Exhibit 10.5
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is dated as of January 31, 1997,
by and among the parties executing this Agreement under the heading "Debtors"
(such parties being hereinafter referred to collectively as the "DEBTORS" and
individually as a "DEBTOR"), each with its mailing address at 0000 Xxxxxxxxxxx
Xxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxx 00000, and BANK OF MONTREAL, a
Canadian chartered bank acting through its Chicago Branch ("BOM"), with its
mailing address at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, acting as
agent hereunder for the Banks hereinafter identified and defined (BOM acting as
such agent and any successor or successors to BOM acting in such capacity being
hereinafter referred to as the "AGENT");
PRELIMINARY STATEMENTS
A. Platinum Entertainment, Inc., a Delaware corporation (the "BORROWER"),
Lexicon Music, Inc., a Delaware corporation, River North Studios, Inc., a
Delaware corporation, CGI Records, Inc., a Delaware corporation, River North
Records, Inc., a Delaware corporation, Light Records, Inc., a Delaware
corporation, The Recording Experience, Inc., a Delaware corporation, Peg
Publishing, Inc. a Delaware corporation, JustMike Music, Inc., a Delaware
corporation, Royce Publishing, Inc., a Delaware corporation (collectively, the
"GUARANTORS" and individually, a "GUARANTOR"), BOM, individually and as agent,
and certain Banks have entered into a Credit Agreement dated as of even date
herewith (such Credit Agreement, as the same may be amended or modified from
time to time, including amendments and restatements thereof in its entirety,
being hereinafter referred to as the "CREDIT AGREEMENT"), pursuant to which BOM
and other Banks from time to time party to the Credit Agreement (BOM and the
other Banks which are now or from time to time hereafter become party to the
Credit Agreement, together with any affiliates of such Banks to which is owed
any Hedging Liability, being hereinafter referred to collectively as the "BANKS"
and individually as a "BANK") have agreed, subject to certain terms and
conditions, to extend credit and make certain other financial accommodations
available to the Borrower identified therein.
B. Pursuant to the Credit Agreement, the Guarantors guarantee all of the
indebtedness, obligations, and liabilities of the Borrower to the Agent and the
Banks under the Credit Agreement.
C. The Borrower may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Banks party to
the Credit Agreement or their affiliates for the purpose of hedging or otherwise
protecting the Borrower against changes in interest rates on the Revolving
Credit Loans and the Term Credit Loans (the liability of the Borrower in respect
of such agreements with such Banks or their affiliates being hereinafter
referred to as the "HEDGING LIABILITY").
D. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrower under the Credit Agreement,
the Banks have required, among other things, that each Debtor grant to the Agent
for the benefit of the Banks a lien on and security interest in certain personal
property of such Debtor pursuant to this Agreement.
E. The Borrower owns, directly or indirectly, all or substantially all of
the equity interests in each Guarantor and the Borrower provides each Guarantor
with financial, management, administrative, and technical support which enables
such Guarantor to conduct its business in an orderly and efficient manner in the
ordinary course.
F. Each Guarantor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Banks to the Borrower.
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Banks of the Credit Agreement, and other good and valuable consideration,
receipt whereof is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein
shall mean and include the Debtors collectively and also each individually, with
all grants, representations, warranties and covenants of and by the Debtors, or
any of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; PROVIDED,
HOWEVER, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL; OBLIGATIONS
SECURED. (a) Each Debtor hereby grants to the Agent for the benefit of the
Banks a lien on and security interest in, and right of set-off against, and
acknowledges and agrees that the Agent has and shall continue to have for the
benefit of the Banks a continuing lien on and security interest in, and right of
set-off against, any and all right, title and interest of each
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Debtor, whether now owned or existing or hereafter created, acquired or arising,
in and to the following:
(i) RECEIVABLES. Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which such Debtor now has or hereafter acquires any rights (the term
"RECEIVABLES" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of such Debtor to payment for goods sold or leased
or for services rendered, whether arising out of the sale of Inventory (as
hereinafter defined) or otherwise and whether or not earned by performance,
and all other forms of obligations owing to such Debtor, and all of such
Debtor's rights to any merchandise and other goods (including without
limitation any returned or repossessed goods and the right of stoppage in
transit) which is represented by, arises from or is related to any of the
foregoing);
(ii) GENERAL INTANGIBLES. All general intangibles, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights, including, without
limitation all patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade styles, trade names,
copyrights, copyright registrations, copyright licenses and other licenses
and similar intangibles and all customer, client and supplier lists (in
whatever form maintained) and all rights in leases and other agreements
relating to real or personal property, all causes of action and tax refunds
of every kind and nature, all privileges, franchises, immunities, licenses,
permits and similar intangibles, all rights to receive payments in
connection with the termination of any pension plan or employee stock
ownership plan or trust established for the benefit of employees of such
Debtor and all other personal property (including things in action) not
otherwise covered by this Agreement;
(iii) INVENTORY. Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "INVENTORY" means and
includes all goods which are held for sale or lease or are to be furnished
under contracts of service or consumed in such Debtor's business, and all
goods which are raw materials, work-in-process, finished goods, materials
and supplies of every kind and nature, in each case used or usable in
connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or
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repossessed goods) including, without limitation, Inventory consisting of
records, albums and music videos;
(iv) EQUIPMENT. Equipment, whether now owned or existing or hereafter
created, acquired or arising, or in which such Debtor now has or hereafter
acquires any rights (the term "EQUIPMENT" means and includes all equipment,
machinery, tools, trade fixtures, furniture, furnishings, office equipment
and vehicles (including vehicles subject to a certificate of title law) and
all other goods, in each case now or hereafter used or usable in connection
with such Debtor's business, together with all parts, accessories and
attachments relating to any of the foregoing), including, without
limitation, Equipment consisting of recording equipment;
(v) INVESTMENT PROPERTY. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "INVESTMENT
PROPERTY" means and includes all investment property and any other
securities (whether certificated or uncertificated), security entitlements,
securities accounts, commodity contracts and commodity accounts, including
all substitutions and additions thereto, all dividends, distributions and
sums distributable or payable from, upon, or in respect of such property,
and all rights and privileges incident to such property);
(vi) RECORDS AND CABINETS. Supporting evidence and documents relating
to any of the above-described property, including without limitation,
computer programs, disks, tapes and related electronic data processing
media, rights of such Debtor to retrieve the same from third parties,
written applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like, together with all books of account, ledgers and
cabinets in which the same are reflected or maintained, all whether now
existing or hereafter arising;
(vii) DEPOSITS AND PROPERTY IN POSSESSION. All deposit accounts
(whether general, special or otherwise) maintained with the Agent or any of
the Banks and all sums now or hereafter on deposit therein or payable
thereon, and any and all other property or interests in property which now
is or may from time to time hereafter come into the possession, custody or
control of the Agent or any of the Banks, or any agent or affiliate of the
Agent or any of the Banks, in any way and for any purpose (whether for
safekeeping, custody, pledge, transmission, collection or otherwise);
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(viii) ACCESSIONS AND ADDITIONS. All accessions and additions to
and substitutions and replacements of any of the foregoing, whether now
existing or hereafter arising; and
(ix) PROCEEDS AND PRODUCTS. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof, whether
now existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "COLLATERAL."
(b) This Agreement is made and given to secure, and shall secure, the
payment and performance of (i) (x) any and all indebtedness, obligations and
liabilities of the Borrower to the Agent, the Banks, or any of them
individually, evidenced by or otherwise arising out of or relating to the Credit
Agreement or any promissory note of the Borrower issued at any time under the
Credit Agreement (including all notes issued in extension or renewal thereof or
in substitution or replacement therefor), (y) any and all Hedging Liability of
the Borrower to the Banks or any of them individually, and (z) any liability of
the Guarantors, or any of them individually, arising out of the Credit
Agreement, as well as for any and all other indebtedness, obligations and
liabilities of the Debtors, or any of them individually, to the Agent, the
Banks, or any of them individually, evidenced by or otherwise arising out of or
relating to this Agreement or any other Loan Document, in each case, whether now
existing or hereafter arising (and whether arising before or after the filing of
a petition in bankruptcy), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired, and (ii) any and all
expenses and charges, legal or otherwise, suffered or incurred by the Agent, the
Banks, or any of them individually, in collecting or enforcing any of such
indebtedness, obligations or liabilities or in realizing on or protecting or
preserving any security therefor, including, without limitation, the lien and
security interest granted hereby (all of the foregoing being hereinafter
referred to as the "OBLIGATIONS"). Notwithstanding anything in this Agreement
to the contrary, the right of recovery against any Debtor (other than the
Borrower to which this limitation shall not apply) under this Agreement shall
not exceed $1 less than the amount which would render such Debtor's obligations
under this Agreement void or voidable under applicable law, including fraudulent
conveyance law.
SECTION 3. COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES. Each
Debtor hereby covenants and agrees with, and represents and warrants to the
Agent and the Banks that:
(a) Such Debtor is duly organized and existing under the laws of the
state of its organization, is the sole and lawful owner of its Collateral
and has full right,
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power and authority to enter into this Agreement and to perform each and
all of the matters and things herein provided for; and the execution and
delivery of this Agreement, and the observance and performance of any of
the matters and things herein set forth, will not violate or contravene any
provision of law or of the articles of incorporation, by-laws or operating
agreement of such Debtor, as applicable, or of any indenture, loan
agreement or other agreement of or affecting such Debtor or any of its
properties, or result in the creation or imposition of any liens or
encumbrance on any property of such Debtor.
(b) The Collateral is in each Debtor's possession at the locations
listed under Column 1 on Schedule A attached hereto. Each Debtor's
respective chief executive office and chief place of business is listed
opposite its name on Schedule A attached hereto and the Debtors have no
other places of business other than those listed under Column 4 on
Schedule A attached hereto. No Debtor will remove its Collateral from the
locations specified in the first sentence of this Section 3(b) without the
Agent's prior written consent (provided that if for any reason Collateral
is at any time kept or located at locations other than its present location
or locations hereafter consented to by the Agent shall nevertheless have
and retain a security interest therein). The aggregate value of all
Debtors' Collateral located in the State of Tennessee shall not at any time
exceed $5,000.
(c) The Collateral and every part thereof is and will be free and
clear of all security interests, liens (including, without limitation,
mechanic's, laborer's and statutory liens), attachments, levies and
encumbrances of every kind, nature and description and whether voluntary or
involuntary except for the security interest of the Agent therein and as
otherwise provided in the Credit Agreement, and each Debtor will warrant
and defend its Collateral against any claims and demands of all persons at
any time claiming the same or any interest therein adverse to the Agent or
any Bank.
(d) Each Debtor will pay promptly when due all taxes, assessments,
and governmental charges and levies upon or against its Collateral in each
case before the same become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good faith by
appropriate proceedings.
(e) Each Debtor at its own cost and expense will maintain, keep and
preserve its Collateral in good repair and condition and will not waste or
destroy such Collateral or any part thereof and will not be negligent in
the care and use of any Collateral and will not use or permit to be used
any Collateral in violation of any statute, ordinance or other governmental
requirement. Each Debtor will
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perform its obligations under any contract or other agreement constituting
part of the Collateral, it being understood and agreed that the Agent and
the Banks have no responsibility to perform such obligations.
(f) Except for liens expressly permitted by the Credit Agreement, and
subject to Sections 5(a), 7(b) and 7(c) hereof, no Debtor will, without the
Agent's prior written consent, sell, assign, mortgage, lease or otherwise
dispose of its Collateral or any interest therein.
(g) Each Debtor will insure its Collateral which is insurable against
such risks and hazards as other companies similarly situated insure
against, and including in any event loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as the Agent
may specify, in amounts and under policies containing loss payable clauses
to the Agent as its interest may appear (and, if the Agent requests, naming
the Agent and the Banks as additional insureds therein) by insurers
acceptable to the Agent. In case of any material loss, damage to or
destruction of its Collateral or any part thereof, the appropriate Debtor
shall promptly give written notice thereof to the Agent generally
describing the nature and extent of such damage or destruction. In the
event any Debtor shall receive any proceeds of such insurance, such Debtor
will immediately pay over such proceeds to the Agent. Net insurance
proceeds received by the Agent under the provisions hereof or under any
policy or policies of insurance covering the Collateral or any part thereof
shall be applied to the reduction of the Obligations (whether or not then
due); PROVIDED, HOWEVER, that the Agent may in its sole discretion release
any or all such insurance proceeds to the appropriate Debtor. All
insurance proceeds shall be subject to the lien and security interest of
the Agent hereunder.
UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE AT
THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN THE COLLATERAL.
THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S INTERESTS IN THE
COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY NOT PAY ANY CLAIMS
THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE AGAINST SUCH DEBTOR IN
CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY LATER CANCEL ANY SUCH
INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH
EVIDENCE THAT THE DEBTORS HAVE OBTAINED INSURANCE AS REQUIRED BY THIS
AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE
DEBTORS WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
INTEREST AND ANY OTHER CHARGES THAT THE AGENT MAY IMPOSE IN CONNECTION WITH
THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE
CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE
MAY BE
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ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE
MORE THAN THE COST OF INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON THEIR
OWN.
(h) Each Debtor will at all times allow the Agent, any Bank or their
respective representatives free access to and right of inspection of the
Collateral. Each Debtor will, to the extent it is within its power so to
do, authorize and instruct all bailees and other parties at any time
holding, storing, shipping or transferring all or any part of such Debtor's
Collateral to permit the Agent, any Bank or their respective or its
designees to examine and inspect any of such Collateral then in such
party's possession and to verify from such party's own books and records
any information concerning such Collateral or any part thereof which the
Agent or such Bank may seek to verify. As to any premises not owned by any
of the Debtors wherein any of the Collateral is located, if any, the
appropriate Debtor shall, unless the Agent requests otherwise, cause each
Person having any right, title or interest in, or lien on, any of such
premises to enter into an agreement (any such agreement to contain a legal
description of such premises) whereby such party disclaims any right, title
and interest in, and lien on, the Collateral, allowing the removal of such
Collateral by the Agent or its designee and otherwise in form and substance
acceptable to the Agent.
(i) Each Debtor agrees from time to time to deliver to the Agent and
any Bank such evidence of the existence and identity of such Debtor's
Collateral and of its availability as collateral security pursuant hereto
(including, without limitation, schedules describing all Receivables
created or acquired by such Debtor, copies of customer invoices or the
equivalent and original shipping or delivery receipts for all merchandise
and other goods sold or leased or services rendered, together with such
Debtor's warranty of the genuineness thereof, and reports stating the book
value of Inventory and Equipment by major category and location), as the
Agent or such Bank may request. Each Debtor will promptly notify the Agent
and each Bank of any Collateral which such Debtor has determined to have
been rendered obsolete, stating the prior book value of such Collateral,
its type and location.
(j) Each Debtor will comply with the terms and conditions of any
leases, easements, right-of-way agreements or other agreements covering the
premises wherein its Collateral is located and any orders, ordinances, laws
or statutes of any city, state or other governmental entity, department or
agency having jurisdiction with respect to such premises or the conduct of
business thereon.
(k) On failure of any Debtor to perform any of the covenants and
agreements herein contained, the Agent may, at its option, perform the same
and in
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so doing may expend such sums as the Agent may deem advisable in the
performance thereof, including without limitation the payment of any
insurance premiums, the payment of any taxes, liens and encumbrances,
expenditures made in defending against any adverse claim and all other
expenditures which the Agent may be compelled to make by operation of law
or which the Agent may make by agreement or otherwise for the protection of
the security hereof. All such sums and amounts so expended shall be
repayable by the Debtors immediately without notice or demand, shall
constitute so much additional Obligations hereby secured and shall bear
interest from the date said amounts are expended at the rate per annum
(computed on the basis of a 360-day year for the actual number of days
elapsed) determined by adding 3% to the Base Rate (such rate per annum as
so determined being hereinafter referred to as the "DEFAULT RATE"). No
such performance of any covenant or agreement by the Agent on behalf of any
Debtor and no such advancement or expenditure therefor, shall relieve any
Debtor of any default under the terms of this Agreement or in any way
obligate the Agent or any Bank to take any further or future action with
respect thereto. The Agent, in making any payment hereby authorized, may
do so according to any xxxx, statement or estimate 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 or title or
claim. The Agent, in performing any act hereunder, shall be the sole judge
of whether the relevant Debtor is required to perform same under the terms
of this Agreement. The Agent is authorized to charge any depository
account of any Debtor maintained with the Agent for the amount of such sums
and amounts so expended.
(l) Each Debtor warrants that such Debtor has not transacted
business, and does not transact business, under any trade names except as
set forth on Schedule B. Each Debtor agrees that it will not change its
name or transact business under any trade names without first giving the
Agent 30 days' prior written notice of its intent to do so.
(m) Each Debtor agrees to execute and deliver to the Agent such
further agreements and assignments or other instruments and to do all such
other things as the Agent may deem necessary or appropriate to assure the
Agent its security interest hereunder, including such financing statement
or statements or amendments thereof or supplements thereto or other
instruments as the Agent or the Required Banks may from time to time
require in order to comply with the Uniform Commercial Code as enacted in
the State of Illinois and any successor statute(s) thereto (the "CODE").
Each Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient
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for filing as a financing statement by the Agent without notice thereof to
any Debtor wherever the Agent in its sole discretion desires to file the
same. In the event for any reason the law of any other jurisdiction than
Illinois becomes or is applicable to the Collateral or any part thereof, or
to any of the Obligations, each Debtor agrees to execute and deliver all
such instruments and to do all such other things as the Agent in its sole
discretion deems necessary or appropriate to preserve, protect and enforce
the security interests of the Agent under the law of such other
jurisdiction to at least the same extent as such security interests would
be protected under the Code. If any Collateral is in the possession or
control of any Debtor's agents or processors and unless the Agent requests
otherwise, such Debtor agrees to notify such agents or processors in
writing of the Agent's security interests therein, and upon the Agent's
request instruct them to hold all such Collateral for the Agent's account
and subject to the Agent's instructions. The Debtors agree to xxxx their
books and records to reflect the security interests of the Agent in the
Collateral.
SECTION 4. SPECIAL PROVISIONS RE: RECEIVABLES. (a) As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
and all of such Receivables that all warranties of such Debtor set forth in this
Agreement are true and correct with respect to such Receivables; that each
Receivable and all papers and documents relating thereto are genuine and in all
respects what they purport to be; that each Receivable is valid and subsisting
and, if such Receivable is an account, arises out of a bona fide sale of goods
sold and delivered by such Debtor to, or in the process of being delivered to,
or out of and for services theretofore actually rendered by such Debtor to, the
account debtor named therein; that no such Receivable is evidenced by any
instrument or chattel paper unless such instrument or chattel paper has
theretofore been endorsed by such Debtor and delivered to the Agent (except to
the extent the Agent specifically requests such Debtor not to do so with
respect to any such instrument or chattel paper); that no surety bond was
required or given in connection with said Receivable or the contracts or
purchase orders out of which the same arose; that the amount of the Receivable
represented as owing is the correct amount actually and unconditionally owing,
except for normal cash discounts on normal trade terms in the ordinary course of
business if such Receivable is an account and that the amount of such Receivable
represented as owing is not disputed and is not subject to any set-offs,
credits, deductions or countercharges other than those arising in the ordinary
course of such Debtor's business which are disclosed to the Agent in writing
promptly upon such Debtor becoming aware thereof. Without limiting the
foregoing, if any Receivable arises out of a contract with the United States of
America or any of its departments, agencies or instrumentalities, each Debtor
agrees to notify the Agent and execute whatever
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instruments and documents are required by the Agent in order that such
Receivable shall be assigned to the Agent and that proper notice of such
assignment shall be given under the federal Assignment of Claims Act (or any
successor statute).
(b) Each Debtor shall keep all of its books and records relating to the
Receivables only at its chief executive office described in Section 3(b) hereof.
(c) Unless and until an Event of Default occurs, any merchandise which is
returned by a customer or account debtor or otherwise recovered may be resold by
the Debtors in the ordinary course of their respective businesses in accordance
with Section 5(b) hereof; after an Event of Default occurs, such merchandise
shall be set aside and held by each of the Debtors as trustee for the Agent and
the Banks and shall remain part of the Agent's Collateral. Unless and until an
Event of Default occurs, each Debtor may settle and adjust disputes and claims
with its customers and account debtors, handle returns and recoveries and grant
discounts, credits and allowances in the ordinary course of its business and
otherwise for amounts and on terms which such Debtor considers advisable.
However, after an Event of Default has occurred and unless the Agent requests
otherwise, each Debtor shall notify the Agent promptly of all returns and
recoveries and on request deliver the merchandise to the Agent. After an Event
of Default has occurred and unless the Agent requests otherwise, each Debtor
shall also notify the Agent promptly of all disputes and claims and settle or
adjust them at no expense to the Agent or the Banks, but no discount, credit or
allowance other than on normal trade terms in the ordinary course of business
shall be granted to any customer or account debtor and no returns of merchandise
shall be accepted by such Debtor without the Agent's consent. The Agent may, at
all times after such an Event of Default has occurred, settle or adjust disputes
and claims directly with customers or account debtors for amounts and upon terms
which the Agent considers advisable.
(d) From time to time, as the Agent may request of any Debtor, such Debtor
shall provide the Agent with schedules describing all Receivables created or
acquired by such Debtor, provided, however, that the failure of such Debtor to
execute and deliver such schedules shall not affect or limit the Agent's
security interest or other rights in and to any such Receivables. Together with
each schedule, each Debtor shall if requested by the Agent, furnish copies of
customers' invoices or the equivalent, and original shipping or delivery
receipts, for all merchandise sold, and each Debtor warrants the genuineness
thereof.
SECTION 5. COLLECTION OF RECEIVABLES. (a) Except as otherwise
provided in this Agreement each Debtor shall make collection of all of its
Receivables and may use the
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same to carry on its business in accordance with sound business practice and
otherwise subject to the terms hereof.
(b) Whether or not the Agent has exercised any or all of its rights under
other provisions of this Section 5 and whether or not any Event of Default has
occurred, at the request of the Agent, such Debtor shall instruct all account
debtors to remit all payments in respect of its Receivables to a lockbox or
lockboxes from which deposits will be made into one or more accounts maintained
with the Agent or under the control by agreement of the Agent (whether or not
maintained with the Agent), the Debtors acknowledging that each such account and
all funds contained therein constitute Collateral hereunder.
(c) Whether or not any Event of Default has occurred and whether or not
the Agent has exercised any or all of its rights under other provisions of this
Section 5, in the event the Agent requests any Debtor to do so, all instruments
and chattel paper at any time constituting part of the Receivables (including
any postdated checks) shall, upon receipt by such Debtor, be immediately
endorsed to and deposited with the Agent.
(d) Upon the occurrence and during the continuation of any Event of
Default and whether or not the Agent has exercised any or all of its rights
under other provisions of this Section 5, the Agent or its designee may notify
any Debtor's customers or account debtors at any time that Receivables have been
assigned to the Agent or of the Agent's security interest therein and either in
its own name, or such Debtor's or both, demand, collect (including without
limitation through a lockbox analogous to that described in Section 5(b)(ii)
hereof), receive, receipt for, xxx for, compound and give acquittance for any or
all amounts due or to become due on Receivables, and in the Agent's discretion
file any claim or take any other action or proceeding which the Agent may deem
necessary or appropriate to protect and realize upon the security interest of
the Agent in the Receivables.
(e) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of
Sections 5(b), 5(c) or 5(d) hereof shall be handled and administered by the
Agent in and through a remittance account maintained at the Agent and each
Debtor acknowledges that the maintenance of such remittance account by the Agent
is solely for the Agent's own convenience and that such Debtor does not have any
right, title or interest in such remittance account or any amounts at any time
standing to the credit thereof. The Agent may apply all or any part of any
proceeds of Receivables or other Collateral received by it from any source to
the payment of the Obligations (whether or not then due and payable), such
applications to be made in such amounts, in such manner and order and at such
intervals as the Agent may from time to time in its discretion determine, but
not less often than once each week. The
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Agent need not apply or give credit for any item included in proceeds of
Receivables or other Collateral until the Agent has received final payment
therefor at its office in cash or final solvent credits current in Chicago,
Illinois, acceptable to the Agent as such. However, if the Agent does give
credit for any item prior to receiving final payment therefor and the Agent
fails to receive such final payment or an item is charged back to the Agent for
any reason, the Agent may at its election in either instance charge the amount
of such item back against the remittance account, together with interest thereon
at the Default Rate. Each Debtor shall accompany each transmission of any
proceeds of Receivables or other Collateral to the Agent with a report in such
form as the Agent shall require identifying the particular Receivable or other
Collateral from which the same arises or relates. The Debtors hereby jointly
and severally indemnify the Agent and the Banks from and against all
liabilities, damages, losses, actions, claims, judgments, costs, expenses,
charges and attorney's fees suffered or incurred by the Agent or the Banks
because of the maintenance of the foregoing arrangements. The Agent and the
Banks shall have no liability or responsibility to any Debtor for accepting any
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
whatsoever or be responsible for determining the correctness of any remittance.
SECTION 6. SPECIAL PROVISIONS RE: INVESTMENT PROPERTY. (a) Unless
and until an Event of Default has occurred and is continuing and thereafter
until notified to the contrary by the Agent pursuant to Section 9(e) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Investment Property or any part thereof
owned or held by it, for all purposes not inconsistent with the terms of
this Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of the Investment Property owned or held
by it.
(b) Certificates for all securities now or at any time constituting
Investment Property hereunder shall be promptly delivered by the relevant Debtor
to the Agent duly endorsed in blank for transfer or accompanied by an
appropriate assignment or assignments or an appropriate undated stock power or
powers, in every case sufficient to transfer title thereto, and, with respect to
any Investment Property held by a securities intermediary, commodity
intermediary, or other financial intermediary of any kind, the relevant Debtor
shall execute and deliver, and shall cause any such intermediary to execute and
deliver, an agreement among such Debtor, the Agent, and such intermediary
-13-
in form and substance satisfactory to the Agent which provides, among other
things, for the intermediary's agreement that it will comply with entitlement
orders, and apply any value distributed on account of any Investment Property
maintained in an account with such intermediary, as directed by the Agent
without further consent by such Debtor at any time after the occurrence of any
Event of Default; PROVIDED, HOWEVER, that, prior to the existence of an Event of
Default and thereafter until otherwise required by the Agent or the Required
Banks, a Debtor shall not be required to deliver any such certificates or cause
any such agreement to be entered into with the relevant financial intermediary
if and so long as (i) the fair market value of any such Investment Property held
by such Debtor is less than $10,000 and (ii) the aggregate fair market value of
all such Investment Property held by the Debtors and not subject to the control
(as such term is defined in the Code) of the Agent under the Collateral
Documents is less than $100,000 at any one time outstanding. The Agent may at
any time after the occurrence of an Event of Default cause to be transferred
into its name or the name of its nominee or nominees any and all of the
Investment Property hereunder.
(c) Unless and until an Event of Default has occurred and is continuing,
each Debtor may sell or otherwise dispose of any Investment Property to the
extent permitted by the Credit Agreement, PROVIDED that no Debtor shall sell or
otherwise dispose of any capital stock or other equity interests in any other
Debtor or any direct or indirect Subsidiary of any Debtor without the Agent's
prior written consent. During the existence of any Event of Default, no Debtor
shall sell or otherwise dispose of all or any part of the Investment Property
without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of the
Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement (including, without limitation, the Pledge Agreement bearing even date
herewith relating to the equity interests issued by certain of the Debtors
hereunder) in favor of the Agent, the terms of such separate security agreement
shall govern and control unless otherwise agreed to in writing by the Agent and
the Banks.
-14-
SECTION 7. SPECIAL PROVISIONS RE: INVENTORY AND EQUIPMENT. (a) Each
Debtor will at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable condition and keep and preserve its Equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and without limiting the foregoing make all necessary and proper repairs,
replacements and additions to the Equipment so that the efficiency thereof shall
be fully preserved and maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell its Inventory in the ordinary course of its business as presently
conducted, but a sale in the ordinary course of business shall not under any
circumstance include any transfer or sale in satisfaction, partial or complete,
of a debt owing by any Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell
(i) obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by such Debtor free of any lien, charge or encumbrance other than the lien
hereof and (y) Equipment which is not necessary for, or of importance to, the
proper conduct of any Debtor's business in the ordinary course and failure to
repair or replace such Equipment would not be disadvantageous to the rights
hereunder of the Agent and the Banks.
(d) As of the time any Inventory or Equipment becomes subject to the
security interest provided for hereby and at all times thereafter, each Debtor
shall be deemed to have warranted as to any and all of its Inventory and
Equipment that all warranties of such Debtor set forth in this Agreement are
true and correct with respect to such Inventory and Equipment and that all of
such Inventory and Equipment is located at a location set forth pursuant to
Section 3(b) hereof. Each Debtor warrants and agrees that no Inventory is or
will be consigned to any other person without the Agent's prior written consent.
(e) Each Debtor shall at its own cost and expense cause the lien of the
Agent in and to any portion of its Collateral subject to a certificate of title
law to be duly noted on such certificate of title or to be otherwise filed in
such manner as is prescribed by law in order to perfect such lien and shall
cause all such certificates of title and evidences of lien to be deposited with
the Agent unless otherwise permitted by the Required Banks in their sole
discretion; PROVIDED THAT no Debtor shall be obligated to cause the Agent's lien
to be so noted or to deliver any such certificate of title to the Agent to the
extent such certificate is held by another Bank with a purchase money security
interest permitted by the Credit Agreement on the Collateral represented by such
certificate.
-15-
(f) Each Debtor shall at its own cost and expense cause any certificate of
title evidencing any of the Collateral to be amended to reflect the current and
correct name of such Debtor as and when required by applicable law, but in any
event no later than such date on which such Debtor must renew its registration
of such Collateral under applicable law. Each Debtor shall cause the lien of
the Agent in such Collateral to continue to be duly noted on such amended or
reissued certificate of title.
(g) Except for Equipment from time to time located on the real estate
described on Schedule C attached hereto and as otherwise disclosed to the Agent
in writing, none of the Equipment is or will be attached to real estate in such
a manner that the same may become a fixture.
(h) If any of its Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the appropriate Debtor to
the Agent.
SECTION 8. POWER OF ATTORNEY. In addition to any other powers of
attorney contained herein, each Debtor appoints the Agent, its nominee, or any
other person whom the Agent may designate as such Debtor's attorney in fact,
with full power to endorse such Debtor's names on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Agent's possession, to sign such Debtor's names on any invoice or
xxxx of lading relating to any Receivables, on drafts against customers, on
schedules and assignments of Receivables, on notices of assignment, on public
records, on verifications of accounts and on notices to customers, to send
requests for verification of Receivables to customers or account debtors, to
notify the post office authorities to change the address for delivery of such
Debtor's mail to an address designated by the Agent and to receive, open and
dispose of all mail addressed to such Debtor and to do all other things
necessary to carry out this Agreement. Each Debtor hereby ratifies and approves
all acts of any such attorney and agree that neither the Agent nor any such
attorney nor any Bank will be liable for any acts or omissions nor for any error
of judgment or mistake of fact or law other than their own gross negligence or
willful misconduct. The foregoing power of attorney, being coupled with an
interest, is irrevocable until the Obligations have been fully satisfied and any
commitment of the Banks to extend credit constituting Obligations has
terminated. The Agent may file one or more financing statements disclosing its
security interest in any or all of the Collateral without any Debtor's signature
appearing thereon. Each Debtor also hereby grants the Agent a power of attorney
to execute any such financing statement, or amendments and supplements to
financing statements, on behalf of such Debtor without notice thereof to any
Debtor, which power of attorney is coupled with an interest and is irrevocable
until the Obligations have been fully satisfied and any commitment of the Banks
to extend credit constituting Obligations to the Borrower has terminated.
-16-
SECTION 9. DEFAULTS AND REMEDIES. (a) The occurrence of any event or
the existence of any condition which is specified as an Event of Default under
the Credit Agreement shall constitute an "EVENT OF DEFAULT" hereunder.
(b) Upon the occurrence of any Event of Default, the Agent shall have, in
addition to all other rights provided herein or by law, the rights and remedies
of a secured party under the Code (regardless of whether the Code is the law of
the jurisdiction where the rights or remedies are asserted and regardless of
whether the Code applies to the affected Collateral), and further the Agent may,
without demand and without advertisement, notice, hearing or process of law, all
of which each Debtor hereby waives to the extent permitted by law, at any time
or times, sell and deliver any or all Collateral held by or for it at public or
private sale, for cash, upon credit or otherwise, at such prices and upon such
terms as the Agent deems advisable, in its sole discretion. In addition to all
other sums due the Agent and the Banks hereunder, the Debtors jointly and
severally agree to pay to the Agent and the Banks all costs and expenses
incurred by the Agent and the Banks, including reasonable attorneys' fees and
court costs, in obtaining, liquidating or enforcing payment of Collateral or
Obligations or in the prosecution or defense of any action or proceeding by or
against the Agent or such Bank or the Debtors or any of them concerning any
matter arising out of or connected with this Agreement or the Collateral or
Obligations, including without limitation any of the foregoing arising in,
arising under or related to a case under the Bankruptcy Code. Any requirement
of reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Debtors in accordance with Section 14(b) hereof
at least ten days before the time of sale or other event giving rise to the
requirement of such notice; however, no notification need be given to a Debtor
if that Debtor has signed, after an Event of Default has occurred, a statement
renouncing any right to notification of sale or other intended disposition. The
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. The Agent or any Bank may be
the purchaser at any such sale. Each Debtor hereby waives all of its rights of
redemption from any such sale. Subject to the provisions of applicable law, the
Agent 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, be made at the time and place to which the
sale was postponed or the Agent may further postpone such sale by announcement
made at such time and place.
(c) Without in any way limiting the foregoing, during the existence of any
Event of Default, the Agent shall have the right, in addition to all other
rights provided herein or by law, to take physical possession of any and all of
the Collateral and anything found therein, the right for that purpose to enter
without legal process any premises where the Collateral may be found (provided
such entry be done lawfully), and the right to maintain
-17-
such possession on each Debtor's premises (each Debtor hereby agreeing to lease
warehouses without cost or expense to the Agent or its designee if the Agent so
requests) or to remove its Collateral or any part thereof to such other places
as the Agent may desire. During the existence of any Event of Default, the
Agent shall have the right to exercise any and all rights with respect to
deposit accounts of any Debtor maintained with the Agent or any Bank, including,
without limitation, the right to collect, withdraw and receive all amounts due
or to become due or payable under each such deposit account. During the
existence of any Event of Default, each Debtor shall, upon the Agent's demand,
assemble its Collateral and make it available to the Agent at a place designated
by the Agent. If the Agent exercises its right to take possession of the
Collateral, each Debtor shall also at its expense perform any and all other
steps requested by the Agent to preserve and protect the security interest
hereby granted in the Collateral, such as placing and maintaining signs
indicating the security interest of the Agent, appointing overseers for the
Collateral and maintaining stock records.
(d) Without in any way limiting the foregoing, each Debtor hereby grants
to the Agent and the Banks a royalty-free irrevocable license and right to use
all of such Debtor's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles, and
similar intangibles in connection with any foreclosure or other realization by
the Agent or the Banks on all or any part of the Collateral, provided that the
license granted hereunder shall not include any rights in any license agreement
under which the relevant Debtor is licensee which, by its terms, prohibits the
license contemplated by this Section. The license and right granted the Agent
and the Banks hereby shall be without any royalty or fee or charge whatsoever.
(e) Without in any way limiting the foregoing, during the existence of any
Event of Default, all rights of a Debtor to exercise the voting and/or
consensual powers which it is entitled to exercise pursuant to Section 6(a)(i)
hereof and/or to receive and retain the distributions which it is entitled to
receive and retain pursuant to Section 6(a)(ii) hereof, shall, at the option of
the Agent, cease and thereupon become vested in the Agent, which, in addition to
all other rights provided herein or by law, shall then be entitled solely and
exclusively to exercise all voting and other consensual powers pertaining to the
Investment Property and/or to receive and retain the distributions which such
Debtor would otherwise have been authorized to retain pursuant to
Section 6(a)(ii) hereof and shall then be entitled solely and exclusively to
exercise any and all rights of conversion, exchange or subscription or any other
rights, privileges or options pertaining to any Investment Property as if the
Agent were the absolute owner thereof including, without limitation, the rights
to exchange, at its discretion, any and all of the Investment Property upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
the respective issuer thereof or upon the exercise by or on behalf of any such
issuer or the
-18-
Agent of any right, privilege or option pertaining to any Investment Property
and, in connection therewith, to deposit and deliver any and all of the
Investment Property with any committee, depositary, transfer Agent, registrar or
other designated agency upon such terms and conditions as the Agent may
determine. Without limiting the foregoing, during the existence of any Event of
Default, the Agent may, by written demand, direct any securities intermediary,
commodities intermediary, or other financial intermediary at any time holding
any Investment Property, or any issuer thereof, to deliver such Collateral, or
any part thereof, and/or liquidate such Collateral, or any party thereof, and
deliver the proceeds therefrom to the Agent. In the event the Agent in good
faith believes any of the Collateral constitutes restricted securities within
the meaning of any applicable securities laws, any disposition thereof in
compliance with such laws shall not render the disposition commercially
unreasonable.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duty to exercise
such powers. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of Investment Property in its possession if such
Collateral is accorded treatment substantially equivalent to that which the
Agent accords its own property consisting of similar type assets, it being
understood, however, that the Agent shall have no responsibility for
ascertaining or taking any action with respect to calls, conversions, exchanges,
maturities, tenders, or other matters relating to any such Collateral, whether
or not the Agent has or is deemed to have knowledge of such matters. This
Agreement constitutes an assignment of rights only and not an assignment of any
duties or obligations of any Debtor in any way related to the Collateral, and
the Agent shall have no duty or obligation to discharge any such duty or
obligation. The Agent shall have no responsibility for taking any necessary
steps to preserve rights against any parties with respect to any Collateral or
initiating any action to protect the Collateral against the possibility of a
decline in market value. Neither the Agent or any Bank, nor any party acting as
attorney for the Agent or any Bank, shall be liable for any acts or omissions or
for any error of judgment or mistake of fact or law other than such person's
gross negligence or willful misconduct.
(g) Failure by the Agent or any Bank to exercise any right, remedy or
option under this Agreement or any other agreement between the Debtors or any of
them and the Agent or any Bank or Banks or provided by law, or delay by the
Agent or any Bank in exercising the same, shall not operate as a waiver; no
waiver shall be effective unless it is in writing, signed by the party against
whom enforcement of the waiver is sought and then only to the extent
specifically stated. Neither the Agent, any Bank nor any party acting as
attorney for the Agent or such Bank, shall be liable for any acts or omissions
or for any error of judgment or mistake of fact or law other than their gross
negligence or willful
-19-
misconduct. The rights and remedies of the Agent and the Banks under this
Agreement shall be cumulative and not exclusive of any other right or remedy
which the Agent or any Bank may have. For purposes of this Agreement, an Event
of Default shall be construed as continuing after its occurrence until the same
is waived in writing by the Banks or the Required Banks, as the case may be, in
accordance with the Credit Agreement.
SECTION 10. APPLICATION OF PROCEEDS. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of the Obligations in
accordance with the terms of the Credit Agreement. The Debtors shall remain
liable to the Agent and the Banks for any deficiency. Any surplus remaining
after the full payment and satisfaction of the Obligations shall be returned to
the Debtors or to whomsoever the Agent reasonably determines is lawfully
entitled thereto.
SECTION 11. CONTINUING AGREEMENT. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and any commitment to extend any credit constituting Obligations to
the Borrower shall have terminated.
SECTION 12. PRIMARY SECURITY; OBLIGATIONS ABSOLUTE. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any portion thereof shall in any manner entitle any Debtor to any
right, title or interest in or to the Obligations or any collateral security
therefor, whether by subrogation or otherwise, unless and until all Obligations
have been fully paid and satisfied and any commitment to extend credit
constituting Obligations to the Borrower shall have terminated. Each Debtor
acknowledges and agrees that the lien and security hereby created and provided
for are absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of the Agent, any Bank or any other
holder of any of the Obligations, and without limiting the generality of the
foregoing, the lien and security hereof shall not be impaired by any acceptance
by the Agent, any Bank or any holder of any of the Obligations of any other
security for or guarantors upon any of the Obligations or by any failure,
neglect or omission on the part of the Agent, any Bank or any other holder of
any of the Obligations to realize upon or protect any of the Obligations or any
collateral security therefor. The lien and security hereof shall not in any
manner be impaired or affected by (and the Agent and the Banks, without notice
to anyone, are hereby authorized to make from time to time) any sale, pledge,
surrender, compromise,
-20-
settlement, release, renewal, extension, indulgence, alteration, substitution,
exchange, change in, modification or disposition of any of the Obligations, or
of any collateral security therefor, or of any guaranty thereof or of any
obligor thereon. The Banks may at their discretion at any time grant credit to
the Borrower without notice to any Debtor in such amounts and on such terms as
the Banks may elect (all of such to constitute additional Obligations) without
in any manner impairing the lien and security hereby created and provided for.
No release, compromise or discharge of any Debtor hereunder or with respect to
any of the Obligations or any Collateral provided by such Debtor shall release
or discharge, or impair the agreements of, any other Debtor hereunder or in any
manner impair the liens and security interests granted by any other Debtor
hereunder; and the Agent may proceed against the Collateral provided hereunder
by any one or more of the Debtors without proceeding against any or all of the
other Debtors, their respective properties or any other security or guaranty
whatsoever. Without limiting the generality of the foregoing, the Agent (acting
at the direction of the Banks) may at any time or from time to time release any
Debtor from its obligations hereunder or release any Collateral or effect any
compromise with any Debtor, and no such release or compromise shall in any
manner impair or otherwise effect the liens granted by, or the obligations of,
the other Debtors hereunder. In order to foreclose or otherwise realize hereon
and to exercise the rights granted the Agent hereunder and under applicable law
as against any Debtor or any Collateral in which such Debtor has rights, there
shall be no obligation on the part of the Agent, any Bank or any other holder of
any of the Obligations at any time to first resort for payment to the Borrower
or any other Debtor or any other Person, its property or estate or to any
guaranty of the Obligations or any portion thereof or to resort to any other
collateral security, property, liens or any other rights or remedies whatsoever,
and the Agent shall have the right to enforce this instrument as against any
Debtor or any Collateral in which such Debtor has rights, irrespective of
whether or not other proceedings or steps are pending seeking resort to or
realization upon or from any of the foregoing.
SECTION 13. THE AGENT. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the Banks concerning the perfection
of the security interest granted hereunder or in the value of any of the
Collateral.
SECTION 14. MISCELLANEOUS. (a) This Agreement cannot be changed or
terminated orally. All of the rights, privileges, remedies and options given to
the Agent and the Banks hereunder shall inure to the benefit of their respective
successors and assigns, and
-21-
all the terms, conditions, promises, covenants, representations and warranties
of and in this Agreement shall bind each Debtor and its legal representatives,
successors and assigns, provided that no Debtor may assign its rights or
delegate its duties hereunder without the Agent's prior written consent.
Without limiting the generality of the foregoing, and subject to the provisions
of Sections 12.9 and 12.12 of the Credit Agreement, any Bank may assign or
otherwise transfer any indebtedness held by it secured by this Agreement to any
other person or entity, and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to such Bank herein or
otherwise, subject, however, to the provisions of the Credit Agreement. Each
Debtor hereby releases the Agent and each Bank from any liability for any act or
omission relating to its Collateral or this Agreement, except the Agent's or
such Bank's gross negligence or willful misconduct.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to the Borrower in accordance
with Section 12.6 of the Credit Agreement, or if to the Agent or any Bank, when
given to such party in accordance with Section 12.6 of the Credit Agreement.
(c) No Bank shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure against any Collateral
subject to this Agreement or for the execution of any trust or power hereof or
for the appointment of a receiver, or for the enforcement of any other remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Banks shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien and security interest of this Agreement by its or
their action or to enforce any right hereunder, and that all proceedings at law
or in equity shall be instituted, had and maintained by the Agent in the manner
herein provided for the ratable benefit of the Banks.
(d) In the event that any provision hereof shall be deemed to be invalid
by reason of the operation of any law or by reason of the interpretation placed
thereon by any court, this Agreement shall be construed as not containing such
provision, but only as to such locations where such law or interpretation is
operative, and the invalidity of such provision shall not affect the validity of
any remaining provision hereof, and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect. Without
limiting the generality of the foregoing, in the event that this Agreement shall
be deemed to be invalid or otherwise unenforceable with respect to any Debtor,
such invalidity or unenforceability shall not affect the validity of this
Agreement with respect to the other Debtors.
-22-
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by the internal laws of the State of Illinois
(without regard to the principles of conflicts of law). All terms which are
used in this Agreement which are defined in the Code shall have the same
meanings herein as said terms do in the Code unless this Agreement shall
otherwise specifically provide. The headings in this instrument are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
(f) This Agreement may be executed in any number of counterparts, each
constituting an original, but all together one and the same instrument. Each
Debtor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
(g) THE AGENT AND THE DEBTORS AGREE THAT ALL DISPUTES AMONG THEM ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL
COURTS LOCATED IN XXXX COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE DEBTORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF XXXX COUNTY, ILLINOIS. EACH OF THE DEBTORS WAIVES IN ALL
DISPUTES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH DEBTOR MAY HAVE THAT ANY
OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE DEBTORS AGREES
THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE
DEBTORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO
REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY DEBTOR
AND ITS PROPERTY OR JOINTLY AGAINST THE BORROWER AND ANY ONE OR MORE OF THE
DEBTORS AND THEIR PROPERTY. EACH OF THE DEBTORS AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS
PROVISION BY THE AGENT TO REALIZE ON COLLATERAL, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE AGENT. EACH OF THE DEBTORS WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH.
[SIGNATURE PAGES TO FOLLOW]
-23-
In WITNESS WHEREOF, the Debtors have caused this Agreement to be duly
executed as of the date first above written.
DEBTORS:
PLATINUM ENTERTAINMENT, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
LEXICON MUSIC, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
RIVER NORTH STUDIOS, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
CGI RECORDS, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
RIVER NORTH RECORDS, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
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LIGHT RECORDS, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
THE RECORDING EXPERIENCE, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
PEG PUBLISHING, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
JUSTMIKE MUSIC, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
ROYCE PUBLISHING, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its President
-26-
Accepted and agreed to as of the date first above written.
BANK OF MONTREAL, as Agent as aforesaid
for the Banks
By /s/ Xxxx Xxxxxxxxxxx
------------------------------------
Its Director
-28-
