EXHIBIT 2.5
EXECUTION COPY
SECURITY AGREEMENT dated as of September 29, 1998, among PSINET INC., a New
York corporation (the "Borrower"), each subsidiary of the Borrower listed on
Schedule I hereto (each such subsidiary individually a "Guarantor" and,
collectively, the "Guarantors"; the Guarantors and the Borrower are referred to
collectively herein as the "Grantors") and THE CHASE MANHATTAN BANK, a New York
banking corporation ("Chase"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of September 29,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders"), Chase, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent") Fleet National Bank, as Syndication Agent
and The Bank of New York, as Documentation Agent, and (b) the Guarantee
Agreement dated as of September 29, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement"), among the Guarantors and
the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Each of the Guarantors has agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The obligations
of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit
are conditioned upon, among other things, the execution and delivery by the
Grantors of an agreement in the form hereof to secure (a) the due and punctual
payment by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon
2
and obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all obligations
of the Borrower, monetary or otherwise, under each Hedging Agreement entered
into with a counterparty that was a Lender or an Affiliate of a Lender at the
time such Hedging Agreement was entered into and (d) each payment required to be
made in respect of any non-dollar denominated letters of credit issued for the
account of the Borrower by Fleet National Bank, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral (all the monetary and other obligations
described in the preceding clauses (a) through (d) being collectively called the
"Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein,
the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.
3
"Accounts" shall mean any and all right, title and interest of any Grantor
to payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including accounts receivable from Affiliates of the Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Investment Property and (h) Proceeds, but shall exclude the Excluded
Collateral.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an option on
a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a Commodity Intermediary for a
Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been
4
designated as a contract market pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary. If a Person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such Person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and all
tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"Excluded Collateral" shall mean any Collateral which (a) is subject to a
Lien permitted by Section 6.02 of the Credit Agreement if and to the extent the
terms of such
5
permitted Lien prohibit the Grantor from granting a Lien on the assets or
properties the subject of such permitted Lien or on Grantor's rights under the
agreement to which such permitted Lien relates or (b) is the subject of any
license, lease or other agreement which by its terms prohibit Grantor from
granting a Lien on the assets or properties the subject thereof or on Grantor's
rights as lessee or licensee thereunder.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a Person
or a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by any Grantor, including corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, Hedging Agreements and other agreements), Intellectual
Property, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar property of
any Grantor of every kind and
6
nature now owned or hereafter acquired by any Grantor, including inventions,
designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential
or proprietary technical and business information, know-how, show-how or other
data or information, software and databases and all embodiments or fixations
thereof and related documentation, registrations and franchises, and all
additions, improvements and accessions to, and books and records describing or
used in connection with, any of the foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party (other
than those license agreements which by their terms prohibit assignment or a
grant of a security interest by such Grantor as licensee thereunder).
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
7
"Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule III, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the form
of Annex 2 hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other Person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of any Grantor against any third
party for (and the right to xxx and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by any Grantor or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
8
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to a
Hedging Agreement entered into with the Borrower or any Loan Party if such
counterparty was a Lender at the time the Hedging Agreement was entered into,
and continues to be a Lender, (f) the beneficiaries of each indemnification
obligation undertaken by any Grantor under any Loan Document and (g) the
successors and assigns of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or trade on securities exchanges or securities markets or (ii) are a medium
for investment and by their terms expressly provide that they are a security
governed by Article 8 of the Uniform Commercial Code; provided that securities
-------- ----
shall not include (i) more than 65% of the issued and outstanding shares of
stock of any first-tier Foreign Subsidiary or (ii) to the extent that applicable
law requires that a Subsidiary of any Grantor issue directors' qualifying
shares, such qualifying shares.
"Securities Account" shall mean an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains
9
securities accounts for others and is acting in that capacity.
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Grantor: (a) all domestic trademarks, service marks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired in the United States, all registrations and recordings
thereof in the United States, and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office, any State of the
United States or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule IV, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
10
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements (including fixture filings), continuation statements,
filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good title to, or
valid leasehold interest in, the Collateral material to its business with
respect to which it has purported to grant a Security Interest hereunder,
11
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for
their intended purposes and subject to Liens permitted by the Credit Agreement
and has full power and authority to grant to the Collateral Agent the Security
Interest in such Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other Person other than any consent or approval which
has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Each Grantor has or will deliver
to the Collateral Agent fully executed Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations containing a description of the Collateral
pursuant to the Credit Agreement for filing in each governmental, municipal or
other office in the United States requested by the Collateral Agent and
specified in Schedule 6 to the Perfection Certificate, which are all the
filings, recordings and registrations (other than filings required to be made in
the United States Patent and Trademark Office and the United States Copyright
Office in order to perfect the Security Interest in Collateral consisting of
United States Patents, Trademarks and Copyrights) that are necessary in the
United States to publish notice of and protect the validity of and to establish
a legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral in
which the Security Interest may be perfected by filing, recording or
registration in the United States (or any political subdivision thereof) and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property shall have been received and recorded within
three months after the execution of this Agreement with respect to United States
Patents and United States
12
registered Trademarks (and Trademarks for which United States registration
applications are pending) and within one month after the execution of this
Agreement with respect to United States registered Copyrights by the United
States Patent and Trademark Office and the United States Copyright Office
pursuant to 35 U.S.C. (S) 261, 15 U.S.C. (S) 1060 or 17 U.S.C. (S) 205 and the
regulations thereunder, as applicable, and otherwise as may be required pursuant
to the laws of any other necessary jurisdiction, to protect the validity of and
to establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral consisting of Patents, Trademarks and Copyrights in which a
security interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions and
(c) a security interest that shall be perfected in all Collateral in which a
security interest may be perfected upon the receipt and recording of this
Agreement with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable, within the three-month period
(commencing as of the date hereof) pursuant to 35 U.S.C. 261 or 15 U.S.C. (S)
1060 or the one-month period (commencing as of the date hereof) pursuant to 17
U.S.C. (S) 205 and otherwise as may be required pursuant to the laws of any
other necessary jurisdiction. The Security Interest is and shall be prior
13
to any other Lien on any of the Collateral, other than Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement and except for restrictions on
transfer, assignment, use and rights of first refusal and similar rights under
the terms of any leases, licenses and other agreements under which the Grantor
acquired rights in and to Collateral. The Grantor has not filed or consented to
the filing of (a) any financing statement or analogous document under the
Uniform Commercial Code or any other applicable laws covering any Collateral,
(b) any assignment in which any Grantor assigns any Collateral or any security
agreement or similar instrument covering any Collateral with the United States
Patent and Trademark Office or the United States Copyright Office or (c) any
assignment in which any Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with any foreign governmental,
municipal or other office, which financing statement or analogous document,
assignment, security agreement or similar instrument is still in effect, except,
in each case, for Liens expressly permitted pursuant to Section 6.02 of the
Credit Agreement and except for financing statements evidencing Liens being
terminated on the Effective Date.
14
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees to promptly notify in writing the Collateral
Agent, but in no event later than 30 days after such change, of any change (i)
in its corporate name or in any trade name used to identify it in the conduct of
its business or in the ownership of its properties, (ii) in the location of its
chief executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it having a value in excess of $1,000,000
is located (including the establishment of any such new office or facility),
(iii) in its corporate structure or (iv) in its Federal Taxpayer Identification
Number. Each Grantor agrees to make within 45 days, after the occurrence of any
of the foregoing changes, all filings under the Uniform Commercial Code or
otherwise that are required by the Collateral Agent in order for the Collateral
Agent to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.01 of the Credit Agreement, the Borrower shall deliver to
the Collateral Agent a certificate executed by an executive officer or a
Financial Officer of the Borrower (a) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there has
been no change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant this Section 4.02 and (b)
15
certifying that all Uniform Commercial Code financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest or identifying such additional Uniform Commercial
Code financing statements or other appropriate filings, recordings or
registrations as may be required to protect and perfect the security interests
hereunder which, upon the request of the Collateral Agent, shall be filed,
recorded or registered, in either case for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period). Each certificate
delivered pursuant to this Section 4.02 shall identify in the format of Schedule
II, III or IV, as applicable, all Intellectual Property of any Grantor in
existence on the date thereof and not then listed on such Schedules or
previously so identified to the Collateral Agent.
SECTION 4.03. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all reasonable actions necessary to defend title to
the Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees, at its own expense,
(x) to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith and (y) at the request of the
Collateral Agent, to enter into and to cause any Securities Intermediary through
which it holds Investment Property to enter into
16
(or to reinvest through a Securities Intermediary who will enter into) a control
agreement, in form and substance satisfactory to the Collateral Agent, pursuant
to which such Securities Intermediary grants "control", within the meaning of
Section 8-106 of the Uniform Commercial Code of the State of New York, over such
Investment Property to the Collateral Agent. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be forthwith
pledged and delivered to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III or IV hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
however, that any Grantor shall have the right, exercisable within 45 days after
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its reasonable best
efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Collateral within 30 days after the date it has been notified by the
Collateral Agent of the specific identification of such Collateral.
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to inspect the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Grantors'
affairs with the officers of the Grantors and their independent accountants and
to verify under reasonable procedures the validity, amount, quality, quantity,
value, condition and status of, or any other matter relating to, the Collateral,
including, in the case of Accounts or Collateral in the possession of any third
Person, by contacting Account Debtors in the event of and during the
17
continuance of an Event of Default or the third Person possessing such
Collateral for the purpose of making such a verification. The Collateral Agent
shall have the absolute right to share any information it gains from such
inspection or verification with any Secured Party (it being understood that any
such information shall be deemed to be "Information" subject to the provisions
of Section 9.12 of the Credit Agreement).
SECTION 4.06. Taxes; Encumbrances. At its option, the Collateral Agent
may, upon reasonable prior notice to Grantors, discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
Person to secure payment and performance of an Account in excess of $1,000,000
to the extent permissible under the document granting a security interest, such
Grantor shall promptly assign such security interest to the Collateral Agent.
Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other Person granting the security
interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating
18
to the Collateral, all in accordance with the terms and conditions thereof, and
each Grantor jointly and severally agrees to indemnify and hold harmless the
Collateral Agent and the Secured Parties from and against any and all liability
for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by the Credit Agreement. None of the Grantors shall make,
nor shall they permit to be made, any sale, conveyance, lease, assignment,
transfer or other disposition of any Collateral except as permitted by the
Credit Agreement and each Grantor shall remain at all times in possession of the
Collateral owned by it, except that (a) Inventory may be sold in the ordinary
course of business and (b) unless and until the Collateral Agent shall notify
the Grantors that an Event of Default shall have occurred and be continuing, the
Grantors may use and dispose of the Collateral in any lawful manner not
inconsistent with the provisions of this Agreement, the Credit Agreement or any
other Loan Document. Without limiting the generality of the foregoing, each
Grantor agrees that it shall not permit any Inventory in excess of $5,000,000 to
be in the possession or control of any warehouseman, bailee, agent or processor
at any time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors
will, without the Collateral Agent's prior written consent, grant any extension
of the time of payment of any of the Accounts Receivable in excess of $5,000,000
in the aggregate, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partly, any Person liable for the payment
thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its good faith business
judgment.
19
SECTION 4.11. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 5.07 of the Credit
Agreement. Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, solely during the continuance of an Event of Default, of
making, settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole reasonable discretion, obtain and maintain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
SECTION 4.12. Legend. Each Grantor shall upon written request legend, in
form and manner reasonably satisfactory to the Collateral Agent, its Accounts
Receivable and its books, records and, to the extent applicable, documents
evidencing or pertaining thereto with an appropriate reference to the fact that
such Accounts Receivable have been collaterally assigned to the Collateral Agent
for the benefit of the Secured Parties and that the Collateral Agent has a
security interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, and it will exercise its
best efforts to ensure that its licensees will not, do any act, or omit to do
any act, whereby any Patent which is material to the conduct of
20
such Grantor's business may become invalidated or dedicated to the public, and
agrees that it shall continue to xxxx any products covered by a Patent with the
relevant patent number as necessary and sufficient to establish and preserve its
maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
material to the conduct of Grantor's business covered by a material Copyright,
continue to publish, reproduce, display, adopt and distribute the work with
appropriate copyright notice as necessary and sufficient to establish and
preserve its rights under applicable copyright laws.
(d) Each Grantor shall notify the Collateral Agent promptly if it knows
that any Patent, Trademark or Copyright material to the conduct of the business
of the Grantors (taken as a whole) may reasonably be expected to become
abandoned, lost or dedicated to the public, or of any material adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's ownership of any such Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.
(e) In the event that any Grantor shall, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or
21
agency in any political subdivision of the United States or in any other country
or any political subdivision thereof, such Grantor shall promptly thereafter
inform the Collateral Agent of such action, and, upon request of the Collateral
Agent, execute and deliver any and all agreements, instruments, documents and
papers as the Collateral Agent may reasonably request to evidence the Collateral
Agent's security interest in such Patent, Trademark or Copyright, and such
Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute
and file such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power, being coupled with an interest,
is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (excluding applications which a
Grantor abandons pursuant to good faith business considerations) (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
the business of the Grantors (taken as a whole), including timely filings of
applications for renewal, affidavits of use, affidavits of incontestability and
payment of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancelation proceedings against third
parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of the business of the Grantors (taken as a whole) has been or is about
to be infringed, misappropriated or diluted by a third party in any material
respect, such Grantor promptly shall notify the Collateral Agent and shall, if
consistent with good business judgment, promptly xxx for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
22
(h) Upon and during the continuance of an Event of Default, if requested
by the Collateral Agent, each Grantor shall use reasonable efforts to obtain all
requisite consents or approvals by the licensor of each Copyright License,
Patent License or Trademark License to effect the assignment of all of such
Grantor's right, title and interest thereunder to the Collateral Agent or its
designee.
ARTICLE V
Power of Attorney
23
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, solely upon the
occurrence and during the continuance of an Event of Default (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to sign the
name of any Grantor on any invoice or xxxx of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes, in each case
in a manner not inconsistent with the terms of this Agreement and on terms that
are commercially reasonable and in compliance with any mandatory requirements of
applicable law; provided, however, that nothing herein contained shall be
construed as requiring or obligating the Collateral Agent or any Secured Party
to make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Collateral Agent or any Secured Party, or to present
or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to
24
any defense, counterclaim or offset in favor of any Grantor or to any claim or
action against the Collateral Agent or any Secured Party. It is understood and
agreed that the appointment of the Collateral Agent as the agent and
attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve any Grantor of any of its obligations hereunder or under any other
Loan Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VI
Remedies
25
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent forthwith on demand to the extent reasonably
practicable, and it is agreed that the Collateral Agent shall have the right to
take any of or all the following actions at the same or different times (subject
to any mandatory requirements of law and standards of commercial reasonableness
that cannot be waived by contract): (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained), and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and to enter any premises owned or leased by the Grantors where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights afforded to a
secured party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate and commercially reasonable. The
Collateral Agent shall be authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to Persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Collateral Agent shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to
26
the extent permitted by law) all rights of redemption, stay and appraisal which
such Grantor now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice (which
each Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent's intention to make
any sale of Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Collateral Agent may fix and state in the notice (if any) of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Collateral Agent
shall be free to carry out such sale pursuant to such agreement and no Grantor
shall be entitled to the return of the Collateral or any portion thereof subject
thereto, notwith-
27
standing the fact that after the Collateral Agent shall have entered into such
an agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply
promptly the proceeds of any collection or sale of the Collateral, as well as
any Collateral consisting of cash, as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations, including all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Collateral Agent hereunder or under any other Loan Document on
behalf of any Grantor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the respective Grantors, their successors or assigns, or as
a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient
28
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor (to the extent not prohibited by the terms of any
license agreement pursuant to which such Grantor is a licensee), and wherever
the same may be located, and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof.
The use of such license by the Collateral Agent shall be exercised, at the
option of the Collateral Agent, upon the occurrence and during the continuation
of an Event of Default; provided that any license, sub-license or other
transaction entered into by the Collateral Agent in accordance herewith shall be
binding upon the Grantors notwithstanding any subsequent cure of an Event of
Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the Borrower.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest
29
and all obligations of the Grantors hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any agreement with respect to any of
the Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument, (c) any exchange, release or non-
perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This
Agreement shall be construed as a separate agreement
30
with respect to each Grantor and may be amended, modified, supplemented, waived
or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from or other realization upon any of the Collateral, (iii)
the exercise, enforcement or protection of any of the rights of the Collateral
Agent hereunder or (iv) the failure of any Grantor to perform or observe any of
the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
31
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Collateral Agent or any Lender. All amounts due under this Section 7.06
shall be payable on written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Administrative Agent, the Issuing Bank and the
Lenders under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.02 of the Credit Agreement.
32
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
33
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement or any other
Loan Document shall affect any right that the Collateral Agent, the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or any other Loan Document
against any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations have been indefeasibly paid in full and the
Lenders have no further commitment to lend, the LC Exposure has been reduced to
zero and the Issuing Bank has no further
34
commitment to issue Letters of Credit under the Credit Agreement, at which time
the Collateral Agent shall execute and deliver to the Grantors, at the Grantors'
expense, all Uniform Commercial Code termination statements and similar
documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent (except to the extent that any losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of the Collateral Agent). A Guarantor shall
automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Guarantor shall be automatically released in
the event that all the capital stock of such Guarantor shall be sold,
transferred or otherwise disposed of to a Person that is not a Subsidiary Loan
Party in accordance with the terms of the Credit Agreement; provided that the
Required Lenders shall have consented to such sale, transfer or other
disposition (if and to the extent required by the Credit Agreement) and the
terms of such consent did not provide otherwise. The Security Interest in
Collateral which is disposed of by a Grantor to a Person other than another
Grantor in a transaction permitted by Section 6.06 of the Credit Agreement shall
be automatically released except with respect to the Proceeds received therefor
subject to the Credit Agreement with respect to a Prepayment Event.
35
SECTION 7.15. Additional Grantors. Pursuant to Section 5.13 of the Credit
Agreement, each Subsidiary Loan Party of the Borrower that was not in existence
or not a Subsidiary Loan Party on the date of the Credit Agreement is required
to enter in this Agreement as a Guarantor upon becoming a Subsidiary Loan Party.
Upon execution and delivery by the Collateral Agent and a Subsidiary Loan Party
of an instrument in the form of Annex 3 hereto, such Subsidiary Loan Party shall
become a Grantor hereunder with the same force and effect as if originally named
as a Grantor herein. The execution and delivery of any such instrument shall
not require the consent of any Grantor hereunder. The rights and obligations of
each Grantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantors as a party to this Agreement.
36
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
PSINET INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
PSIWEB INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
PSINET SECURITY SERVICES INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
PSINET NORTH AMERICA HOLDINGS INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
IONET, INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
37
PSINETWORKS COMPANY,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
TELECOM LICENSING INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
PSINET ASIA HOLDINGS INC.,
By /s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman
THE CHASE MANHATTAN BANK, as
Collateral Agent,
By /s/ Xxxxxxxx Xxxxxx
--------------------------
Name: Xxxxxxxx Xxxxxx
Title: Vice President
