedule 1.
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5.5 Farm Products. None of the Collateral constitutes, or is the Proceeds
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of, Farm Products.
5.6 Representations and Warranties Relating to Contracts. (a) No consent
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of any party (other than the Credit Party) to any Contract is required, or
purports to be required, in connection with the execution, delivery and
performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid and
legally enforceable obligation of the parties thereto, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect.
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(d) No amount payable to the Credit Party under or in connection with any
Contract is evidenced by any Instrument (other than checks and other instruments
in the process of collection) or Chattel Paper which has not been delivered to
the Administrative Agent.
5.7 Copyrights, Patents and Trademarks. (a) Schedule 3 hereto includes
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all Copyrights and Copyright Licenses owned by the Credit Party in its own name
as of the date hereof. Schedule 4 hereto includes all Patents and Patent
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Licenses owned by the Credit Party in its own name as of the date hereof.
Schedule 5 hereto includes all Trademarks and Trademark Licenses owned by the
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Credit Party in its own name as of the date hereof.
(b) To the best of the Credit Party's knowledge, each Copyright, Patent
and Trademark of the Borrower is valid, subsisting, unexpired, enforceable and
has not been abandoned.
(c) Except as set forth in either Schedule 4 or Schedule 5, none of such
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Copyrights, Patents and Trademarks is the subject of any licensing or franchise
agreement.
(d) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of any Copyright,
Patent or Trademark.
(e) No action or proceeding is pending seeking to limit, cancel or
question the validity of any Copyright, Patent or Trademark, or which, if
adversely determined, would have a material adverse effect on the value of any
Copyright, Patent or Trademark.
6. Covenants. Each of the Credit Parties covenants and agrees with the
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Administrative Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security interests created
hereby are released:
6.1 Delivery of Instruments and Chattel Paper. If any amount payable
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under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument (other than checks and other
instruments in the process of collection) or Chattel Paper shall be immediately
delivered to the Administrative Agent (except for promissory notes issued in
connection with loans to employees, officers and directors which shall be
immediately delivered to the Administrative Agent upon the request of the
Administrative Agent), duly indorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.
6.2 Maintenance of Perfected Security Interest; Further Documentation.
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(a) The Credit Party shall maintain the security interest created by this
Agreement as a perfected security interest subject only to the Liens permitted
to exist pursuant to the Credit Agreement and shall defend such security
interest against claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Credit Party, the Credit
Party will promptly and duly execute and deliver such further instruments and
documents and take such further action (including without limitation all actions
required under the Federal Assignment of Claims Act or any similar state
statute) as the Administrative Agent may reasonably request for the purpose of
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obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in effect
in any jurisdiction with respect to the security interests created hereby.
6.3 Changes in Locations, Name, etc. The Credit Party will not:
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(a) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 1 hereto, unless it shall have given
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the Administrative Agent and the Lenders at least 30 days' prior written
notice (or, in the case of the acquisition of Inventory or Equipment in
connection with a Credit Party's purchase of a business, written notice
within 30 days of the date of such acquisition) of such change and any
filings required under the Uniform Commercial Code in effect in the
affected jurisdiction to maintain the perfected security interest granted
pursuant to this Agreement shall have been made, except that Equipment may
be moved from such location for a reasonable period of time for purposes of
repair of such Equipment or for testing in the ordinary cause of business;
(b) change the location of its chief executive office and chief place
of business or the location at which it maintains its books and records
from that specified in subsection 5.4, unless it shall have given the
Administrative Agent and the Lenders at least 30 days' prior written notice
of such change and any filings required under the Uniform Commercial Code
in effect in the affected jurisdiction to maintain the perfected security
interest granted pursuant to this Agreement shall have been made; or
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Administrative Agent in
connection with this Agreement would become seriously misleading, unless it
shall have given the Administrative Agent and the Lenders at least 30 days'
prior written notice of such change and any filings required under the
Uniform Commercial Code in effect in the affected jurisdiction to maintain
the perfected security interest granted pursuant to this Agreement shall
have been made.
6.5 Further Identification of Collateral. The Credit Party will furnish
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to the Administrative Agent and the Lenders from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
6.6 Indemnification. The Credit Parties agree to pay, and to save the
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Administrative Agent and the Lenders harmless from, any and all liabilities,
costs and expenses (including, without limitation, reasonable legal fees and
expenses) (i) with respect to, or resulting from any delay in paying, any and
all excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay in complying with any Requirement of Law applicable to
any of the Collateral and (iii) in connection with any of the transactions
contemplated by this Agreement, except for any such liabilities which result
from the gross negligence or willful misconduct of the Administrative Agent or
any Lender, respectively. In any suit, proceeding or action brought by the
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Administrative Agent or any Lender under any Account for any sum owing
thereunder, the Credit Party will save, indemnify and keep the Administrative
Agent and such Lender harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor thereunder, arising out of a
breach by the Credit Party of any obligation thereunder or arising out of any
other agreement, indebtedness or liability at any time owing to or in favor of
such account debtor or its successors from the Credit Party.
6.7 Covenants Relating to Accounts Upon Default. At any time after the
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occurrence and during the continuation of an Event of Default:
(a) the amount represented by the Credit Party to the Lenders from
time to time as owing by each account debtor or by all account debtors in
respect of the Accounts will at such time be the correct amount actually
owing by such account debtor or debtors thereunder,
(b) the Credit Party will not amend, modify, terminate or waive any
agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of the Accounts as
Collateral;
(c) the Credit Party will not fail to exercise promptly and diligently
each and every material right which it may have under each agreement giving
rise to an Account (other than any right of termination);
(d) the Credit Party will not fail to deliver to the Administrative
Agent a copy of each material demand, notice or document received by it
relating in any way to any agreement giving rise to an Account; and
(e) other than in the ordinary course of business as generally
conducted by the Credit Party, the Credit Party will not grant any
extension of the time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon.
6.8 Covenants Relating to Contracts. The Credit Party will deliver to the
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Administrative Agent, upon request by the Administrative Agent, copies of all
Contracts, including any amendments or modifications thereto.
6.9 Covenants Relating to Copyrights. (a) The Credit Party will employ
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the Copyright for each Work with such notice of copyright as may be required by
law to secure copyright protection.
(b) The Credit Party will not do any act or knowingly omit to do any act
whereby any material Copyright may become invalidated and (i) will not do any
act, or omit to do any act, whereby any material Copyright may become injected
into the public domain; (ii) shall notify the Administrative Agent immediately
if it knows, or has reason to know, that any material Copyright may become
injected into the public domain or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
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development in, any court or tribunal in the United States or any other country)
regarding the Credit Party's ownership of any such Copyright or its validity;
(iii) will take all necessary steps as it shall deem appropriate under the
circumstances, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of each material
Copyright owned by the Credit Party including, without limitation, filing of
applications for renewal when necessary; and (iv) will promptly notify the
Administrative Agent of any material infringement of any material Copyright of
the Credit Party of which it becomes aware and will take such actions as it
shall reasonably deem appropriate under the circumstances to protect such
Copyright including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages for such
infringement.
6.10 Covenants Relating to Patents and Trademarks. (a) The Credit Party
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(either itself or through licensees) will, except with respect to any Trademark
that the Credit Party shall reasonably determine is not useful to it in its
business, (i) continue to use each Trademark on each and every trademark class
of goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (ii) maintain as in the past the
quality of products and services offered under such Trademark, (iii) employ such
Trademark with the appropriate notice of registration, (iv) not adopt or use any
xxxx which is confusingly similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable benefit of the Lenders, shall
obtain a perfected security interest in such xxxx pursuant to this Agreement,
and (v) not (and not permit any licensee or sublicensee thereof to) do any act
or knowingly omit to do any act whereby any Trademark may become invalidated.
(b) The Credit Party will not, except with respect to any Patent that the
Credit Party shall reasonably determine is of negligible economic value to it,
do any act, or omit to do any act, whereby any Patent may become abandoned or
dedicated.
(c) The Credit Party will notify the Administrative Agent and the Lenders
immediately if it knows that any application or registration relating to any
Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
the Credit Party's ownership of any Patent or Trademark or its right to register
the same or to keep and maintain the same.
(d) Whenever the Credit Party, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, the Credit Party shall report such filing to the Administrative Agent
and the Lenders within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Administrative Agent,
the Credit Party shall execute and deliver any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Administrative
Agent's and the Lenders' security interest in any Patent or Trademark and the
goodwill and general intangibles of the Credit Party relating thereto or
represented thereby.
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(e) The Credit Party will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
Patents and Trademarks, including, without limitation, filing of applications
for renewal, affidavits of use and affidavits of incontestability.
(f) In the event that any Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party, the Credit Party shall
promptly notify the Administrative Agent and the Lenders after it learns thereof
and shall unless the Credit Party shall reasonably determine that such Patent or
Trademark is of negligible economic value to the Credit Party which
determination the Credit Party shall promptly report to the Administrative Agent
and the Lenders, promptly xxx for infringement, misappropriation or dilution, to
seek injunctive relief where appropriate and to recover any and all damages for
such infringement, misappropriation or dilution, or take such other actions as
the Credit Party shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
6.11 Covenants Relating to Inventory and Equipment.
---------------------------------------------
(a) The Credit Party will, upon thirty (30) days' written notice from the
Administrative Agent, provide to the Administrative Agent the location, value
and owner of the Inventory and/or Equipment on a quarterly basis or, after the
occurrence and during the continuation of an Event of Default, more frequently.
(b) Each Credit Party shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with such insurers, as are consistent with prudent business
practice and in any event consistent with normal industry practice (except to
any greater extent as may be required by the terms of any of the other Credit
Documents). Each policy for liability insurance shall provide for all losses to
be paid on behalf of the Administrative Agent and such Credit Party as their
interests may appear, and each policy for property damage insurance shall
provide for all losses (except for losses of less than $2,000,000 per
occurrence) to be paid directly to the Administrative Agent. Each such policy
shall in addition (i) name such Credit Party and the Administrative Agent as
insured parties thereunder (without any representation or warranty by or
obligation upon the Administrative Agent) as their interests may appear, (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to the Administrative Agent notwithstanding any action, inaction or breach of
representation or warranty by such Credit Party, (iii) provide that there shall
be no recourse against the Administrative Agent for payment of premiums or other
amounts with respect thereto and (iv) provide that at least thirty (30) days'
prior written notice of cancellation or lapse shall be given to the
Administrative Agent by the insurer. Each Credit Party shall, if so requested
by the Administrative Agent, deliver to the Administrative Agent original or
duplicate policies of such insurance and, as often as the Administrative Agent
may reasonably request, a report of a reputable insurance broker with respect to
such insurance. Further, each Credit Party shall, at the request of the
Administrative Agent, duly exercise and deliver instruments of assignment of
such insurance policies to comply with the requirements of Section 6.3 hereof
and cause the insurers to acknowledge notice of such assignment.
12
(c) In the case of any loss involving damage to Equipment or Inventory of
any Credit Party, such Credit Party shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance properly received by or released to such Credit Party shall be used by
such Credit Party, except as otherwise required or permitted hereunder or by the
Credit Agreement, to pay or as reimbursement for the costs of such repairs or
replacements.
(d) So long as no Event of Default shall have occurred and shall be
continuing, all insurance payments received by the Administrative Agent in
connection with any loss, damage or destruction of any Inventory or Equipment
shall be released by the Administrative Agent to the applicable Credit Party for
the repair, replacement or restoration thereof. To the extent that (i) the
amount of any such insurance payments exceeds the cost of any such repair,
replacement or restoration, or (ii) such insurance payments are not otherwise
required by the applicable Credit Party to complete any such repair, replacement
or restoration required hereunder, the Administrative Agent shall not be
required to release the amount thereof to such Credit Party and may hold or
continue to hold such amount in a Collateral Account as additional security for
the Secured Obligations of such Credit Party (except that any such amount shall
be released by the Administrative Agent to such Credit Party if no Event of
Default has occurred and is then continuing). If an Event of Default has
occurred and is continuing, the Administrative Agent may elect, in its sole and
absolute discretion, to release any such insurance payments for the purposes set
forth in the first sentence of this subparagraph (d), or to hold such insurance
payments as additional Collateral hereunder or apply the same as specified in
the Credit Agreement.
7. Remedies.
--------
7.1 Notice to Account Debtors And Contract Parties. Upon the request of
----------------------------------------------
the Administrative Agent at any time after the occurrence and during the
continuation of an Event of Default, the Credit Parties shall notify account
debtors on the Accounts and parties to the Contracts that the Accounts and the
Contracts have been assigned to the Administrative Agent for the ratable benefit
of the Lenders and that payments in respect thereof shall be made directly to
the Administrative Agent.
7.2 Proceeds to be Turned Over To Administrative Agent. In addition to
--------------------------------------------------
the rights of the Administrative Agent and the Lenders specified in subsection
3.3 with respect to payments of Accounts, after the occurrence and during the
continuation of an Event of Default all Proceeds received by the Credit Parties
consisting of cash, checks and other near-cash items shall be held by the Credit
Parties in trust for the Administrative Agent and the Lenders, segregated from
other funds of the Credit Parties, and shall, forthwith upon receipt by the
Credit Parties, be turned over to the Administrative Agent in the exact form
received by the Credit Parties (duly indorsed by the Credit Parties to the
Administrative Agent, if required) and held by the Administrative Agent in a
Collateral Account maintained under the sole dominion and control of the
Administrative Agent. All Proceeds while held by the Administrative Agent in a
Collateral Account (or by the Credit Parties in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof until applied
as provided in subsection 7.3.
13
7.3 Application of Proceeds. At any time after an Event of Default shall
-----------------------
have occurred and be continuing, the Administrative Agent shall apply all of the
Proceeds held in any Collateral Account in payment of the Secured Obligations in
such order as the Administrative Agent may elect. Any balance of such Proceeds
remaining after the Secured Obligations shall have been paid in full and the
Commitments shall have been terminated shall be paid over to the Credit Parties
or to whomsoever may be lawfully entitled to receive the same.
7.4 Code Remedies. At any time after an Event of Default shall have
-------------
occurred and be continuing, the Administrative Agent, on behalf of the Lenders,
may exercise, in addition to all other rights and remedies granted to them in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured party
under the Code. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Credit Parties or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Administrative Agent or any Lender
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in the
Credit Parties, which right or equity is hereby waived or released. The Credit
Parties further agree, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at the respective Credit
Party's premises or elsewhere. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Secured Obligations, in such order as the Administrative Agent may elect,
and only after such application and after the payment by the Administrative
Agent of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent
account for the surplus, if any, to each of the Credit Parties. To the extent
permitted by applicable law, the Credit Parties waive all claims, damages and
demands it may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if received by the Credit Parties
at least 20 days before such sale or other disposition.
7.5 Deficiency. The Credit Parties shall remain liable for any deficiency
----------
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Secured
14
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
8. Administrative Agent's Appointment as Attorney-in-Fact; Administrative
----------------------------------------------------------------------
Agent's Performance of Credit Parties' Obligations.
------- ------------------------------------------
8.1 Powers. Each of the Credit Parties hereby irrevocably constitutes and
------
appoints the Administrative Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Credit Party and
in the name of such Credit Party or in its own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to secure the
Secured Obligations and grant security interests in the Collateral as
contemplated by this Agreement, and, without limiting the generality of the
foregoing, each Credit Party hereby gives the Administrative Agent the power and
right, on behalf of such Credit Party, without notice to or assent by such
Credit Party, to do the following:
(a) in the case of any Account, at any time when the authority of the
Credit Party to collect the Accounts has been curtailed or terminated
pursuant to subsection 3.3(a), or in the case of any other Collateral, at
any time after an Event of Default shall have occurred and be continuing,
in the name of the Borrower or its own name, or otherwise, to take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account, Instrument, or General Intangible or with respect to any other
Collateral and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys
due under any Account, Instrument or General Intangible or with respect to
any other Collateral whenever payable;
(b) in the case of any Copyrights, Patents or Trademarks, at any time
after an Event of Default has occurred and is continuing, to execute and
deliver any and all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative Agent's and
the Lenders' security interest in any copyright, Patent or Trademark and
the goodwill and general intangibles of the Credit Party relating thereto
or represented thereby;
(c) at any time after an Event of Default has occurred and is
continuing, to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect, any repairs or any insurance
called for by the terms all or any part of the premiums therefor and the
costs thereof;
(d) to execute, in connection with the sale provided for in Section
7.4 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
15
(e) upon the occurrence and during the continuation of any Event of
Default, (i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) to sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (v) to defend any suit, action or proceeding
brought against the Credit Party with respect to any Collateral; (vi) to
settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (vii) to assign or grant
licenses, any Copyright, Patent or Trademark (along with the goodwill of
the business to which any such Copyright, Patent or Trademark pertains),
throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its reasonable discretion
determine; and (viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner thereof for all purposes, and to do, at the Administrative Agent's
option and the Credit Party's expense, at any time, or from time to time,
all reasonable acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Administrative Agent's and the Lenders' security interests therein and to
effect the intent of this Agreement, all as fully and effectively as the
Credit Party might do.
The Administrative Agent agrees that, except after the occurrence and
continuation of an Event of Default, it will forbear from exercising the power
of attorney or any rights granted to the Administrative Agent pursuant to this
subsection 8.1.
8.2 Performance by Administrative Agent of Credit Parties' Obligations.
------------------------------------------------------------------
If the Credit Parties fail to perform or comply with any of their agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
8.3 Credit Parties' Reimbursement Obligation. The expenses of the
----------------------------------------
Administrative Agent incurred in connection with actions undertaken as provided
in this Section, together with interest thereon at the rate per annum set forth
in subsection 3.1 of the Credit Agreement for Base Rate Loans from the date of
payment by the Administrative Agent to the date reimbursed by the Credit
Parties, shall be payable by the Credit Parties to the Administrative Agent on
demand.
8.4 Ratification; Power Coupled With An Interest. The Credit Parties
--------------------------------------------
hereby ratify all that said attorneys shall lawfully do or cause to be done by
virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are
16
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
9. Duty of Administrative Agent. The Administrative Agent's sole duty
----------------------------
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent,
any Lender nor any of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Credit Parties or
any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent's
and the Lenders' interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to the Credit Parties for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct, except as provided
herein.
10. Execution of Financing Statements. Pursuant to Section 9-402 of the
---------------------------------
Code, each of the Credit Parties authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of the
Credit Party in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent and the Lenders under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
11. Authority of Administrative Agent. The Credit Parties acknowledge
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting right
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Credit Parties, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Credit Parties shall be
under no obligation, or entitlement, to make any inquiry respecting such
authority.
12. Notices. All notices shall be given or made in accordance with
-------
Section 11.1 of the Credit Agreement.
13. Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any
17
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14. Amendments in Writing; No Waiver; Cumulative Remedies.
-----------------------------------------------------
14.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Administrative Agent and the Credit Parties
directly affected thereby; provided that any provision of this Agreement may be
---------
waived by the Administrative Agent in a letter or agreement executed by the
Administrative Agent or by facsimile transmission from the Administrative Agent.
14.2 No Waiver by Course of Conduct. Neither the Administrative Agent nor
------------------------------
any Lender shall by any act (except by a written instrument pursuant to
subsection 14.1 hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have an any future occasion.
14.3 Remedies Cumulative. The rights and remedies herein provided are
-------------------
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
15. Section Headings. The section and subsection headings used in this
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of the Credit Parties and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns,
provided that the Credit Parties may not assign any of their rights or Secured
--------
Obligations under this Agreement without the prior written consent of the
Administrative Agent and any such purported assignment shall be null and void.
17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND SECURED OBLIGATIONS
-------------
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[Remainder of Page Intentionally Left Blank]
18
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
BORROWER: SCHOOL SPECIALTY, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: CFO & Exec. V.P.
GUARANTORS: CHILDCRAFT EDUCATION CORP.,
a New York corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P.
RE-PRINT LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P. School Specialty, Inc. Member
BIRD-IN-HAND WOODWORKS, INC.
a New Jersey corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P.
SAX ARTS & CRAFTS, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P.
THE NATIONAL SCHOOL SUPPLY COMPANY
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P.
19
BECKLEY-CARDY, INC.
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: V.P. & CFO
ADMINISTRATIVE AGENT: NATIONSBANK, N.A.
as Administrative agent
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President
20
Schedules to Amended and Restated Security Agreement:
Schedule 1 Chief Executive Office and Locations of
Collateral
Schedule 2 Filings and Actions Required to Perfect Security
Interests
Schedule 3 U.S. Copyright Registrations
Schedule 4 U.S. and Foreign Patents
Schedule 5 (I) U.S. Trademark Registrations and
Applications
(II)Foreign Trademark Registrations Applications
The above schedules to this document have been omitted. The schedules will be
furnished supplementally to the Securities and Exchange Commission upon request.
21
