Exhibit 10.2
EXECUTION VERSION
AMENDED AND RESTATED SECURITY AGREEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of August 9, 2004
(as this agreement may be further amended, amended and restated, supplemented or
otherwise modified, renewed or replaced from time to time, this "Agreement"), is
by and among ONEIDA LTD., a New York corporation (the "Borrower"), the parties
listed on Schedule I hereto (and together with each direct or indirect domestic
subsidiary of the Borrower which executes an Instrument of Assumption and
Joinder pursuant to Section 5.12 of the Credit Agreement (as defined herein),
each a "Guarantor" and together the "Guarantors"; the Borrower and the
Guarantors are referred to herein individually as a "Grantor" and collectively
as the "Grantors") and JPMORGAN CHASE BANK, formerly known as The Chase
Manhattan Bank ("JPMorgan Chase"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined herein). All capitalized
terms used herein shall have the respective meanings given to them in Section
1.01 hereof.
R E C I T A L S
A. WHEREAS, the Borrower, JPMorgan Chase, as administrative agent, and the
lenders from time to time party thereto (the "Existing Lenders") are parties to
that certain Amended and Restated Credit Agreement dated as of April 27, 2001
(as the same has been amended, supplemented, replaced or otherwise modified, the
"Existing Credit Agreement") pursuant to which the Existing Lenders made
revolving loans and a term loan to the Borrower;
B. WHEREAS, THC, as borrower, the Borrower, as guarantor, and Allstate
Insurance Company (together with its permitted assignees, "Allstate"), Allstate
Life Insurance Company (together with its permitted assignees, "Allstate Life")
and Pacific Life Insurance Company (together with its permitted assignees and
together with Allstate and Allstate Life, the "Existing Noteholders") are
parties to the 2001 Amended and Restated Note Purchase Agreement dated as of May
1, 2001 (as the same has been amended, supplemented, replaced or otherwise
modified, the "Existing Note Agreement") pursuant to which the Existing
Noteholders purchased certain notes (the "Existing Notes") with a maturity date
of May 31, 2005;
C. WHEREAS, the Borrower's obligations under the Existing Credit Agreement
and the Loan Documents (as defined in the Existing Credit Agreement) (the
"Existing Credit Agreement Obligations") are guaranteed by each of the
Borrower's direct and indirect domestic subsidiaries (the "Existing Guarantors")
pursuant to (i) that certain Amended and Restated Guarantee Agreement dated as
of April 27, 2001 made by Buffalo China, Encore, THC, Delco and Sakura for the
benefit of the Existing Lenders, JPMorgan Chase, as administrative agent under
the Existing Credit Agreement (the "Existing Administrative Agent"), and the
Existing Collateral Agent (as defined below), (ii) that certain Subsidiary
Guarantee Agreement dated as of April 23, 2002 made by Kenwood for the benefit
of the Existing Lenders, the Existing Administrative Agent and the Existing
Collateral Agent, (iii) that certain Subsidiary Guarantee Agreement dated as of
July 25, 2003 made by Silversmiths for the benefit of the Existing Lenders, the
Existing Administrative Agent and the Existing Collateral Agent and (iv) that
certain Subsidiary Guarantee Agreement dated as of July 25, 2003 made by Food
Service for
the benefit of the Existing Lenders, the Existing Administrative Agent and the
Existing Collateral Agent (the agreements described in clauses (i) through (iv)
above, as the same have been amended, supplemented or otherwise
modified, collectively, the "Existing Loan Guarantee Agreements");
D. WHEREAS, THC's obligations under the Existing Note Agreement are
guaranteed (A) by the Borrower pursuant to the terms of the Existing Note
Agreement (THC's and the Borrower's obligations collectively referred to as the
"Existing Note Agreement Obligations") and (B) by each of the Existing
Guarantors pursuant to (i) that certain Amended and Restated Subsidiary
Guarantee Agreement dated April 27, 2001 for the benefit of the Existing
Noteholders and executed by Buffalo China, (ii) that certain Amended and
Restated Subsidiary Guarantee Agreement dated April 27, 2001 for the benefit of
the Existing Noteholders and executed by Encore, (iii) that certain Amended and
Restated Subsidiary Guarantee Agreement dated April 27, 2001 for the benefit of
the Existing Noteholders and executed by Delco, (iv) that certain Amended and
Restated Subsidiary Guarantee Agreement dated April 27, 2001 for the benefit of
the Existing Noteholders and executed by THC, (v) that certain Amended and
Restated Subsidiary Guarantee Agreement dated April 27, 2001 for the benefit of
the Existing Noteholders and executed by Sakura, (vi) that certain Subsidiary
Guarantee Agreement dated April 23, 2002 for the benefit of the Existing
Noteholders and executed by Kenwood, (vii) that certain Subsidiary Guarantee
Agreement dated July 25, 2003 for the benefit of the Existing Noteholders and
executed by Silversmiths, and (viii) that certain Subsidiary Guarantee Agreement
dated July 25, 2003 for the benefit of the Existing Noteholders and executed by
Food Service (the agreements described in clauses (i) through (viii) above, as
the same have been amended, supplemented, or otherwise modified, collectively,
the "Existing Note Guarantee Agreements");
E. WHEREAS, pursuant to that certain Amended and Restated Collateral Agency
and Intercreditor Agreement dated as of April 23, 2002, by and among (i) the
Existing Lenders, (ii) the Existing Noteholders, (iii) JPMorgan Chase as
administrative agent, collateral agent and individually, as a working capital
lender, and (iv) certain other secured parties (as the same has been amended,
supplemented, replaced or otherwise modified, the "Existing Intercreditor
Agreement"), each of the parties to the Existing Intercreditor Agreement, among
other things, appointed JPMorgan Chase as collateral agent (the "Existing
Collateral Agent") and authorized the Existing Collateral Agent to, among other
things, execute, deliver and perform as their collateral agent with respect to
the security documents entered into in connection with the Existing Credit
Agreement;
F. WHEREAS, the Existing Credit Agreement Obligations, the Existing Note
Agreement Obligations, certain letter of credit obligations (the "Existing L/C
Obligations") of the Borrower and the Existing Guarantors' obligations under the
Existing Loan Guarantee Agreements and the Existing Note Guarantee Agreements
(collectively, with the Existing Credit Agreement Obligations, the Existing Note
Agreement Obligations and the Existing L/C Obligations, the "Existing Secured
Obligations") are secured by liens on substantially all of the real and personal
property of the Borrower and each of the Existing Guarantors (collectively, the
"Existing Collateral") pursuant to, among other security documents: (A) (i) that
certain Security Agreement dated as of April 27, 2001 by and among the Borrower,
THC, Buffalo China, Encore, Delco and Sakura and the Existing Collateral Agent,
(ii) that certain Amendment No. 1 to
Security Agreement dated as of April 27, 2001 by and among the Borrower, THC,
Buffalo China, Encore, Delco and Sakura and the Existing Collateral Agent, (iii)
that certain Security Agreement dated as of April 23, 2002 by and among Kenwood
and the Existing Collateral Agent, (iv) that certain Security Agreement dated as
of July 25, 2003 by and among Silversmiths and the Existing Collateral Agent and
(v) that certain Security Agreement dated as of July 25, 2003 by and among Food
Service and the Existing Collateral Agent (as the same have been amended,
supplemented or otherwise modified, collectively, the "Existing Security
Agreements"); (B) (i) that certain Copyright Security Agreement dated as of
April 27, 2001 made by the Borrower, Buffalo China, THC, Encore, Delco and
Sakura in favor of the Existing Collateral Agent, (ii) that certain Copyright
Security Agreement dated as of April 23, 2002 made by the Borrower in favor of
the Existing Collateral Agent, (iii) that certain Copyright Security Agreement
dated as of January 19, 2004 made by Sakura in favor of the Existing Collateral
Agent and (iv) that certain Copyright Security Agreement dated as of January 19,
2004 made by THC in favor of the Existing Collateral Agent (as the same have
been amended, supplemented or otherwise modified, collectively, the "Existing
Copyright Security Agreements"); (C) (i) that certain Trademark Security
Agreement dated as of April 27, 2001 made by the Borrower, Buffalo China, THC,
Encore, Delco and Sakura in favor of the Existing Collateral Agent, (ii) that
certain Trademark Security Agreement dated as of April 23, 2002 made by the
Borrower in favor of the Existing Collateral Agent, (iii) that certain Trademark
Security Agreement dated as of August 29, 2003 made by the Borrower in favor of
the Existing Collateral Agent, (iv) that certain Trademark Security Agreement
dated as of January 19, 2004 made by the Borrower in favor of the Existing
Collateral Agent, and (v) that certain Trademark Security Agreement dated as of
June 18, 2004 made by the Borrower, Buffalo China, THC, Encore, Delco and Sakura
in favor of the Existing Collateral Agent (as the same have been amended,
supplemented or otherwise modified, collectively, the "Existing Trademark
Security Agreements"); and (D) (i) that certain Patent Security Agreement dated
as of April 27, 2001 made by the Borrower, Buffalo China, THC, Encore, Delco and
Sakura in favor of the Existing Collateral Agent, (ii) that certain Patent
Security Agreement dated as of August 13, 2001 made by the Borrower in favor of
the Existing Collateral Agent, (iii) that certain Patent Security Agreement
dated as of April 23, 2002 made by the Borrower in favor of the Existing
Collateral Agent, and (iv) that certain Patent Security Agreement dated as of
January 19, 2004 made by the Borrower in favor of the Existing Collateral Agent,
(as the same have been amended, supplemented or otherwise modified,
collectively, the "Existing Patent Security Agreements" and, together with the
Existing Security Agreements, the Existing Copyright Security Agreements, and
the Existing Trademark Security Agreements, the "Existing Security Documents");
G. WHEREAS, the Existing Secured Obligations and certain other indebtedness
incurred by the Borrower (collectively, the "Existing Obligations") are being
restructured pursuant to a Second Amended and Restated Credit Agreement dated as
of the date hereof among the Borrower, the Collateral Agent, JPMorgan Chase as
administrative agent (in such capacity, the "Administrative Agent"), the lenders
party thereto and the Existing Standby L/C Issuers (as the same may be amended,
amended and restated, supplemented or otherwise modified, renewed or replaced,
the "Credit Agreement"); and
H. WHEREAS, it is a condition precedent to the restructuring of the
Existing Obligations as contemplated under the Credit Agreement and to the
extension of additional credit contemplated under the Credit Agreement that,
among other things: (i) a Second Amended and
Restated Collateral Agency and Intercreditor Agreement dated as of the date
hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified, renewed or replaced, the "Intercreditor Agreement") be
entered into by and among the Borrower, the Guarantors, the Administrative
Agent, the Collateral Agent, each of the lenders from time to time party to the
Credit Agreement, the Existing Standby L/C Issuers (as defined below) and the
issuer of the Trade Letters of Credit, in order to, among other things, appoint
JPMorgan Chase as Collateral Agent and authorize the Collateral Agent to, among
other things, execute, deliver and perform as their collateral agent with
respect to the security documents; (ii) the Borrower and each of the Guarantors
enter into this Amended and Restated Security Agreement; (iii) the Borrower and
each of the Grantors acknowledge and confirm that the liens granted pursuant to
the Existing Security Agreements, and not heretofore expressly released, remain
in effect; and (iv) the Borrower and each of the Guarantors execute this
Agreement in order to grant a security interest in favor of the Collateral Agent
on behalf of the Secured Parties to secure the payment, in full, when due of all
of the Obligations (as defined below) as more fully set forth herein.
NOW, THEREFORE, to secure the prompt and complete payment and performance
when due of the Obligations for the benefit of the Collateral Agent on behalf of
the Secured Parties for good and valuable consideration, the receipt of which is
hereby acknowledged and in order to (i) confirm and acknowledge the Collateral
Agent's continuing security interests, for the ratable benefit of the Secured
Parties, in all of the Existing Collateral secured under the Existing Security
Agreements, and (ii) grant, pledge, hypothecate and transfer to the Collateral
Agent, for the ratable benefit of the Secured Parties, a security interest in
all of each of the Grantor's right, title and interest in, to and under the
following, whether presently existing or hereafter arising or acquired, each of
the Grantors and the Collateral Agent, on behalf of itself and each Secured
Party (and each of their respective successors or assigns), hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Accessions" shall mean any goods which are physically united with any item
constituting part of the Collateral hereunder in such a manner that the identity
of such goods is not lost.
"Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to, or on account of an Account.
"Accounts" shall mean any and all right, title and interest of any Grantor
to payment for goods or services sold or leased, including Chattel Paper
(whether tangible or electronic) and any right evidenced by Chattel Paper
(whether tangible or electronic), whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Additional Grantor" shall have the meaning given to that term in Section
7.05 of this Agreement.
"Administrative Agent" shall have the meaning given to that term in
paragraph G of the recitals to this Agreement.
"Affiliate" shall mean, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person.
"Allstate" shall have the meaning given to that term in paragraph B of the
recitals to this Agreement.
"Allstate Life" shall have the meaning given to that term in paragraph B of
the recitals to this Agreement.
"Amended and Restated Consolidated Subsidiary Guarantee Agreement" shall
have the meaning given to that term in the Credit Agreement.
"Amended and Restated Copyright Security Agreement" shall mean the
Copyright Security Agreement in substantially the form of Exhibit A annexed
hereto and being executed concurrently herewith to be filed in the United States
Copyright Office, as the same may be further amended, amended and restated,
supplemented or otherwise modified, renewed or replaced from time to time.
"Amended and Restated Patent Security Agreement" shall mean the Patent
Security Agreement in substantially the form of Exhibit B annexed hereto and
being executed concurrently herewith to be filed in the United States Patent and
Trademark Office, as the same may be further amended, amended and restated,
supplemented or otherwise modified, renewed or replaced from time to time.
"Amended and Restated Pledge Security Agreement" shall have the meaning
given to that term in the Credit Agreement.
"Amended and Restated Trademark Security Agreement" shall mean the
Trademark Security Agreement in substantially the form of Exhibit C annexed
hereto and being executed concurrently herewith to be filed in the United States
Patent and Trademark Office, as the same may be further amended, amended and
restated, supplemented or otherwise modified, renewed or replaced from time to
time.
"Applicable Law" shall have the meaning given to that term in the Credit
Agreement.
"Bankruptcy Code" shall have the meaning given to that term in the Credit
Agreement.
"Borrower" shall have the meaning given to that term in the first paragraph
of this Agreement.
"Buffalo China" shall mean Buffalo China, Inc., a New York corporation and
a wholly-owned subsidiary of the Borrower.
"Chattel Paper" shall mean any record or records that evidence both a
monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security interest
in specific goods and license of software used in the goods, a lease of specific
goods, or a lease of specific goods and license of software used in the goods,
including in the case of any transaction which is evidenced by records that
include an instrument or series of instruments, the group of records taken
together.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) Fixtures, (e) General Intangibles, (f) Inventory, (g) cash and
currency, (h) Deposit Accounts, (i) Investment Property, (j) Instruments, (k)
Commercial Tort Claims, (l) Letter-of-Credit Rights, (m) Supporting Obligations,
(n) Financial Assets, (o) all other personal property of whatever type or
description and (p) to the extent not otherwise included, all Accessions and all
Proceeds of the foregoing, in each case whether now owned or hereafter acquired
and wherever the same may be located.
"Collateral Agent" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Collateral Documents" shall mean, collectively, this Agreement, the
Amended and Restated Pledge Security Agreement, the Amended and Restated
Copyright Security Agreement, the Amended and Restated Patent Security
Agreement, the Amended and Restated Trademark Security Agreement, any UCC
financing statements, any other documents filed with governmental authorities to
perfect, establish priority or give public notice of the security interests
granted by this Agreement or the Amended and Restated Pledge Security Agreement,
and any certificate or other document contemplated by or delivered pursuant to
this Agreement or the Amended and Restated Pledge Security Agreement.
"Commercial Tort Claims" shall mean any claims, causes of action, choses in
action rights and interests arising in tort which are held or owned by any
Grantor.
"Commitments" shall have the meaning given to that term in the Credit
Agreement.
"Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an option on
a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign
commodity board of trade, exchange or market, and is carried on the books of a
Commodity Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity Intermediary
carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following: (a) all copyright rights in
any work subject to the copyright laws of the United States, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States, including
registrations, recordings, supplemental registrations and pending applications
for registration in the United States Copyright Office, including those listed
on Schedule II.
"Credit Agreement" shall have the meaning given to that term in paragraph G
of the recitals to this Agreement.
"Delco" shall mean Delco International, Ltd., a New York corporation and a
wholly-owned subsidiary of the Borrower.
"Deposit Account" means a demand, time, savings, passbook or like account
maintained with a bank, savings and loan association, credit union or other
financial institution, or a branch of any of the foregoing.
"Documents" shall mean all documents of title and all files, records,
ledger sheets and documents covering or relating to any of the Collateral.
"Encore" shall mean Encore Promotions, Inc., a New York corporation and a
wholly-owned subsidiary of the Borrower.
"Entitlement Holder" shall mean a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary. If a Person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the UCC, such Person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture, furnishings, machinery,
manufacturing, selling, data processing and office equipment tools, parts,
supplies, and all other goods and tangible personal property of every type and
description (other than Inventory), and all
improvements, Accessions or appurtenances thereto, that are now or hereafter
owned by any Grantor. The term Equipment shall include Fixtures owned by any
Grantor.
"Event of Default" shall have the meaning given to that term in the Credit
Agreement.
"Existing Administrative Agent" shall have the meaning given to that term
in paragraph C of the recitals to this Agreement.
"Existing Collateral" shall have the meaning given to that term in
paragraph F of the recitals to this Agreement.
"Existing Collateral Agent" shall have the meaning given to that term in
paragraph E of the recitals to this Agreement.
"Existing Copyright Security Agreements" shall have the meaning given to
that term in paragraph F of the recitals to this Agreement.
"Existing Credit Agreement" shall have the meaning given to that term in
paragraph A of the recitals to this Agreement.
"Existing Credit Agreement Obligations" shall have the meaning given to
that term in paragraph C of the recitals to this Agreement.
"Existing Guarantors" shall have the meaning given to that term in
paragraph C of the recitals to this Agreement.
"Existing Intercreditor Agreement" shall have the meaning given to that
term in paragraph E of the recitals to this Agreement.
"Existing L/C Obligations" shall have the meaning given to that term in
paragraph F of the recitals to this Agreement.
"Existing Lenders" shall have the meaning given to that term in paragraph A
of the recitals to this Agreement.
"Existing Loan Guarantee Agreements" shall have the meaning given to that
term in paragraph C of the recitals to this Agreement.
"Existing Note Agreement" shall have the meaning given to that term in
paragraph B of the recitals to this Agreement.
"Existing Note Agreement Obligations" shall have the meaning given to that
term in paragraph D of the recitals to this Agreement.
"Existing Note Guarantee Agreements" shall have the meaning given to that
term in paragraph D of the recitals to this Agreement.
"Existing Noteholders" shall have the meaning given to that term in
paragraph B of the recitals to this Agreement.
"Existing Notes" shall have the meaning given to that term in paragraph B
of the recitals to this Agreement.
"Existing Obligations" shall have the meaning given to that term in
paragraph G of the recitals to this Agreement.
"Existing Patent Security Agreements" shall have the meaning given to that
term in paragraph F of the recitals to this Agreement.
"Existing Secured Obligations" shall have the meaning given to that term in
paragraph F of the recitals to this Agreement.
"Existing Security Agreements" shall have the meaning given to that term in
paragraph F of the recitals to this Agreement.
"Existing Security Documents" shall have the meaning given to that term in
paragraph F of the recitals to this Agreement.
"Existing Standby L/C Issuers" shall have the meaning given to such term in
the Credit Agreement.
"Existing Standby L/Cs" shall have the meaning given to such term in the
Credit Agreement.
"Existing Trademark Security Agreements" shall have the meaning given to
that term in paragraph F of the recitals to this Agreement.
"Fair Market Value" (a) when used in connection with a Security traded
on a securities exchange or reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, shall mean the closing price thereof
or, in the case there is no closing price, the average of the closing bid and
asked price, (b) when used in connection with a Security which is not traded on
a securities exchange or reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, shall mean the fair market value
thereof as determined in good faith by the Collateral Agent, and (c) when used
in connection with an Instrument or debt security, shall mean the outstanding
principal amount thereof.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a Person
or a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the UCC. As
the context requires, the term Financial Asset shall mean either the interest
itself or the means by which a Person's claim to it is evidenced, including a
certificated or uncertificated Security, a certificate representing a Security
or a Security Entitlement.
"Fixtures" shall mean all items of Equipment located in the United States,
whether now owned or hereafter acquired, of any Grantor that become so related
to particular real estate that an interest in them arises under any real estate
law applicable thereto.
"Food Service" shall mean Oneida Food Service, Inc., a New York corporation
and a wholly-owned subsidiary of Buffalo China.
"Fundamental Documents" shall have the meaning given to that term in the
Credit Agreement.
"General Intangibles" shall mean all rights, interests, choses in action,
causes of action, claims, Intellectual Property and all other intangible
personal property of any Grantor of every kind and nature (other than Accounts
Receivable) now owned or hereafter acquired by any Grantor, including corporate
or other business records, indemnification claims, all contracts and contract
rights (including, but not limited to, rights under leases, whether entered into
as lessor or lessee, rights under license and franchise agreements, customer and
supplier contracts and firm sale orders), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts
Receivable.
"Grantors" shall have the meaning given to that term in the first paragraph
of this Agreement.
"Guarantors" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Hedging Banks" shall have the meaning given to that term in the Credit
Agreement.
"Indemnitee" shall mean, with respect to any Person, such Person's
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Affiliates.
"Instrument" shall mean a negotiable instrument or any other writing which
evidences a right to the payment of money and is not itself a security agreement
or lease and is of a type which in the ordinary course of business in
transferred by delivery with any necessary endorsement or assignment.
"Intellectual Property" shall mean all intellectual and similar property of
any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, correspondence, confidential or proprietary technical
and business information, know-how, show-how or other data or information, all
Software and databases and all embodiments or fixations thereof and related
documentation, and all other computer materials, created or owned by any
Grantor, registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection with, any
of the foregoing.
"Intercreditor Agreement" shall have the meaning given to that term in
paragraph H of the recitals to this Agreement.
"Inventory" shall mean all goods and merchandise of any Grantor, whether
now owned or hereafter acquired, whether in the possession of such Grantor or a
bailee or any other Person, held for sale or lease, or furnished or to be
furnished by any Grantor under contracts of service, or consumed in any
Grantor's business, including raw materials, intermediates, work in process,
packaging materials, finished goods, semi-finished inventory, scrap inventory,
manufacturing supplies and spare parts, and all such goods that have been
returned to or repossessed by or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"Issuing Bank" shall mean JPMorgan Chase as an issuer of letters of credit
under the Credit Agreement.
"Joinder" shall have the meaning given to that term in Section 7.05 of this
Agreement.
"JPMorgan Chase" shall have the meaning given to that term in the first
paragraph of this Agreement.
"Kenwood" shall mean Kenwood Silver Company, Inc., a New York corporation
and a wholly-owned subsidiary of the Borrower.
"L/C Exposure" shall have the meaning given to that term in the Credit
Agreement.
"Lenders" shall have the meaning given to that term in the Credit
Agreement.
"Letter-of-Credit Rights" shall mean any right to payment or performance
under any letter of credit under which any Grantor is a beneficiary, whether or
not such Grantor has demanded or is at the time entitled to demand payment or
performance, but excluding the right of any Grantor to demand payment or
performance under any letter of credit.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party, whether
as licensor or licensee (other than those license agreements in existence on the
date hereof or entered into after the date hereof, which by their terms prohibit
the grant of a security interest by such Grantor as licensee thereunder).
"Lien" shall have the meaning given to that term in the Credit Agreement.
"Material Adverse Effect" shall have the meaning given to that term in the
Credit Agreement.
"Obligations" shall mean (i) with respect to the Borrower, as such term is
defined in the Credit Agreement and (ii) with respect to the Guarantors, the
"Guaranteed Obligations" as defined in the Amended and Restated Consolidated
Guarantee Agreement.
"Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following: (a) all letters patent of the
United States, all registrations and recordings thereof, and all applications
for letters patent of the United States, including registrations, recordings and
pending applications in the United States Patent and Trademark Office, including
those listed on Schedule III, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the form
of Exhibit D hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by an executive officer of
the Borrower.
"Permitted Liens" shall have the meaning given to that term in the Credit
Agreement.
"Person" shall mean any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, governmental
authority or other entity.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other Person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, without limitation, (a) any claim of any Grantor
against any third party for (and the right to ▇▇▇ and recover for and the rights
to damages or profits due or accrued arising out of or in connection with) (i)
past, present or future infringement of any Patent now or hereafter owned by any
Grantor, or licensed under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned by any Grantor
or licensed under a Trademark License or injury to the goodwill associated with
or symbolized by any Trademark now or hereafter owned by any Grantor, (iii)
past, present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Sakura" shall mean Sakura, Inc., a New York corporation and a wholly-owned
subsidiary of the Borrower.
"Secured Parties" shall mean (a) the Lenders, (b) the Issuing Bank, (c) the
Administrative Agent, (d) the Collateral Agent, (e) the Hedging Banks, (f) HSBC,
USA, as issuer of the HSBC China L/C (as defined in the Credit Agreement), (g)
the Bank of America, N.A., as issuer of the Bank of America L/C (as defined in
the Credit Agreement), (h) the issuer of the Trade Letters of
Credit, (i) the beneficiaries of each indemnification obligation undertaken by
any Grantor under any Fundamental Document, and (j) the successors and assigns
of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the UCC.
"Securities Account" shall mean an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Documents" shall have the meaning given to that term in the
Credit Agreement.
"Security Entitlements" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning given to that term in Section
2.01.
"Security Intermediary" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Software" shall mean any computer program and any supporting information
provided in connection with any transaction relating to any such program.
"Subsidiary" shall have the meaning given to that term in the Credit
Agreement.
"Supporting Obligations" shall mean any letter-of-credit right or any
secondary obligation held by any Grantor that supports the payment or
performance of any Account, Chattel Paper, Document, General Intangible,
Instrument or Investment Property.
"THC" shall mean THC Systems, Inc., a New York corporation and a
wholly-owned subsidiary of the Borrower.
"Trade Letters of Credit" shall have the meaning given to such term in the
Credit Agreement.
"Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following: (a) all trademarks, service
marks, trade names, corporate names, company names, business names, fictitious
business names, trade styles, trade dress, logos, other source or business
identifiers, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office or any State of the United States, and all extensions or
renewals thereof, including those listed on Schedule IV, (provided that no
security interest shall be granted in United States intent-to-use trademark
applications to the extent that, and solely during the period in which, the
grant of a security interest therein would impair the validity or enforceability
of such intent-to-use trademark applications under applicable federal law), (b)
all goodwill associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such goodwill.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New York from time to time.
SECTION 1.02. Other Terms. Unless the context otherwise requires, terms
used in this Agreement (whether capitalized or not), other than those set forth
in Section 1.01 hereof or elsewhere in this Agreement, shall have the meanings
given to them in the New York UCC as in effect from time to time. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation".
ARTICLE II
SECURITY INTEREST
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
(i) confirms and acknowledges the Collateral Agent's continuing security
interests, for the ratable benefit of the Secured Parties, in all of the
Existing Collateral encumbered under the Existing Security Agreements not
heretofore expressly released and (ii) bargains, sells, conveys, assigns, sets
over, mortgages, pledges, hypothecates and transfers to the Collateral Agent,
its successors and assigns, for the ratable benefit of the Secured Parties, and
hereby grants to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, a security interest in, all of such
Grantor's right, title and interest in, to and under the Collateral (the
"Security Interest"); provided that (i) Securities having a Fair Market Value of
$7,500 per issuer are excluded from the Security Interest up to a maximum of
$50,000 in the aggregate, (ii) the Securities set forth on Schedule V hereto are
excluded from the Security Interest, (iii) the Security Interest shall not
include Securities received by a Grantor pursuant to any distributions made to
such Grantor in respect of any claims held by such Grantor against any Person in
connection with any proceeding of such Person under the Bankruptcy Code, which
Securities have been held by such Grantor for less than thirty (30) days from
the date of receipt, (iv) the Security Interest in Securities of a Subsidiary of
a Grantor is limited, in the case of foreign Subsidiaries of a Grantor, to 65%
of the issued and outstanding Securities of such foreign Subsidiaries
notwithstanding the delivery by any Grantor to the Collateral Agent of
Securities representing in excess of such percentage, and
(v) Instruments and debt securities having a Fair Market Value of less than
$7,500 per issuer or obligor are excluded from the Security Interest up to a
maximum of $50,000 in the aggregate; provided further that, with respect to the
Security Interest, the following property shall be excluded therefrom: any
General Intangibles or other rights arising under any contract, instrument,
license or other document if (but only to the extent that) the grant of a
security interest therein would constitute a violation of a valid and
enforceable restriction in favor of a third party or would result in an
enforceable right to declare a default or enforceable right to terminate or
annul unless and until all required consents are obtained, it being understood
that the applicable Grantor shall use commercially reasonable efforts to obtain
any such consents. Without limiting the foregoing, the Collateral Agent is
hereby authorized to file one or more financing statements (including fixture
filings), continuation statements, filings with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office or
any similar office in any other country) or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest granted by each Grantor, without the signature of any Grantors, and
naming any Grantor or the Grantors as debtors and the Collateral Agent as
secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all respects. Fully completed UCC financing statements
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations containing a description of the Collateral have been
delivered to the Collateral Agent for filing in each governmental, municipal or
other office specified in the Perfection Certificate, which are all the filings,
recordings and registrations (other than filings required to be made in the
United States Patent and Trademark Office and the United States Copyright Office
in order to perfect the Security Interest in Collateral consisting of United
States Patents, Trademarks and Copyrights) that are necessary, upon filing, to
publish notice of and protect the validity of and to continue a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Collateral in which the
Security Interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is, or will be, necessary in any
such jurisdiction, except as provided under Applicable Law with respect to the
filing of continuation statements.
(b) Each Grantor represents and warrants that a fully executed Amended and
Restated Copyright Security Agreement, Amended and Restated Patent Security
Agreement and Amended and Restated Trademark Security Agreement containing
descriptions of all Collateral consisting of Intellectual Property with respect
to United States Patents and United States registered Trademarks (and Trademarks
for which United States registration applications are pending) and United States
registered Copyrights have been or concurrently herewith are being delivered to
the Collateral Agent for recording by the United States Patent and Trademark
Office and the United States Copyright Office pursuant to 35 U.S.C. Section 261,
15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the regulations thereunder,
as applicable, and otherwise as may be required pursuant to the laws of any
other necessary jurisdiction, to protect the validity of and to continue a
legal, valid and perfected security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, or in
any other necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction (other than such actions as are necessary to perfect the Security
Interest with respect to any Collateral consisting of Patents, Trademarks and
Copyrights (or registration or application for registration thereof) acquired or
developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal valid and binding security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
to the filings described in Section 3.02 above, a perfected security interest in
all Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its territories and
possessions pursuant to the UCC or other similar law in such jurisdictions, to
the extent such security interest may be perfected under the UCC and (c) a
security interest that shall be perfected in all Collateral in which a security
interest may be perfected upon the receipt and recording of this Agreement with
the United States Patent and Trademark Office and the United States Copyright
Office, as applicable. The Security Interest is and shall be prior to any other
Lien on any of the Collateral, other than Permitted Liens that have priority
over the Security Interest by operation of law and Liens expressly permitted by
the Fundamental Documents.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for the security interests created
by this Agreement, the Amended and Restated Patent Security Agreement, the
Amended and Restated Trademark Security Agreement and the Amended and Restated
Copyright Security Agreement and except as permitted under Section 6.2 of the
Credit Agreement. The Grantor has not filed or consented to the filing of (a)
any financing statement or analogous document under the UCC or any other
Applicable Laws covering any Collateral, (b) any assignment in which any Grantor
assigns any Collateral or any security agreement or similar instrument covering
any Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
financing statement or analogous document, assignment, security agreement or
similar instrument is still in effect, except, in each case, for Liens expressly
permitted pursuant to the Fundamental Documents.
ARTICLE IV
COVENANTS
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business.
(a) Each Grantor agrees to provide the Collateral Agent with written notice
promptly, but in any event within seven (7) Business Days, following the
occurrence of any change (i) in its name, corporate structure or jurisdiction of
organization, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility) or
(iii) in its Federal Taxpayer Identification Number. Each Grantor agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the UCC or otherwise that are required in order for
the Collateral Agent to continue at all times following such change to have a
valid, legal and perfected security interest in all the Collateral. Each Grantor
agrees promptly to notify the Collateral Agent if any material portion of the
Collateral owned or held by such Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail satisfactory to the
Collateral Agent showing the identity, amount and location of any and all
Collateral.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to the Fundamental Documents.
SECTION 4.03. Maintenance of Collateral and Compliance with Laws.
(a) Each Grantor shall keep and maintain at its own cost and consistent
with its past practices satisfactory and complete records of the Collateral,
including, without limitation, a
record of all payments received and all credits granted with respect to the
Accounts Receivable. Each Grantor shall furnish to the Collateral Agent upon
request such statements and schedules further identifying and describing the
Collateral as the Collateral Agent may reasonably request.
(b) Except as otherwise expressly permitted by this Agreement or the other
Fundamental Documents, each Grantor agrees to keep and maintain all Equipment
material to the operation of its business in good operating condition, ordinary
wear and tear excepted, and make or cause to be made all appropriate repairs,
renewals and replacements thereof, to the extent such Equipment is not obsolete
and consistent with past practice of such Grantor, as quickly as practicable
after the occurrence of any loss or damage thereto which are necessary or
reasonably desirable to such end, except where the failure to do any of the
foregoing would not result in a Material Adverse Effect.
(c) Each Grantor shall comply in all material respects with all federal,
state and local laws, rules, regulations and decrees applicable to the
Collateral, provided that a Grantor may contest the validity or applicability
thereof in good faith by proper proceedings so long as such contest will not
have a Material Adverse Effect.
(d) Each Grantor shall maintain and preserve each contract and agreement
included within the Collateral if the failure to do so would have a Material
Adverse Effect, and will not amend or modify any such material contract or
agreement if the amendment or modification would impair the value of the
interest or rights of the Grantor thereunder.
(e) Each Grantor shall keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places identified in
the Perfection Certificate or, upon thirty (30) days' prior written notice to
the Collateral Agent, at such other locations in a jurisdiction where all action
required by Section 4.04(b) hereof shall have been taken to assure the
continuation of the perfection of the security interest of the Collateral Agent
(for its benefit and the ratable benefit of the Secured Parties) with respect to
the Equipment and Inventory; provided that a Grantor may remove, upon the
reasonable request of the Collateral Agent and pursuant to Section 4.03(f)(i)
hereof, any of such Grantor's Equipment or Inventory located on, without
limitation, premises leased by such Grantor to another location reasonably
convenient to such Grantor and the Collateral Agent for the purpose of making
such Collateral item or items available to the Collateral Agent.
(f) Until satisfaction in full of the Obligations, at any time when an
Event of Default has occurred and is continuing: (i) each Grantor will perform
any and all reasonable actions requested by the Collateral Agent to enforce the
Collateral Agent's security interest in the Inventory and all of the Collateral
Agent's rights hereunder, such as (but not by way of limitation) subleasing
warehouses to the Collateral Agent or its designee, placing and maintaining
signs, appointing custodians, transferring Inventory to warehouses, obtaining
acknowledgements of bailees and delivering to the Collateral Agent warehouse
receipts and documents of title in the Agent's name; (ii) if any Inventory is in
the possession or control of any of the Grantors' agents, contractors or
processors or any other third party (other than in connection with a temporary
relocation of such inventory for a limited time such that the perfection of the
security interests in such Inventory is not adversely affected thereby), each
such Grantor will notify the Collateral Agent thereof and will notify such
agents, contractors or
processors or third party of the Collateral Agent's security interest therein
and use its commercially reasonable efforts to obtain their acknowledgment
thereof and, upon request, instruct them to hold all such Inventory for the
Collateral Agent and such Grantor's account, as their interests may appear, and
subject to the Collateral Agent's instructions; (iii) the Collateral Agent shall
have the right to hold all Inventory subject to the security interest granted
hereunder; and (iv) the Collateral Agent shall have the right to take possession
of the Inventory or any part thereof and to maintain such possession on such
Grantor's premises (except in the case of premises leased by a Grantor and in
the event that the relevant landlord has not consented to the Collateral Agent's
entry thereupon) or to remove any or all of the Inventory to such other place or
places as the Collateral Agent desires in its sole discretion. If the Collateral
Agent exercises its right to take possession of the Inventory, such Grantor,
upon the Collateral Agent's demand, will assemble the Inventory and make it
available to the Collateral Agent at such Grantor's premises at which it is
located.
(g) Each Grantor shall keep its place of business or chief executive office
and the offices where it keeps its records concerning the Accounts, and the
offices where it keeps all originals of all Chattel Paper which evidence
Accounts, at the location or locations therefor specified in the Perfection
Certificate or, upon fifteen (15) days' prior written notice to the Collateral
Agent, at such other locations in a jurisdiction where all actions required by
Section 4.04(b) shall have been taken with respect to the Accounts. Each Grantor
will hold and preserve such records and Chattel Paper and will permit
representatives of the Collateral Agent, at any time during normal business
hours and upon reasonable prior written notice, to inspect and make abstracts
from such records and chattel paper in accordance with Section 4.05 of this
Agreement.
(h) Except as otherwise provided in this subsection (h), each Grantor shall
continue to collect in accordance with its customary practice, at its own
expense, all amounts due or to become due to such Grantor under the Accounts
and, prior to the occurrence and continuance of an Event of Default, such
Grantor shall have the right to adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, all in accordance with
its customary practices. In connection with such collections, the Grantors may,
upon the occurrence and during the continuation of an Event of Default, take
(and at the direction of the Collateral Agent shall take) such action as the
Grantors or the Collateral Agent may reasonably deem necessary or advisable to
enforce collection of the Accounts; provided, that upon written notice by the
Collateral Agent to any Grantor, following the occurrence and during the
continuation of an Event of Default, of its intention so to do, the Collateral
Agent shall have the right to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to the Collateral Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to such Grantor thereunder directly to the Collateral Agent and, upon
such notification and at the expense of such Grantor, to enforce collection of
any such Accounts, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by such Grantor of the notice referred to in the proviso to
the preceding sentence, and unless and until such notice is rescinded by the
Collateral Agent by written notice to such Grantor, (i) all amounts and proceeds
(including instruments) received by such Grantor in respect of the Accounts
shall be received in trust for the benefit of the Collateral Agent (for the
ratable benefit of the Secured Parties) hereunder, shall be segregated from
other funds of the Grantors and shall be forthwith paid over to the Collateral
Agent in the
same form as so received (with any necessary endorsement) to be held as cash
collateral and either (A) promptly released to the Grantors if such Event of
Default shall have been cured or waived or (B) if such Event of Default shall be
continuing, applied as provided in Section 6.02 hereof, and (ii) the Grantors
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 4.04. Additional Deliveries and Further Assurances.
(a) Prior to or contemporaneously with the execution of this Agreement, the
Grantors shall cause to be delivered to the Collateral Agent the Perfection
Certificate, duly completed and executed.
The Grantors shall use commercially reasonable efforts to cause to be
delivered to the Collateral Agent, on or before the ninetieth (90th) day
following the Closing Date, with respect to each facility at which Collateral is
located which is leased by the Grantors or on which a mortgage Lien exists
(including, in the case of Kenwood, only those factory stores at which the value
of Inventory and other items of Collateral exceeds $60,000 and excluding, in the
case of Encore, the leased facility located in Malta, NY), landlord and/or
mortgagee waivers in form and substance reasonably satisfactory to the
Collateral Agent.
(b) Each Grantor agrees, at its own expense, to execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Collateral Agent may from time to time
reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of any
financing statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately pledged and
promptly delivered to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent. Each Grantor agrees that it will use its
best efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Collateral within 30 days after the date it has been notified by the
Collateral Agent of the specific identification of such Collateral.
(c) The Borrower agrees that it will deliver to the Collateral Agent an
updated Perfection Certificate which shall be true and correct in all respects
with respect to each Grantor and each Additional Grantor which becomes a party
hereto pursuant to Section 7.05 of this Agreement (i) on the first business day
of August of each year, and (ii) concurrently with the delivery of any Joinder
pursuant to Section 7.05 of this Agreement (it being understood that any
Perfection Certificate delivered pursuant to this clause (d) shall include the
pertinent information for the Additional Grantor being joined as a party hereto
pursuant to such Joinder).
SECTION 4.05. Inspection and Verification. The Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right,
at the Grantors' own cost and expense, to (a) inspect the Collateral, all
records related thereto (and to make extracts and copies
from such records) and the premises upon which any of the Collateral is located
(except in the case of premises leased by a Grantor and in the event that the
relevant landlord has not consented to the Collateral Agent's entry thereupon),
to discuss the Grantors' affairs with the officers of the Grantors and to verify
under reasonable procedures the validity, amount, quality, quantity, value,
condition and status of, or any other matter relating to, the Collateral, and
(b) following the occurrence of an Event of Default, contact Account Debtors or
any third Person possessing such Collateral for the purpose of making such
verification. The Collateral Agent shall maintain the confidentiality of any
information it gains from such inspection or verification except that
information may be disclosed (a) to the Secured Parties, their Affiliates, and
their directors, officers, employees and agents, including accountants, legal
counsel and other advisors who need to know such information (it being
understood that the Person to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by Applicable Law and regulations or by
any subpoena or similar legal process (in any which event the Collateral Agent
shall promptly notify the Borrower to the extent not otherwise prohibited by
Applicable Law or regulations and to the extent practicable, it being understood
that the Borrower shall have the right to attempt to prevent such disclosure or
to preserve the confidentiality thereof), (d) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (e) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or participant in, or any prospective assignee of or participant in,
any of the Obligations, (f) with the prior written consent of the Borrower or
(g) to the extent such information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) was available to the Collateral
Agent or any Secured Party on a nonconfidential basis prior to its disclosure to
the Collateral Agent or any Secured Party or becomes available to the Collateral
Agent or any Secured Party on a nonconfidential basis from a source not known by
the Collateral Agent or Secured Party to be under an obligation of
confidentiality with respect thereto.
SECTION 4.06. Taxes; Encumbrances. The Grantors shall pay and discharge all
taxes, assessments, charges, fees or Liens at any time levied or placed on the
Collateral or payable in respect of the Collateral, except (a) Liens created by
the Collateral Documents, (b) Permitted Liens and (c) taxes, assessments,
changes or fees levied against the Collateral where (i) the validity or amount
thereof is being contested in good faith by proper proceedings, (ii) the
Grantors have set aside on their books adequate reserves therefor in accordance
with generally accepted accounting principles, and (iii) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect. At its option, the Collateral Agent may discharge all
such Liens and all such taxes, assessments, charges or fees not being contested
in accordance with the preceding sentence, and may pay for the maintenance and
preservation of the Collateral, in each case to the extent any Grantor fails to
do so as required by this Agreement or any other Fundamental Document, and each
Grantor jointly and severally agrees to reimburse the Collateral Agent on demand
for any payment made or any expense incurred by the Collateral Agent pursuant to
the foregoing authorization; provided, however, that nothing in this Section
4.06 shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees or Liens and maintenance as set forth herein or in
the other Fundamental Documents.
SECTION 4.07. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property having a fair market value of
$25,000 or more of an Account Debtor or any other Person to secure payment and
performance of an Account, such Grantor shall promptly assign such security
interest to the Collateral Agent. Such assignment need not be filed of public
record unless necessary to continue the perfected status of the security
interest against creditors of and transferees from the Account Debtor or other
Person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. None of the Grantors shall
make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by the Fundamental Documents. None of the Grantors shall
make or permit to be made any transfer of the Collateral and each Grantor shall
remain at all times in possession of the Collateral owned by it, except that (a)
Inventory may be sold in the ordinary course of business consistent with past
practice and (b) unless and until the Collateral Agent shall notify the Grantors
that an Event of Default shall have occurred and be continuing and that during
the continuance thereof the Grantors shall not sell, convey, lease, assign,
transfer or otherwise dispose of any Collateral (which notice may be given by
telephone if promptly confirmed in writing), the Grantors may dispose of
Collateral if permitted by the terms of each Fundamental Document. Without
limiting the generality of the foregoing, each Grantor agrees that (a) it shall
not permit any Inventory to be in the possession or control of any warehouseman,
bailee, agent or processor at any time unless such warehouseman, bailee, agent
or processor shall have been notified of the Security Interest, (b) it shall use
its best efforts to obtain the written agreement of any such warehouseman,
bailee, agent or processor to hold the Inventory subject to the Security
Interest and the instructions of the Collateral Agent and to waive and release
any Lien held by it with respect to such Inventory, whether arising by operation
of law or otherwise, and (c) it will promptly notify the Collateral Agent in the
event any warehouseman, bailee, agent or processor issues to a Grantor a
negotiable warehouse receipt or other negotiable document with respect to
Inventory and will use its best efforts to cause the Collateral Agent to have a
perfected Lien therein.
SECTION 4.10. Limitation on Modification of Accounts. None of the Grantors
will, without the Collateral Agent's prior written consent, grant any extension
of the time of payment of any of the Accounts Receivable, compromise, compound
or settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices.
SECTION 4.11. Insurance. Each of the Grantors will maintain or caused to be
maintained, at its own expense, with financially sound and reputable insurance
companies (a)
casualty insurance covering the Collateral, including fire, theft and other
risks usually insured against by extended coverage, in an amount not less than
the fair market value of the Collateral, and (b) such other insurance on the
Collateral in such amounts (with no greater risk retention) and against such
risks as are customarily maintained by companies of established repute engaged
in the same or similar businesses operating in the same or similar locations.
Each policy of insurance covering the Collateral shall designate the Collateral
Agent as an additional insured and loss payee and shall provide 30 days minimum
written notice of cancellation to the Collateral Agent. Grantors will furnish
Secured Party with certificates evidencing such insurance or, at the Collateral
Agent's request, a copy of each such policy of insurance, together with such
additional insurance information as the Collateral Agent may reasonably request
from time to time. Grantors shall give immediate written notice to the
Collateral Agent and to insurers of loss or damage to the Collateral and shall
promptly file proofs of loss with insurers. Each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent (and attorney-in-fact) for the purpose, during the continuance of an Event
of Default, of making, settling and adjusting claims in respect of Collateral
under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
In the event that any Grantor at any time or times shall fail to obtain or
maintain any of the policies of insurance required hereby or to pay any premium
in whole or part relating thereto, the Collateral Agent may, without waiving or
releasing any obligation or liability of the Grantors hereunder or any Event of
Default, in its sole discretion, obtain and maintain such policies of insurance
and pay such premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
SECTION 4.12. Legend. Upon the request of the Collateral Agent, each
Grantor shall legend, in form and manner satisfactory to the Collateral Agent,
its Accounts Receivable and any invoices evidencing or pertaining thereto with
an appropriate reference to the fact that such Accounts Receivable have been
assigned to the Collateral Agent for the benefit of the Secured Parties and that
the Collateral Agent has a security interest therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and Copyright
Collateral.
(a) Each Grantor agrees that it will not, nor will it permit any of its
licensees to, knowingly do any act, or omit to do any act, whereby any Patent
which is material to the conduct of such Grantor's business may become
invalidated or dedicated to the public, and agrees that, consistent with its
past practices, it shall continue to ▇▇▇▇ any products covered by a Patent with
the relevant patent number as necessary and sufficient to establish and preserve
its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality standard of
products and services offered under such Trademark, (iii) as applicable,
display such Trademark with notice of Federal or foreign registration to the
extent necessary and sufficient to establish and preserve its maximum rights
under Applicable Law, and (iv) not use or knowingly permit the use of such
Trademark in violation of any third party rights, in each case in a manner
reasonably consistent with its past practices.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws in a manner reasonably consistent with its past practices.
(d) No Grantor will knowingly do any act, or omit to do any act, whereby
any material Patent, Trademark or Copyright that is material to the conduct of
such Grantor's business may become abandoned, lost or dedicated to the public.
Each Grantor shall notify the Collateral Agent immediately if it knows or has
reason to know that any Patent, Trademark or Copyright material to the conduct
of its business may become abandoned, lost or dedicated to the public, 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, United States Copyright Office or any court or similar office
of any country) regarding such Grantor's ownership of any Patent, Trademark or
Copyright, its right to register the same, or to keep and maintain the same.
(e) In the event any Grantor, either itself or through any agent, employee,
licensee or designee, files an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States, at the end
of each fiscal quarter, such Grantor shall inform the Collateral Agent of such
filing, and such Grantor shall execute and deliver any and all agreements,
supplements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence and perfect the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all reasonably necessary steps that are
consistent with the applicable practice in any proceeding before any relevant
office or agency, such as the United States Patent and Trademark Office, the
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any foreign country, to maintain and
pursue each application relating to the Patents, Trademarks and/or Copyrights
that is material to the conduct of any Grantor's business (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any Collateral
consisting of a Patent, Trademark or Copyright material to the conduct of any
Grantor's business has been
or is about to be infringed, misappropriated or diluted by a third party, such
Grantor promptly shall notify the Collateral Agent and shall, if consistent with
good business judgment, promptly take appropriate action to end such
infringement, misappropriation or dilution, and take such other action as is
appropriate under the circumstances to protect such Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals from
the licensor of each Copyright License, Patent License or Trademark License that
is material to the conduct of any Grantor's business to effect the assignment of
all of such Grantor's right, title and interest thereunder to the Collateral
Agent or its designee.
(i) Each Grantor will perform all acts and execute and deliver all further
instruments and documents, including, without limitation, conditional
assignments for security in form suitable for filing with the United States
Patent and Trademark Office, and the United States Copyright Office,
respectively, reasonably requested by the Collateral Agent at any time to
evidence, perfect, maintain, record and enforce the Collateral Agent's interest
in all material Trademarks, Patents and Copyrights or otherwise in furtherance
of the provisions of this Agreement, and each Grantor hereby authorizes the
Collateral Agent to execute and file one or more accurate financing statements
(and similar documents) or copies thereof or of this Security Agreement with
respect to material Patents, Trademarks and Copyrights signed only by the
Collateral Agent.
(j) Each Grantor will, upon acquiring knowledge of any use by any person of
any term or design reasonably likely to cause confusion with any material
Trademark, promptly notify the Collateral Agent of such use, and if requested by
the Collateral Agent, shall join with the Collateral Agent, at such Grantor's
expense, in such action as the Collateral Agent, in its reasonable discretion,
may deem advisable for the protection of the Collateral Agent's interest in and
to the Trademarks; provided that the foregoing in this clause (j) shall not
prohibit any Grantor from taking such action as such Grantor, in its reasonable
discretion, may independently deem advisable for the protection of its and the
Collateral Agent's interest in and to the Trademarks prior to any such request
by the Collateral Agent.
ARTICLE V
POWER OF ATTORNEY
Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact (which appointment
shall be irrevocable and coupled with an interest subject to the terms of this
Agreement), and in such capacity the Collateral Agent shall have the right, with
power of substitution for each Grantor and in each Grantor's name or otherwise,
for the use and benefit of the Collateral Agent and the Secured Parties, upon
the occurrence and during the continuance of an Event of Default to take any
action and to execute any instrument the Collateral Agent may reasonably deem
advisable to accomplish the purposes of this Agreement, including, without
limitation, (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Collateral; (c) to sign the name of any Grantor on any invoice or ▇▇▇▇ of
lading relating to any of the Collateral; (d) to send verifications of Accounts
Receivable to any Account Debtor; (e) to commence and prosecute any and all
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction, or to take any other action which the Collateral Agent may deem
necessary or desirable to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (f) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require any
Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things reasonably necessary to carry out the purposes of this
Agreement, as fully and completely as though the Collateral Agent were the
absolute owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Collateral Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the monies due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent or
any Secured Party with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable subject to the terms of this Agreement. The
provisions of this Article shall in no event relieve any Grantor of any of its
obligations hereunder or under any other Fundamental Document with respect to
the Collateral or any part thereof or impose any obligation on the Collateral
Agent or any Secured Party to proceed in any particular manner with respect to
the Collateral or any part thereof, or in any way limit the exercise by the
Collateral Agent or any Secured Party of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder, under any
other Fundamental Document, by law or otherwise.
ARTICLE VI
REMEDIES
SECTION 6.01. Remedies Upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver or make
available each item of Collateral to the Collateral Agent, on demand, at the
Collateral item's then current location or, to the extent possible, at an
alternate location reasonably convenient to the applicable Grantor and the
Collateral Agent, and it is agreed that the Collateral Agent shall have the
right to take any or all of the following actions at the same or different
times: (a) require each Grantor to, and each Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith, assemble all
or part of the Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place to be designated by the Collateral
Agent which is reasonably convenient to both parties; (b) with respect to any
Collateral consisting of Intellectual
Property, on demand, to (i) cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the applicable
Grantors to the Collateral Agent, or to license or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive basis, any
such Collateral on such terms and conditions and in such manner as the
Collateral Agent shall determine, (ii) instruct the Grantors not to make any
further use of the Patents, Copyrights or Trademarks or any ▇▇▇▇ similar thereto
for any purpose to the extent that such use would be inconsistent with the
exercise by the Collateral Agent of any other remedies under this Section 6.01,
(iii) in the event of any license, assignment, sale or other disposition of the
Collateral, or any of it, commenced in accordance with this Section 6.01,
require each Grantor to supply to the Collateral Agent or its designee its
know-how and expertise relating to the Trademarks, Patents or Copyrights, and
records relating to the Trademarks, Patents or Copyrights, and (iv) at any time,
pursuant to the authority granted in Article V hereof, execute and deliver on
behalf of the Grantors one or more instruments of assignment of any of the
Trademarks, Patents or Copyrights (or any application of registration thereof),
in form suitable for filing, recording or registration in any country in order
to implement the assignment, sale or other disposal of any of the Trademarks,
Patents or Copyrights; (c) without assuming any obligations or liability
thereunder, enforce (it being understood that the Collateral Agent shall have
the exclusive right to so enforce) all rights and remedies of the Grantors
against any licensee or sublicensee in, to and under any license agreements with
respect to the Collateral, and take or refrain from taking any action under any
thereof, and each of the Grantors hereby releases the Collateral Agent from, and
agrees to hold the Collateral Agent free and harmless from and against any
claims arising out of, any action taken or omitted to be taken with respect to
any such license agreement except claims involving gross negligence, willful
misconduct or bad faith of the Collateral Agent; and (d) with or without legal
process and with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises owned by a Grantor where the Collateral may be located for the purpose
of taking possession of or removing the Collateral and, generally, to exercise
any and all rights afforded to a secured party under the UCC or other Applicable
Law.
Without limiting the generality of the foregoing, each Grantor agrees that
the Collateral Agent shall have the right, subject to the mandatory requirements
of Applicable Law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board, on any
securities exchange or in the over-the-counter market, for cash, upon credit or
for future delivery as the Collateral Agent shall deem appropriate. The
Collateral Agent shall be authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to Persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Collateral Agent shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
sold absolutely, free from any claim or right on the part of any Grantor, and
each Grantor hereby waives (to the fullest extent permitted by law) all rights
of redemption, stay and appraisal which such Grantor now has or may at any time
in the future have under any rule of law or statute now existing or hereafter
enacted.
Each Grantor agrees that, to the extent notice of such sale shall be
required by law, at least ten (10) business days' notice to the applicable
Grantor of the Collateral Agent's intention to make any sale of Collateral shall
constitute reasonable notification. Such notice, in the case of
a public sale, shall state the time and place for such sale and, in the case of
a sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free from any right of redemption, stay, valuation or appraisal
on the part of any Grantor (all said rights being also hereby waived and
released to the fullest extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
Obligation then due and payable to such Secured Party from any Grantor as a
credit against the purchase price, and such Secured Party may, upon compliance
with the terms of sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes hereof a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and no Grantor shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement, all Events
of Default shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
on this Agreement and to sell the Collateral or any portion thereof pursuant to
a judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, first, to the payment of all costs and expenses incurred by
the Collateral Agent (in its capacity as such hereunder or under any other
Collateral Document) or by the Administrative Agent (in its capacity as such
under the Credit Agreement or under any related loan documents) in connection
with such collection or sale or otherwise in connection with this Agreement or
such other Fundamental Documents, including all court costs and the fees and
expenses of its agents and legal counsel (including, without limitation, the
allocated fees, expenses and cost of in-house counsel), the repayment of all
advances made by the Collateral Agent or the Administrative Agent hereunder or
under any other Fundamental Document on behalf of any Grantor and any other
costs or expenses incurred in connection with the exercise of any right or
remedy hereunder or under any other Fundamental Document, and any balance
thereof shall be applied
by the Collateral Agent toward repayment of the Obligations in accordance with
the provisions of the Credit Agreement or the Intercreditor Agreement.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, monies or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the proceeds by the Collateral Agent or of the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised, at the option of the Collateral Agent, upon the occurrence
and during the continuation of an Event of Default; provided that any license,
sub-license or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
If to the Borrower or any other Grantor:
Oneida Ltd.
▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Oneida Ltd.
▇▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Collateral Agent:
JPMorgan Chase Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
JPMorgan Chase Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Any party hereto may change its address or telecopy number for notice
hereunder by notice to the other parties. All notices given in accordance with
this Section shall be deemed to have been given on the date of receipt.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of any Fundamental Document, any agreement with
respect to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment to or waiver of or any consent to any departure from any Fundamental
Document, or any other agreement or instrument, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in any
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall continue in full force and effect until this Agreement
shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Grantor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Grantor, the Collateral Agent and the
Secured Parties and their respective successors and assigns, except that no
Grantor shall have the right to assign or transfer its rights or obligations
hereunder or any interest herein or in the Collateral (and any such assignment
or transfer shall be void) except as expressly contemplated by this Agreement
and each Fundamental Document. This Agreement shall be construed as a separate
agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.
SECTION 7.05. Additional Grantors. Each Grantor acknowledges that, pursuant
to Section 5.12 of the Credit Agreement, the Borrower is required to cause each
Person which becomes a domestic Subsidiary of the Borrower or any Grantor to
become a party hereto as an additional Grantor (each such Person, an "Additional
Grantor") by executing an Instrument of Assumption and Joinder (a "Joinder")
substantially in the form of Exhibit K attached to the Credit Agreement. Upon
delivery of any such Joinder to the Administrative Agent or the Collateral
Agent, as the case may be, notice of which is hereby waived by the Grantors,
each such Additional Grantor shall be deemed a Grantor hereunder and shall be as
fully a party hereto as if such Additional Grantor were an original signatory
hereto. Each Grantor expressly agrees that its obligations arising hereunder
shall not be discharged, diminished or otherwise affected (a) by the addition or
release of any other Grantor hereunder, (b) any failure by the Borrower or any
Grantor to cause any Subsidiary to become an Additional Grantor or a Grantor
hereunder or (c) by reason of the Collateral Agent's or any of the Secured
Parties' actions in effecting, or failure to effect, any such Joinder, or in
releasing any Grantor hereunder, in each case without the necessity of giving
notice to or obtaining the consent of any other Grantor. This Agreement shall be
fully effective as to any Grantor that is or becomes a party hereto regardless
of whether any other Person becomes or fails to become or ceases to be a Grantor
hereunder.
SECTION 7.06. Encore Dissolution. The parties hereto acknowledge and agree
that upon the dissolution of Encore Promotions, Inc., as permitted by the terms
of the Credit Agreement, such entity shall no longer be a party to this
Agreement.
SECTION 7.07. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.08. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the fees referred
to in the Fee Letter (as defined in the Credit Agreement), disbursements and
other charges of its counsel (including, without limitation, local and special
counsel) and of any experts or agents, which the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent
hereunder, or (iv) the failure of any Grantor to perform or observe any of the
provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Fundamental Documents, each Grantor jointly and severally agrees to indemnify
the Collateral Agent, the Secured Parties and their Indemnitees against, and
hold each of them harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable fees, disbursements and
other charges of counsel, incurred by or asserted against any of them arising
out of, in any way connected with, or as a result of, the execution, delivery or
performance of this Agreement or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any Indemnitee
is a party thereto; provided that such indemnity shall not, as to any such
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Collateral Documents. The provisions
of this Section 7.07 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Fundamental
Document, the consummation of the transactions contemplated thereby, the
repayment of any of the Obligations, the invalidity or unenforceability of any
term or provision of this Agreement or any other Fundamental Document or any
investigation made by or on behalf of the Collateral Agent or any Secured Party.
All amounts due under this Section 7.07 shall be payable on written demand
therefor given in accordance with Section 7.01 hereof.
SECTION 7.09. Governing Law. This Amended and Restated Security Agreement
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York without reference to conflict of laws principles.
SECTION 7.10. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Collateral Agent hereunder and of
the Collateral Agent and the Secured Parties under the other Fundamental
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Agreement or any
other Fundamental Documents or consent to any departure by any Grantor therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on any Grantor in any case shall entitle such Grantor or any other
Grantor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply.
SECTION 7.11. Waiver of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this agreement. Each party hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this agreement by, among other
things, the mutual waivers and certifications in this section 7.10.
SECTION 7.12. Independent Effectiveness; Severability. This Agreement is
effective notwithstanding any defect in the validity or enforceability of any
instrument or document contained in any of the other Security Agreements. In the
event any one or more of the provisions contained in this Agreement should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby (it being understood that the invalidity of
a particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall cooperate in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one instrument, and shall become effective
as provided in Section 7.04 hereof. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof.
SECTION 7.14. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.15. Jurisdiction; Consent to Service of Process. (a) Each Grantor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the State or Federal courts located in the
State of New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each Grantor hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such State or Federal court or, to the
extent permitted by law, in such Federal court. Each Grantor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any Secured Party may otherwise have to bring any action or
proceeding relating to this Agreement or the other Fundamental Documents against
any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or
the other Fundamental Documents in any New York State or Federal court described
in subparagraph (a) above. Each Grantor hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 7.01 hereof. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 7.16. Termination. This Agreement and the Security Interest shall
terminate when each of the following events shall have occurred: (a) all the
Obligations have been indefeasibly paid in full or cash collateralized in
accordance with the terms of the Credit Agreement or the Intercreditor
Agreement, (b) the Lenders have no further commitment to lend under the Credit
Agreement, (c) the L/C Exposure has been reduced to zero and (d) the Issuing
Bank has no further obligation to issue letters of credit under the Credit
Agreement or make payments to beneficiaries thereunder (other than those letters
of credit collateralized by Cash Equivalents equal to 105% of the L/C Exposure
or collateralized with a back-to-back letter of credit in accordance with the
terms of the Credit Agreement). This Agreement, or the Security Interest on any
Collateral, may also be terminated by and with the written consent of the
Collateral Agent, provided that the Collateral Agent obtains written
authorization to so consent by the Required Secured Parties (as defined in the
Intercreditor Agreement), provided, further, that no such written authorization
shall be required from the Required Secured Parties in order for the Collateral
Agent to release any Security Interest on any Collateral which any Grantor is
entitled to sell or otherwise dispose of, without the consent of the Required
Lenders, pursuant to Section 6.6 of the Credit Agreement and in connection with
such sale or disposition, the Collateral Agent will take such necessary and
appropriate actions to release such Security Interest. Upon termination of this
Agreement or the Security Interest on any Collateral, the Collateral Agent shall
execute and deliver to the Grantors, at the Grantors' expense, all appropriate
UCC termination statements and similar documents which the Grantors shall
reasonably request to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section 7.15 shall be
without recourse to or warranty by the Collateral Agent.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, each of the Grantors has caused this Agreement to be
duly executed by its officer thereunto duly authorized as of the date and year
first above written.
ONEIDA LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
BUFFALO CHINA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
THC SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
ENCORE PROMOTIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
DELCO INTERNATIONAL, LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
SAKURA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
Signature Page to Amended and Restated Security Agreement
KENWOOD SILVER COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
ONEIDA SILVERSMITHS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
ONEIDA FOOD SERVICE, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
ONEIDA INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
Accepted and Agreed to:
JPMORGAN CHASE BANK
as Collateral Agent
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
Signature Page to Amended and Restated Security Agreement
The following identified Exhibits and Schedules to the foregoing Amended and
Restated Security Agreement are not filed with such Agreement. To the extent
that any such Exhibits and/or Schedules have not been otherwise filed with the
Securities & Exchange Commission, these Exhibits and/or Schedules will be
furnished supplementally to the Securities & Exchange Commission upon request.
Exhibits:
Exhibit A: Amended & Restated Copyright Security Agreement
Exhibit B: Amended & Restated Patent Security Agreement
Exhibit C: Amended & Restated Trademark Security Agreement
Exhibit D: Perfection Certificate
Schedules:
Schedule I: List of subsidiary "Guarantors"
Schedule II: List of U.S. Copyright Registrations
Schedule III: List of U.S. Patents
Schedule IV: List of U.S. Trademark Registrations
Schedule V: List of "Securities" excluded from the "Security Interest"