EXHIBIT 4.2
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Security
Agreement") dated as of April 11, 2003 is by and among the parties identified as
"Grantors" on the signature pages hereto and such other parties as may become
Grantors hereunder after the date hereof (individually a "Grantor", and
collectively the "Grantors") and BANK OF AMERICA, N.A., as administrative agent
(in such capacity, the "Administrative Agent") for the holders of the Secured
Obligations referenced below.
W I T N E S S E T H
WHEREAS, a $250 million credit facility has been established in favor
of School Specialty, Inc., a Wisconsin corporation (the "Borrower"), pursuant to
the terms of that Credit Agreement (as amended, modified, supplemented and
extended from time to time, the "Credit Agreement") dated as of the date hereof
among the Borrower, the Guarantors identified therein, the Lenders identified
therein and Bank of America, N.A., as Administrative Agent;
WHEREAS, this Security Agreement is required under the terms of the
Credit Agreement; and
WHEREAS, this Security Agreement is given in amendment to, restatement
of and substitution for the Amended and Restated Security Agreement dated as of
September 30, 1998 among the Grantors and Bank of America, N.A., as
administrative agent.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Capitalized terms used and not otherwise defined herein shall have
the meanings provided in the Credit Agreement.
(b) The following terms shall have the meanings assigned thereto in the
Uniform Commercial Code in effect in the State of North Carolina on the date
hereof: Accession, Account, As-Extracted Collateral, Chattel Paper, Commercial
Tort Claim, Commingled Goods, Consumer Goods, Deposit Account, Document,
Equipment, Farm Products, Fixtures, General Intangible, Goods, Instrument,
Inventory, Investment Property, Letter-of-Credit Right, Manufactured Home,
Proceeds, Software, Standing Timber, Supporting Obligation and Tangible Chattel
Paper.
(c) As used herein, the following terms shall have the meanings set
forth below:
"Collateral" has the meaning provided in Section 2 hereof.
"Copyright License" means any written agreement, naming any Grantor
as licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 6.17 to the Credit
Agreement.
"Copyrights" means (a) all registered United States copyrights in
all Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright Office
including, without limitation, any thereof referred to in Schedule 6.17
to the Credit Agreement, and (b) all renewals thereof including,
without limitation, any thereof referred to in Schedule 6.17 to the
Credit Agreement.
"Patent License" means any agreement, whether written or oral,
providing for the grant by or to a Grantor of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule 6.17 to the Credit
Agreement.
"Patents" means (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any letters patent referred to in Schedule 6.17 to
the Credit Agreement, and (b) all applications for letters patent of
the United States or any other country and all divisions, continuations
and continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 6.17 to the Credit Agreement.
"Secured Obligations" means, without duplication, (i) all of the
obligations of the Loan Parties to the Lenders (including the L/C
Issuer and the Swing Line Lender) and the Administrative Agent, under
the Credit Agreement or any other Loan Document (including, but not
limited to, any interest accruing after the commencement of a
proceeding by or against any Loan Party under any Debtor Relief Laws,
regardless of whether such interest is an allowed claim under such
proceeding), whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, howsoever
evidenced, created, held or acquired, whether primary, secondary,
direct, contingent, or joint and several, as such obligations may be
amended, modified, increased, extended, renewed or replaced from time
to time, (ii) all of the obligations owing by the Loan Parties under
any Swap Contract between any Loan Party and any Lender or Affiliate or
a Lender, whether now existing or hereafter arising and (iii) all costs
and expenses incurred in connection with enforcement and collection of
the obligations described in the foregoing clauses (i) and (ii),
including reasonable attorneys' fees and the allocated cost of internal
counsel.
"Trademark License" means any agreement, written or oral, providing
for the grant by or to a Grantor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 6.17
to the Credit Agreement.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 6.17 to the Credit Agreement, and (b)
all renewals thereof.
"UCC" means the Uniform Commercial Code.
"Work" means any work that is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Administrative Agent, for the benefit of the
holders of the Secured Obligations, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Grantor
in and to all of the following, whether now owned or existing or owned,
acquired, or arising hereafter (collectively, the "Collateral"):
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(a) all Accounts;
(b) all cash and currency;
(c) all Chattel Paper;
(d) those Commercial Tort Claims identified on Schedule 2(d)
attached hereto;
(e) all Copyrights;
(f) all Copyright Licenses;
(g) all Deposit Accounts;
(h) all Documents;
(i) all Equipment;
(j) all Fixtures;
(k) all General Intangibles;
(l) all Instruments;
(m) all Inventory;
(n) all Investment Property;
(o) all Letter-of-Credit Rights;
(p) all Patents;
(q) all Patent Licenses;
(r) all Software;
(s) all Supporting Obligations;
(t) all Trademarks;
(u) all Trademark Licenses;
(v) all other personal property of such Grantor of whatever
type or description; and
(w) to the extent not otherwise included, all Accessions and
all Proceeds of any and all of the foregoing.
Notwithstanding anything to the contrary contained herein, the
security interests granted under this Security Agreement shall not
extend to (i) any Property that is subject to a Lien securing
purchase money Indebtedness permitted under the Credit Agreement
pursuant to documents that prohibit such Grantor from granting any
other Liens in such Property, (ii) any lease, license or other
contract if the grant of a security interest in such lease, license
or contract in the manner
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contemplated by this Security Agreement is prohibited by the terms of
such lease, license or contract or by law and would result in the
termination of such lease, license or contract, but only to the extent
that (A) after reasonable efforts, consent from the relevant party or
parties has not been obtained and (B) any such prohibition could not be
rendered ineffective pursuant to the UCC or any other applicable law
(including Debtor Relief Laws) or principles of equity or (iii) any
Securitization Related Property.
The Grantors and the Administrative Agent, on behalf of the holders of
the Secured Obligations, hereby acknowledge and agree that the security interest
created hereby in the Collateral (i) constitutes continuing collateral security
for all of the Secured Obligations, whether now existing or hereafter arising
and (ii) is not to be construed as an assignment of any Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of the
Grantors shall remain liable under each of the Accounts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. Neither the Administrative Agent nor any holder of the
Secured Obligations shall have any obligation or liability under any Account (or
any agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Administrative Agent or any holder of the
Secured Obligations of any payment relating to such Account pursuant hereto, nor
shall the Administrative Agent or any holder of the Secured Obligations be
obligated in any manner to perform any of the obligations of a Grantor under or
pursuant to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under
any Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts that may have been assigned to it or to which it may be entitled
at any time or times.
(b) At any time after the occurrence and during the continuation of an
Event of Default, the Administrative Agent shall have the right, but not the
obligation, to make test verifications of the Accounts in any manner and through
any medium that it reasonably considers advisable, and the Grantors shall
furnish all such assistance and information as the Administrative Agent may
require in connection with such test verifications, (ii) upon the Administrative
Agent's request and at the expense of the Grantors, the Grantors shall cause
independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Accounts and (iii)
the Administrative Agent in its own name or in the name of others may
communicate with account debtors on the Accounts to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Grantor hereby represents and
warrants to the Administrative Agent, for the benefit of the holders of the
Secured Obligations, that so long as any of the Secured Obligations remains
outstanding and until all of the commitments relating thereto have been
terminated:
(a) Ownership. Each Grantor is the legal and beneficial owner of
its Collateral and has the right to pledge, sell, assign or transfer
the same.
(b) Security Interest/Priority. This Security Agreement creates a
valid security interest in favor of the Administrative Agent, for the
benefit of the holders of the Secured Obligations, in the Collateral of
such Grantor and, when properly perfected by filing, shall constitute a
valid perfected
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security interest in such Collateral, to the extent such security
interest can be perfected by filing under the UCC, free and clear of
all Liens except for Permitted Liens.
(c) Types of Collateral. None of the Collateral consists of, or is
the Accessions or the Proceeds of, As-Extracted Collateral, Consumer
Goods, Farm Products, Manufactured Homes, or Standing Timber.
(d) Accounts. (i) Each Account of the Grantors and the papers and
documents relating thereto are genuine and in all material respects
what they purport to be, (ii) each Account arises out of (A) a bona
fide sale of goods sold and delivered by such Grantor (or is in the
process of being delivered) or (B) services theretofore actually
rendered by such Grantor to, the account debtor named therein and (iii)
no surety bond was required or given in connection with any Account of
a Grantor or the contracts or purchase orders out of which they arose.
(e) Inventory. No Inventory is held by any Person other than a
Grantor pursuant to consignment, sale or return, sale on approval or
similar arrangement.
(f) Copyrights, Patents and Trademarks.
(i) Schedule 6.17 to the Credit Agreement includes all
Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks and Trademark Licenses owned by any Grantor in its own
name, or to which any Grantor is a party, as of the date hereof.
(ii) To each Grantor's knowledge, each material Copyright,
Patent and Trademark of such Grantor is valid, subsisting,
unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 6.17 to the Credit
Agreement, none of the material Copyrights, Patents and Trademarks
of any Grantor is the subject of any licensing or franchise
agreement.
(iv) To each Grantor's knowledge, no holding, decision or
judgment has been rendered by any Governmental Authority that would
limit, cancel or question the validity of any material Copyright,
Patent or Trademark of any Grantor.
(v) No action or proceeding is pending seeking to limit,
cancel or question the validity of any material Copyright, Patent
or Trademark of any Grantor, or that, if adversely determined,
could reasonably be expected to have a material adverse effect on
the value of such Copyright, Patent or Trademark.
(vi) All applications pertaining to the material Copyrights,
Patents and Trademarks of each Grantor have been duly and properly
filed, and all registrations or letters pertaining to such
Copyrights, Patents and Trademarks have been duly and properly
filed and issued, and all of such Copyrights, Patents and
Trademarks are valid and enforceable.
5. Covenants. Each Grantor covenants that, so long as any of the
Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Grantor shall:
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein other than
Permitted Liens.
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(b) Instruments/Tangible Chattel Paper/Documents. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Tangible Chattel Paper, or if any
property constituting Collateral shall be stored or shipped subject to
a Document, (i) ensure that such Instrument, Tangible Chattel Paper or
Document is either in the possession of such Grantor at all times or,
if requested by the Administrative Agent, is immediately delivered to
the Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent and (ii) ensure that any Collateral consisting of
Tangible Chattel Paper is marked with a legend acceptable to the
Administrative Agent indicating the Administrative Agent's security
interest in such Tangible Chattel Paper.
(c) Perfection of Security Interest. Execute and deliver to the
Administrative Agent such agreements, assignments or instruments
(including affidavits, notices, reaffirmations and amendments and
restatements of existing documents, as the Administrative Agent may
reasonably request) and do all such other things as the Administrative
Agent may reasonably deem necessary, appropriate or convenient (i) to
assure to the Administrative Agent the effectiveness and priority of
its security interests hereunder, including (A) such instruments as the
Administrative Agent may from time to time reasonably request in order
to perfect and maintain the security interests granted hereunder in
accordance with the UCC, (B) with regard to Copyrights, a Notice of
Grant of Security Interest in Copyrights for filing with the United
States Copyright Office in the form of Schedule 5(f)(i) attached
hereto, (C) with regard to Patents, a Notice of Grant of Security
Interest in Patents for filing with the United States Patent and
Trademark Office in the form of Schedule 5(f)(ii) attached hereto and
(D) with regard to Trademarks, a Notice of Grant of Security Interest
in Trademarks for filing with the United States Patent and Trademark
Office in the form of Schedule 5(f)(iii) attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise
protect and assure the Administrative Agent of its rights and interests
hereunder. To that end, each Grantor authorizes the Administrative
Agent to file one or more financing statements (with collateral
descriptions broader and/or less specific than the description of the
Collateral contained herein) disclosing the Administrative Agent's
security interest in any or all of the Collateral of such Grantor
without such Grantor's signature thereon, and further each Grantor also
hereby irrevocably makes, constitutes and appoints the Administrative
Agent, its nominee or any other Person whom the Administrative Agent
may designate, as such Grantor's attorney-in-fact with full power and
for the limited purpose to sign in the name of such Grantor any such
financing statements (including renewal statements), amendments and
supplements, notices or any similar documents that in the
Administrative Agent's reasonable discretion would be necessary,
appropriate or convenient in order to perfect and maintain perfection
of the security interests granted hereunder, such power, being coupled
with an interest, being and remaining irrevocable so long as the
Secured Obligations remain unpaid and until the commitments relating
thereto shall have been terminated. Each Grantor hereby agrees that a
carbon, photographic or other reproduction of this Security Agreement
or any such financing statement is sufficient for filing as a financing
statement by the Administrative Agent without notice thereof to such
Grantor wherever the Administrative Agent may in its sole discretion
desire to file the same. In the event for any reason the law of any
jurisdiction other than North Carolina becomes or is applicable to the
Collateral of any Grantor or any part thereof, or to any of the Secured
Obligations, such Grantor agrees to execute and deliver all such
instruments and to do all such other things as the Administrative Agent
in its sole discretion reasonably deems necessary, appropriate or
convenient to preserve, protect and enforce the security interests of
the Administrative Agent under the law of such other jurisdiction (and,
if a Grantor shall fail to do so promptly upon the request of the
Administrative Agent, then the Administrative Agent may execute any and
all such requested documents on behalf of such Grantor pursuant to the
power of attorney granted hereinabove). If any Collateral is in the
possession or control of a Grantor's agents and the Administrative
Agent so requests, such Grantor agrees to notify such agents in writing
of the Administrative Agent's security interest therein and, upon the
Administrative Agent's request, instruct them to hold all such
Collateral for the account of the holders of the Secured Obligations
and
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subject to the Administrative Agent's instructions. Each Grantor agrees
to xxxx its books and records to reflect the security interest of the
Administrative Agent in the Collateral.
(d) Control. Execute and deliver all agreements, assignments,
instruments or other documents as the Administrative Agent shall
reasonably request for the purpose of obtaining and maintaining control
within the meaning of the UCC with respect to any Collateral consisting
of Deposit Accounts, Investment Property, Letter-of-Credit Rights and
Electronic Chattel Paper.
(e) Collateral held by Warehouseman, Bailee, etc. If any Collateral
is at any time in the possession or control of a warehouseman, bailee,
agent or processor of such Grantor, (i) notify the Administrative Agent
of such possession or control, (ii) notify such Person of the
Administrative Agent's security interest in such Collateral, (iii)
instruct such Person to hold all such Collateral for the Administrative
Agent's account and subject to the Administrative Agent's instructions
and (iv) use its best efforts to obtain an acknowledgment from such
Person that it is holding such Collateral for the benefit of the
Administrative Agent.
(f) Treatment of Accounts. Not grant or extend the time for payment
of any Account, or compromise or settle any Account for less than the
full amount thereof, or release any Person or property, in whole or in
part, from payment thereof, or allow any credit or discount thereon,
other than as normal and customary in the ordinary course of a
Grantor's business or as required by law.
(g) Covenants Relating to Copyrights. Not do any act or knowingly
omit to do any act whereby any material Copyright may become
invalidated and (A) not do any act, or knowingly omit to do any act,
whereby any material Copyright may become injected into the public
domain; (B) notify the Administrative Agent immediately if it knows
that any material Copyright may become injected into the public domain
or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any court or tribunal in the United States or any other
country) regarding a Grantor's ownership of any such Copyright or its
validity; (C) take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration
of each material Copyright owned by a Grantor including, without
limitation, filing of applications for renewal where necessary; and (D)
promptly notify the Administrative Agent of any material infringement
of any material Copyright of a Grantor of which it becomes aware and
take such actions as it shall reasonably deem appropriate under the
circumstances to protect such Copyright, including, where appropriate,
the bringing of suit for infringement, seeking injunctive relief and
seeking to recover any and all damages for such infringement.
(h) Covenants Relating to Patents and Trademarks.
(i) With respect to each material Trademark of such Grantor,
(A) continue to use such 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) employ such Trademark
with the appropriate notice of registration, (D) not adopt or use
any xxxx that is confusingly similar or a colorable imitation of
such Trademark unless the Administrative Agent, for the ratable
benefit of the holders of the Secured Obligations, shall obtain a
perfected security interest in such xxxx pursuant to this Security
Agreement, and (E) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated.
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(ii) Not do any act, or omit to do any act, whereby any material
Patent may become abandoned or dedicated.
(iii) Notify the Administrative Agent immediately if it knows that
any application or registration relating to any material Patent or
Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any
court or tribunal in any country) regarding a Grantor's ownership of
any material Patent or Trademark or its right to register the same or
to keep and maintain the same.
(iv) Take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country
or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain
each registration of its material Patents and Trademarks, including,
without limitation, filing of applications for renewal, affidavits of
use and affidavits of incontestability.
(v) Promptly notify the Administrative Agent after it learns that
any material Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party and promptly xxx
for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or to take such other
actions as it shall reasonably deem appropriate under the circumstances
to protect such Patent or Trademark.
(i) Commercial Tort Claims.
(i) Promptly notify the Administrative Agent in writing of the
initiation of any Commercial Tort Claim seeking damages in excess of
$5,000,000 before any Governmental Authority by or in favor of such
Grantor or any of its Subsidiaries.
(ii) Execute and deliver such statements, documents and notices
and do and cause to be done all such things as the Administrative Agent
may reasonably deem necessary, appropriate or convenient, or as are
required by law, to create, perfect and maintain the Administrative
Agent's security interest in any Commercial Tort Claim.
6. Advances by Holders of the Secured Obligations. On failure of any
Grantor to perform any of the covenants and agreements contained herein, the
Administrative Agent may, at its sole option and in its sole discretion, perform
the same and in so doing may expend such sums as the Administrative Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures that the
Administrative Agent or the holders of the Secured Obligations may make for the
protection of the security hereof or that may be compelled to make by operation
of law. All such sums and amounts so expended shall be repayable by the Grantors
on a joint and several basis (subject to Section 23 hereof) promptly upon timely
notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 2.08 of the Credit Agreement for Base Rate
Revolving Loans. No such performance of any covenant or agreement by the
Administrative Agent or the holders of the Secured Obligations on behalf of any
Grantor, and no such advance or expenditure therefor, shall relieve the Grantors
of any default under the terms of this Security Agreement, the other Credit
Documents or any other documents relating to the Secured Obligations. The
holders of the Secured Obligations may make any payment hereby authorized in
accordance with any xxxx, statement or estimate
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procured from the appropriate public office or holder of the claim to be
discharged without inquiry into the accuracy of such xxxx, statement or estimate
or into the validity of any tax assessment, sale, forfeiture, tax lien, title or
claim except to the extent such payment is being contested in good faith by a
Grantor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
7. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Administrative Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Credit Documents, in any other documents relating to the Secured
Obligations, or by law (including, without limitation, levy of attachment and
garnishment), the rights and remedies of a secured party under the UCC of the
jurisdiction applicable to the affected Collateral and, further, the
Administrative Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the Collateral
may be located and, without resistance or interference by the Grantors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Grantors to assemble and make available to the
Administrative Agent at the expense of the Grantors any Collateral at any place
and time designated by the Administrative Agent that is reasonably convenient to
both parties, (iv) remove any Collateral from any such premises for the purpose
of effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which each of
the Grantors hereby waives to the fullest extent permitted by law, at any place
and time or times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more parcels, for
cash, upon credit or otherwise, at such prices and upon such terms as the
Administrative Agent deems advisable, in its sole discretion (subject to any and
all mandatory legal requirements). Each of the Grantors acknowledges that any
private sale referenced above may be at prices and on terms less favorable to
the seller than the prices and terms that might have been obtained at a public
sale and agrees that such private sale shall be deemed to have been made in a
commercially reasonable manner. Neither the Administrative Agent's compliance
with applicable law nor its disclaimer of warranties relating to the Collateral
shall be considered to adversely affect the commercial reasonableness of any
sale. In addition to all other sums due the Administrative Agent and the holders
of the Secured Obligations with respect to the Secured Obligations, the Grantors
shall pay the Administrative Agent and each of the holders of the Secured
Obligations all reasonable documented costs and expenses incurred by the
Administrative Agent or any such holder of the Secured Obligations, including,
but not limited to, reasonable attorneys' fees, the allocated cost of internal
counsel and court costs, in obtaining or liquidating the Collateral, in
enforcing payment of the Secured Obligations, or in the prosecution or defense
of any action or proceeding by or against the Administrative Agent or the
holders of the Secured Obligations or the Grantors concerning any matter arising
out of or connected with this Security Agreement, any Collateral or the Secured
Obligations, including, without limitation, any of the foregoing arising in,
arising under or related to a case under the Bankruptcy Code. To the extent the
rights of notice cannot be legally waived hereunder, each Grantor agrees that
any requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Borrower in accordance with the
notice provisions of Section 11.02 of the Credit Agreement at least ten Business
Days before the time of sale or other event giving rise to the requirement of
such notice. The Administrative Agent and the holders of the Secured Obligations
shall not be obligated to make any sale or other disposition of the Collateral
regardless of notice having been given. To the extent permitted by law, any
holder of the Secured Obligations may be a purchaser at any such sale. To the
extent permitted by applicable law, each of the Grantors hereby waives all of
its rights of redemption with respect to any such sale. Subject to the
provisions of applicable law, the Administrative Agent and the holders of the
Secured Obligations may postpone or cause the postponement of the sale of all or
any portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent permitted by law,
be made at the time and place to which the sale was postponed, or the
Administrative Agent and the holders of the Secured Obligations may further
postpone such sale by announcement made at such time and place.
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(b) Remedies relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Administrative
Agent has exercised any or all of its rights and remedies hereunder, (i) each
Grantor will promptly upon request of the Administrative Agent instruct all
account debtors to remit all payments in respect of Accounts to a mailing
location selected by the Administrative Agent and (ii) the Administrative Agent
shall have the right to enforce any Grantor's rights against its customers and
account debtors, and the Administrative Agent or its designee may notify any
Grantor's customers and account debtors that the Accounts of such Grantor have
been assigned to the Administrative Agent or of the Administrative Agent's
security interest therein, and may (either in its own name or in the name of a
Grantor or both) demand, collect (including without limitation by way of a
lockbox arrangement), receive, take receipt for, sell, xxx for, compound,
settle, compromise and give acquittance for any and all amounts due or to become
due on any Account, and, in the Administrative Agent's discretion, file any
claim or take any other action or proceeding to protect and realize upon the
security interest of the holders of the Secured Obligations in the Accounts.
Each Grantor acknowledges and agrees that the Proceeds of its Accounts remitted
to or on behalf of the Administrative Agent in accordance with the provisions
hereof shall be solely for the Administrative Agent's own convenience and that
such Grantor shall not have any right, title or interest in such Accounts or in
any such other amounts except as expressly provided herein. The Administrative
Agent and the holders of the Secured Obligations shall have no liability or
responsibility to any Grantor for acceptance of a check, draft or other order
for payment of money bearing the legend "payment in full" or words of similar
import or any other restrictive legend or endorsement or be responsible for
determining the correctness of any remittance. Each Grantor hereby agrees to
indemnify the Administrative Agent and the holders of the Secured Obligations
from and against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys' fees (including the allocated
cost of internal counsel) suffered or incurred by the Administrative Agent or
the holders of the Secured Obligations (each, an "Indemnified Party") because of
the maintenance of the foregoing arrangements except as relating to or arising
out of the gross negligence or willful misconduct of an Indemnified Party or its
officers, employees or agents. In the case of any investigation, litigation or
other proceeding, the foregoing indemnity shall be effective whether or not such
investigation, litigation or proceeding is brought by a Grantor, its directors,
shareholders or creditors or an Indemnified Party or any other Person or any
other Indemnified Party is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the
Administrative Agent shall have the right to enter and remain upon the various
premises of the Grantors without cost or charge to the Administrative Agent, and
use the same, together with materials, supplies, books and records of the
Grantors for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Administrative
Agent or the holders of the Secured Obligations to exercise any right, remedy or
option under this Security Agreement, any other Credit Document, any other
documents relating to the Secured Obligations, or as provided by law, or any
delay by the Administrative Agent or the holders of the Secured Obligations in
exercising the same, shall not operate as a waiver of any such right, remedy or
option. No waiver hereunder shall be effective unless it is in writing, signed
by the party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Administrative Agent or
the holders of the Secured Obligations shall only be granted as provided herein.
To the extent permitted by law, neither the Administrative Agent, the holders of
the Secured Obligations, nor any party acting as attorney for the Administrative
Agent or the holders of the Secured Obligations, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct hereunder. The rights
and remedies of the Administrative Agents and the holders of the Secured
Obligations under this
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Security Agreement shall be cumulative and not exclusive of any other right or
remedy that the Administrative Agent or the holders of the Secured Obligations
may have.
(e) Retention of Collateral. To the extent permitted under applicable
law, in addition to the rights and remedies hereunder, upon the occurrence of an
Event of Default, the Administrative Agent may, after providing the notices
required by Sections 9-620 and 9-621 of the UCC or otherwise complying with the
requirements of applicable law of the relevant jurisdiction, accept or retain
all or any portion of the Collateral in satisfaction of the Secured Obligations.
Unless and until the Administrative Agent shall have provided such notices,
however, the Administrative Agent shall not be deemed to have accepted or
retained any Collateral in satisfaction of any Secured Obligations for any
reason.
(f) Deficiency. In the event that the proceeds of any sale, collection
or realization are insufficient to pay all amounts to which the Administrative
Agent or the holders of the Secured Obligations are legally entitled, the
Grantors shall be jointly and severally liable for the deficiency (subject to
Section 23 hereof), together with interest thereon at the default rate specified
in Section 2.08 of the Credit Agreement for Base Rate Revolving Loans, together
with the costs of collection and reasonable attorneys' fees (including the
allocated cost of internal counsel). Any surplus remaining after the full
payment and satisfaction of the Secured Obligations shall be returned to the
Grantors or to whomsoever a court of competent jurisdiction shall determine to
be entitled thereto.
8. Rights of the Administrative Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Grantor hereby designates and appoints the Administrative
Agent, on behalf of the holders of the Secured Obligations, and each of its
designees or agents, as attorney-in-fact of such Grantor, irrevocably and with
power of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise and adjust, and give
discharges and releases concerning the Collateral, all as the
Administrative Agent may reasonably deem appropriate;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Collateral and enforcing any other
right in respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the
Administrative Agent may reasonably deem appropriate;
(iv) to receive, open and dispose of mail addressed to a Grantor
and endorse checks, notes, drafts, acceptances, money orders, bills of
lading, warehouse receipts or other instruments or documents evidencing
payment, shipment or storage of the goods giving rise to the Collateral
on behalf of and in the name of such Grantor, or securing, or relating
to such Collateral;
(v) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral;
(vi) to direct any parties liable for any payment in connection
with any of the Collateral to make payment of any and all monies due
and to become due thereunder directly to the Administrative Agent or as
the Administrative Agent shall direct;
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(vii) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect
of or arising out of any Collateral;
(viii) to sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services that have given rise thereto, as
fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes;
(ix) to adjust and settle claims under any insurance policy
relating thereto;
(x) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security and pledge agreements, affidavits, notices and other
agreements, instruments and documents that the Administrative Agent may
reasonably deem appropriate in order to perfect and maintain the
security interests and liens granted in this Security Agreement and in
order to fully consummate all of the transactions contemplated therein;
(xi) to institute any foreclosure proceedings that the
Administrative Agent may reasonably deem appropriate; and
(xii) to do and perform all such other acts and things as the
Administrative Agent may reasonably deem appropriate or convenient in
connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have been
terminated. The Administrative Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Administrative Agent in this Security
Agreement, and shall not be liable for any failure to do so or any delay in
doing so. The Administrative Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney is
conferred on the Administrative Agent solely to protect, preserve and realize
upon its security interest in the Collateral.
(b) Performance by the Administrative Agent of Obligations. If any
Grantor fails to perform any agreement or obligation contained herein, the
Administrative Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Grantors on a joint and several
basis (subject to Section 24 hereof).
(c) The Administrative Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by
the Administrative Agent hereunder, the Administrative Agent shall have no duty
or liability to preserve rights pertaining thereto, it being understood and
agreed that the Grantors shall be responsible for preservation of all rights in
the Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Grantors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which the Administrative Agent accords its own property, which shall be
no less than the treatment employed by a reasonable and prudent agent in the
industry, it being understood that the Administrative Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any of the Collateral. In the event of a public or
private sale of Collateral pursuant to Section 7 hereof, the Administrative
Agent shall have no obligation to clean, repair or otherwise prepare the
Collateral for sale.
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9. Rights of Required Lenders. All rights of the Administrative Agent
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.
10. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the
Administrative Agent or any of the holders of the Secured Obligations in cash or
its equivalent, will be applied in reduction of the Secured Obligations in the
order set forth in the Credit Agreement or other document relating to the
Secured Obligations, and each Grantor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Administrative Agent's
sole discretion, notwithstanding any entry to the contrary upon any of its books
and records.
11. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Security Agreement and the
liens and security interests of the Administrative Agent hereunder shall be
automatically terminated and the Administrative Agent shall, upon the request
and at the expense of the Grantors, execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Grantors
evidencing such termination. Notwithstanding the foregoing, all releases and
indemnities provided hereunder shall survive termination of this Security
Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including, without limitation, attorneys' fees, the allocated cost
of internal counsel and disbursements) incurred by the Administrative Agent or
any holder of the Secured Obligations in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Secured
Obligations.
12. Amendments and Waivers. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in Section 11.01 of the Credit Agreement.
13. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Grantor, its successors and assigns, and shall inure, together with the rights
and remedies of the Administrative Agent and the holders of the Secured
Obligations hereunder, to the benefit of the Administrative Agent and the
holders of the Secured Obligations and their successors and permitted assigns;
provided, however, that none of the Grantors may assign its rights or delegate
its duties hereunder without the prior written consent of the requisite Lenders
under the Credit Agreement. To the fullest extent permitted by law, each Grantor
hereby releases the Administrative Agent and each holder of the Secured
Obligations, their respective successors and assigns and their respective
officers, attorneys, employees and agents, from any liability for any act or
omission or any error of judgment or mistake of fact or of law relating to this
Security Agreement or the Collateral, except for any liability arising from the
gross negligence or willful misconduct of the Administrative Agent or such
holder, or their respective officers, attorneys, employees or agents.
14. Notices. All notices required or permitted to be given under this
Security Agreement shall be given as provided in Section 11.02 of the Credit
Agreement.
15. Counterparts. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
16. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
17. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, the LAW OF THE STATE OF NORTH CAROLINA applicable to agreements
made and to be performed entirely within such State; PROVIDED THAT THE
ADMINISTRATIVE Agent AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN CHARLOTTE, XXXXX XXXXXXXX XX XX XXX XXXXXX XXXXXX
FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS
SECURITY AGREEMENT, THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH
LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHER
DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE
MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
18. Waiver of Right to Trial by Jury.
EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER
THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS SECURITY AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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19. Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
20. Entirety. This Security Agreement, the other Credit Documents and
the other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.
21. Survival. All representations and warranties of the Grantors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.
22. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Grantor), or by a
guarantee, endorsement or property of any other Person, then the Administrative
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Administrative
Agent shall have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Administrative Agent shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or the Secured
Obligations or any of the rights of the Administrative Agent or the holders of
the Secured Obligations under this Security Agreement, under any of the other
Credit Documents or under any other document relating to the Secured
Obligations.
23. Joint and Several Obligations of Grantors.
(a) Subject to subsection (c) of this Section 25, each of the Grantors
is accepting joint and several liability hereunder in consideration of the
financial accommodation to be provided by the holders of the Secured
Obligations, for the mutual benefit, directly and indirectly, of each of the
Grantors and in consideration of the undertakings of each of the Grantors to
accept joint and several liability for the obligations of each of them.
(b) Subject to subsection (c) of this Section 25, each of the Grantors
jointly and severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with the other
Grantors with respect to the payment and performance of all of the Secured
Obligations arising under this Security Agreement, the other Credit Documents
and any other documents relating to the Secured Obligations, it being the
intention of the parties hereto that all the Secured Obligations shall be the
joint and several obligations of each of the Grantors without preferences or
distinction among them.
(c) Notwithstanding any provision to the contrary contained herein, in
any other of the Credit Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement and the other Credit Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
[Signature Pages Follow]
15
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
GRANTORS: SCHOOL SPECIALTY, INC.
a Wisconsin corporation
By: /s/ Xxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
CHILDCRAFT EDUCATION CORP.,
a New York corporation
XXXXXXXXXXXXXXX.XXX, LLC,
a Delaware limited liability company
BIRD-IN-HAND WOODWORKS, INC.,
a New Jersey corporation
SPORTIME, LLC,
a Delaware limited liability company
GLOBAL VIDEO, LLC,
a Wisconsin limited liability company
PREMIER AGENDAS, INC.,
a Washington corporation
XXXX SCIENTIFIC, INC.,
a Delaware corporation
AMALGAMATED WIDGETS, INC.,
a Wisconsin corporation
SAX ARTS & CRAFTS, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Treasurer
Accepted and agreed to as of the date first above written.
Bank of America, N.A., as Administrative Agent
By: /s/ Xxxxx Xxxxxxxx
------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President
