EXECUTION COPY
EXHIBIT 99.7
AMENDED AND RESTATED
SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of January
27, 2004 among VIRCO MFG. CORPORATION, a Delaware corporation (the "PARENT"),
each of the Parent's Subsidiaries signatory hereto (such Subsidiaries, the
"SUBSIDIARY GUARANTORS"; and together with the Parent are referred to herein as
the "GRANTORS"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION (the "BANK").
W I T N E S S T H:
WHEREAS, pursuant to the Credit Agreement dated as of January
27, 2004 (as amended, restated, supplemented or otherwise modified , the "CREDIT
AGREEMENT") between the Parent and the Bank, the Bank has agreed to made certain
loans and other financial accommodations to the Parent;
WHEREAS, as a condition to the Bank's obligation to extend
such loans and other financial accommodations the Subsidiary Guarantors have
agreed to guaranty the Parent's obligations under the Credit Agreement and the
other Loan Documents to which the Company is party; and
WHEREAS, as a further condition to the Bank's obligation to
extend such loans and other financial accommodations, the Bank has required, and
the Grantors have agreed, to (i) execute and deliver this Security Agreement to
provide collateral security for the obligation of the Grantors under the Loan
Documents to which each is party and (ii) amend, restate and consolidate the
Continuing Security Agreement: Rights to Payment and Inventory dated as of
February 1, 2003 between the Company and the Bank and the Security Agreement:
Equipment dated as of February 1, 2003 (collectively, the "PRIOR SECURITY
DOCUMENTS") between the Company and the Bank in the form set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. Terms defined in the Credit Agreement
and not otherwise defined in Annex A hereto are used herein as therein defined.
All other terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein.
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment,
performance and observance of all of its Secured Obligations, each Grantor
hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers
to the Bank, a security interest in and Lien upon all of its right, title and
interest in, to and under all personal property and other assets, whether now
owned
Security Agreement
by or owing to, or hereafter acquired by or arising in favor of such Grantor
(including under any trade names, styles or derivations thereof), and whether
owned or consigned by or to, or leased from or to, such Grantor, and regardless
of where located (all of which being hereinafter collectively referred to as the
"COLLATERAL"), including:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all General Intangibles (including payment
intangibles and Software);
(v) all Goods (including Inventory, Equipment
and Fixtures);
(vi) all Instruments;
(vii) all Investment Property;
(viii) all Deposit Accounts of such Grantor,
including all deposits therein;
(ix) all money, cash or cash equivalents of such
Grantor;
(x) all Supporting Obligations and
Letter-of-Credit Rights of such Grantor; and
(xi) to the extent not otherwise included, all
Proceeds, tort claims, insurance claims and other rights to payments
not otherwise included in the foregoing and products of the foregoing
and all accessions to, substitutions and replacements for, and rents
and profits of, each of the foregoing.
(b) In addition, to secure the prompt and complete
payment, performance and observance of the Secured Obligations and in order to
induce the Bank as aforesaid, each Grantor hereby grants to the Bank, a right of
setoff against the property of such Grantor held by the Bank, consisting of
property described above in Section 2(a) now or hereafter in the possession or
custody of or in transit to the Bank, for any purpose, including safekeeping,
collection or pledge, for the account of such Grantor, or as to which such
Grantor may have any right or power.
3. RIGHTS: LIMITATIONS ON THE BANK'S OBLIGATIONS.
(a) It is expressly agreed by the Grantors that, anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of its Contracts and each of its Licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder. The
Bank shall not have any obligation or liability under any Contract or License by
reason of or arising out of this Security Agreement or the granting herein of a
Lien
Security Agreement
2
thereon or the receipt by the Bank of any payment relating to any Contract or
License pursuant hereto. The Bank shall not be required or obligated in any
manner to perform or fulfill any of the obligations of any Grantor under or
pursuant to any Contract or License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any Contract or License, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) The Bank may at any time after an Event of Default
has occurred and be continuing (or, if any rights of set-off (other than
set-offs against an Account arising under the Contract giving rise to the same
Account) or contra accounts may be asserted with respect to the following),
without prior notice to any Grantor, notify Account Debtors and other Persons
obligated on the Collateral that the Bank has a security interest therein, and
that payments shall be made directly to the Bank. Upon the request of the Bank,
each Grantor shall so notify Account Debtors and other Persons obligated on
Collateral. Once any such notice has been given to any Account Debtor or other
Person obligated on the Collateral, the affected Grantor shall not give any
contrary instructions to such Account Debtor or other Person without the Bank's
prior written consent.
(c) The Bank may at any time in the Bank's own name, in
the name of a nominee of the Bank or in the name of any Grantor communicate with
Account Debtors, parties to Contracts and obligors in respect of Instruments to
verify with such Persons, to the Bank's satisfaction, the existence, amount
terms of, and any other matter relating to, Accounts, payment intangibles,
Instruments or Chattel Paper.
4. REPRESENTATIONS AND WARRANTIES. Each Grantor
represents and warrants that:
(a) Each Grantor has rights in and the power to transfer
each item of the Collateral upon which it purports to xxxxx x Xxxx hereunder
free and clear of any and all Liens other than Permitted Liens.
(b) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is on file or of record in any public office, except
such as may have been filed (i) by any Grantor in favor of the Bank pursuant to
this Security Agreement; and (ii) in connection with any other Permitted Liens.
(c) This Security Agreement is effective to create a
valid and continuing Lien on and, upon the filing of appropriate financing
statements with the governmental offices listed on Schedule I hereto, a
perfected Lien in favor of the Bank on the Collateral with respect to which a
Lien may be perfected by filing pursuant to the Code. Such Lien is prior to all
other Liens, except the Permitted Liens that would be prior to Liens in favor of
the Bank as a matter of law, and is enforceable as such as against any and all
creditors of and purchasers from any Grantor (other than purchasers and lessees
of Inventory in the ordinary course of business and non-exclusive licensees of
General Intangibles in the ordinary course of business). All action by
Security Agreement
3
any Grantor necessary or desirable to protect and perfect such Lien on each item
of the Collateral has been duly taken.
(d) Schedule II hereto lists, as of the Closing Date, all
Instruments, Letter of Credit Rights and Chattel Paper of each Grantor. All
action by any Grantor necessary or desirable to protect and perfect the Lien of
the Bank on each item set forth on Schedule II (including the delivery of all
originals thereof to the Bank and the legending of all Chattel Paper as required
by Section 5(b) hereof) has been duly taken. The Lien of the Bank on the
Collateral listed on Schedule II hereto is prior to all other Liens, except the
Permitted Liens that would be prior to the Liens in favor of the Bank as a
matter of law, and is enforceable as such against any and all creditors of and
purchasers from any Grantor.
(e) Each Grantor's name as it appears in official filings
in its jurisdiction of organization, the type of entity of each Grantor
(including corporation, partnership, limited partnership or limited liability
company), any other registered, trade or fictious names of such Grantor, the
organizational identification number issued to such Grantor by its jurisdiction
of organization or a statement that no such number has been issued, such
Grantor's jurisdiction of organization, the location of such Grantor's chief
executive office, principal place of business, offices, all warehouses and
premises where Collateral is stored or located, and the locations of its books
and records concerning the Collateral, in each case for the last five (5) years
are set forth on Schedule III hereto. Each Grantor has only one state of
incorporation or organization.
(f) With respect to the Accounts (i) they represent bona
fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of each Grantor's business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes
existing or asserted with respect thereto and no Grantor has made any agreement
with any Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by such Grantor in the ordinary course of its
business for prompt payment and disclosed to the Bank; (iii) to each Grantor's
knowledge, there are no facts, events or occurrences which in any way impair the
validity or enforceability thereof or could reasonably be expected to reduce the
amount payable thereunder as shown on any Grantor's books and records and any
invoices and statements delivered to the Bank with respect thereto; (iv) that
are Eligible Accounts, no Grantor has received any notice of proceedings or
actions which are threatened or pending against any Account Debtor on such
Eligible Accounts which might result in any adverse change in such Account
Debtor's financial condition; and (v) no Grantor has knowledge that any Account
Debtor is unable generally to pay its debts as they become due. Further with
respect to the Accounts (x) the amounts shown on all invoices and statements
which may be delivered to the Bank with respect thereto are actually and
absolutely owing to such Grantor as indicated thereon and are not in any way
contingent; and (y) to each Grantor's knowledge, all Account Debtors have the
capacity to contract.
(g) With respect to any Inventory of the Grantors (i)
such Inventory is located at one of the applicable Grantor's locations set forth
on Schedule III hereto; (ii) no Inventory is now, or shall at any time or times
hereafter be stored at any other location without the Bank's
Security Agreement
4
prior consent, and if the Bank gives such consent, the applicable Grantor will
concurrently therewith obtain a bailee, landlord and mortgagee agreement with
respect to such location; (iii) the applicable Grantor has good, indefeasible
and merchantable title to such Inventory and such Inventory are not subject to
any Lien or security interest or document whatsoever except for the Lien granted
to the Bank, and except for Permitted Liens; (iv) except as disclosed to Bank in
writing, such Inventory is not subject to any licensing, Patent, royalty,
Trademark, trade name or Copyright agreements with any third parties which would
require any consent of any third party upon sale or disposition of that
Inventory or the payment of any monies to any third party upon such sale or
other disposition; and (v) the disposition of such Inventory by the Bank
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which any Grantor is a party or to which such property is subject.
(h) As of the Closing Date, no Grantor has any interest
in, or title to, any Patent, Trademark or Copyright except as set forth in
Schedule IV hereto. This Security Agreement is effective to create a valid and
continuing Lien on and, upon filing of appropriate financing statements with the
governmental offices listed on Schedule I hereto and an Intellectual Property
Security Agreement with the United States Copyright Office or the United States
Patent and Trademark Office, as the case may be, perfected Liens in favor of the
Bank on each Grantor' s Patents, Trademarks and Copyrights and such perfected
Liens are enforceable as such as against any and all creditors of and purchasers
from any Grantor. Upon filing of an Intellectual Property Security Agreement
with the United States Copyright Office or the United States Patent and
Trademark Office, as the case may be, and the filing of appropriate financing
statements listed on Schedule I hereto, all action necessary or desirable to
protect and perfect the Bank's Lien on each Grantor's Patents, Trademarks or
Copyrights shall have been duly taken.
(i) (i) Other than as described on Schedule V, there
are no subscriptions, options, warrants, or calls relating to any shares of the
capital stock of the Parent, including any right of conversion or exchange under
any outstanding security or other instrument. The Parent is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any security convertible into or
exchangeable for any of its capital stock or other Equity Interests.
(ii) Schedule V hereto lists a complete and
accurate list of the Parent's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization; (ii) the number of shares of each class of
capital stock authorized for each of such Subsidiaries; and (iii) the number and
the percentage of the outstanding shares of each such class owned directly or
indirectly by the Parent. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and nonassessable.
(iii) Except as set forth on Schedule V, no
capital stock (or any securities, instruments, warrants, options, purchase
rights, conversion or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for capital stock) of any direct or
indirect Subsidiary of the Parent is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right, call,
put, commitment or claim of any right, title, or interest therein or thereto.
Security Agreement
5
(j) All Deposit Accounts of each Grantor are listed on
Schedule VI, including, with respect to each depository (i) the name and address
of such depository and (ii) the account numbers of the accounts maintained with
such depository.
5. COVENANTS. Each Grantor covenants and agrees with the
Bank that from and after the date of this Security Agreement and until the
Termination Date:
(a) Further Assurances: Pledge of Instruments; Chattel
Paper.
(i) At any time and from time to time, upon the
written request of the Bank and at the sole expense of Grantors, each
Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as the
Bank may deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted, including (A)
using its best efforts to secure all consents and approvals necessary
or appropriate for the assignment to or for the benefit of the Bank of
any License or Contract held by such Grantor and to enforce the
security interests granted hereunder; and (B) filing any financing or
continuation statements under the Code with respect to the Liens
granted hereunder or under any other Loan Document as to those
jurisdictions that are not Uniform Commercial Code jurisdictions.
(ii) Unless the Bank shall otherwise consent in
writing (which consent may be revoked), each Grantor shall deliver to
the Bank all Collateral consisting of negotiable Documents,
certificated securities, Chattel Paper and Instruments (in each case,
accompanied by stock powers, allonges or other instruments of transfer
executed in blank) promptly after such Grantor receives the same.
(iii) Each Grantor shall obtain or use its best
efforts to obtain waivers or subordinations of Liens from landlords and
mortgagees, and each Grantor shall in all instances obtain
authenticated acknowledgements of the Bank's Liens from bailees having
possession of any Grantor's Goods that they hold for the benefit of the
Bank.
(iv) Unless waived by the Bank in writing (which
waiver may be revoked), each Grantor shall obtain authenticated
Investment Property Control Agreements from each issuer of
uncertificated securities, securities intermediary, or commodities
intermediary issuing or holding any financial assets or commodities to
or for any Grantor.
(v) Unless waived by the Bank in writing (which
waiver may be revoked), each Grantor shall obtain a Deposit Account
Control Agreement with each bank or financial institution holding a
Deposit Account for such Grantor.
(vi) Each Grantor that is or becomes the
beneficiary of a letter of credit shall, promptly, and in any event
within two (2) Business Days after becoming a beneficiary, notify the
Bank thereof and (i) if so requested by the Bank, use their best
efforts to (and, if the face amount of the Letter-of-Credit Right
exceeds $100,000 shall)
Security Agreement
6
enter into a tri-party agreement with the Bank and the issuer and/or
confirmation bank with respect to Letter-of-Credit Rights assigning
such Letter-of-Credit Rights to the Bank.
(vii) Each Grantor shall take all steps necessary
to grant the Bank control of all electronic chattel paper in accordance
with the Code.
(viii) Each Grantor hereby irrevocably authorizes
the Bank at any time and from time to time to file in any filing office
in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (a) indicate the Collateral (i)
as all assets of such Grantor or words of similar effect, regardless of
whether any particular asset comprised in the Collateral falls within
the scope of Article 9 of the Code or such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b)
contain any other information required by part 5 of Article 9 of the
Code for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether such Grantor is an
organization, the type of organization and any organization
identification number issued to such Grantor, and (ii) in the case of a
financing statement filed as a fixture filing or indicating Collateral
as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. Each
Grantor agrees to furnish any such information to the Bank promptly
upon request. Each Grantor also ratifies its authorization for the Bank
to have filed in any Uniform Commercial Code jurisdiction any initial
financing statements or amendments thereto if filed prior to the date
hereof.
(ix) Each Grantor shall promptly, and in any
event within two (2) Business Days after the same is acquired by it,
notify the Bank of any commercial tort claim (as defined in the Code)
acquired by it and unless otherwise consented to by the Bank (which may
be revoked), such Grantor shall enter into a supplement to this
Security Agreement, granting to the Bank a Lien in such commercial tort
claim.
(b) Maintenance of Records. The Grantors shall keep and
maintain, at their own cost and expense, satisfactory and complete records of
the Collateral, including a record of any and all payments received and any and
all credits granted with respect to the Collateral and all other dealings with
the Collateral. The Grantors shall xxxx their books and records pertaining to
the Collateral to evidence this Security Agreement and the Liens granted hereby.
If any Grantor retains possession of any Chattel Paper or Instruments with the
Bank's consent, such Chattel Paper and Instruments shall be marked with a legend
the form, scope and substance of which is acceptable to the Bank.
(c) Covenants Regarding Patent, Trademark and Copyright
Collateral.
(i) Grantors shall notify the Bank immediately
if they know or have reason to know that any application or
registration relating to any Patent, Trademark or Copyright (now or
hereafter existing) may become abandoned or dedicated, or of any
adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office
or any court) regarding any
Security Agreement
7
Grantor's ownership of any Patent, Trademark or Copyright, its right to
register the same, or to keep and maintain the same.
(ii) In the event any Grantor, either itself or
through any agent, employee, licensee or designee, files an application
for the registration of any Patent, Trademark or Copyright with the
United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency then the relevant Grantor shall,
within 45 days of the filing of such application notify, the Bank of
such application, and, upon request of the Bank, Grantor shall execute
and deliver any and all applicable Intellectual Property Security
Agreements as the Bank may request to evidence the Bank's Lien on such
Patent, Trademark or Copyright, and the General Intangibles of such
Grantor relating thereto or represented thereby.
(iii) Grantors shall take all actions necessary or
requested by the Bank to maintain and pursue each application, to
obtain the relevant registration and to maintain the registration of
each of the Patents, Trademarks and Copyrights (now or hereafter
existing), including the filing of applications for renewal, affidavits
of use, affidavits of noncontestability and opposition and interference
and cancellation proceedings, unless the applicable Grantor shall
determine that such Patent, Trademark or Copyright is not material to
the conduct of its business.
(iv) In the event that any of the Patent,
Trademark or Copyright Collateral is infringed upon, or misappropriated
or diluted by a third party, such Grantor shall comply with Section
5(a)(ix) of this Security Agreement. Such Grantor shall, unless such
Grantor shall reasonably determine that such Patent, Trademark or
Copyright Collateral is in no way material to the conduct of its
business or operations, promptly xxx for infringement, misappropriation
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as the
Bank shall deem appropriate under the circumstances to protect such
Patent, Trademark or Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action
brought by the Bank relating to any Collateral for any sum owing with respect
thereto or to enforce any rights or claims with respect thereto, each Grantor
will save, indemnify and keep the Bank harmless from and against all expense
(including reasonable attorneys' fees and expenses), loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the Account Debtor or other Person obligated on the
Collateral, arising out of a breach by any Grantor of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from such Grantor,
except in the case of the Bank, to the extent such expense, loss, or damage is
attributable solely to the gross negligence or willful misconduct of the Bank as
finally determined by a court of competent jurisdiction. All such obligations of
Grantors shall be and remain enforceable against and only against Grantors and
shall not be enforceable against the Bank.
Security Agreement
8
(e) Compliance with Terms of Accounts, etc. In all
material respects, each Grantor will perform and comply with all obligations in
respect of the Collateral and all other agreements to which it is a party or by
which it is bound relating to the Collateral.
(f) Limitation on Liens on Collateral. No Grantor will
create, permit or suffer to exist, and each Grantor will defend the Collateral
against, and take such other action as is necessary to remove, any Lien on the
Collateral except Permitted Liens, and will defend the right, title and interest
of the Bank in and to any of such Grantor's rights under the Collateral against
the claims and demands of all Persons whomsoever.
(g) Limitations on Disposition. No Grantor will sell,
license, lease, transfer or otherwise dispose of any of the Collateral, or
attempt or contract to do so except as permitted by the Credit Agreement.
(h) Further Identification of Collateral. The Grantors
will, if so requested by the Bank, furnish to the Bank, as often as the Bank
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Bank
may reasonably request, all in such detail as the Bank may specify.
(i) Notices. Grantors will advise the Bank promptly, in
reasonable detail, (i) of any Lien (other than Permitted Liens) or written claim
made or asserted against any of the Collateral, and (ii) of the occurrence of
any other event which would have a material adverse effect on the aggregate
value of the Collateral or on the Liens created hereunder or under any other
Security Document.
(j) No Reincorporation; No Name Change. No Grantor shall
reincorporate or reorganize itself under the laws of any jurisdiction other than
the jurisdiction in which it is incorporated or organized as of the date hereof
without the prior written consent of the Bank. No Grantor shall change its legal
name without first giving 30 days prior written notice of its intent to do so to
the Bank.
(k) Terminations; Amendments Not Authorized. Each Grantor
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of the Bank and agrees that it will not do so
without the prior written consent of the Bank, subject to such Grantor's rights
under Section 9-509(d)(2) of the Code.
6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Closing Date each Grantor shall execute and deliver to
the Bank a power of attorney (the "Power of Attorney") substantially in the form
attached hereto as Exhibit A. The power of attorney granted pursuant to the
Power of Attorney is a power coupled with an interest and shall be irrevocable
until the Termination Date. The powers conferred on the Bank under the Power of
Attorney are solely to protect the Bank's interests in the Collateral and shall
not impose any duty upon the Bank to exercise any such powers. The Bank agrees
that (a) except for the powers granted in clause (h) of the Power of Attorney,
it shall not exercise any power or
Security Agreement
9
authority granted under the Power of Attorney unless an Event of Default has
occurred and is continuing, and (b) the Bank shall account for any moneys
received by the Bank in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that the Bank shall not
have any duty as to any Collateral, and the Bank shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers.
NEITHER THE BANK, NOR ANY OF ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR
FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF
DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY
PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES: RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted
to it under this Security Agreement, the Line of Credit Note, the Term Note, the
Credit Agreement, the other Loan Documents and under any other instrument or
agreement securing, evidencing or relating to any of the Secured Obligations, if
any Event of Default shall have occurred and be continuing, the Bank may
exercise all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, each Grantor expressly agrees that in
any such event the Bank, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon such Grantor or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code and other applicable law),
may forthwith enter upon the premises of such Grantor where any Collateral is
located through self-help, without judicial process, without first obtaining a
final judgment or giving such Grantor or any other Person notice and opportunity
for a hearing on the Bank's claim or action and may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, license, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more parcels at a public or
private sale or sales, at any exchange at such prices as it may deem acceptable,
for cash or on credit or for future delivery without assumption of any credit
risk. The Bank shall have the right upon any such public sale or sales and, to
the extent permitted by law, upon any such private sale or sales, to purchase
for the benefit of the Bank, the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption each
Grantor hereby releases. Such sales may be adjourned and continued from time to
time with or without notice. The Bank shall have the right to conduct such sales
on any Grantor's premises or elsewhere and shall have the right to use any
Grantor's premises without charge for such time or times as the Bank deems
necessary or advisable.
If any Event of Default shall have occurred and be continued,
each Grantor further agrees, at the Bank's request, to assemble the Collateral
and make it available to the Bank at a place or places designated by the Bank
which are reasonably convenient to the Bank and such Grantor, whether at such
Grantor's premises or elsewhere. Until the Bank is able to effect a sale, lease,
or other disposition of Collateral, the Bank shall have the right to hold or use
Collateral, or
Security Agreement
10
any part thereof, to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by the Bank. The Bank shall have no obligation to any Grantor to maintain or
preserve the rights of such Grantor as against third parties with respect to
Collateral while Collateral is in the possession of the Bank. The Bank may, if
it so elects, seek the appointment of a receiver or keeper to take possession of
Collateral and to enforce any of the Bank's remedies, with respect to such
appointment without prior notice or hearing as to such appointment. The Bank
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Secured Obligations as provided in the
Credit Agreement, and only after so paying over such net proceeds, and after the
payment by the Bank of any other amount required by any provision of law, need
the Bank account for the surplus, if any, to any Grantor. To the maximum extent
permitted by applicable law, each Grantor waives all claims, damages, and
demands against the Bank arising out of the repossession, retention or sale of
the Collateral except such as arise solely out of the gross negligence or
willful misconduct of the Bank as finally determined by a court of competent
jurisdiction. Each Grantor agrees that ten (10) days prior notice by the Bank of
the time and place of any public sale or of the time after which a private sale
may take place is reasonable notification of such matters. The Grantors shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all Secured Obligations, including any
attorneys' fees and other expenses incurred by the Bank to collect such
deficiency.
(b) Except as otherwise specifically provided herein,
each Grantor hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection with this
Security Agreement or any Collateral.
(c) To the extent that applicable law imposes duties on
the Bank to exercise remedies in a commercially reasonable manner, each Grantor
acknowledges and agrees that it is not commercially unreasonable for the Bank
(i) to fail to incur expenses reasonably deemed significant by the Bank to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Account Debtors or other Persons obligated on Collateral or to
remove Liens on or any adverse claims against Collateral, (iv) to exercise
collection remedies against Account Debtors and other Persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other Persons, whether or not in the
same business as the Grantor, for expressions of interest in acquiring all or
any portion of such Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Bank against risks of loss, collection or disposition
of Collateral or to provide to the Bank a guaranteed return from the
Security Agreement
11
collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Bank, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist the Bank in the
collection or disposition of any of the Collateral. Each Grantor acknowledges
that the purpose of this Section 7(c) is to provide non-exhaustive indications
of what actions or omissions by the Bank would not be commercially unreasonable
in the Bank's exercise of remedies against the Collateral and that other actions
or omissions by the Bank shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 7(c). Without limitation upon the
foregoing, nothing contained in this Section 7(c) shall be construed to grant
any rights to any Grantor or to impose any duties on the Bank that would not
have been granted or imposed by this Security Agreement or by applicable law in
the absence of this Section 7(c).
(d) The Bank shall not be required to make any demand
upon, or pursue or exhaust any of their rights or remedies against, any Grantor,
any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Secured Obligations or to pursue or exhaust any of their rights
or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. The Bank shall not be required to marshal the Collateral or
any guarantee of the Secured Obligations or to resort to the Collateral or any
such guarantee in any particular order, and all of its and their rights
hereunder or under any other Loan Document shall be cumulative. To the extent it
may lawfully do so, each Grantor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
the Bank, any valuation, stay, appraisement, extension, redemption or similar
laws and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise.
(e) Without limiting the foregoing, upon the occurrence
and during the continuance of an Event of Default and upon written notice
thereof to the Grantors, all rights of a Grantor to exercise any voting or
consensual powers with respect to any capital stock in which such Grantor has an
interest and to receive and retain the distributions which it would otherwise be
entitled to receive and retain shall terminate and all such powers and rights to
receive and retain such distributions shall immediately without further action
become vested in the Bank.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY
COLLATERAL. For the purpose of enabling the Bank to exercise rights and remedies
under Section 7 hereof (including, without limiting the terms of Section 7
hereof, in order to take possession of, hold, preserve, process, assemble,
prepare for sale, market for sale, sell or otherwise dispose of Collateral) at
such time as the Bank shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to the Bank an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Grantor) to use, license or sublicense any Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
Security Agreement
12
9. INDEMNITY; EXPENSES; LIMITATION ON BANK'S DUTY IN
RESPECT OF COLLATERAL. (a) Whether or not the transactions contemplated hereby
are consummated, each Grantor shall indemnify and hold the Bank, its Affiliates,
directors, officers, agents, employees and representatives (collectively, the
"INDEMNIFIED PERSONS") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, charges, expenses and disbursements (including reasonable
attorneys costs and expenses) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Secured Obligations or
any assignment by the Bank) be imposed on, incurred by or asserted against any
such Indemnified Person in any way relating to or arising out of or in
connection with the execution, delivery, enforcement, performance or
administration of this Security Agreement, the Credit Agreement, the other Loan
Documents or any other agreement, letter or instrument delivered in connection
with the transactions contemplated hereby or the consummation of the
transactions contemplated hereby or any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, investigation, litigation or
proceeding) and regardless of whether any Indemnified Person is a party thereto
(all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"), in all cases,
whether or not caused by or arising, in whole or in part, out of the negligence
of any Indemnified Person; provided that such indemnity shall not, as to any
Indemnified Person, be available to the extent that such Indemnified Liabilities
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnified Person. No Indemnified Person shall have any liability for any
indirect or consequential damages relating to this Security Agreement, the
Credit Agreement or any other Loan Document or arising out of its activities in
connection herewith or therewith (whether before or after the date hereof). In
the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 9 applies, such indemnity shall be effective whether
or not such investigation, litigation or proceeding is brought by any Grantor,
its directors, shareholders or creditors or an Indemnified Party or any other
Person, whether or not an Indemnified Person is otherwise a party thereto and
whether or not any of the transactions contemplated hereunder or under any of
the other Loan Documents are consummated. All amounts due under this Section 9
shall be payable within five Business Days after demand therefor. The agreements
in this Section 9 shall survive the assignment by the Bank and the repayment,
satisfaction or discharge of all the other Secured Obligations. The Indemnified
Person agrees that in the event that any investigation, litigation or proceeding
is asserted or threatened in writing or instituted against it or any other
Indemnified Person, or any remedial, removal or response action which is
requested of it or any other Indemnified Person, for which such Indemnified
Person may desire indemnity or defense hereunder, such Indemnified Person shall
notify the Parent in writing of such event; provided that failure to so notify
the Parent shall not affect the right of any Indemnified Person to seek
indemnification under this Section 9.
(b) Each Grantor will upon demand pay to the Bank the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of its counsel and of any experts and agents, that
the Bank may incur in connection with (i) the administration of this Security
Agreement, (ii) the custody, preservation, use or operation of, or
Security Agreement
13
the sale of, collection from or other realization upon, any of the Collateral of
such Grantor, (iii) the exercise or enforcement of any of the rights of the Bank
hereunder or (iv) the failure by such Grantor to perform or observe any of the
provisions hereof.
(c) The Bank shall use reasonable care with respect to
the Collateral in its possession or under its control. The Bank shall not have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Bank or any income thereon
or as to the preservation of rights against prior parties or any other rights
pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain
in full force and effect and continue to be effective should any petition be
filed by or against any Grantor for liquidation or reorganization, should any
Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any
significant part of any Grantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee of the Secured Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
11. NOTICES. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other party, or whenever any of the parties
desires to give and serve upon any other party any communication with respect to
this Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given in the
manner, and deemed received, as provided for in the Credit Agreement.
12. SEVERABILITY. Whenever possible, each provision of
this Security Agreement shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Loan Documents which, taken together,
set forth the complete understanding and agreement of the Bank and Grantors with
respect to the matters referred to herein and therein.
13. NO WAIVER; CUMULATIVE REMEDIES. The Bank shall not by
any act, delay, omission or otherwise be deemed to have waived any of its rights
or remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Bank and then only to the extent therein set forth. A waiver by the Bank of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Bank would otherwise
Security Agreement
14
have had on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Bank any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by the Bank and Grantors.
14. LIMITATION BY LAW. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be limited
to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to
Section 10 hereof, this Security Agreement shall terminate upon the Termination
Date.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and
all obligations of Grantors hereunder shall be binding upon the successors and
assigns of each Grantor (including any debtor-in-possession on behalf of such
Grantor) and shall, together with the rights and remedies of the Bank hereunder,
inure to the benefit of the Bank, all future holders of any instrument
evidencing any of the Secured Obligations and their respective successors and
assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Secured Obligations or any portion thereof or interest therein shall in any
manner impair the Lien granted to the Bank hereunder. No Grantor may assign,
sell, hypothecate or otherwise transfer any interest in or obligation under this
Security Agreement.
17. COUNTERPARTS. This Security Agreement may be
authenticated in any number of separate counterparts, each of which shall
collectively and separately constitute one agreement. This Security Agreement
may be authenticated by manual signature, facsimile or, if approved in writing
by the Bank, electronic means, all of which shall be equally valid.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
Security Agreement
15
19. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by
any party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees, officers,
directors, attorneys, and other agents), whether in tort, contract or otherwise
arising out of or relating to in any way (i) the loan and related Loan Documents
which are the subject of the Credit Agreement and this Security Agreement and
its negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination thereof; or (ii) requests for additional credit
thereunder.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in California selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of
the United States Code), notwithstanding any conflicting choice of law provision
in any of the documents between the parties; and (iii) be conducted by the AAA,
or such other administrator as the parties shall mutually agree upon, in
accordance with the AAA's commercial dispute resolution procedures, unless the
claim or counterclaim is at least $1,000,000 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA's optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the "Rules"). If there is any inconsistency between the terms
hereof and the Rules, the terms and procedures set forth herein shall control.
Any party who fails or refuses to submit to arbitration following a demand by
any other party shall bear all costs and expenses incurred by such other party
in compelling arbitration of any dispute. Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded to
it under 12 U.S.C. Section 91 or any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of any party
to (i) foreclose against real or personal property collateral; (ii) exercise
self-help remedies relating to collateral or proceeds of collateral such as
setoff or repossession; or (iii) obtain provisional or ancillary remedies such
as replevin, injunctive relief, attachment or the appointment of a receiver,
before during or after the pendency of any arbitration proceeding. This
exclusion does not constitute a waiver of the right or obligation of any party
to submit any dispute to arbitration or reference hereunder, including those
arising from the exercise of the actions detailed in sections (i), (ii) and
(iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000 or less will be
decided by a single arbitrator selected according to the Rules, and who shall
not render an award of greater than $5,000,000. Any dispute in which the amount
in controversy exceeds $5,000,000 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In
Security Agreement
16
any arbitration proceeding the arbitrator will decide (by documents only or with
a hearing at the arbitrator's discretion) any pre-hearing motions which are
similar to motions to dismiss for failure to state a claim or motions for
summary adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of California and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award. The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
California Rules of Civil Procedure or other applicable law. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
(e) Discovery. In any arbitration proceeding discovery
will be permitted in accordance with the Rules. All discovery shall be expressly
limited to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution
of any dispute arising pursuant to the terms of this Agreement shall be
determined by a separate arbitration proceeding and such dispute shall not be
consolidated with other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference.
Notwithstanding anything herein to the contrary, no dispute shall be submitted
to arbitration if the dispute concerns indebtedness secured directly or
indirectly, in whole or in part, by any real property unless (i) the holder of
the mortgage, lien or security interest specifically elects in writing to
proceed with the arbitration, or (ii) all parties to the arbitration waive any
rights or benefits that might accrue to them by virtue of the single action rule
statute of California, thereby agreeing that all indebtedness and obligations of
the parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
Security Agreement
17
(i) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action required to conclude
any arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
20. SECTION TITLES. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
21. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Security Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Security Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Security
Agreement.
22. ADVICE OF COUNSEL. Each of the parties represents to
each other party hereto that it has discussed this Security Agreement and,
specifically, the provisions of Section 18 and Section 19, with its counsel.
23. BENEFIT OF THE BANK. All Liens granted or
contemplated hereby shall be for the benefit of the Bank and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Secured Obligations in the manner determined by the Bank in its sole discretion.
24. RESTATEMENT OF PRIOR SECURITY DOCUMENTS. The Grantors
and the Bank hereby agree that (i) the terms and provisions of the Prior
Security Documents shall be and hereby are amended, superceded, restated and
consolidated in their entirety by the terms and provisions of this Security
Agreement, (ii) the Bank shall not have any obligations under the Prior Security
Documents, except to the extent that any such obligations may be restated in
this Security Agreement or in the other Loan Documents and (iii) the execution
and delivery of this Security Agreement shall not constitute or effect, or be
deemed to constitute or effect, a novation, refinancing, discharge,
extinguishment or refunding of any of the Indebtedness outstanding under the
Prior Credit Agreement or that portion of such Indebtedness that remain
outstanding under the Credit Agreement.
[Signature Page Follows]
Security Agreement
18
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
VIRCO MFG. CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Dose
----------------------------------
Name: Xxxxxx X. Dose
Title: Vice President - Finance, Secretary
and Treasurer
VIRCO INC.,
a Delaware corporation
VIRCO MGMT. CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Dose
----------------------------------
Name: Xxxxxx X. Dose
Title: Authorized officer of each of the
above referenced Grantors
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxxx X. Xxxx
----------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President
Signature Page to
Virco Mfg. Corporation.
Security Agreement
EXECUTION COPY
ANNEX A
TO
SECURITY AGREEMENT
DEFINITIONS
Capitalized terms used in the Security Agreement shall have the
following respective meanings, and all references to Sections, Exhibits,
Schedules or Annexes in the following definitions shall refer to Sections,
Exhibits, Schedules or Annexes of or to the Security Agreement:
"ACCOUNT DEBTOR" means any Person who may become obligated to a Grantor
under, with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).
"ACCOUNTS" means all "accounts," as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, or Instruments),
(including any such obligations that may be characterized as an account or
contract right under the Code), (b) all of a Grantor's rights in, to and under
all purchase orders or receipts for goods or services, (c) all of a Grantor's
rights to any goods represented by any of the foregoing (including unpaid
sellers' rights of rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), (d) all rights to payment
due to a Grantor for property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by a Grantor or in connection with any other transaction (whether or
not yet earned by performance on the part of a Grantor), (e) all health care
insurance receivables and (f) all collateral security of any kind, given by any
Account Debtor or any other Person with respect to any of the foregoing.
"CHARGES" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments, charges, liens, claims
or encumbrances upon or relating to (a) the Collateral, (b) the Secured
Obligations, (c) the employees, payroll, income or gross receipts of a Grantor,
(d) a Grantor's ownership or use of any properties or other assets, or (e) any
other aspect of a Grantor's business.
"CHATTEL PAPER" means any "chattel paper," as such term is defined in
the Code, including electronic chattel paper, now owned or hereafter acquired by
a Grantor.
"COLLATERAL" has the meaning ascribed to it in Section 2(a).
"CONTRACTS" means all "contracts," as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which a Grantor may now or
hereafter have any right, title or interest.
Annex A to
Security Agreement
"COPYRIGHT LICENSE" means any and all rights now owned or hereafter
acquired by a Grantor under any written agreement granting any right to use any
Copyright or Copyright registration.
"COPYRIGHTS" means all of the following now owned or hereafter adopted
or acquired by a Grantor: (a) all copyrights, all General Intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"DEPOSIT ACCOUNT CONTROL AGREEMENT" means any agreement or arrangement
establishing "control" within the meaning of the Code over any Deposit Account,
including an arrangement establishing a secured party as the "customer" with
respect thereto which agreement or arrangement shall be in form and substance
reasonably satisfactory to the Bank.
"DEPOSIT ACCOUNTS" means all "deposit accounts" as such term is defined
in the Code, nor or hereafter held in the name of a Grantor.
"DOCUMENTS" means all "documents," as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, wherever located.
"EQUIPMENT" means all "equipment," as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, wherever located and, in any
event, including all of such Grantor's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"FIXTURES" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by a Grantor.
"GENERAL INTANGIBLES" means all "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by a Grantor, including all
right, title and interest that a Grantor may now or hereafter have in or under
any Contract, all payment intangibles, customer lists, Licenses, Copyrights,
Trademarks, Patents, and all applications therefor and reissues, extensions or
renewals thereof, rights in Intellectual Property, interests in partnerships,
joint ventures and other business associations, licenses, permits, copyrights,
trade secrets, proprietary or confidential information, inventions (whether or
not patented or patentable), technical
Annex A to
Security Agreement
2
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), choses in action, rights to receive tax refunds and other payments,
rights to receive dividends, distributions, cash, Instruments and other property
in respect of or in exchange for any pledged Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of a
Grantor or any computer bureau or service company from time to time acting for a
Grantor.
"GOODS" means all "goods" as defined in the Code, now owned or
hereafter acquired by a Grantor, wherever located, including embedded software
to the extent included in "goods" as defined in the Code.
"INSTRUMENTS" means all "instruments," as such term is defined in the
Code, now owned or hereafter acquired by a Grantor, wherever located, and, in
any event, including all certificated securities, all certificates of deposit,
and all promissory notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means an intellectual
property security agreement substantially in the form of Exhibit I attached
hereto and shall include any amendments, restatements, supplements, or other
modifications thereto.
"INVENTORY" means all "inventory," as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, wherever located, and in any event
including inventory, merchandise, goods and other personal property that are
held by or on behalf of a Grantor for sale or lease or are furnished or are to
be furnished under a contract of service, or that constitute raw materials, work
in process, finished goods, returned goods, or materials or supplies of any
kind, nature or description used or consumed or to be used or consumed in a
Grantor's business or in the processing, production, packaging, promotion,
delivery or shipping of the same, including all supplies and embedded software.
"INVESTMENT PROPERTY" means all "investment property" as such term is
defined in the Code now owned or hereafter acquired by a Grantor, wherever
located, including (i) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership
interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of a Grantor, including the rights of a Grantor to any
securities account and the financial assets held by a securities intermediary in
such securities account and any free credit balance or other money owing by any
securities intermediary with
Annex A to
Security Agreement
3
respect to that account; (iii) all securities accounts of a Grantor; (iv) all
commodity contracts of a Grantor; and (v) all commodity accounts held by a
Grantor.
"INVESTMENT PROPERTY CONTROL AGREEMENT" means an agreement (in form and
substance reasonably acceptable to the Bank) among a Grantor, the Bank and (i)
the issuer of uncertificated securities with respect to uncertificated
securities in the name of a Grantor, (ii) a securities intermediary with respect
to securities, whether certificated or uncertificated, securities entitlements
and other financial assets held in a securities account in the name of a
Grantor, (iii) a futures commission merchant or clearing house, as applicable,
with respect to commodity accounts and commodity contracts held by a Grantor,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of the Bank in such financial assets, and agrees
to follow the instructions or entitlement orders of the Bank without further
consent by any Grantor.
"LETTER-OF-CREDIT RIGHTS" means "letter-of-credit rights" as such term
is defined in the Code, now owned or hereafter acquired by a Grantor, including
rights to payment or performance under a letter of credit, whether or not a
Grantor, as beneficiary, has demanded or is entitled to demand payment or
performance.
"LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by a Grantor.
"PATENT LICENSE" means rights under any written agreement now owned or
hereafter acquired by a Grantor granting any right with respect to any invention
on which a Patent is in existence.
"PATENTS" means all of the following in which a Grantor now holds or
hereafter acquires any interest: (a) all letters patent of the United States or
of any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State, or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.
"PROCEEDS" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to a Grantor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to a Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Entity (or any Person acting under color of
Governmental Entity), (c) any claim of a Grantor against third parties (i) for
past, present or future infringement of any Patent or Patent License, or (ii)
for past, present or future infringement or dilution of any Copyright, Copyright
License, Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries by a
Grantor against third parties with respect to any litigation or dispute
concerning any of the Collateral including claims arising out of the loss or
nonconformity of, interference with the use of, defects in, or infringement of
rights
Annex A to
Security Agreement
4
in, or damage to, Collateral, (e) all amounts collected on, or distributed on
account of, other Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property, and (f) any and all other
amounts, rights to payment or other property acquired upon the sale, lease,
license, exchange or other disposition of Collateral and all rights arising out
of Collateral.
"SECURED OBLIGATIONS" means, with respect to each Grantor, all loans,
advances, debts, liabilities and obligations for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are liquidated or
determinable) owing by such Grantor to the Bank and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or not
evidenced by any note, agreement or other instrument, in each case arising under
the Credit Agreement, the Line of Credit Note, the Term Note, this Security
Agreement or any other Loan Document to which such Grantor is a party. This term
includes all Obligations (including principal, interest (including all interest
that accrues after the commencement of any case or proceeding by or against a
Grantor an Insolvency Proceeding, whether or not allowed in such case or
proceeding), Charges, expenses, attorneys' fees and any other sum chargeable to
a Grantor under the Credit Agreement, the Line of Credit Note, the Term Note,
this Security Agreement or any other Loan Document).
"SECURITY AGREEMENT" means the Security Agreement of even date herewith
among the Grantors and the Bank, as the same may be amended, supplemented,
restated or otherwise modified from time to time.
"SOFTWARE" means all "software" as such term is defined in the Code,
now owned or hereafter acquired by a Grantor, other than software embedded in
any category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.
"SUPPORTING OBLIGATIONS" means all "supporting obligations" as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
"TERMINATION DATE" means the date on which all obligations of the
Grantors to the Bank or its assigns under the Line of Credit Note, the Term
Note, the Credit Agreement, this Security Agreement and each other Loan Document
to which each is a party have been indefeasibly satisfied.
"TRADEMARK LICENSE" means rights under any written agreement now owned
or hereafter acquired by a Grantor granting any right to use any Trademark.
"TRADEMARKS" means all of the following now owned or hereafter existing
or adopted or acquired by a Grantor: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and General Intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in
Annex A to
Security Agreement
5
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state or territory thereof, or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to the Security Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection section
or clause contained in the Security Agreement or any such Annex, Exhibit or
Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of the same and
any successor statutes and regulations. Whenever any provision in this Security
Agreement refers to the knowledge (or an analogous phrase) of a Grantor, such
words are intended to signify that such Grantor has actual knowledge or
awareness of a particular fact or circumstance or that Grantor, if it had
exercised reasonable diligence, would have known or been aware of such fact or
circumstance.
Annex A to
Security Agreement
6
SCHEDULE I
TO
SECURITY AGREEMENT
FILING JURISDICTIONS
Virco Mfg. Corporation -- Delaware Secretary of State
Virco Inc. -- Delaware Secretary of State
Virco Mgmt. Corporation -- Delaware Secretary of State
SCHEDULE II
TO
SECURITY AGREEMENT
INSTRUMENTS,
CHATTEL PAPER
AND
LETTER OF CREDIT RIGHTS
INSTRUMENTS
None
CHATTEL PAPER
None
LETTER OF CREDIT RIGHTS
$100,000 To expire 2/4/04
$ 30,000 To expire 2/25/04
$ 60,000 To expire 5/1/04
$ 10,000 To expire 8/20/04
SCHEDULE III
TO
SECURITY AGREEMENT
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING VIRCO MFG. CORPORATION'S COLLATERAL
I. Grantor's official name: VIRCO MFG. CORPORATION
II. Type of entity (e.g. corporation, partnership, business trust, limited
partnership, limited liability company): Corporation
III. Former names, tradenames and fictitious names: None
IV. Organizational identification number issued by Grantor's state of
incorporation or organization or a statement that no such number has
been issued: 2033553
V. State of Incorporation or Organization: Delaware
VI. Chief Executive Office and principal place of business:
0000 Xxxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxx 00000
VII. Other Corporate Offices: None
VIII. Warehouses: Factory and Warehouse: 0000 Xxxxxxx Xxx
Xxxxxxxx, XX 00000
Factory and Warehouse 0000 Xxxxxxx Xxxx
Xxxxxx, XX
Factory: 000 Xxxxxx Xxxxxx
Xxxxxx, XX
Warehouse: 000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX
Warehouse: Logistics Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxx Xxxx, XX 00000
Warehouse: C.M.D.
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
IX. Other Premises at which Collateral is Stored or Located: None
X. Locations of Records Concerning Collateral: 0000 Xxxxxxx Xxx
Xxxxxxxx, XX 00000
10
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING VIRCO INC.'S COLLATERAL
I. Grantor's official name: VIRCO INC.
II. Type of entity (e.g. corporation, partnership, business trust, limited
partnership, limited liability company): Corporation
III. Former names, tradenames and fictitious names: None
IV. Organizational identification number issued by Grantor's state of
incorporation or organization or a statement that no such number has
been issued: 2921021
V. State of Incorporation or Organization: Delaware
VI. Chief Executive Office and principal place of business:
0000 Xxxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxx 00000
VII. Other Corporate Offices: None
VIII. Warehouses: None
IX. Other Premises at which Collateral is Stored or Located: None
X. Locations of Records Concerning Collateral: 0000 Xxxxxxx Xxx
Xxxxxxxx, XX 00000
SCHEDULE OF OFFICES, LOCATIONS OF COLLATERAL
AND RECORDS CONCERNING VIRCO MGMT'S COLLATERAL
I. Grantor's official name: VIRCO MGMT. CORPORATION
II. Type of entity (e.g. corporation, partnership, business trust, limited
partnership, limited liability company): Corporation
III. Former names, tradenames and fictitious names: None
IV. Organizational identification number issued by Grantor's state of
incorporation or organization or a statement that no such number has
been issued: 2921024
V. State of Incorporation or Organization: Delaware
VI. Chief Executive Office and principal place of business:
0000 Xxxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxx 00000
VII. Other Corporate Offices: None
VIII. Warehouses: None
IX. Other Premises at which Collateral is Stored or Located: None
X. Locations of Records Concerning Collateral: 0000 Xxxxxxx Xxx
Xxxxxxxx, XX 00000
SCHEDULE IV
TO
SECURITY AGREEMENT
PATENTS, TRADEMARKS AND COPYRIGHTS
U.S. Intellectual Property held by
Virco Mfg. Corporation or its Subsidiaries
as of November 14, 2003
PATENTS:
Type USPTO # Description
Design D479,118 Grommet
Utility 6,585,320 Tilt control mechanism for a tilt back chair
Design D476,512 Furniture leg
Design D474,044 Desk
Design D473,399 Desk
Design D473,068 Desk
Utility 6,533,352 Chair with reclining back rest
Design D471,729 Four-legged chair
Design D469,969 Four-legged chair
Design D469,284 Chair
Design D469,265 Chair
Utility 6,484,647 Office furniture system
Design D461,348 Chair portion
Design D461,345 Chair base
Design D461,322 Chair
Utility 6,247,770 Furniture construction
Design D441,557 Lightweight chair
Design D437,124 Chair
Design D431,910 Chair
Design D431,910 Easel
Utility 6,116,692 Chair construction
Design D429,914 Lectern
Design D429,546 Projector cart
Design D427,405 Book truck
Design D427,404 Conference cart
Design D425,319 Chair with end panel
Utility 6,058,854 Lightweight plastic furniture
Design D421,533 Workstation module
Design D417,969 Chair frame
Utility 6,004,157 Connector module
Utility 6,003,948 Chair construction
Design D417,342 Chair with tablet arm
Design D417,095 Table with modesty panel
Utility 5,983,807 Lightweight plastic furniture
Design D414,618 Power module
Utility 5,934,203 Table construction
Utility 5,924,770 Chair construction
Design D410,801 Chair with arm rests
Design D407,830 Trim strip
Type USPTO # Description
Utility 5,868,081 Lightweight plastic furniture
Utility 5,694,865 Lightweight plastic furniture
Utility 4,841,877 Table
Utility 4,768,833 Chair construction
Design D296,732 High chair
Utility 4,727,816 Table
Utility 4,710,049 Safety hinge
Design D289,235 Chair
Utility 4,400,031 Interlocking chair
TRADEMARKS:
Xxxx USPTO #
9000 Chair 2,068,214
And-1 App. pending
Cheers App. pending
Core-a-Gator (name) 2,122,306
Core-a-Gator (logo) 2,137,835
Core-a-Gator (design) 2,145,248
Designed for Stacking,
The Safe Edge 1,518,917
Designing Quality,
Furnishing Value 2,074,335
Egg 2,265,456
ErgoCombo App. pending
Express Rail App. pending
Furniture Focus App. pending
Furniture that Fits 2,100,181
Furnishings that Fit App. pending
Future Access 2,416,339
Gator-Gram 2,131,937
IQ 2,350,789
Lunada 2,678,466
Martest 0,740,021
14
Martest 21 2,404,744
Mojave 2,605,121
Ph.D. App. 75/496,005
Planscape App. pending
Plateau 2,190,003
Rol-Fol (Stylized) 0,586,886
Sure Edge App. 76/332,595
Symposium 2,309,622
V 0,983,345
Xxxx USPTO#
Vespers 2,341,840
Virco (Design only) 2,068,214
Virco (Stylized) 0,622,279
Virco (Design) 1,970,054
Vircolite 0,638,621
Virtue 1,059,295
Virtue of California 0,877,409
Virtuoso 2,329,332
Zuma App. pending
15
SCHEDULE V
TO
SECURITY AGREEMENT
CAPITALIZATION
[NUMBER OF ISSUED AND OUTSTANDING SHARES OF STOCK OF EACH SUBSIDIARY OF VIRCO]
# of Issued and Outstanding Shares of Stock
-------------------------------------------
Virco Inc. 10
Virco Mgmt. Corporation 10
SCHEDULE VI
TO
SECURITY AGREEMENT
DEPOSIT ACCOUNTS
Non-Xxxxx Fargo Bank: Of Virco Mfg. Corporation:
Xxxxx Fargo Bank:
Controlled Disbursement: 4759031149
Payroll: 4038174199
Payroll: 4648064988
Operating Account: 4648052785
First State Bank (Concentration/PR)
X.X. Xxx 000, Xxxxxx, XX 00000,
#0002018160
KeyBank(Xxxxx Cash <$1,000)
00 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000
#351321001692
Of Virco Mgmt. Corporation: None
Of Virco, Inc.: None
EXHIBIT A
FORM OF
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by
______________________, a _____________________ corporation (the "GRANTOR") to
XXXXX FARGO BANK, NATIONAL ASSOCIATION (hereinafter referred to as "ATTORNEY"),
under a Credit Agreement and a Security Agreement, each dated as of January 27,
2004 and other related documents (the "LOAN DOCUMENTS"). No person to whom this
Power of Attorney is presented, as authority for Attorney to take any action or
actions contemplated hereby, shall be required to inquire into or seek
confirmation from the Grantor as to the authority of the Attorney to take any
action described below, or as to the existence of or fulfillment of any
condition to this Power of Attorney, which is intended to grant to the Attorney
unconditionally the authority to take and perform the actions contemplated
herein, and the Grantor irrevocable waives any right to commence any suit or
action, in law or equity, against any person or entity which acts in reliance
upon or acknowledges the authority granted under this Power of Attorney. The
power of attorney granted hereby is coupled with an interest, and may not be
revoked or canceled by the Grantor without the Attorney' s written consent.
The Grantor hereby irrevocably constitutes and appoints the
Attorney (and all officers, employees or agents designated by the Attorney),
with full power of substitution, as the Grantor's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Grantor and in the name of the Grantor or in its own name, from
time to time in the Attorney's discretion, to take any and all appropriate
action and to execute and deliver any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of the Note Documents
and, without limiting the generality of the foregoing, the Grantor hereby grants
to the Attorney the power and right, on behalf of the Grantor, without notice to
or assent by the Grantor, and at any time, to do the following: (a) change the
mailing address of the Grantor, open a post office box on behalf of the Grantor,
open mail for the Grantor, and ask, demand, collect, give acquittances and
receipts for, take possession of, endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, and notices in connection with any property of the
Grantor; (b) effect any repairs to any asset of the Grantor, or continue or
obtain any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of
insurance, and make all determinations and decisions with respect to such
policies; (c) pay or discharge any taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against the Grantor or its
property; (d) defend any suit, action or proceeding brought against the Grantor
if the Grantor does not defend such suit, action or proceeding or if the
Attorney believes that the Grantor is not pursuing such defense in a manner that
will maximize the recovery to the Attorney, and settle, compromise or adjust any
suit, action, or proceeding described above and, in connection therewith, give
such discharges or releases as the Attorney may deem appropriate; (e) file or
prosecute any claim, litigation, suit or proceeding in any court of competent
jurisdiction or before any arbitrator, or take any other action otherwise deemed
appropriate by the Attorney for the purpose of collecting any and all such
moneys due to the Grantor whenever payable and to enforce any other right in
respect of the Grantor's property;
(f) cause the certified public accountants then engaged by the Grantor to
prepare and deliver to the Attorney at any time and from time to time, promptly
upon the Attorney's request, the following reports: (1) a reconciliation of all
accounts, (2) an aging of all accounts, (3) trial balances, (4) test
verifications of such accounts as the Attorney may request, and (5) the results
of each physical verification of inventory; (g) communicate in its own name with
any party to any contract with regard to the assignment of the right, title and
interest of such Grantor in and under the contracts and other matters relating
thereto; (h) to file such financing statements with respect to the Security
Agreement, with or without Grantor's signature, or to file a photocopy of the
Security Agreement in substitution for a financing statement, as the Bank may
deem appropriate and to execute in the Grantor's name such financing statements
and amendments thereto and continuation statements which may require the
Grantor's signature; and (i) execute, in connection with any sale provided for
in any Loan Document, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral and to otherwise direct
such sale or resale, all as though the Attorney were the absolute owner of the
property of the Grantor for all purposes, and to do, at the Attorney's option
and the Grantor's expense, at any time or from time to time, all acts and other
things that the Attorney reasonably deems necessary to perfect, preserve, or
realize upon the Grantor's property or assets and the Bank's Liens thereon, all
as fully and effectively as the Grantor might do. The Grantor hereby ratifies,
to the extent permitted by law, all that said Attorney shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by the
Grantor, and the Grantor has caused its seal to be affixed pursuant to the
authority of its board of directors this ____ day of January , 2004.
[_______________________________________]
By:_____________________________________
Name:___________________________________
Title:__________________________________
NOTARY PUBLIC CERTIFICATE
On this _____ day of ______________, 200_, ___________________
[name] who is personally known to me appeared before me in his/her capacity as
the _________________[title] of _______________________ [Grantor] ("Grantor")
and executed on behalf of the Grantor the Power of Attorney in favor of Xxxxx
Fargo Bank, National Association [Attorney] to which this Certificate is
attached.
____________________________________
Notary Public
2
EXHIBIT I
FORM OF
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This INTELLECTUAL PROPERTY SECURITY AGREEMENT (as amended,
restated, supplemented or otherwise modified from time to time, the "IP SECURITY
AGREEMENT") dated ________, ____, is made by the undersigned (the "GRANTOR") in
favor of XXXXX FARGO BANK, NATIONAL ASSOCIATION.
WHEREAS, pursuant to the Credit Agreement dated as of January
27, 2004 (as amended, restated, supplemented or otherwise modified , the "CREDIT
AGREEMENT") between the Parent and the Bank, the Bank has agreed to made certain
loans and other financial accommodations to the Parent;
[WHEREAS, as a condition to the Bank's obligation to extend
such loans and other financial accommodations, the [Parent] [undersigned] agreed
to [guaranty the Parent's obligations under the Credit Agreement and the other
Loan Documents to which the Parent is party and] to collateralize [its
obligations under the Credit Agreement and the other Loan Documents to which it
is party] [such guaranty] by entering into the Security Agreement dated as of
[-], 2004 (as amended, restated, supplemented or otherwise modified, the
"SECURITY AGREEMENT"; terms defined in the Security Agreement and not otherwise
defined herein are used herein as therein defined) among the Parent, [the
undersigned,] [the other Subsidiaries of the Company] and the Bank; and]
WHEREAS, under the terms of the Security Agreement, the
undersigned has granted to the Bank a security interest in, among other
property, certain intellectual property of the undersigned, and has agreed as a
condition thereof to execute this IP Security Agreement for recording with the
U.S. Patent and Trademark Office, the United States Copyright Office and other
Governmental Entities.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Grantor agrees as
follows:
SECTION 1. Grant of Security. The Grantor hereby grants to the
Bank a security interest in all of the Grantor's right, title and interest in
and to the following (the "COLLATERAL"):
(i) the Patents set forth in Schedule A hereto;
(ii) the Trademarks set forth in Schedule B hereto,
together with the goodwill symbolized thereby;
(iii) all Copyrights and exclusive Copyright licenses set
forth in Schedule C hereto;
(iv) all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations of any
of the foregoing, all rights in the foregoing provided
1
by international treaties or conventions, all rights corresponding
thereto throughout the world and all other rights of any kind
whatsoever of the Grantor accruing thereunder or pertaining thereto;
(v) any and all claims for damages and injunctive relief
for past, present and future infringement, dilution, misappropriation,
violation, misuse or breach with respect to any of the foregoing, with
the right, but not the obligation, to xxx for and collect, or otherwise
recover, such damages; and
(vi) any and all Proceeds of, collateral for, income,
royalties and other payments now or hereafter due and payable with
respect to, and Supporting Obligations relating to, any and all of the
Collateral of or arising from any of the foregoing.
SECTION 2. Security for Obligations. The grant of a security
interest in, the Collateral by the Grantor under this IP Security Agreement
secures the payment of the Grantor's Secured Obligations now or hereafter
existing under or in respect of the Loan Documents, whether direct or indirect,
absolute or contingent, and whether for principal, reimbursement obligations,
interest, premiums, penalties, fees, indemnifications, contract causes of
action, costs, expenses or otherwise.
SECTION 3. Recordation. The Grantor authorizes and requests
that the Register of Copyrights, the Commissioner for Patents and the
Commissioner for Trademarks and any other applicable government officer record
this IP Security Agreement.
SECTION 4. Execution in Counterparts. This IP Security
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
SECTION 5. Grants, Rights and Remedies. This IP Security
Agreement has been entered into in conjunction with the provisions of the
Security Agreement. The Grantor does hereby acknowledge and confirm that the
grant of the security interest hereunder to, and the rights and remedies of, the
Bank with respect to the Collateral are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated herein by
reference as if fully set forth herein.
SECTION 6. Governing Law. This IP Security Agreement shall be
governed by, and construed in accordance with, the laws of the State of
California.
[Signature Page Follows]
2
IN WITNESS WHEREOF, the Grantor has caused this IP Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
___________________________________
By ________________________________
Name:
Title:
SCHEDULE A
PATENTS
OF
_______________
PATENTS
PATENT REGISTRATION NO. REGISTRATION DATE
--------------------------------------------------------------------------------
PATENT APPLICATIONS
PATENT SERIAL NO. APPLICATION DATE
--------------------------------------------------------------------------------
SCHEDULE B
TRADEMARKS
OF
____________________
TRADEMARKS AND SERVICE MARKS
TRADEMARK/SERVICE XXXX REGISTRATION NO. REGISTRATION DATE
--------------------------------------------------------------------------------
TRADEMARK AND SERVICE XXXX APPLICATIONS
TRADEMARK/SERVICE XXXX SERIAL NO. APPLICATION DATE
--------------------------------------------------------------------------------
SCHEDULE C
COPYRIGHTS
OF
______________
COPYRIGHTS
COPYRIGHT REGISTRATION NO. REGISTRATION DATE
--------------------------------------------------------------------------------
COPYRIGHT APPLICATIONS
COPYRIGHT SERIAL NO. APPLICATION DATE
--------------------------------------------------------------------------------
EXCLUSIVE COPYRIGHT LICENSES
COPYRIGHT LICENSE DESCRIPTION
--------------------------------------------------------------------------------
