AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (as amended,
restated, supplemented or otherwise modified, this "Agreement"), dated as of
June 29, 1999, by and among GT Interactive Software Corp. (the "Borrower") and
certain of its subsidiaries identified on the signature pages attached hereto
(together with the Borrower and each additional subsidiary who becomes a party
hereto pursuant to a Joinder Agreement, the "Grantors", each individually, a
"Grantor"), and First Union National Bank, a national banking association, as
administrative agent (the "Administrative Agent"), for the ratable benefit of
the Administrative Agent and the financial institutions who are or may from time
to time become parties to the Credit Agreement referred to below (the
"Lenders").
STATEMENT OF PURPOSE
Pursuant to the terms of the Credit Agreement, dated as of
September 11, 1998 (as amended, restated, supplemented or otherwise modified,
the "Credit Agreement"), by and among the Borrower, the Lenders and the
Administrative Agent, the Lenders agreed to make certain Extensions of Credit to
the Borrower as more particularly described therein.
In connection with the execution and delivery of the Credit
Agreement, the Borrower executed and delivered in favor of the Administrative
Agent a Security Agreement, dated as of September 11, 1998 (as heretofore
amended, restated, supplemented or otherwise modified, the "Existing Security
Agreement"), pursuant to which the Borrower granted to the Administrative Agent,
for the ratable benefit of the Lenders, the Collateral to secure the Obligations
(as such terms are defined in the Existing Security Agreement).
The Borrower, the Lenders and the Administrative Agent have
agreed to execute a Second Amendment, Waiver and Agreement, dated as of June 29,
1999 (the "Second Amendment"), under the Credit Agreement to, among other
things, amend certain provisions thereof.
In connection with the transactions contemplated by the Second
Amendment and as a condition precedent thereto, the Administrative Agent and the
Lenders have requested that the Existing Security Agreement be amended and
restated, and that each Grantor execute and deliver this Agreement to the
Administrative Agent, for the ratable benefit of the Administrative Agent and
the Lenders, and each of the Grantors has agreed to do so pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
to induce the Administrative Agent and the Lenders to enter into the Second
Amendment, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, as follows:
2
SECTION 1. Definitions
(a) Terms defined in the Credit Agreement and not otherwise
defined herein, when used in this Agreement including its preamble and recitals,
shall have the respective meanings provided for in the Credit Agreement, and the
following terms which are defined in the UCC are used herein as so defined:
Chattel Paper, Documents, Equipment, Instruments and Investment Property. The
following additional terms, when used in this Agreement, shall have the
following meanings:
"Account Debtor" means any Person who is or may become
obligated to any Grantor under, with respect to, or on account of, an
Account.
"Accounts" means collectively, all rights to payment for goods
sold or leased or for services rendered or to be rendered, whether or
not earned by performance, and all sums of money or other proceeds due
or becoming due thereon, including, without limitation, "Accounts" as
defined in the UCC, whether secured or unsecured, now existing or
hereafter created, now or hereafter owned or acquired by any Grantor or
in which any Grantor now or hereafter has or acquires any right or
interest.
"Accounts Aging Report" means an aged trial balance of all
Accounts existing as of a specified date, in a form reasonably
satisfactory to the Administrative Agent, specifying the names,
addresses, face value and dates of invoices of each Account Debtor
obligated on any Accounts so listed.
"Collateral" shall have the meaning given such term in Section
2(a).
"Collateral Account" means any cash collateral account
established by any of the Grantors with the Administrative Agent, in
the name and under the exclusive dominion and control of the
Administrative Agent, pursuant to Section 6 .
"Contracts" means all contracts and agreements listed on
Schedule 1, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (a) all
rights of any Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of any Grantor to
damages arising thereunder and (c) all rights of any Grantor to perform
and to exercise all remedies thereunder, in each case, to the extent
the grant by such Grantor of a security interest pursuant to this
Agreement in its right, title and interest in such contract or
agreement is not prohibited thereby.
"Copyright License" means any written agreement naming any
Grantor as licensor or licensee (including, without limitation, those
listed on Schedule 2) granting any right under any Copyright,
including, without limitation, the grant of rights to manufacture,
distribute, exploit and sell materials derived from any Copyright.
3
"Copyrights" means (a) all copyrights of any Grantor arising
under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether
published or unpublished (including, without limitation, those listed
on Schedule 2) all registrations and recordings thereof, and all
applications in connection therewith, including, without limitation,
all registrations, recordings and applications in the United States
Copyright Office and (b) the right to obtain all renewals thereof.
"Deposit Accounts" means all "Deposit Accounts" (as defined in
the UCC) established by any Grantor, including, without limitation, the
deposit accounts listed on Schedule 3 hereto and any other deposit
accounts established by any Grantor after the date hereof.
"Financing Statements" means the Uniform Commercial Code Form
UCC-1 Financing Statements (or, with respect to any Foreign Subsidiary,
any filing required by the applicable foreign jurisdiction) executed by
the Grantors with respect to the Collateral and to be filed in the
jurisdictions set forth in the Perfection Certificate.
"General Intangibles" means all "General Intangibles" (as
defined in the UCC) of any Grantor, including, without limitation, all
contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Grantor is a party or under which such
Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to
time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights
of such Grantor to damages arising thereunder and (iii) all rights of
such Grantor to perform and to exercise all remedies thereunder, in
each case to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture is not prohibited by
such contract, agreement, instrument or indenture without the consent
of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from
the other parties thereto (it being understood that the foregoing shall
not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any Account or any money or other amounts
due or to become due under any such contract, agreement, instrument or
indenture.
"Intellectual Property" means all rights, priorities and
privileges of any Grantor relating to intellectual property, whether
arising under United States, multinational or foreign laws or
otherwise, including, without limitation, the Copyrights, the Copyright
Licenses, the Patents, the Patent Licenses, the Trademarks and the
Trademark Licenses,
4
and all rights to xxx at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and
damages therefrom.
"Inventory" means all "Inventory" (as defined in the UCC) of
any Grantor wherever located, including, without limitation, all goods
manufactured or acquired for sale or lease and all raw materials,
work-in-process and finished goods, and all supplies and goods, used or
consumed in the operation of the business of any Grantor, whether now
or hereafter owned or acquired by any Grantor or in which such Grantor
now or hereafter has or acquires any right or interest.
"Obligations" means the Grantors' obligations under the Loan
Documents in respect of the unpaid principal of and interest on the
Notes (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans, the Letters of Credit or the L/C Obligations 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 any
Grantor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) and all other obligations and
liabilities of the Grantors to the Administrative Agent, the Issuing
Lender and the Lenders in respect of the Loans, the Notes, the Letters
of Credit, the L/C Obligations, any Hedging Agreements permitted or
required under the Credit Agreement, the Concentration Account or any
cash management arrangements with any Lender, 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, the Notes, the Letters of Credit, the L/C
Obligations, any Hedging Agreements permitted or required under the
Credit Agreement, this Agreement, the other Loan Documents or any other
document made, delivered or given in connection herewith or 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, the Issuing Lender or the Lenders that are
required to be paid by any Grantor pursuant to the terms of the Credit
Agreement, this Agreement or any other Loan Document).
"Patent License" means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in part by a
Patent (including, without limitation, any of the foregoing referred to
on Schedule 2).
"Patents" means (i) all of any Grantor's letters patent of the
United States, any other country or any political subdivision thereof,
all reissues and extensions thereof and all goodwill associated
therewith (including, without limitation, any of the foregoing referred
to on Schedule 2), (ii) all of any Grantor's 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 of the foregoing referred to on Schedule 2 and (iii)
all rights to obtain any reissues or extensions of the foregoing.
5
"Permitted Liens" means all Liens respecting the Collateral
permitted pursuant to Section 10.3 of the Credit Agreement.
"Perfection Certificate" means a certificate substantially in
the form of Exhibit A attached hereto, setting forth the corporate or
other names, chief executive office or principal place of business in
each state and other current locations of each Grantor and such other
information as the Administrative Agent deems reasonably necessary for
the perfection of the security interests granted hereunder, completed
and supplemented with the schedules and attachments contemplated
thereby to the reasonable satisfaction of the Administrative Agent, and
certified by the Chief Executive Officer, President, any Executive Vice
President, Chief Financial Officer or Treasurer of each Grantor so
authorized to act.
"Proceeds" means all "Proceeds" (as defined in the UCC) of any
Grantor and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property of any Grantor,
collections thereon or distributions or payments with respect thereto.
"Schedule of Inventory" means a schedule of Inventory based
upon each Grantor's most recent physical inventory and its perpetual
inventory records, in a form reasonably satisfactory to the
Administrative Agent.
"Security Interests" means the security interests granted
hereby to the Administrative Agent, for the ratable benefit of the
Administrative Agent and the Lenders, in respect of the Collateral.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark (including, without limitation, any thereof referred to on
Schedule 2).
"Trademarks" means (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos, and other source or business identifiers
of any Grantor, and all 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 other country or
any political subdivision thereof, or otherwise, and all common-law
rights related thereto (including, without limitation, any of the
foregoing referred to on Schedule 2) and (ii) the right to obtain all
renewals thereof.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York; provided that, if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection of
the Security Interests in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New
6
York, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection.
(b) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. The Security Interests
(a) With respect to each Grantor, all of such Grantor's
estate, right, title and interest in and to all of the following property,
whether now or hereafter owned or acquired by such Grantor or in which such
Grantor now has or hereafter acquires any estate, right, title or interest, and
wherever located, along with any other property of such Grantor which may from
time to time secure the Obligations pursuant to the terms of this Agreement, is
collectively referred to as the "Collateral":
(i) all Accounts;
(ii) all Chattel Paper;
(iii) the Collateral Account, all cash deposited therein
from time to time, the investments made pursuant to Section 6 and other monies
and property of any kind of any Grantor in the possession or under the control
of the Administrative Agent or any Lender;
(iv) all Contracts;
(v) all Deposit Accounts;
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Intellectual Property;
(xi) all Inventory;
(xii) all Investment Property;
(xiii) all other property not otherwise described above;
7
(xiv) all books and records pertaining to any of the
foregoing; and
(xv) all products and Proceeds of all or any of the
foregoing.
(b) The Borrower hereby confirms and reaffirms its grant of a
security interest in the Collateral (as defined in the Existing Security
Agreement) pursuant to the Existing Security Agreement. In order to secure the
payment when due whether at the stated maturity, by acceleration or otherwise of
the Obligations, each Grantor (including the Borrower) hereby grants to the
Administrative Agent, for the ratable benefit of the Lenders and the
Administrative Agent, a security interest in the Collateral.
(c) The Security Interests are granted as security only and
shall not subject the Administrative Agent or any Lender to, or transfer to the
Administrative Agent or any Lender, or in any way affect or modify, any
obligation or liability of any Grantor with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 3. Representations and Warranties. Each Grantor
represents and warrants to the Administrative Agent and each Lender as follows:
(a) Such Grantor has the corporate power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the Security Interests in the Collateral owned by it pursuant to, this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Security Interests in
the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of such Grantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) Such Grantor is the sole owner of, and has valid and legal
title to, all of the Collateral owned by it, free and clear of any Liens, other
than Permitted Liens.
(d) Other than financing statements or other similar or
equivalent documents or instruments with respect to Permitted Liens, no
financing statement, mortgage, security agreement or similar or equivalent
document or instrument covering all or any part of the Collateral is on file or
of record in any jurisdiction. No Collateral is in the possession of any Person
(other than the Grantors) asserting any claim thereto or security interest
therein, except that the Administrative Agent or its designee may have
possession of Collateral as contemplated hereby and a bailee, warehouseman,
agent or processor may have possession of the Collateral as contemplated by, and
so long as such Grantor has complied with, Section 4(c)(iii) and Section
4(c)(iv).
8
(e) All of the information set forth in the Perfection
Certificate relating to such Grantor is true and correct in all material
respects as of the date hereof.
(f) Such Grantor has, contemporaneously herewith, delivered to
the Administrative Agent possession of all originals of all negotiable
Instruments constituting Collateral currently owned or held by such Grantor, if
any (duly endorsed in blank, if requested by the Administrative Agent).
(g) With respect to any Inventory of such Grantor: (i) all
such Inventory is, and shall be at all times, located at places of business of
such Grantor listed in the Perfection Certificate or as to which such Grantor
has complied with the provisions of Section 4(a)(i), except Inventory in transit
from one such location to another such location; (ii) no Inventory is, nor shall
at any time or times be, subject to any Lien whatsoever, except for Permitted
Liens; (iii) no Inventory in aggregate value exceeding $1,000,000 at any time
is, nor shall at any time or times be, kept, stored or maintained with a bailee,
warehouseman, carrier or similar party (other than a carrier delivering
Inventory to a purchaser in the ordinary course of such Grantor's business)
unless the Administrative Agent shall have received prior written notice of such
storage and the such Grantor has complied with the provisions of Section
4(c)(iii); and (iv) no Inventory in aggregate value exceeding $1,000,000 at any
time is, nor shall at any time or times be, kept, stored or maintained with a
consignee unless the Administrative Agent shall have received prior written
notice of such consignment and such Grantor has complied with the provisions of
Section 4(c)(iii).
(h) The Financing Statements relating to such Grantor are in
appropriate form and when filed in the offices specified in the Perfection
Certificate, the Security Interests will constitute valid and perfected security
interests in all of the Collateral (to the extent that a security interest
therein may be perfected by filing pursuant to the UCC) in favor of the
Administrative Agent, for the benefit of the Lenders, prior to all other Liens
and rights of others therein, other than with respect to Permitted Liens.
(i) On the date hereof, such Grantor's jurisdiction of
organization and the location of such Grantor's chief executive office or sole
place of business are specified in the Perfection Certificate.
(j) With respect to any Account of such Grantor: (i) no amount
payable to such Grantor under or in connection with such Account is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent; (ii) none of the obligors on any Account is a Governmental
Authority; and (iii) the amounts represented by such Grantor to the Lenders from
time to time in reports delivered to the Administrative Agent by such Grantor as
owing to such Grantor in respect of the Accounts will at such times be accurate.
(k) With respect to any Contract to which such Grantor is a
party: (i) no consent of any party (other than such Grantor) is required, or
purports to be required, in connection with the execution, delivery and
performance of this Agreement; (ii) each Contract is in full force and
9
effect and constitutes a valid and legally enforceable obligation of such
Grantor and, to the best of such Grantor's knowledge, the other parties thereto,
subject to the effects of 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; (iii) 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 or performance of any of the Contracts by such Grantor other
than those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Contract to any material
adverse limitation, either specific or general in nature; (iv) neither such
Grantor nor, to such Grantor's knowledge (without independent investigation),
any of the other parties to the Contracts is in default in the performance or
observance of any of the material terms thereof; (v) the right, title and
interest of such Grantor in, to and under the Contracts are not subject to any
defenses, offsets, counterclaims or claims; (vi) if a copy of any such Contract
is requested by the Administrative Agent, such Contract as delivered to the
Administrative Agent shall be a complete and correct copy of such Contract,
including all amendments, supplements and other modifications thereto; (vii) to
the best of such Grantor's knowledge, no amount payable to such Grantor under or
in connection with any Contract is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent; and (viii) none of the
parties to any Contract is a Governmental Authority.
(l) With respect to any Intellectual Property of such Grantor:
(i) to the best of such Grantor's knowledge, on the date hereof, all material
Intellectual Property is valid, subsisting, unexpired and enforceable, has not
been abandoned and does not infringe the intellectual property rights of any
other Person; (ii) except as set forth on Schedule 2, on the date hereof, none
of the material Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor; (iii) no holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any material Intellectual Property in any respect that
could reasonably be expected to have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property; and (iv) except as set
forth in Schedule 6.1(u) to the Credit Agreement, no action or proceeding is
pending, or, to the best of such Grantor's knowledge, threatened, on the date
hereof (A) seeking to limit, cancel or question the validity of any material
Intellectual Property or such Grantor's ownership interest therein or (B) which,
if adversely determined, would have a material adverse effect on the aggregate
value of all of such Grantor's Intellectual Property.
10
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor will change the location of its chief executive
office or principal place of business in any state unless such Grantor
shall have given the Administrative Agent thirty (30) days prior
written notice thereof, executed and delivered to the Administrative
Agent all financing statements and financing statement amendments which
the Administrative Agent may request in connection therewith and, if
reasonably requested by the Administrative Agent, delivered an opinion
of counsel with respect thereto in accordance with Section 4(a)(v).
(ii) No Grantor shall change the locations where it keeps or
holds any Collateral or any records relating thereto from the
applicable location described in the Perfection Certificate unless such
Grantor shall have given the Administrative Agent thirty (30) days
prior written notice of such change of location, executed and delivered
to the Administrative Agent all financing statements and financing
statement amendments which the Administrative Agent may request in
connection therewith and, if reasonably requested by the Administrative
Agent, delivered an opinion of counsel with respect thereto in
accordance with Section 4(a)(v); provided, however, that any Grantor
may keep Inventory or Equipment at, or in transit to, any location
described in the Perfection Certificate. No Grantor shall in any event
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be
perfected.
(iii) No Grantor will change its name, identity or corporate
or other structure in any manner unless it shall have given the
Administrative Agent thirty (30) days prior written notice thereof,
executed and delivered to the Administrative Agent all financing
statements and financing statement amendments which the Administrative
Agent may request in connection therewith, and, if reasonably requested
by the Administrative Agent, delivered an opinion of counsel with
respect thereto in accordance with Section 4(a)(v).
(iv) Each Grantor will maintain the Administrative Agents
Security Interests in the Collateral owned by it as perfected Liens
with priority over all other Liens other than Permitted Liens. Each
Grantor will, from time to time, at its expense, execute, deliver, file
and record any statement, assignment, instrument, document, agreement
or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under
the UCC) that from time to time may be necessary, or that the
Administrative Agent may reasonably request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect,
confirm or validate the Security Interests or to enable the
Administrative Agent to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral. Prior to
the irrevocable payment in full of the Obligations, to the extent
required by the immediately preceding
11
sentence, each Grantor hereby authorizes the Administrative Agent, upon
the failure of any Grantor to so do within ten (10) Business Days after
receipt of notice in writing from the Administrative Agent, to execute
and file financing statements, financing statement amendments,
continuation statements and any other agreements, instruments,
documents and papers reasonably necessary to perfect the Administrative
Agents security interest in such Grantor's Collateral without such
Grantor's signature appearing thereon. Each Grantor agrees that, except
as otherwise required by law, a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. Each Grantor shall pay the
reasonable costs of, or incidental to, any recording or filing of the
Financing Statements and any other financing statements, financing
statement amendments, continuation statements and any other agreements,
instruments, documents and papers reasonably necessary to perfect the
Administrative Agents security interests in such Grantor's Collateral.
(v) Each Grantor will, promptly upon request, provide to the
Administrative Agent all information and evidence the Administrative
Agent may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Administrative Agent to enforce
the provisions of this Agreement.
(vi) Prior to each date on which any Grantor proposes to take
any action contemplated by Section 4(a)(i) or Section 4(a)(ii), if
reasonably requested by the Administrative Agent, such Grantor shall,
at its cost and expense, cause to be delivered to the Administrative
Agent (with a copy for each Lender) an opinion of counsel, satisfactory
to the Administrative Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers from such Grantor have
been filed in each filing office necessary or desirable for such
purposes and that all filing fees and taxes, if any, payable in
connection with such filings have been paid in full.
(vii) After the occurrence and during the continuance of an
Event of Default, from time to time upon request by the Administrative
Agent, each Grantor shall, at its cost and expense, cause to be
delivered to the Administrative Agent (with a copy for each Lender) an
opinion or opinions of counsel, reasonably satisfactory to the
Administrative Agent, as to the enforceability of the Loan Documents
and the Security Interests of the Administrative Agent, for the ratable
benefit of the Administrative Agent and the Lenders, on the Collateral
and other property of the Grantors and such other matters relating to
the transactions contemplated hereby as the Administrative Agent or the
Required Lenders may reasonably request.
(viii) Each Grantor will comply in all material respects with
all Applicable Laws applicable to the Collateral or any material part
thereof or to the operation of such Grantor's business.
12
(ix) Each Grantor will pay when due all material taxes,
assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as
all material claims of any kind (including, without limitation, claims
for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if (A) the validity
thereof is being contested in good faith by appropriate proceedings,
(B) such proceedings do not involve any danger of the sale, forfeiture
or loss of, or creation of a Lien on, any of the Collateral or any
interest therein and (C) such charge is adequately reserved against on
such Grantor's books in accordance with GAAP.
(x) The Grantors shall not (A) sell, assign (by operation of
law or otherwise) or otherwise dispose of any of the Collateral, except
as permitted by the Credit Agreement or hereunder or (B) create or
suffer to exist any Lien or other charge or encumbrance upon or with
respect to any of the Collateral to secure indebtedness of any Person
or entity other than Permitted Liens.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to cause to
be collected from its Account Debtors, as and when due, any and all
amounts owing under or on account of each Account (including, without
limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with past practices) and to apply upon receipt
thereof all such amounts as are so collected to the outstanding balance
of such Account. The costs and expenses (including, without limitation,
attorneys fees) of collection of Accounts incurred by such Grantor or
the Administrative Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of an
Event of Default, upon request of the Administrative Agent or the
Required Lenders, each Grantor will promptly notify (and each Grantor
hereby authorizes the Administrative Agent so to notify) each Account
Debtor in respect of any Account that such Account has been assigned to
the Administrative Agent hereunder and that any payments due or to
become due in respect of such Account are to be made directly to the
Administrative Agent or its designee.
(iii) Each Grantor will perform and comply in all material
respects with all of its material obligations in respect of its
Accounts and the exercise by the Administrative Agent of any of its
rights hereunder shall not release such Grantor from any of its duties
or obligations.
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to an Account in any
manner which could reasonably be expected to materially adversely
affect the value of the Collateral, (B) 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) which could reasonably be expected to materially adversely
affect the value of the Collateral or
13
(C) fail to deliver to the Administrative Agent a copy of each written
material demand, notice or document received by it which could
reasonably be expected to materially adversely affect the value of the
Collateral relating in any way to any material agreement giving rise to
an Account.
(v) Other than in the ordinary course of business as generally
conducted by each Grantor, no Grantor will (A) grant any extension of
the time of payment of any of the Accounts with a face amount in excess
of $500,000 or (B) 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 hereon.
(vi) At the times set forth in Section 7.1(d) of the Credit
Agreement or, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent or the Required Lenders, the Grantors shall
deliver to the Administrative Agent with a copy for each Lender an
Accounts Aging Report. Unless otherwise indicated thereon or in writing
by the Grantors, each Accounts Aging Report delivered by the Grantors
to the Administrative Agent shall constitute a representation by the
Grantors with respect to the Accounts listed thereon that: (A) such
Accounts are genuine, are not evidenced by a judgment and are evidenced
by invoices issued in respect thereof; (B) such Accounts represent
undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto or in
accordance with past practices; (C) the amounts of the face value
shown, and any invoices and statements delivered to the Administrative
Agent with respect to any Account are owing to the applicable Grantor
and are not contingent for any reason; (D) there are no material
setoffs, counterclaims or disputes existing or asserted with respect to
such Accounts, and such Grantor has not made any agreement with any
Account Debtor thereunder for any deduction therefrom; (E) no Grantor
has knowledge of any facts, events, or occurrences which in any way
impair in any material respect the validity or enforceability of any
such Account or tend to reduce the amount payable thereunder from the
amount of the invoice face value shown on any Accounts Aging Report and
on all contracts, invoices and statements delivered to the
Administrative Agent with respect thereto; (F) no Grantor has knowledge
that any Account Debtor under any such Account did not have the
capacity to contract at the time any contract or other document giving
rise to the Account was executed; (G) the goods giving rise to such
Accounts are not, and were not at the time of the sale thereof, subject
to any Lien, except Permitted Liens; (H) no Grantor has knowledge of
any fact or circumstance which would materially impair the validity or
collectability of any such Account; (I) to the applicable Grantor's
knowledge, there are no proceedings or actions which are pending or,
threatened against any Account Debtor under such Accounts which could
result in any material adverse change in such Account Debtors
financial condition; (J) no security interest in such Accounts has been
granted to any Person other than that granted to the Administrative
Agent pursuant hereto and other Permitted Liens; and (K) each invoice
or other evidence of payment obligation furnished to Account Debtors
with respect to such Accounts is issued in the applicable Grantor's
corporate name.
14
(c) Inventory, Equipment, Etc.
(i) At the times set forth in Section 7.1(d) of the Credit
Agreement and, after the occurrence and during the continuance of an
Event of Default, from time to time, at the request of the
Administrative Agent or the Required Lenders, the Grantors shall
deliver to the Administrative Agent with a copy for each Lender a
Schedule of Inventory. Unless otherwise indicated thereon or in writing
by the Grantors, each Schedule of Inventory delivered by the Grantors
to the Administrative Agent shall constitute a representation by each
Grantor with respect to the Inventory listed thereon or referred to
therein that: (A) all such Inventory is located at places of business
listed in the Perfection Certificate or as to which the applicable
Grantor has complied with the provisions of Section 4(a)(i) or on the
premises identified on the then current Schedule of Inventory or is
Inventory in transit from one such location to another such location;
(B) no such Inventory is subject to any Lien whatsoever, except for
Permitted Liens; (C) no such Inventory in aggregate value exceeding
$1,000,000 at any time is, nor shall at any time or times be, kept,
stored or maintained with a bailee, warehouseman, carrier or similar
party (other than a carrier delivering Inventory to a purchaser in the
ordinary course of such Grantor's business) unless the Administrative
Agent has given its consent and the applicable Grantor has complied
with the provisions of Section 4(c)(iii); and (D) no such Inventory in
aggregate value exceeding $1,000,000 is, nor shall at any time or times
be, kept, stored or maintained with a consignee unless the
Administrative Agent has given its consent and the applicable Grantor
has complied with the provisions of Section 4(c)(iii).
(ii) Each Grantor will cause the Administrative Agent, for the
ratable benefit of the Administrative Agent and the Lenders, to be
named as loss payee on each insurance policy covering risks relating to
any of its Inventory or Equipment, as reasonably requested by the
Administrative Agent. Each Grantor will deliver to the Administrative
Agent, upon request of the Administrative Agent, copies of the
insurance policies for such insurance. Each such insurance policy shall
provide that all insurance proceeds shall be adjusted with and payable
to the Administrative Agent, and provide that no cancellation or
termination thereof shall be effective until at least thirty (30) days
have elapsed after receipt by the Administrative Agent of written
notice thereof. The Administrative Agent agrees that, as long as no
Default or Event of Default has occurred and is continuing, any such
net cash proceeds received by it in an aggregate amount of (i) less
than $2,000,000 shall be promptly paid over to the Grantors and (ii)
greater than or equal to $2,000,000 shall be promptly paid over to the
Grantors who hereby agree to use such net cash proceeds in a diligent
manner to replace or restore the damaged property to which such
insurance proceeds relate within three hundred and sixty-five (365)
days of receipt of such proceeds. All such loss proceeds not so
utilized within such three hundred and sixty-five (365) day period
shall be applied to the Obligations in accordance with Section
2.5(b)(ii) of the Credit Agreement. Any surplus shall be paid by the
Administrative Agent to such Grantor or applied as may be otherwise
required by law.
15
Any deficiency thereon shall be paid by such Grantor to the
Administrative Agent, on behalf of the Administrative Agent and the
Lenders, on demand.
(iii) If any Inventory or Equipment exceeding in value
$1,000,000 in the aggregate is at any time in the possession or control
of any warehouseman, bailee (other than a carrier transporting
Inventory to a purchaser in the ordinary course of business), or any of
any Grantor's agents or processors, such Grantor shall notify in
writing such warehouseman, bailee, agent or processor of the Security
Interests created hereby, shall obtain such warehousemans, bailees,
agents or processors agreement in writing to hold all such Inventory
or Equipment for the Administrative Agents account subject to the
Administrative Agents instructions, and shall cause such warehouseman,
bailee, agent or processor to issue and deliver to the Administrative
Agent warehouse receipts, bills of lading or any similar documents
relating to such Inventory in the Administrative Agents name and in
form and substance reasonably acceptable to the Administrative Agent.
(iv) If at any time during the term of this Agreement, any
Inventory or Equipment exceeding in value $1,000,000 is placed by any
Grantor on consignment with any consignee, such Grantor shall, prior to
the delivery of any such consigned Inventory or Equipment: (A) provide
the Administrative Agent with a copy of all consignment agreements and
other instruments and documentation to be used in connection with such
consignment, all of which agreements, instruments and documentation
shall be reasonably acceptable in form and substance to the
Administrative Agent; (B) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory or
Equipment showing the consignee as debtor, such Grantor as secured
party and the Administrative Agent as assignee of secured party; (C)
prepare, execute and file appropriate financing statements with respect
to any consigned Inventory or Equipment showing such Grantor as debtor
and the Administrative Agent as secured party; (D) after all financing
statements referred to in clauses (B) and (C) above shall have been
filed, conduct a search of all filings made against the consignee in
all jurisdictions in which the Inventory or Equipment to be consigned
is to be located while on consignment, and deliver to the
Administrative Agent copies of the results of all such searches; (E)
notify, in writing, all creditors of the consignee which would be
holders of security interests in the Inventory or Equipment to be
consigned that such Grantor expects to deliver certain Inventory to the
consignee, all of which Inventory shall be described in such notice by
item or type; and (F) if reasonably requested by the Administrative
Agent, deliver an opinion of counsel to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers of such Grantor and
such consignee have been filed in each filing office necessary or
desirable for such purposes and that all filing fees and taxes, if any,
payable in connection with such filings have been paid in full.
(d) Contracts, Etc.
16
(i) Each Grantor will perform and comply in all material
respects with all its obligations under the Contracts.
(ii) No Grantor will amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be
expected to materially adversely affect the value of such Contract,
except for such amendments, modifications, terminations or waivers in
the ordinary course of such Grantor's business.
(iii) Each Grantor will exercise promptly and diligently each
and every material right which it may have under the Contracts (other
than any right of termination).
(iv) Each Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it
relating in any way to any Contract that questions the validity or
enforceability of such Contract.
(e) Intellectual Property, Etc.
(i) Each Grantor (either itself or through licensees) will (A)
continue to use each material 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,
(B) maintain as in the past the quality of products and services
offered under such Trademark, (C) use such Trademark with the
appropriate notice of registration and all other notices and legends
required by applicable Requirements of Law, (D) 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 and the Administrative Agent, shall obtain a perfected
security interest in such xxxx pursuant to this Agreement, and (E) not
(and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(ii) No Grantor (either itself or through licensees) will do
any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(iii) Each Grantor (either itself or through licensees) (A)
will employ each material Copyright and (B) will not (and will not
permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any material portion of the Copyrights may
become invalidated or otherwise impaired. No Grantor will (either
itself or through licensees) do any act whereby any material portion of
the Copyrights may fall into the public domain.
17
(iv) No Grantor (either itself or through licensees) will do
any act that knowingly uses any material Intellectual Property to
infringe the intellectual property rights of any other Person.
(v) Each Grantor will notify the Administrative Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any material
adverse determination or development (including, without limitation,
the institution of, or any such material adverse determination or
development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or
tribunal in any country) regarding such Grantor's ownership of, or the
validity of, any material Intellectual Property or such Grantor's right
to register the same or to own and maintain the same.
(vi) Whenever a Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for
the registration of any Intellectual Property with the United States
Patent and Trademark Office, the United States Copyright Office or any
similar office or agency in any other country or any political
subdivision thereof, such Grantor shall report such filing to the
Administrative Agent within five (5) Business Days after the last day
of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as
the Administrative Agent may request to evidence the Administrative
Agents and the Lenders Security Interests in any Copyright, Patent or
Trademark and the goodwill and General Intangibles of such Grantor
relating thereto or represented thereby.
(vii) Each Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, the United States Copyright
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 material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(viii) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, the applicable
Grantor shall (A) take such actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such Intellectual
Property and (B) if such Intellectual Property is of material economic
value, promptly notify the Administrative Agent after it learns thereof
and 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.
(f) Indemnification. Each Grantor agrees to pay, and to save
the Administrative Agent and the Lenders harmless from, any and all liabilities,
reasonable costs and expenses
18
(including, without limitation, reasonable legal fees and expenses) incurred by
the Administrative Agent or any Lender (i) with respect to, or resulting from,
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, complying with any Applicable Law applicable to any of the
Collateral or (iii) in connection with any of the transactions contemplated by
this Agreement (except to the extent any such liabilities, costs and expenses
result from the gross negligence or willful misconduct of the Administrative
Agent or such Lenders). In any suit, proceeding or action brought by the
Administrative Agent under any Account for any sum owing thereunder, or to
enforce any provisions of any Account, each Grantor will save, indemnify and
keep the Administrative Agent and each Lender harmless from and against all
expense, loss or damage suffered by the Administrative Agent or any Lender by
reason of any defense, setoff, counterclaim, recoupment or reduction or
liability whatsoever of the Account Debtor or any other obligor thereunder,
arising out of a breach by any Grantor 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 obligor or its successors from any Grantor
(except to the extent any such expense, loss or damage results from the gross
negligence or willful misconduct of the Administrative Agent or such Lenders).
The obligations of the Grantors under this Section 4(f) shall survive the
termination of the other provisions of this Agreement.
SECTION 5. Reporting and Recordkeeping. Each Grantor
respectively covenants and agrees with the Administrative Agent and the Lenders
that from and after the date of this Agreement and until the Aggregate
Commitment is terminated and all Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Each Grantor will keep
and maintain at its own cost and expense adequate records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral in accordance with past practices. All Chattel Paper given to such
Grantor with respect to any Accounts will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby are subject to the
security interests of First Union National Bank, as Administrative Agent". For
the Administrative Agents and the Lenders further security, each Grantor
agrees that upon the occurrence and during the continuance of any Event of
Default, upon the request of the Administrative Agent or the Required Lenders,
such Grantor shall deliver and turn over any such books and records directly to
the Administrative Agent or its designee. Each Grantor shall permit any
representative of the Administrative Agent to inspect such books and records in
accordance with Section 8.11 of the Credit Agreement and will provide
photocopies thereof to the Administrative Agent upon its reasonable request.
19
(b) Certain Provisions Regarding Maintenance of Records and
Reporting Re: Accounts.
(i) In the event any amounts due and owing in excess of
$500,000 individually or $1,000,000 in the aggregate are in dispute
between any Account Debtor and any Grantor, such Grantor shall provide
the Administrative Agent with written notice thereof promptly after
such Grantor's learning thereof, explaining the reason for the dispute,
all claims related thereto and the amount in controversy.
(ii) Each Grantor will promptly notify the Administrative
Agent in writing if any Account or Accounts, the face value of which
exceeds $500,000 individually or $1,000,000 in the aggregate, arises or
arise out of a contract with the United States of America, or any
department, agency, subdivision or instrumentality thereof, or of any
state (or department, agency, subdivision or instrumentality thereof)
where such state has a state assignment of claims act or other law
comparable to the Federal Assignment of Claims Act. Each Grantor will
take any action required or requested by the Administrative Agent or
give notice of the Administrative Agents Security Interest in such
Accounts under the provisions of the Federal Assignment of Claims Act
or any comparable law or act enacted by any state or local Governmental
Authority. Any notifications or other documents executed and delivered
to the Administrative Agent in connection with the Federal Assignment
of Claims Act or any comparable state law may be promptly filed with
the appropriate Governmental Authority by the Administrative Agent or
held by the Administrative Agent until the Administrative Agent or the
Required Lenders decide in its or their sole discretion to make any
such filing.
(iii) Each Grantor will promptly upon, but in no event later
than ten (10) Business Days after: (A) such Grantor's learning thereof,
inform the Administrative Agent, in writing, of any material delay in
such Grantor's performance of any of its obligations to any Account
Debtor and of any assertion of any claims, offsets or counterclaims by
any Account Debtor and of any allowances, credits and/or other monies
granted by such Grantor to any Account Debtor, in each case involving
amounts in excess of $500,000 for any single Account or Account Debtor
or in excess of $1,000,000 in the aggregate for all Accounts and
Account Debtors; and (B) such Grantor's receipt or learning thereof,
furnish to and inform the Administrative Agent of any adverse
information that, to the knowledge of such Grantor, could reasonably be
expected to materially adversely affect the financial condition of any
Account Debtor with respect to Accounts exceeding $500,000 individually
or $1,000,000 in the aggregate.
(c) Further Identification of Collateral. Each Grantor will,
if so reasonably requested by the Administrative Agent, furnish to the
Administrative Agent 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.
20
(d) Notices. In addition to the notices required by Section
5(b), each Grantor will advise the Administrative Agent promptly, in reasonable
detail, (i) of any material Lien or claim made or asserted against any of the
Collateral, (ii) of any material adverse change in the composition of the
Collateral and (iii) of the occurrence of any other event which could reasonably
be expected to have a material adverse effect on the Collateral or on the
validity, perfection or priority of the Security Interests.
SECTION 6. Collateral Account.
(a) There is hereby established with the Administrative Agent
a Collateral Account in the name and under the exclusive dominion and control of
the Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to Section 6(b) or any other provision of this
Agreement. Any income received by the Administrative Agent with respect to the
balance from time to time on deposit in the Collateral Account, including any
interest or capital gains on investments of amounts on deposit in the Collateral
Account, shall remain, or be deposited, in the Collateral Account together with
any investments from time to time made pursuant to Section 6(c), shall vest in
the Administrative Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Obligations until applied thereto as
hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event
of Default, if requested by the Administrative Agent, each Grantor shall
instruct all Account Debtors and other Persons obligated in respect of all
Accounts to make all payments in respect of the Accounts either (i) directly to
the Administrative Agent (by instructing that such payments be remitted to a
post office box which shall be in the name and under the exclusive dominion and
control of the Administrative Agent) or (ii) to one or more banks in any state
in the United States (by instructing that such payments be remitted to a post
office box which shall be in the name and under the exclusive dominion and
control of any such bank) under a Lockbox Letter substantially in the form of
Annex I hereto duly executed by each Grantor and any such bank or under other
arrangements, in form and substance reasonably satisfactory to the
Administrative Agent, pursuant to which such Grantor shall have irrevocably
instructed such bank (and such bank shall have agreed) to remit all proceeds of
such payments directly to the Administrative Agent for deposit into the
Collateral Account or as the Administrative Agent may otherwise instruct such
bank, and thereafter if the proceeds of any Collateral shall be received by any
of the Grantors, such Grantor will promptly deposit such proceeds into the
Collateral Account and until so deposited, all such proceeds shall be held in
trust by such Grantor for and as the property of the Administrative Agent, for
the benefit of itself and the Lenders, and shall not be commingled with any
other funds or property of such Grantor. At any time after the occurrence and
during the continuance of an Event of Default, the Administrative Agent may
itself so instruct each Grantor's Account Debtors. All such payments made to the
Administrative Agent shall be deposited in the Collateral Account.
21
(c) Amounts on deposit in the Collateral Account shall be
promptly liquidated and applied to the payment of the Obligations in the manner
specified in Section 10.
SECTION 7. General Authority.
(a) Each Grantor hereby irrevocably appoints the
Administrative Agent their true and lawful attorney, with full power of
substitution, in the name of each Grantor, the Administrative Agent, the Lenders
or otherwise, for the sole use and benefit of the Administrative Agent and the
Lenders, but at the Grantors' expense, to exercise, at any time from time to
time all or any of the following powers:
(i) to file any financing statements, financing statement
amendments, continuation statements and any other agreements,
instruments, documents and papers to evidence the Security Interests in
the Collateral;
(ii) to demand, xxx for, collect, receive and give acquittance
for any and all monies due or to become due with respect to any
Collateral or by virtue thereof;
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral;
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral and the Proceeds thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof;
(v) to do all acts and things which the Administrative Agent
deems necessary to protect, preserve or realize upon the Collateral and
the Security Interests therein and to effect the intent of this
Agreement, all as fully and effectively as if the Administrative Agent
were the absolute owner thereof; and
(vi) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference to the
Collateral;
provided that the Administrative Agent shall not take any of the actions
described in this Section 7(a), except those described in clause (i) above,
unless an Event of Default shall have occurred and be continuing. The
Administrative Agent shall give the Grantors not less than ten (10) Business
Days prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Grantors agree that any such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC (to
the extent such Section is applicable).
(b) Ratification. The Grantors hereby ratify all that said
attorney shall lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to Section 7(a) is a power coupled with an interest
and shall be irrevocable.
22
(c) Other Powers. The Grantors also authorize the
Administrative Agent, after the occurrence and during the continuance of an
Event of Default, at any time and from time to time, to execute, in connection
with any sale provided for in Section 8, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
(a) If any Event of Default has occurred and is continuing,
the Administrative Agent may, upon the request of the Required Lenders (and only
upon such request), exercise on behalf of the Administrative Agent and the
Lenders all rights of a secured party under the UCC (whether or not in effect in
the jurisdiction where such rights are exercised) and, in addition, the
Administrative Agent may, upon the request of the Required Lenders (and only
upon such request), (i) withdraw all cash, if any, in the Collateral Account and
investments made with amounts on deposit in the Collateral Account, and apply
such monies, investments and other cash, if any, then held by it as Collateral
as specified in Section 10 and (ii) if there shall be no such monies,
investments or cash or if such monies, investments or cash shall be insufficient
to pay the Obligations then outstanding in full, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future delivery,
and at such price or prices as the Administrative Agent may deem satisfactory.
The Administrative Agent or any Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations or if otherwise permitted under
applicable law, at any private sale) and thereafter hold the same, absolutely,
free from any right or claim of whatsoever kind. Each Grantor will execute and
deliver such documents and take such other action as the Administrative Agent
deems reasonably necessary or advisable in order that any such sale may be made
in compliance with law. Upon any such sale the Administrative Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold (without warranty). Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely, free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Grantor. To
the extent permitted by law, each Grantor hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale shall be given to the
Grantors ten (10) Business Days prior to such sale and (A) in case of a public
sale, state the time and place fixed for such sale, and (B) in the case of a
private sale, state the day after which sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Administrative Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an entirety or
in separate parcels, as the Administrative Agent may determine. The
Administrative Agent shall not be obligated to make any such sale pursuant to
any such notice. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Administrative Agent
until the
23
selling price is paid by the purchaser thereof, but the Administrative Agent
shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Administrative Agent, instead
of exercising the power of sale herein conferred upon it, may proceed by a suit
or suits at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction. The Grantors shall remain liable for any
deficiency.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement, the Administrative Agent may (i) require each
Grantor to, and each Grantor agrees that it will, at its expense and upon the
request of the Administrative Agent, forthwith assemble all or any part of the
Collateral as directed by the Administrative Agent and make it available at a
place designated by the Administrative Agent which is, in the Administrative
Agents opinion, reasonably convenient to the Administrative Agent and such
Grantor, whether at the premises of such Grantor or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premises where any of the Collateral is or may
be located and, without charge or liability to the Administrative Agent, seize
and remove such Collateral from such premises, (iii) have access to and use such
Grantor's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer such Collateral without charge
in or by means of any storage or transportation facility owned or leased by such
Grantor, process, repair or recondition such Collateral or otherwise prepare it
for disposition in any manner and to the extent the Administrative Agent deems
appropriate.
SECTION 9. Limitation on Duty of Administrative Agent in
Respect of Collateral. The Administrative Agents sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC 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 officers, directors, 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 any Grantor 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 Agents 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 any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct. The Administrative Agent shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the
Administrative Agent in good faith.
24
SECTION 10. Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be applied by
the Administrative Agent in accordance with Section 4.5 of the Credit Agreement
and then to payment to the Grantors or their successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds. The Administrative Agent may make distribution hereunder in cash
or in kind or, on a ratable basis, in any combination thereof.
SECTION 11. Concerning the Administrative Agent. The
provisions of Article XII of the Credit Agreement shall inure to the benefit of
the Administrative Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or,
when expressly required by this Agreement or the Credit Agreement, all
the Lenders) or, in the absence of such instructions, in accordance
with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by reason of any
action or omission to act on its part (other than any such action or
inaction constituting gross negligence or willful misconduct). The
Administrative Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
any Grantor.
SECTION 12. Appointment of Collateral Agents. At any time or
times, with, so long as no Default or Event of Default has occurred and is
continuing, the consent of the Grantors (which consent shall not be unreasonably
withheld), in order to comply with any legal requirement in any jurisdiction or
in order to effectuate any provision of the Loan Documents, the Administrative
Agent may appoint a bank or trust company or one or more other Persons, either
to act as collateral agent or agents, jointly with the Administrative Agent or
separately, on behalf of the Administrative Agent and the Lenders with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment (which may, in
the discretion of the Administrative Agent, include provisions for the
protection of such collateral agent similar to the provisions of Section 11).
SECTION 13. Expenses. In the event that the Grantors fail to
comply with the provisions of the Credit Agreement, this Agreement or any other
Loan Document, such that the value of any Collateral or the validity,
perfection, rank or value of the Security Interests are
25
thereby diminished or potentially diminished or put at risk, the Administrative
Agent if requested by the Required Lenders may, but shall not be required to,
effect such compliance on behalf of the Grantors, and the Grantors shall
reimburse the Administrative Agent for the reasonable costs thereof on demand.
All insurance expenses and all reasonable expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, any and all excise, stamp, intangibles, transfer, property, sales,
and use taxes imposed by any state, federal, or local authority or any other
Governmental Authority on any of the Collateral, or in respect of the sale or
other disposition thereof, shall be borne and paid by the Grantors, and if the
Grantors fail promptly to pay any portion thereof when due, the Administrative
Agent or any Lender may, at its option, but shall not be required to, pay the
same and charge the Grantors' account therefor, and the Grantors agree to
reimburse the Administrative Agent or such Lender therefor on demand. All sums
so paid or incurred by the Administrative Agent or any Lender for any of the
foregoing and any and all other sums for which the Grantors may become liable
hereunder and all reasonable costs and expenses (including reasonable attorneys
fees, legal expenses and court costs) incurred by the Administrative Agent or
any Lender in enforcing or protecting the Security Interests or any of their
rights or remedies hereunder shall be payable by the Grantors on demand and
shall bear interest (after as well as before judgment) until paid at the rate
then applicable to Base Rate Loans under the Credit Agreement and shall be
additional Obligations hereunder.
SECTION 14. Notices. Notices. All notices and communications
hereunder to a Grantor shall be made in accordance with Section 13.1 of the
Credit Agreement and given to the addresses or transmission numbers for notices
set forth under its signature below.
SECTION 15. Release and Termination.
(a) Upon any sale, lease, transfer or other disposition of any
item of Collateral by any Grantor in accordance with the terms of the Loan
Documents (other than sales of Collateral in the ordinary course of business
consistent with past practices), the Administrative Agent will, at such
Grantor's expense, execute and deliver to such Grantor such documents as such
Grantor shall request to evidence the release of such item of Collateral from
the assignment and security interests granted hereby.
(b) This Agreement shall remain in effect from the Closing
Date through and including the date upon which all Obligations shall have been
indefeasibly and irrevocably paid and satisfied in full and the Aggregate
Commitment is terminated and upon such date the Security Interests granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantors. Upon any such termination, (i) the Administrative Agent shall promptly
assign, release, transfer and deliver to the Grantors the Collateral held by it
hereunder, all instruments of assignment executed in connection therewith,
together with all monies held by the Administrative Agent or any of its agents
hereunder, free and clear of the Liens hereof and (ii) the Administrative Agent
and the Lenders will promptly execute and deliver to the Grantors such documents
and instruments (including but not limited to appropriate UCC termination
statements) as the Grantors shall request to evidence such termination in each
such case at the expense of the Grantors.
26
SECTION 16. Waivers, Non-Exclusive Remedies Remedies. No
failure on the part of the Administrative Agent or any Lender to exercise, and
no delay in exercising and no course of dealing with respect to, any right under
the Credit Agreement, this Agreement or any other Loan Document shall operate as
a waiver thereof or hereof; nor shall any single or partial exercise by the
Administrative Agent or any Lender of any right under the Credit Agreement, this
Agreement or any other Loan Document preclude any other or further exercise
thereof, and the exercise of any rights under this Agreement, the Credit
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law. This Agreement is a Loan Document executed
pursuant to the Credit Agreement.
SECTION 17. Successors and Assigns. This Agreement is for the
benefit of the Administrative Agent and the Lenders and their successors and
assigns (as permitted by the Credit Agreement), and in the event of an
assignment of all or any of the Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on the Grantors and their
successors and assigns; provided, that the Grantors may not assign any of their
rights or obligations hereunder without the prior written consent of the
Administrative Agent and the Lenders.
SECTION 18. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Grantors and the Administrative Agent with the
consent of the Required Lenders (or, when expressly required by this Agreement
or the Credit Agreement, all of the Lenders).
SECTION 19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 20. Consent to Jurisdiction. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general jurisdiction
of the courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
27
similar form of mail), postage prepaid, to such Grantor at its address
set forth under its signature below;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to xxx in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
SECTION 21. Waiver of Jury Trial. EACH GRANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
SECTION 22. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the
Administrative Agent and the Lenders in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (b) the invalidity or
unenforceability of any provisions hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 23. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
SECTION 24. Counterparts. This Agreement may be executed by
the parties hereto in several counterparts (including by telecopy), each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
[Signature Pages Follow]
28
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
HUMONGOUS ENTERTAINMENT, INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
29
WIZARDWORKS GROUP, INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
SINGLETRAC ENTERTAINMENT TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
30
SWAN ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
CANDEL INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
ONE ZERO MEDIA, INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
FORMGEN, INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
GOLD MEDALLION SOFTWARE INC.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
MEDIATECHNICS, LTD.
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
LEGEND ENTERTAINMENT COMPANY LLC
By: /s/ Xxxxxx Xxxxx
--------------------
Name: Xxxxxx Xxxxx
Title: Vice President
Address for notices:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx Xxxxx
Attention: Vice President, Legal Affairs
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ Xxxxx Xxxxxxx
----------------------------
Name: Xxxxx Xxxxxxx
Title: Senior Vice President
