EXECUTION COPY
SECURITY AGREEMENT
dated as of
April 1, 1999
among
MARVEL ENTERPRISES, INC.,
THE SUBSIDIARY GUARANTORS PARTY HERETO
and
CITIBANK, N.A.,
as Collateral Agent
TABLE OF CONTENTS
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PAGE
SECTION 1. Definitions........................................................1
SECTION 2. Representations and Warranties.....................................8
SECTION 4. Delivery of Certain Collateral....................................11
SECTION 5. Further Assurances; Covenants.....................................12
SECTION 6. Record Ownership of Pledged Equity Securities.....................15
SECTION 7. Right to Vote Pledged Equity Interests............................15
SECTION 8. Right to Receive Distributions on Collateral......................15
SECTION 9. Collateral Accounts...............................................16
SECTION 10. General Authority.................................................18
SECTION 11. Remedies upon Event of Default....................................18
SECTION 12. Limitation on Duty of Collateral Agent in Respect of Collateral...20
SECTION 13. Application of Proceeds...........................................20
SECTION 14. Concerning the Collateral Agent...................................22
SECTION 15. Appointment of Co-Agents..........................................23
SECTION 16. Expenses..........................................................23
SECTION 17. Termination of Security Interests; Release of Collateral..........23
SECTION 18. Additional Subsidiary Guarantors..................................24
SECTION 19. Notices...........................................................24
SECTION 20. Waivers, Non-Exclusive Remedies...................................24
SECTION 21. Successors and Assigns............................................24
SECTION 22. Changes in Writing................................................24
SECTION 23. New York Law......................................................25
SECTION 24. Severability......................................................25
SECTION 25. Counterparts......................................................25
Schedule 1 - Operating Accounts
Schedule 2 - Equity Interests
Exhibit A - Form of Perfection Certificate
Exhibit B - Form of Blocked Account Agreement
Exhibit C - Form of Security Agreement Supplement
- i -
SECURITY AGREEMENT
AGREEMENT dated as of April 1, 1999 among MARVEL ENTERPRISES, INC., a
Delaware corporation (the "Borrower"), the SUBSIDIARY GUARANTORS party hereto
and CITIBANK, N.A., as Collateral Agent (the "Collateral Agent").
WITNESSETH:
WHEREAS the Borrower, the Subsidiary Guarantors, certain Lenders (the
"Lenders"), and the Collateral Agent are parties to a $60,000,000 Credit
Agreement dated as of April 1, 1999 (as the same may be amended from time to
time, the "Credit Agreement");
WHEREAS, the Borrower is willing to secure its obligations under the
Credit Agreement and the other Loan Documents by granting Liens on its assets to
the Collateral Agent as provided in this Agreement and the other Collateral
Documents;
WHEREAS, each of the Borrower's U.S. Subsidiaries has guaranteed the
foregoing obligations of the Borrower pursuant to the Credit Agreement and is
willing to secure its obligations under the Credit Agreement by granting Liens
on its assets to the Collateral Agent as provided in this Agreement and the
other Collateral Documents; and
WHEREAS, the Lenders and the Issuer are not willing to make Loans or
maintain, issue or participate in Letters of Credit under the Credit Agreement
unless the foregoing obligations of the Borrower and the Subsidiary Guarantors
are secured by Liens on their respective assets as provided in this Agreement
and the other Collateral Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means, with respect to any Lien Grantor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Lien Grantor, and
shall also mean and include all accounts receivable, contract rights, book
debts, notes, drafts and other obligations or indebtedness owing to such Lien
Grantor arising from the sale, lease or exchange of goods or other property by
it and/or the performance of services by it (including, without limitation, any
such obligation that might be characterized as an account, contract right or
general intangible under the Uniform Commercial Code in effect in any
jurisdiction) and all of such Lien Grantor's rights in, to and under all
purchase orders for goods, services or other property, and all of such Lien
Grantor's rights to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid sellers'
rights of rescission, replevin, reclamation and rights to stoppage in transit)
and all monies due to or to become due to such Lien Grantor under all contracts
for the sale, lease or exchange of goods or other property and/or the
performance of services by it (whether or not yet earned by performance on the
part of such Lien
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Grantor), in each case whether now in existence or hereafter arising or
acquired, including, without limitation, the right to receive the proceeds of
said purchase orders and contracts and all collateral security and guarantees of
any kind given by any Person with respect to any of the foregoing. Without
limiting the foregoing, "Accounts" shall include all indebtedness, royalties,
fees and other obligations and payments owing to any Lien Grantor under any
Copyright License, Patent License or Trademark License.
"Assets" means, with respect to each Lien Grantor, all Collateral.
"Collateral" has the meaning set forth in Section 3.
"Collateral Accounts" means the Blocked Accounts, the General
Collateral Account and the Insurance Account.
"Collateral Documents" means this Agreement, the Security Agreement
Supplements , the Blocked Account Agreements and all other supplemental or
additional security agreements or similar instruments delivered pursuant hereto
or thereto.
"Commodity Account" means an account maintained by a commodity
intermediary in which a commodity contract is carried for a commodity customer.
"Commodity Contract" means a commodity futures contract, an option on a
commodity futures contract, a commodity option, or other contract that, in each
case, is:
(i) 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
(ii) 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.
"Contingent Secured Obligation" means, at any time, any Secured
Obligation (or portion thereof) that is contingent in nature at such time,
including (without limiting the generality of the foregoing) any obligation to
reimburse the Issuer for drawings not yet made under a Letter of Credit.
"Copyright License" means any agreement now or hereafter in existence
(i) granting to any Lien Grantor (except to the extent that the granting of a
security interest therein would result in a breach of, or default under, such
agreement) or (ii) pursuant to which any Lien Grantor has granted to any other
Person, in each case, any right with respect to a Copyright which is in
existence or may come into existence.
"Copyrights" means all of the following: (i) all copyrights under the
laws of the United States or any other country (whether or not the underlying
works of authorship have been published), all registrations and recordings
thereof, all copyrightable works of authorship (whether or not published), and
all applications for copyrights under the laws of the United States or any other
country, including, without limitation, registrations, recordings and
applications in
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the United States Copyright Office or in any similar office or agency
of the United States, any State thereof or any other country or any political
subdivision thereof, (ii) all renewals thereof, (iii) all claims for, and rights
to ▇▇▇ for, past or future infringements of any of the foregoing, and (iv) all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.
"Documents" means, with respect to any Lien Grantor, all "documents"
(as defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Lien Grantor.
"Equity Interest" means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in the foregoing clauses (i), (ii), (iii) and (iv).
"Event of Default" has the meaning ascribed to such term in the Credit
Agreement.
"Financial Asset" means:
(i) a Security;
(ii) an obligation of a Person or a share, participation, or other
interest in a Person or in property or an enterprise of a Person, that is, or is
of a type, dealt in or traded on financial markets, or that is recognized in any
area in which it is issued or dealt in as a medium for investment; or
(iii) 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, Financial Asset means either the interest itself or the
means by which a Person's claim to it is evidenced, including a certificated or
uncertificated Security, a Security certificate, or a Security Entitlement.
"Foreign Person" means any Person organized under the laws of a
jurisdiction, and conducting substantially all of its operations, outside of the
United States, other than any such Person that is, whether as a matter of law,
pursuant to an election by such Person or otherwise, treated as a partnership in
which any Lien Grantor is a partner or a branch of any Lien Grantor for United
States income tax purposes.
"General Collateral Account" has the meaning set forth in Section 9(A).
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"Instruments" means, with respect to any Lien Grantor, all
"instruments", "chattel paper" or "letters of credit" (each as defined in the
UCC), including those evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment of, any of
the Accounts, including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances, now owned or hereafter acquired by such Lien
Grantor.
"Insurance Account" has the meaning set forth in Section 9(C).
"Insurance Proceeds" has the meaning set forth in Section 9(C).
"Intellectual Property" means (i) Patents, (ii) Patent Licenses, (iii)
Trademarks, (iv) Trademark Licenses, (v) Copyrights and (vi) Copyright Licenses.
"Inventory" means, with respect to any Lien Grantor, all "inventory"
(as defined in the UCC), now owned or hereafter acquired by it, wherever
located, and shall also mean and include all raw materials and other materials
and supplies, work-in-process and finished goods and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto.
"Investment Property" means (i) a Security, whether certificated or
uncertificated, (ii) a Security Entitlement, (iii) a Securities Account, (iv) a
Commodities Contract, or (v) a Commodities Account.
"Lien Grantor" means the Borrower or any Subsidiary Guarantor and "Lien
Grantors" means all of the foregoing.
"Liquid Investments" has the meaning set forth in Section 9(G).
"Non-Contingent Secured Obligation" means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
"Operating Accounts" means those depository accounts of the Lien Grantors
to be identified on Schedule 1 hereto pursuant to Section 9(D), as such Schedule
may be amended from time to time.
"Opinion of Counsel" means a written opinion of legal counsel (who may
be counsel to a Lien Grantor or other counsel, in either case approved by the
Collateral Agent or the Required Lenders in a writing delivered to the
Collateral Agent) addressed and delivered to the Collateral Agent.
"Original Lien Grantor" means the Borrower or any Subsidiary Guarantor
that grants a Lien on any of its assets hereunder on the Closing Date, and
"Original Lien Grantors" means all of the foregoing.
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"Other Investment Property" means, with respect to any Lien Grantor,
all Investment Property now owned or hereafter acquired by it, other than any
such Investment Property constituting an Equity Interest.
"Other Pledged Securities" means, with respect to any Lien Grantor, all
"securities" (as such term is defined in Article 8 of the UCC) now owned or
hereafter acquired by such Lien Grantor, other than any Pledged Equity Interests
of such Lien Grantor.
"Patent License" means any agreement now or hereafter in existence
granting any Lien Grantor, or pursuant to which any Lien Grantor has granted to
any other Person (except to the extent that the granting of a security interest
therein would result in a breach of, or default under, such agreement), any
right with respect to any Patent or any invention now or hereafter in existence,
whether patentable or not, whether a patent or application for patent is in
existence on such invention or not, and whether a patent or application for
patent on such invention may come into existence or not.
"Patents" means all of the following: (i) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof, (ii)
all reissues, continuations, continuations-in-part or extensions thereof, (iii)
all claims for, and rights to ▇▇▇ for, past or future infringements of any of
the foregoing and (iv) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit A, completed and supplemented
with the schedules and attachments contemplated thereby to the satisfaction of
the Collateral Agent, and duly executed by a duly authorized officer of such
Lien Grantor.
"Permitted Liens" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 5.09 of the Credit Agreement.
"Pledged Certificates" means at any time all "certificated securities"
(as such term is defined in Article 8 of the UCC) that evidence or represent
Pledged Equity Interests or Other Pledged Securities at such time.
"Pledged Equity Interests" means at any time all Equity Interests
included in the Collateral at such time.
"Pledged Instruments" means at any time all Instruments included in the
Collateral at such time.
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"Pledged LLC Interest" means at any time any membership interest or
similar interest in a limited liability company that is included in the Pledged
Equity Interests at such time.
"Pledged Partnership Interest" means at any time any partnership
interest (whether general or limited) that is included in the Pledged Equity
Interests at such time.
"Post-Petition Interest" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrower or would accrue but for the
operation of applicable bankruptcy or insolvency laws, whether or not such
interest is allowed or allowable as a claim in any such proceeding.
"Proceeds" means, with respect to any Lien Grantor, all proceeds of,
and all other profits, products, rents or receipts, in whatever form, arising
from the collection, sale, lease, exchange, assignment, licensing or other
disposition of, or other realization upon, the Collateral, including, without
limitation, all claims of such Lien Grantor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any Collateral, in each
case whether now existing or hereafter arising.
"Secured Obligations" means:
(A) with respect to the Borrower, all principal of all Loans and LC
Reimbursement Obligations outstanding from time to time under the Credit
Agreement, all interest (including, without limitation, Post-Petition Interest)
on such Loans and LC Reimbursement Obligations and all other amounts now or
hereafter payable by the Borrower pursuant to any Loan Document;
(B) with respect to any Subsidiary Guarantor, all obligations of such
Subsidiary Guarantor under the Credit Agreement or any other Loan Document
(including, without limitation, obligations in respect of Post-Petition
Interest); and
(C) with respect to any Lien Grantor, any renewals or extensions of any
Secured Obligations.
"Secured Parties" means the Collateral Agent, the Lenders and the
Issuer.
"Securities Account" means 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 the rights that comprise the Financial Asset.
"Security" means an obligation of an issuer or a share, participation,
or other interest in an issuer or in property or an enterprise of an issuer:
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(i) that is represented by a security certificate 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;
(ii) that is one of a class or series or by its terms is divisible into
a class or series of shares, participations, interests, or obligations; and
(iii) that:
(A) is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly provides
that it is a security governed by Article 8 of the Uniform Commercial Code as in
effect in any jurisdiction;
provided that any share or similar equity interest issued by a corporation,
business trust, joint stock company or similar entity or by an entity that is
registered as an investment company under the federal investment company laws,
any interest in a unit trust that is so registered and any face-amount
certificate that is issued by a fact-amount certificate company that is so
registered, is a "Security".
"Security Agreement Supplement" means a letter substantially in the
form of Exhibit C hereto, executed and delivered to the Collateral Agent
pursuant to Section 18 for the purpose of adding a new Subsidiary Guarantor as a
party hereto and/or adding additional property to the Collateral.
"Security Entitlement" means a "security entitlement" (as defined in
the UCC).
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Subsidiary Guarantors" means each Person listed on the signature pages
hereof under the caption "Subsidiary Guarantors" and each Person that shall, at
any time after the date hereof, become a party hereto and a "Subsidiary
Guarantor" as provided in Section 18.
"Trademark License" means any agreement now or hereafter in existence
granting to any Lien Grantor (except to the extent that the granting of a
security interest therein would result in a breach of, or default under, such
agreement) or pursuant to which any Lien Grantor has granted to any other
Person, any right to use any Trademark.
"Trademarks" means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and any other
source or business identifiers, and general
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intangibles of like nature, and the rights in any of the foregoing that arise
under applicable law, (ii) the goodwill of the business symbolized thereby or
associated with each of them, (iii) all registrations and applications in
connection therewith, including, without limitation, registrations and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, (iv) all renewals thereof, (v) all claims
for, and rights to ▇▇▇ for, past or future infringements of any of the foregoing
and (vi) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including, without limitation,
damages and payments for past or future infringements thereof.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
"U.S. Person" means any Person other than a Foreign Person.
SECTION 2. Representations and Warranties. Each Lien Grantor represents
and warrants as follows:
(A) Such Lien Grantor owns the Equity Interests listed as being owned
by it in Schedule 2 hereto or to any Security Agreement Supplement to
which it is a party, free and clear of any Lien other than the Security
Interests. All shares of capital stock identified in any such Schedule 2 as
being beneficially owned by such Lien Grantor have been duly authorized and
validly issued, are fully paid and non-assessable, and are subject to no
option to purchase or similar right of any Person. Such Lien Grantor is not
and will not become a party to or otherwise bound by any agreement, other
than the Loan-Documents, that restricts in any manner the rights of any
present or future holder of any Equity Interest with respect thereto.
(B) Such Lien Grantor has good and marketable title to all of the
Collateral, free and clear of any Liens other than the Permitted Liens.
Such Lien Grantor has taken all actions necessary under the UCC to perfect
its interest in any Accounts purchased or otherwise acquired by it, as
against its assignors and creditors of its assignors.
(C) Such Lien Grantor has not entered into any agreement that is
reasonably likely to, or taken any action that is reasonably likely to,
prevent the Collateral Agent from enforcing any of the terms of this
Agreement or that would limit the Collateral Agent in any such enforcement.
Other than financing statements or other similar or equivalent documents
or instruments with respect to the Security Interests and Permitted Liens,
no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or
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any part of the Collateral is on file or of record in any jurisdiction
in which such filing or recording would be effective to perfect a Lien on
such Collateral. No Collateral is in the possession of any Person (other
than such Lien Grantor or a bailee or warehouseman of such Lien Grantor)
asserting any claim thereto or security interest therein, except that the
Collateral Agent or its designee may have possession of Collateral as
contemplated hereby.
(D) Such Lien Grantor has delivered a Perfection Certificate to the
Collateral Agent. The information set forth therein is correct and complete
as of the Closing Date. On or prior to the Closing Date, such Lien Grantor
shall furnish to the Collateral Agent file search reports from each UCC
filing office set forth in Schedule 3 to such Perfection Certificate
confirming the filing information set forth in such Schedule.
(E) The Security Interests constitute, under the UCC, valid security
interests in all Collateral owned by such Lien Grantor, securing its
Secured Obligations, other than any Collateral the grant of a security
interest in which is excluded from Section 9-104 of the UCC.
(F) Upon the delivery of actual possession of the Pledged Instruments
(if any) and the Pledged Certificates, if any, owned by such Lien Grantor
to the Collateral Agent in accordance with Section 4, the Security
Interests in such Collateral will be perfected, subject to no prior Lien
and, in the case of any Pledged Certificates evidencing "securities" (as
defined in the UCC) the Collateral Agent will have "control" (as defined in
Section 8-106 of the UCC) thereof and will be a "protected purchaser" (as
defined in Section 8-303 of the UCC) of such Security Interests therein.
(G) When UCC financing statements in the form specified in Exhibit 2 to
such Lien Grantor's Perfection Certificate shall have been filed in the
offices specified in such Lien Grantor's Perfection Certificate, the
Security Interests will constitute perfected security interests in the
Collateral (except Inventory in transit) owned by such Lien Grantor to the
extent that a security interest therein may be perfected by filing pursuant
to the UCC, prior to all Liens and rights of others therein except
Permitted Liens. Except for the filing of such UCC financing statements, no
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of the
Collateral Documents or is necessary for the validity or enforceability
thereof or for the perfection or due recordation of the Security Interests
or for the enforcement of the Security Interests.
(H) Such Lien Grantor's Collateral is insured in accordance with the
requirements of the Credit Agreement.
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(I) All of such Lien Grantor's Inventory has or will have been produced
in compliance with the applicable requirements, if any, of the Fair Labor
Standards Act, as amended.
(J) The "securities intermediary's jurisdiction" (as defined in the
UCC) in respect of each of such Lien Grantor's Securities Accounts and
Security Entitlements, the "commodity intermediary's jurisdiction" (as
defined in the UCC) in respect of each of such Lien Grantor's Commodity
Accounts and Commodity Contracts, and the location of such Lien Grantor's
chief executive office, is a jurisdiction that has adopted, in substantial
part, Uniform Commercial Code, Revised Article 8, Investment Securities
(with Conforming and Miscellaneous Amendments to Articles 1, 3, 4, 5, 9 and
10) 1994 Official Text.
SECTION 3. The Security Interests. (A) In order to secure the full and
punctual payment and performance of the Secured Obligations in accordance
with the terms thereof, each Lien Grantor hereby grants to the Collateral
Agent for the ratable benefit of the Secured Parties a continuing security
interest in and to all of the following property of such Lien Grantor,
whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Instruments;
(v) (x) Equity Interests in any U.S. Person now owned or
hereafter beneficially owned by such Lien Grantor, (y) the lesser of
all voting Equity Interests in any Foreign Person now owned or
hereafter beneficially acquired by such Lien Grantor and 65% of all
voting Equity Interests in such Foreign Person held by any Person and
(z) all non-voting Equity Interests in any Foreign Person now owned or
hereafter beneficially acquired by such Lien Grantor and, in each case,
all rights and privileges of such Lien Grantor with respect to such
Equity Interests, and all dividends, distributions and other payments
with respect thereto;
(vi) Other Investment Property;
(vii) The Collateral Accounts, all cash deposited therein from
time to time, the Liquid Investments made pursuant to Section 9(G) and
other monies and property of any kind of any Lien Grantor in the
possession or under the control of the Collateral Agent;
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(viii) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such Lien Grantor pertaining to any of the
Collateral; and
(ix) All Proceeds of all or any of the Collateral described in clauses
3(A)(i) through 3(A)(viii) hereof.
(B) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of any Lien Grantor with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Certain Collateral. (A) On the Closing Date, each
Original Lien Grantor is delivering to the Collateral Agent as Collateral
hereunder (i) with respect to each U.S. Person, all stock certificates or other
certificates, if any, representing Equity Interests in such U.S. Person then
owned by such Original Lien Grantor, (ii) with respect to each Foreign Person,
stock certificates or other certificates, if any, representing (a) the lesser of
(1) all voting Equity Interests in such Foreign Person then owned by such
Original Lien Grantor and (2) 65% of all voting Equity Interests in such Foreign
Person and (b) all nonvoting equity Interests in such Foreign Person then owed
by such Original Lien Grantor and (iii) all Instruments and all certificates
evidencing Other Pledged Securities then owned by such Person.
(B) On the date it signs and delivers its Security Agreement Supplement,
each Lien Grantor (other than an Original Lien Grantor) will deliver to the
Collateral Agent as Collateral hereunder (i) with respect to each U.S. Person,
all stock certificates or other certificates, if any, representing Equity
Interests in such U.S. Person then owned by it, (ii) with respect to each
Foreign Person, stock certificates or other certificates representing (a) the
lesser of (1) all voting Equity Interests in such Foreign Person then owned by
such Lien Grantor and (2) 65% of all voting Equity Interests in such Foreign
Person and (b) all non-voting equity Interests in such Foreign Person then owned
by such Lien Grantor and (iii) all Instruments and all certificates evidencing
Other Pledged Securities then owned by such Person.
(C) After the Closing Date (in the case of an Original Lien Grantor) or the
date of its Security Agreement Supplement (in the case of any other Lien
Grantor), if any Lien Grantor receives (i) any stock certificate or other
certificate representing Equity Interests in another Person then owned by it
(provided that no Lien Grantor shall be required to pledge more than 65% of the
voting Equity Interests in any Foreign Person), (ii) any certificate
representing any Other Pledged Securities then owned by it or (iii) any
Instrument, in which a security interest is granted pursuant to Section 3 hereof
or pursuant to the Security Agreement Supplement signed by it, such Lien Grantor
will immediately deliver such certificate or instrument to the Collateral Agent
to be held by it as Collateral hereunder.
(D) Notwithstanding the foregoing, so long as no Event of Default shall
have occurred and be continuing, each Lien Grantor may retain for collection in
the ordinary course any Instruments (other than checks and drafts constituting
payments in respect of Accounts as to which the provisions of Section 9(B) shall
apply) received by it in the ordinary course of business, and the Collateral
Agent shall, promptly upon request by such Lien Grantor, make
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appropriate arrangements for making any other Instrument pledged by such Lien
Grantor hereunder available to it for purposes of presentation, collection or
renewal (any such arrangement to be effected, to the extent deemed appropriate
by the Collateral Agent, against trust receipt or like document).
(E) All Pledged Certificates delivered to the Collateral Agent hereunder
will be delivered in suitable form for transfer by delivery, or accompanied by
duly executed instruments of transfer or assignment in blank and accompanied by
any required transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent. All Pledged Instruments delivered to the Collateral Agent
hereunder will be endorsed to the order of the Collateral Agent and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Collateral Agent.
SECTION 5. Further Assurances; Covenants. Each Lien Grantor covenants as
follows:
(A) It will not change its name, identity or corporate structure in any
manner unless such Lien Grantor shall have given the Collateral Agent notice of
such proposed action not more than six months nor less than 30 days prior to the
date on which such Lien Grantor proposes to take such action and delivered an
Opinion of Counsel with respect thereto in accordance with Section 5(D).
(B) It will not change the location of (i) its chief executive office or
chief place of business or (ii) the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable location
described in its Perfection Certificate, unless such Lien Grantor shall have
given the Collateral Agent prior notice thereof and delivered an Opinion of
Counsel with respect thereto in accordance with Section 5(D). It will not in any
event change the location of any Collateral owned by it if such change would
cause the Security Interests in such Collateral to lapse or cease to be
perfected.
(C) It will, from time to time, at its expense, execute, deliver, file and
record any statement, assignment, instrument, document, agreement or other paper
and take any other action (including, without limitation, any filings of
financing or continuation statements under the UCC) that from time to time may
be necessary or desirable, or that the Collateral Agent may reasonably request,
in order to create, preserve, perfect, confirm or validate the Security
Interests in such Lien Grantor's Collateral or to enable the Collateral Agent
and the other Secured Parties to obtain the full benefits of the Collateral
Documents, or to enable the Collateral Agent to exercise and enforce any of its
rights, powers and remedies thereunder with respect to any of such Lien
Grantor's Collateral. To the extent permitted by applicable law, such Lien
Grantor authorizes the Collateral Agent to execute and file such financing
statements or continuation statements without such Lien Grantor's signature
appearing thereon. Such Lien Grantor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. Such Lien Grantor shall pay the costs
of, or incidental to, any recording or filing of any such financing or
continuation statements in which it is named as the debtor. Such Lien Grantor
hereby constitutes the Collateral Agent its attorney-in-fact to execute and file
all filings required or so requested for the foregoing purposes, all acts
12
of such attorney being hereby ratified and continued; and such power, being
coupled with an interest, shall be irrevocable until such Lien Grantor's
Collateral is released pursuant to Section 17.
(D) At least 30 days before it takes any action contemplated by Section
5(A) or 5(B), such Lien Grantor will, at its expense, cause to be delivered to
the Collateral Agent an Opinion of Counsel, in form and substance satisfactory
to the Collateral Agent, to the effect that all financing statements and
amendments or supplements thereto, continuation statements and other documents
required to be recorded or filed in order to perfect the Security Interests
against all creditors of and purchasers from such Lien Grantor (except any
continuation statements specified in such Opinion of Counsel that are to be
filed more than six months after the date thereof) have been filed in each
filing office necessary for such purpose and that all filing fees and taxes, if
any, payable in connection with such filings have been paid in full.
(E) If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any agent or processor (other than the Borrower or any
of its Subsidiaries), such Lien Grantor will notify such warehouseman, bailee,
agent or processor of the Security Interests created hereby and instruct it to
hold all such Collateral for the Collateral Agent's account subject to the
Collateral Agent's instructions.
(F) It shall keep full and accurate books and records relating to the
Collateral, and, if requested, stamp or otherwise ▇▇▇▇ such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the Security Interests.
(G) It shall use its best efforts to cause to be collected from its account
debtors, as and when due, any and all amounts owing under or on account of each
of its Accounts (including, without limitation, Accounts that are delinquent,
such Accounts to be collected in accordance with lawful collection procedures)
and shall apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account for credit to the
subaccounts of the applicable Lien Grantor. Subject to the rights of the
Collateral Agent and the other Secured Parties hereunder if an Event of Default
shall have occurred and be continuing, such Lien Grantor may allow in the
ordinary course of business as adjustments to amounts owing under its Accounts
(i) an extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance that such Lien Grantor finds appropriate in
accordance with sound business judgment and (ii) a refund or credit due in
accordance with such Lien Grantor's ordinary course of business consistent with
its historical collection practices. The costs and expenses (including, without
limitation, attorney's fees) of collection, whether incurred by such Lien
Grantor or the Collateral Agent, shall be borne by such Lien Grantor.
(H) Upon the occurrence and during the continuance of any Event of Default,
such Lien Grantor will, upon the request of the Collateral Agent, promptly
notify (and such Lien Grantor hereby authorizes the Collateral Agent so to
notify) each account debtor in respect of any Accounts or Instruments that such
Collateral has been assigned to the Collateral Agent hereunder, and that any
payments due or to become due in respect of such Collateral are to be made
directly to the Collateral Agent or its designee.
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(I) Without the prior written consent of the Required Lenders, such Lien
Grantor will not sell, lease, exchange, assign or otherwise dispose of, or grant
any option or security interest with respect to, any Collateral except, subject
to the rights of the Secured Parties hereunder if an Event of Default shall have
occurred and be continuing, as permitted under the Credit Agreement. Upon any
such permitted sale, exchange, assignment or other disposition of any asset
(other than any such sale, exchange, assignment or other disposition to a
Subsidiary), the Security Interests created hereby in such asset (but not in any
Proceeds arising therefrom) shall cease immediately without any further action
on the part of the Collateral Agent or any other Secured Party, but the
Collateral Agent shall comply with Section 17(C) hereof.
(J) On or prior to the Closing Date, such Lien Grantor will cause the
Collateral Agent to be named as an additional insured and loss payee on each
insurance policy required to be maintained pursuant to Section 5.03 of the
Credit Agreement, including, without limitation, policies relating to any of its
Inventory. Such Lien Grantor will deliver to the Collateral Agent, upon request
of the Collateral Agent, the insurance policies for such insurance or
certificates of insurance evidencing such coverage. Each such insurance policy
shall (i) include effective waivers by the insurer of all claims for insurance
premiums against the Collateral Agent or any Lender, (ii) provide for coverage
to the Collateral Agent regardless of the breach by such Lien Grantor of any
warranty or representation made therein, (iii) not be subject to co-insurance,
(iv) provide that all insurance proceeds in excess of $1,000,000 per claim shall
be adjusted with and payable to the Collateral Agent and (v) provide that no
cancellation, termination or material modification thereof shall be effective
until at least 30 days after receipt by the Collateral Agent of notice thereof.
Such Lien Grantor hereby appoints the Collateral Agent as its attorney-in-fact
to make proof of loss, claim for insurance and adjustments with insurers, and to
execute or endorse all documents, checks or drafts in connection with payments
made as a result of any insurance policies.
(K) It will, promptly upon request, provide to the Collateral Agent all
information and evidence it may reasonably request concerning the Collateral to
enable the Collateral Agent to enforce the provisions of this Agreement.
(L) It will notify the Collateral Agent promptly if any application or
registration relating to any material Intellectual Property owned or licensed by
it is reasonably likely to become abandoned or dedicated to the public, or of
any materially adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Copyright Office, the United States Patent and
Trademark Office or any court) regarding such Lien Grantor's ownership of such
material Intellectual Property, its right to register or patent the same or its
right to keep and maintain the same and (i) if any of such Lien Grantor's rights
to any material Intellectual Property are infringed, misappropriated or diluted
by a third party, such Lien Grantor shall notify the Collateral Agent within 30
days after it learns thereof and shall, unless such Lien Grantor shall
reasonably determine that any such action would be of negligible value, economic
or otherwise, promptly ▇▇▇ for infringement, misappropriation or dilution and to
recover any and all damages for such infringement, misappropriation or dilution,
and take such other actions as such Lien Grantor shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property.
14
SECTION 6. Record Ownership of Pledged Equity Securities. The Collateral
Agent may on and after the occurrence and continuance of an Event of Default, in
its sole discretion, cause the Pledged Equity Interests (or any portion thereof)
to be transferred of record into the name of the Collateral Agent or its
nominee. Each Lien Grantor will promptly give to the Collateral Agent copies of
any notices and other communications received by it with respect to Pledged
Equity Interests registered in its name, and the Collateral Agent will promptly
give to such Lien Grantor copies of any notices and other communications
received by the Collateral Agent with respect to such Lien Grantor's Pledged
Equity Interests registered in the name of the Collateral Agent or its nominee.
SECTION 7. Right to Vote Pledged Equity Interests. (A) Unless an Event of
Default shall have occurred and be continuing, each Lien Grantor shall have the
right, from time to time, to vote and to give consents, ratifications and
waivers with respect to the Pledged Equity Interests owned by it, and the
Collateral Agent shall, upon receiving a written request from such Lien Grantor,
deliver to such Lien Grantor as specified in such request such proxies, powers
of attorney, consents, ratifications and waivers in respect of any of such
Pledged Equity Interests that are registered in the name of the Collateral Agent
or its nominee as shall be specified in such request and be in form and
substance satisfactory to the Collateral Agent. Unless an Event of Default shall
have occurred and be continuing, the Collateral Agent shall have no right to
take any action that the owner of a Pledged Partnership Interest or Pledged LLC
Interest is entitled to take with respect thereto, except the right to receive
and retain payments and other distributions to the extent provided in Section 8.
(B) If an Event of Default shall have occurred and be continuing, the
Collateral Agent shall have the right, to the extent permitted by law (and, in
the case of a Pledged Partnership Interest or Pledged LLC Interest, by the
relevant partnership agreement, limited liability company agreement, operating
agreement or other governing document), and each Lien Grantor shall take all
such action as may be necessary or appropriate to give effect to such right, to
vote and to give consents, ratifications and waivers and take any other action
with respect to any or all of the Pledged Equity Interests with the same force
and effect as if the Collateral Agent were the absolute and sole owner thereof.
SECTION 8. Right to Receive Distributions on Collateral. Subject to Section
17, the Collateral Agent shall have the right to receive and to retain as
Collateral hereunder all dividends, interest and other payments and
distributions made upon or with respect to the Pledged Equity Interests and the
Other Investment Property and each Lien Grantor shall take all such action as
the Collateral Agent may deem necessary or appropriate to give effect to such
right; provided that, unless an Event of Default shall have occurred and be
continuing, this sentence shall not apply to dividends, interest and other
payments and distributions made in cash or cash equivalents ("Cash
Distributions"). All such dividends, interest and other payments and
distributions that are received by any Lien Grantor (except Cash Distributions
received when no Event of Default shall have occurred and be continuing) shall
be received in trust for the benefit of the Secured Parties and shall be
segregated from other assets of such Lien Grantor and shall, promptly upon such
Lien Grantor's receipt thereof, be delivered or paid over to the Collateral
Agent in the same form as received (with any necessary endorsements or executed
assignments
15
in blank), together with a statement identifying the source of such Collateral
and stating that it is being delivered to the Collateral Agent to be held as
Collateral under this Agreement.
SECTION 9. Collateral Accounts. (A) There is hereby established with the
Collateral Agent a cash collateral account (the "General Collateral Account") in
the name and under the control of the Collateral Agent into which there shall be
deposited on each Domestic Business Day the cash proceeds of the Collateral
required to be delivered to the Collateral Agent pursuant to Section 9(B) or any
other provision of this Agreement or the Credit Agreement for credit to
subaccounts therein of the respective Lien Grantors. Any income received by the
Collateral Agent with respect to the balance from time to time standing to the
credit of the General Collateral Account, including any interest or capital
gains on Liquid Investments, shall remain, or be deposited, in the General
Collateral Account for credit to the subaccount of the applicable Lien Grantor.
All right, title and interest in and to the cash amounts on deposit from time to
time in the General Collateral Account for credit to the subaccount of the
applicable Lien Grantor, together with any Liquid Investments from time to time
made pursuant to Section 9(G) hereof, shall constitute part of the Collateral
hereunder but shall not constitute payment of the Secured Obligations until
applied thereto as hereinafter provided.
(B) Each Lien Grantor agrees that, from and after the date on which the
requirements of clauses (x) and (y) first apply under Section 5.30(b) of the
Credit Agreement, if the proceeds of any Collateral hereunder (including all
cash, checks, drafts, money orders and other payments in respect of Accounts)
shall be received by it, such Lien Grantor shall, as promptly as possible (and
in any event within one (1) Business Day after receipt thereof) deposit such
proceeds into a Blocked Account. Until so deposited, all such proceeds shall be
held in trust by such Lien Grantor for and as the property of the Collateral
Agent and the Lenders and shall not be commingled with any other funds or
property of any Lien Grantor. In accordance with the Blocked Account Agreements
to be executed and delivered to the Collateral Agent pursuant to Section 5.30(a)
of the Credit Agreement, each Blocked Account Bank shall remit all proceeds of
such payments deposited in the Blocked Accounts directly to the Collateral Agent
for deposit into the General Collateral Account or as the Collateral Agent may
otherwise instruct such bank. All such payments made to the Collateral Agent
shall be deposited in the General Collateral Account.
(C) There is hereby established with the Collateral Agent a cash collateral
account (the "Insurance Account") in the name and under the control of the
Collateral Agent into which there shall be deposited any amounts required to be
paid to the Collateral Agent pursuant to Section 5.03 of the Credit Agreement
(the "Insurance Proceeds") for credit to subaccounts therein of the respective
Lien Grantors. Each Lien Grantor hereby agrees, to the extent required under
Section 5.03(d) of the Credit Agreement, to cause any Insurance Proceeds
received by it to be deposited in the Insurance Account for credit to such Lien
Grantor's subaccount therein. Any income received with respect to the balance
from time to time standing to the credit of the Insurance Account, including any
interest or capital gains on Liquid Investments, shall remain, or be deposited,
in the Insurance Account for credit to the subaccount of the applicable Lien
Grantor, subject to the rights of such Lien Grantor to receive any amounts on
deposit in such Insurance Account in accordance with Section 9(E). All right,
title and interest in and to the cash amounts on deposit from time to time in
the Insurance Account
16
together with any Liquid Investments from time to time made pursuant to Section
9(G) hereof shall vest in the Collateral Agent, shall constitute part of the
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied thereto as hereinafter provided, subject to the rights of such
Lien Grantor to receive any such amounts in accordance with Section 9(E).
(D) On or before the date on which the Lien Grantors are first required to
deposit proceeds of the Collateral into the Blocked Accounts pursuant to Section
9(B), the Borrower will provide to the Collateral Agent a complete Schedule 1
hereto on which shall be identified all Operating Accounts to which the Borrower
may instruct the Collateral Agent to transfer funds from the General Collateral
Account from time to time pursuant to Section 2.09(b) of the Credit Agreement
and this Section 9(D). On each Domestic Business Day on which there is a balance
standing to the credit of the General Collateral Account (other than funds
constituting cash collateral for outstanding Letters of Credit), the Collateral
Agent shall inform the Agent thereof and such funds shall be applied to the
Secured Obligations on such day in accordance with Section 2.09(b) of the Credit
Agreement. After application as aforesaid, and so long as no Event of Default
has occurred and is continuing, the balance of such funds shall be transferred
to one or more Operating Accounts in accordance with the Borrower's
instructions.
(E) The balance from time to time standing to the credit of the Insurance
Account shall be subject to withdrawal only upon the instructions of the
Collateral Agent. Except upon the occurrence and continuance of an Event of
Default, the Collateral Agent agrees to give instructions to distribute such
amounts to the Borrower at such times and in such amounts as the Borrower shall
request for the purpose of repairing, reconstructing or replacing the property
in respect of which such Insurance Proceeds were received. Any such request
shall be accompanied by a certificate of the chief executive officer, chief
financial officer or treasurer of the Borrower setting forth in detail
reasonably satisfactory to the Required Lenders the repair, reconstruction or
replacement for which such funds will be expended.
(F) Upon the occurrence and during the continuation of an Event of Default,
the Collateral Agent shall, if so instructed by the Required Lenders, apply or
cause to be applied (subject to collection) any or all of the balance from time
to time standing to the credit of the Collateral Accounts in the manner
specified in Section 13.
(G) Amounts on deposit in the Collateral Accounts shall be invested and re-
invested from time to time in such Liquid Investments as the Borrower shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Collateral Agent; provided that, if an Event of Default has
occurred and is continuing, the Collateral Agent shall, if instructed by the
Required Lenders, cause such Liquid Investments to be liquidated and apply or
cause to be applied the proceeds thereof allocable to any Lien Grantor to the
payment of the Secured Obligations of such Lien Grantor in the manner specified
in Section 13. For this purpose, "Liquid Investments" means Temporary Cash
Investments; provided that (i) each Liquid Investment shall mature within 30
days after it is acquired by the Collateral Agent and (ii) in order to provide
the Collateral Agent, for the benefit of the Secured Parties, with a perfected
Security Interest therein, each Liquid Investment shall be either:
17
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Collateral Agent or an agent thereof (which shall not be
the Grantor or any of its Affiliates) in the State of New York; or
(ii) in book-entry form and issued by the United States and subject to
pledge under applicable state law and Treasury regulations and as to which
(in the opinion of counsel to the Collateral Agent) appropriate measures
shall have been taken for perfection of the Security Interests.
SECTION 10. General Authority. Each Lien Grantor hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power of
substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of such
Lien Grantor, to the extent permitted by law to exercise, at any time and from
time to time while an Event of Default has occurred and is continuing, all or
any of the following powers with respect to all or any of such Lien Grantor's
Collateral:
(a) to demand, ▇▇▇ for, collect, receive and give acquittance for any
and all monies due or to become due thereon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the
Collateral Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give such Lien Grantor not less than
ten days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral that is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. The Collateral Agent and each Lien Grantor agree
that such notice constitutes "reasonable notification" within the meaning of
Section 9-504(3) of the UCC.
SECTION 11. Remedies upon Event of Default. (A) If any Event of Default has
occurred and is continuing, the Collateral Agent may exercise on behalf of the
Secured Parties all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Collateral Agent may, without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i)
withdraw all cash held in the Collateral Accounts and apply such cash and other
cash, if any, then held by it as Collateral as specified in Section 13 and (ii)
if there shall be no such cash or if such cash shall be insufficient to pay all
the Secured Obligations of any Lien Grantor in full, sell
18
the Collateral of such Lien Grantor or any part thereof at public or private
sale or any broker's board or on any securities exchange, for cash, upon credit
or for future delivery, and at such price or prices as the Collateral Agent may
deem satisfactory. The Collateral Agent or any other Secured Party may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
that is the subject of widely distributed standard price quotations, at any
private sale). The Collateral Agent is authorized, in connection with any such
sale, if it deems it advisable so to do, to restrict the prospective bidders on
or purchasers of any of the securities included in the Collateral to a limited
number of sophisticated investors who will represent and agree that they are
purchasing for their own account for investment and not with a view to the
distribution or sale of any of such securities, to cause to be placed on any
security included in the Collateral a legend to the effect that such security
has not been registered under the Securities Act of 1933 and may not be disposed
of in violation of the provisions of said Act, and to impose such other
limitations or conditions in connection with any such sale as the Collateral
Agent deems necessary or advisable in order to comply with said Act or any other
law. Each Lien Grantor agrees that it will execute and deliver such documents
and take such other action as the Collateral Agent deems necessary or advisable
in order that any such sale may be made in compliance with law. Upon any such
sale the Collateral Agent shall have the right to deliver, assign and transfer
to the purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold to it absolutely and free from any claim or
right of whatsoever kind, including any equity or right of redemption of any
Lien Grantor that may be waived, and each Lien Grantor, to the extent permitted
by law, hereby specifically waives all rights of redemption, stay or appraisal
that it has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 10 shall (1) in the case of a
public sale, state the time and place fixed for such sale, (2) in the case of
sale at a broker's board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral or
the portion thereof so being sold will first be offered for sale at such board
or exchange and (3) in the case of a private sale, state the day after which
such sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. 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 the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under this
Agreement the Collateral Agent may (i) require each Lien Grantor to, and each
Lien Grantor
19
agrees that it will, at its expense and upon the request of the Collateral
Agent, forthwith assemble all or any part of the Collateral as directed by the
Collateral Agent and make it available at a place designated by the Collateral
Agent that is, in its opinion, reasonably convenient to the Collateral Agent and
such Lien Grantor, whether at the premises of such Lien Grantor or otherwise,
(ii) to the extent permitted by applicable law, enter, with or without process
of law and without breach of the peace, any premise where any of the Collateral
is or may be located, and without charge or liability to it seize and remove
such Collateral from such premises, (iii) have access to and use such Lien
Grantor's books and records relating to the Collateral and (iv) prior to the
disposition of the Collateral, store or transfer it without charge in or by
means of any storage or transportation facility owned or leased by such Lien
Grantor, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Collateral Agent deems
appropriate and, in connection with such preparation and disposition, use
without charge any Trademark, Copyright or Patent owned or used by the Grantor.
The Collateral Agent may also render any or all of the Collateral unusable at
the Grantor's premises and may dispose of such Collateral on such premises
without liability for rent or costs.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing, the Collateral Agent may (without
assuming any obligations or liability thereunder), at any time and from time to
time, enforce (and shall have the exclusive right to enforce) against any
licensor, licensee or sublicensee all rights and remedies of any Lien Grantor
in, to and under any Patent Licenses, Trademark Licenses or Copyright Licenses
and take or refrain from taking any action under any thereof, and each Lien
Grantor hereby releases the Collateral Agent and each of the other Secured
Parties from, and agrees to hold the Collateral Agent and each of the other
Secured Parties free and harmless from and against, any claims arising out of
any lawful action so taken or omitted to be taken with respect thereto, except
any such claim to the extent that it arises solely as the result of the gross
negligence or willful misconduct of any Secured Party.
SECTION 12. Limitation on Duty of Collateral Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Collateral Agent in good
faith.
SECTION 13. Application of Proceeds. (A) Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral and any cash held in the
Collateral Accounts shall be applied by the Collateral Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Collateral
Agent,
20
and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, and any other unreimbursed
expenses for which the Collateral Agent or any other Secured Party is to be
reimbursed pursuant to Section 10.03 of the Credit Agreement or Section 16
hereof and unpaid fees owing to the Agent and the Collateral Agent under
the Loan Documents;
second, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit
Agreement;
third, to the ratable payment of any unpaid LC Reimbursement
Obligations;
fourth, to the ratable payment of the unpaid principal amount of the
Loans;
fifth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to pay to the relevant Lien Grantor or its successors or
assigns, or as a court of competent jurisdiction may direct, any surplus
then remaining from such proceeds of the Collateral owned by it;
provided that Collateral owned by a Subsidiary Guarantor (and any proceeds
thereof) shall be applied pursuant to the foregoing clauses first, second,
third, fourth, and fifth only to the extent of the Secured Obligations of such
Subsidiary Guarantor (and subject to the limitation in Section 9.07 of the
Credit Agreement). The Collateral Agent may make such distributions hereunder in
cash or in kind or, on a ratable basis, in any combination thereof.
(B) If at any time any portion of any monies collected or received by the
Collateral Agent would, but for the provisions of this Section 13(B), be payable
pursuant to Section 13(A) in respect of a Contingent Secured Obligation, the
Collateral Agent shall not apply any monies to pay such Contingent Secured
Obligation but (i) in the case of any Contingent Secured Obligations other than
contingent LC Reimbursement Obligations, shall request the holder thereof, at
least three Domestic Business Days before each proposed distribution hereunder,
to notify the Collateral Agent as to the maximum amount of such Contingent
Secured Obligation if then ascertainable and if the holder of such Contingent
Secured Obligation does not notify the Collateral Agent of the maximum
ascertainable amount thereof at least two Domestic Business Days before such
distribution, such holder shall not be entitled to share in such distribution.
In the case of any holder of Contingent Secured Obligations consisting of
contingent LC Reimbursement Obligations or other Contingent Secured Obligations
as to which the Collateral Agent shall have received notice from the holder
thereof in accordance with the preceding sentence, the Collateral Agent will
allocate to such holder a portion of the monies to be distributed in such
distribution, calculated as if such Contingent Secured Obligation were
outstanding in such maximum ascertainable amount. However, the Collateral Agent
shall not apply such portion of such monies to pay such Contingent Secured
Obligation, but instead shall hold such monies or invest such monies in
Temporary Cash Investments at the direction of the holder of such Contingent
Secured Obligation. All such monies and Temporary Cash
21
Investments shall constitute Collateral hereunder and shall be subject to the
Security Interests, but shall be subject to distribution in accordance with this
Section 13(B) rather than Section 13(A) above. The Collateral Agent shall hold
all such monies and all such Temporary Cash Investments and the net proceeds
thereof in trust until such time as all or part of such Contingent Secured
Obligation becomes a Non-Contingent Secured Obligation, whereupon the Collateral
Agent at the request of the relevant Secured Party shall apply the amount so
held in trust to pay such Non-Contingent Secured Obligation; provided that, if
the other Secured Obligations theretofore paid pursuant to the same clause of
Section 13(A) (i.e., clause third or fifth) were not paid in full, the
Collateral Agent shall apply the amount so held in trust to pay the same
percentage of such Non-Contingent Secured Obligation as the percentage of such
other Secured Obligations theretofore paid pursuant to the same clause of
Section 13(A). If (i) the holder of such Contingent Secured Obligation shall
advise the Collateral Agent that no portion thereof remains in the category of a
Contingent Secured Obligation and (ii) the Collateral Agent still holds any
amount held in trust pursuant to this Section 13(B) in respect of such
Contingent Secured Obligation (after paying all amounts payable pursuant to the
preceding sentence with respect to any portions thereof that became
Non-Contingent Secured Obligations), such remaining amount shall be applied by
the Collateral Agent in the order of priorities set forth in Section 13(A).
(C) All distributions made by the Collateral Agent pursuant to this Section
13 shall be final (except in the event of manifest error) and the Collateral
Agent shall have no duty to inquire as to the application by the Secured Parties
of any amount distributed to them.
SECTION 14. Concerning the Collateral Agent. The provisions of Article 7 of
the Credit Agreement shall inure to the benefit of the Collateral Agent in
respect of this Agreement and shall be binding upon the parties to the Credit
Agreement in such respect. In furtherance and not in derogation of the rights,
privileges and immunities of the Collateral Agent therein set forth:
(A) The Collateral Agent is authorized to take all such action as is
provided to be taken by it as Collateral Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and methods
of realization upon the Collateral) the Collateral Agent shall act or
refrain from acting in accordance with written instructions from the
Required Lenders or, in the absence of such instructions, in accordance
with its discretion.
(B) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any of
the Collateral, whether impaired by operation of law or by reason of any
action or omission to act on its part hereunder. The Collateral Agent shall
have no duty to ascertain or inquire as to the performance or observance of
any of the terms of this Agreement by the Grantor.
22
SECTION 15. Appointment of Co-Agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Collateral Agent may
appoint another bank or trust company or one or more other persons, either to
act as co-agent or co-agents, jointly with the Collateral Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Collateral Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 14).
SECTION 16. Expenses. In the event that a Lien Grantor fails to comply with
the provisions of the Credit Agreement or this Agreement, such that the value of
any Collateral or the validity, perfection, rank or value of any Security
Interest is thereby diminished or potentially diminished or put at risk, the
Collateral Agent if requested by the Required Lenders may, but shall not be
required to, effect such compliance on behalf of such Lien Grantor, and such
Lien Grantor shall reimburse the Collateral Agent for the costs thereof on
demand. All insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining, and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the same may
be requested by the Required Lenders from time to time or in respect of the sale
or other disposition thereof shall be borne and paid by the applicable Lien
Grantor; and if the applicable Lien Grantor fails to pay any portion thereof
promptly when due, the Collateral Agent or any other Secured Party may, at its
option, but shall not be required to, pay the same and charge such Lien
Grantor's account therefor, and such Lien Grantor agrees to reimburse the
Collateral Agent or such other Secured Party therefor on demand. All sums so
paid or incurred by the Collateral Agent or any other Secured Party for any of
the foregoing and any and all other sums for which a Lien Grantor may become
liable hereunder and all costs and expenses (including attorneys' fees, legal
expenses and court costs (including the reasonable allocation of the
compensation, costs and expenses of in-house counsel, based upon time spent))
reasonably incurred by the Collateral Agent or any other Secured Party in
enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement, together with interest thereon until paid at the
rate applicable to Base Rate Loans plus 2%, in each case for each day until
paid, shall be additional Secured Obligations hereunder.
SECTION 17. Termination of Security Interests; Release of Collateral. (A)
When (i) all the Commitments shall have expired or been terminated, (ii) all
Letters of Credit shall have expired or been canceled or been secured with cash
collateral in an amount and on terms satisfactory to the Issuer and (iii) all
outstanding Secured Obligations shall have been paid in full, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Lien Grantor that owns such item of Collateral.
(B) At any time before the Security Interests terminate pursuant to Section
17(A), the Collateral Agent may, upon the written request of the Borrower,
release any of the Collateral with the prior written consent of the Required
Lenders; provided that any release of all or substantially all of the Collateral
shall require the prior written consent of all the Lenders.
23
(C) In addition, so long as no Event of Default shall have occurred and be
continuing, upon the consummation of any sale, exchange, assignment or other
disposition of any asset included in the Collateral (other than any such sale,
exchange, assignment or other disposition to a Domestic Subsidiary) that is
permitted under the Credit Agreement, the Security Interests in the Collateral
subject to such transaction (but not any Proceeds arising from such transaction)
shall cease immediately without any further action on the part of the Collateral
Agent or any Lender. The Collateral Agent shall be fully protected in relying on
a certificate of the Borrower certifying that any Asset Sale is permitted by the
terms of the Credit Agreement and that no Event of Default has occurred and is
continuing. Upon any termination of the Security Interests or release of
Collateral in accordance with this Section 17, the Collateral Agent will, at the
expense of the Borrower, execute and deliver to the applicable Lien Grantor such
documents as such Lien Grantor shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
SECTION 18. Additional Subsidiary Guarantors. Any Subsidiary of the
Borrower that is not a party hereto may become a party hereto by executing and
delivering to the Collateral Agent a Security Agreement Supplement, whereupon
such Subsidiary shall become a "Subsidiary Guarantor," a "Lien Grantor" and a
party hereto.
SECTION 19. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party (i) in the case of any Lien Grantor,
to it at the address, telex number or facsimile number of the Borrower set forth
or referred to in or pursuant to Section 10.01 of the Credit Agreement or (ii)
in the case of any Lender Party, at its address or facsimile number specified in
or pursuant to Section 10.01 of the Credit Agreement. Each such notice, request
or other communication shall be effective in accordance with Section 10.01 of
the Credit Agreement.
SECTION 20. Waivers, Non-Exclusive Remedies. No failure on the part of the
Collateral Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any Secured Party of any right under the Credit Agreement, this Agreement or
any of the other Loan Documents preclude any other or further exercise thereof
or the exercise of any other right. The rights in this Agreement, the Credit
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 21. Successors and Assigns. This Agreement is for the benefit of
the Collateral Agent and the Secured Parties and their successors and assigns,
and in the event of an assignment of all or any of the Secured Obligations, the
rights hereunder, to the extent applicable to the indebtedness so assigned, may
be transferred with such indebtedness. This Agreement shall be binding on the
Lien Grantors and their respective successors and assigns.
SECTION 22. Changes in Writing. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Lien Grantors and the Collateral Agent with the consent of
the Required Lenders.
24
SECTION 23. New York Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF
ANY JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH
JURISDICTION.
SECTION 24. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Collateral Agent
and the other Secured Parties in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 25. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MARVEL ENTERPRISES, INC., as Borrower
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Executive Vice President, Business Affairs
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MARVEL ENTERTAINMENT GROUP, INC., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MEI HOLDING COMPANY S CORP., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MEI HOLDING COMPANY F CORP., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MARVEL CHARACTERS, INC., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MARVEL RESTAURANT VENTURE CORP., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
MRV, INC., as Guarantor
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 212-682-5272
CITIBANK, N.A., as Agent and Collateral Agent
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
CITIBANK, N.A., as Issuer
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
CITIBANK, N.A., as Lender
By:/s/
------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECURITY AGREEMENT
SCHEDULE 1
Operating Accounts
SECURITY AGREEMENT
SCHEDULE 2
Equity Interests
Record Holder Stock Pledged Class of Number Certificate Percentage
Stock of Shares Number of Total
Ownership
Marvel MEI Holding Common 100 1 100%
Entertainment Company F Corp.
Group, Inc.
Marvel Marvel Characters, Common 1,000 1 100%
Entertainment Inc.
Group, Inc.
Marvel Marvel Restaurant Common 1,000 1 100%
Entertainment Venture Corp.
Group, Inc.
Marvel MRV, Inc. Common 1,000 1 100%
Entertainment
Group, Inc.
MEI Holding MEI Holding Common 100 1 100%
Company F Company S Corp.
Corp.
Marvel Toy Biz International Ordinary 65 3 65%
Enterprises, Inc. Limited
Marvel Marvel Common 100 1 100%
Enterprises, Inc. Entertainment Group,
Inc.
Marvel Compania de Class I 65 3
Enterprises, Inc. Juguetes Mexicanos, Series B
S.A. de C.V. 65%
Class II
Series B 41,923 14
SECURITY AGREEMENT
EXHIBIT A
Form of Perfection Certificate
PERFECTION CERTIFICATE
The undersigned, the chief executive officer and chief legal officer of
[Borrower] [Subsidiary Guarantor], a _________ corporation (the "Lien Grantor"),
hereby certify with reference to the Security Agreement dated as of April 1,
1999 among Marvel Enterprises, Inc., the Subsidiary Guarantors party thereto and
CITIBANK, N.A., as Collateral Agent (the "Collateral Agent") (terms defined
therein being used herein as therein defined), to the Collateral Agent and each
Lender as follows:
(A) Names. (i) The exact corporate name of the Lien Grantor as it appears
in its certificate of incorporation is as follows:
(ii) Set forth below is each other corporate name the Lien Grantor has had
since its organization, together with the date of the relevant change:
(iii) Except as set forth in Schedule 1, the Lien Grantor has not changed
its identity or corporate structure in any way within the past five years.
(iv) The following is a list of all other names (including trade names or
similar appellations) used by the Lien Grantor or any of its divisions or other
business units at any time during the past five years:
(B) Current Locations. (i) The chief executive office of the Lien Grantor
is located at the following address:
Mailing Address County State
------------------------------ ---------------------- ------------------
(ii) The following are all the locations where the Lien Grantor maintains
any books or records relating to any Accounts:
A-1
Mailing Address County State
------------------------------ ---------------------- ------------------
(iii) The following are all the places of business of the Lien Grantor not
identified above:
Mailing Address County State
------------------------------ ---------------------- ------------------
(iv) The following are all the locations where the Lien Grantor maintains
any Inventory not identified above:
Mailing Address County State
------------------------------ ---------------------- ------------------
(v) The following are the names and addresses of all Persons other than the
Lien Grantor which have possession of any of the Lien Grantor's Inventory:
Mailing Address County State
------------------------------ ---------------------- ------------------
(C) Prior Locations. (i) Set forth below is the information required by
paragraphs (B)(i), (B)(ii) and (B)(iii) hereof with respect to each location or
place of business maintained by the Lien Grantor at any time during the past
five years:
Mailing Address County State
------------------------------ ---------------------- ------------------
(ii) Set forth below is the information required by paragraphs (B)(iv) and
(B)(v) hereof with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:
A-2
(D) Unusual Transactions. All Accounts have been originated by the Lien
Grantor and all Inventory has been acquired by the Lien Grantor in the ordinary
course of its business.
(E) UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 2 hereto has been delivered to the Collateral
Agent for filing in the Uniform Commercial Code filing office in each
jurisdiction identified in paragraph (B) hereof.
(F) Schedule of Filings. Attached hereto as Schedule 3 is a schedule
setting forth filing information with respect to the filings described in
paragraph (E) above.
(G) Filing Fees. All filing fees and taxes payable in connection with the
filings described in paragraph (E) above will be promptly paid.
A-3
IN WITNESS WHEREOF, we have hereunto set our hands this _____ day of April,
1999.
By:________________________
Name:
Title:
A-4
PERFECTION CERTIFICATE
SCHEDULE 1
Lien Grantor Changes in Identity or Corporate Structure
A-5
PERFECTION CERTIFICATE
SCHEDULE 2
Description of Collateral
A-6
PERFECTION CERTIFICATE
SCHEDULE 3
Schedule of Filings
Grantor Filing Offices File Number Date of Filing1
------------------- ------------------ ---------------- ------------------
----------
1 Indicate lapse date, if other than fifth anniversary.
SECURITY AGREEMENT
EXHIBIT B
Form of Blocked Account Agreement
BLOCKED ACCOUNT AGREEMENT
______ __, 1999
[BANK]
[ADDRESS]
Ladies and Gentlemen:
Reference is made to account number _______ (the "Blocked Account") at [BANK]
("Bank") into which certain monies, instruments and other properties are
deposited on behalf of [Company] ("Customer").
Citibank, N.A. (in its capacity as Collateral Agent for the Lenders pursuant to
the Credit Agreement referred to below, the "Collateral Agent") hereby advises
Bank that pursuant to that certain Credit Agreement dated as of April __, 1999
(the "Credit Agreement"), among Marvel Enterprises, Inc. (the "Borrower"), the
Guarantors party thereto, the Lenders party thereto and Citibank, N.A. as Agent,
Collateral Agent and Issuer, and that certain Security Agreement dated as of
April __, 1999 (the "Security Agreement"), among the Borrower, the Subsidiary
Guarantors party thereto and Citibank, N.A., as Collateral Agent, and to other
documents executed and delivered in connection with the Credit Agreement and the
Security Agreement, Customer has granted to the Collateral Agent a security
interest in, among other things, the Blocked Account.
By signing this letter agreement (this "Blocked Account Agreement"), Bank (i)
acknowledges the above notice from the Collateral Agent of the security interest
granted to the Collateral Agent, (ii) confirms that Bank has received no
currently effective notice of any pledge or assignment of the Blocked Account
(other than pursuant to this Blocked Account Agreement) and (iii) agrees that,
to the extent of the obligations of Customer incurred, or to be incurred, under
the Credit Agreement and until this Blocked Account Agreement is terminated,
Bank will have no security interest or rights in or claims to the funds in the
Blocked Account except as set forth herein.
Further, it is hereby agreed that:
(A) The Blocked Account will be maintained solely for the
benefit of the Collateral Agent and will be under the sole
dominion and control of the Collateral Agent. The Collateral
Agent hereby consents to Bank's withdrawal of amounts from
the Blocked Account from time to time (i) with respect to
items that are
B-1
[BANK]
______ __, 1999
Page 2
deposited in the Blocked Account in error or are unpaid for
any reason and (ii) for fees and expenses due Bank as set
forth in paragraph (B) below. The Blocked Account will be
titled "Citibank, N.A. for the account of [Customer]," and
will be subject to written instructions from an officer of
the Collateral Agent. Bank will not be entitled to rely upon
any instruction from Customer or any other person as to the
use and/or disposition of funds in the Blocked Account. Bank
will not honor any checks, drafts or other payment requests
drawn on or with respect to the Blocked Account except in
accordance with paragraph (C) below.
(B) All expenses for the maintenance of the Blocked Account and
all expenses arising under this Blocked Account Agreement
are the responsibility of Customer.
(C) Subject to Bank's right to place holds for uncollected funds
pursuant to Federal Reserve Regulation CC and Bank's
customary procedures, Bank agrees to wire transfer the net
collected balance of funds in the Blocked Account, on a
daily basis and in same day funds, to the following account,
or such other account as the Collateral Agent may direct in
writing:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
[Account]
(D) Except as set forth in paragraph (A) above, all transfers
referred to in paragraph (C) above will be made by Bank
irrespective of, and without deduction for, any
counterclaims, defense, recoupment or set-off.
Notwithstanding the foregoing, Bank will have the right to
set off funds in the Blocked Account for items credited to
the Blocked Account in error or that were unpaid for any
reason and for fees and expenses due Bank as set forth in
paragraph (B) above.
(E) Customer agrees that the Collateral Agent will have full and
irrevocable right, power and authority to take any action
that the Collateral Agent deems necessary or appropriate to
preserve or protect its interest in the Blocked Account.
B-2
[BANK]
______ __, 1999
Page 3
(F) Bank will follow its ususal operating procedures for the
handling of any remittance received in the Blocked Account
that contains restrictive endorsements, irregularities, such
as a variance between the written and numerical amounts,
undated or post dated items, missing signature, incorrect
payee, etc.
(G) Bank will not modify or alter Bank's arrangements with the
Customer concerning the Blocked Account without the prior
written consent of the Collateral Agent.
(H) Bank will furnish to the Collateral Agent copies of all
statements, notices, reports and other information regarding
the Blocked Account which it furnishes to the Customer,
concurrently with the furnishing of the same to the
Customer, and the Customer hereby consents to and authorizes
Bank to furnish same.
This Blocked Account Agreement will not be effective until signed by the
Collateral Agent, Customer and Bank and will then be binding upon the parties
hereto and their respective successors and assigns. Bank may not terminate this
Blocked Account Agreement or the Blocked Account without giving sixty (60) days'
prior written notice thereof to both Customer and the Collateral Agent. Upon
such termination, Bank will close the Blocked Account and transfer all funds
therein to the Collateral Agent account referred to in paragraph (C) above.
Customer agrees to indemnify, defend and hold harmless Bank and its affiliates,
directors, officers, employees, agents, successors and assigns (each an
"Indemnitee") from and against any and all liabilities, losses, claims, damages,
demands, costs, and expenses of every kind (including but not limited to costs
incurred as a result of items being deposited in the Blocked Account and being
unpaid for any reason, reasonable attorneys' fees and the reasonable charges of
Bank's in-house counsel) incurred or sustained by any Indemnitee arising out of
Bank's performance of the services contemplated by this Blocked Account
Agreement, except to the extent that such liabilities, losses, claims, damages,
demands, costs and expenses are the direct result of Bank's gross negligence or
willful misconduct. The provisions of this paragraph will survive termination of
this Blocked Account Agreement.
In the event that the Customer becomes subject to a voluntary or involuntary
proceeding under the United States Bankruptcy Code, or if Bank is otherwise
served with legal process which Bank in good faith believes affects funds
deposited in the Blocked Account, Bank will have the right to place a hold on
funds deposited in the Blocked Account until such time as Bank receives an
appropriate court order or other assurances satisfactory to Bank establishing
that the funds may continue to be disbursed according to the instructions
contained in this Blocked Account Agreement.
B-3
[BANK]
______ __, 1999
Page 4
This Blocked Account Agreement may be executed by one or more of the parties
hereto on any number of separate counterparts, each of which when so executed
will be an original, but all of which will together constitute one and the same
instrument. A facsimile or other electronically transmitted copy of this letter
will have the same force and effect as an original hereof personally delivered.
B-4
[BANK]
______ __, 1999
Page 5
This Blocked Account Agreement will be governed by and construed in accordance
with the laws of the State of New York.
Very truly yours,
CITIBANK, N.A.,
in its capacity as Collateral Agent
By:_________________________
Name:
Title:
Acknowledged and agreed to this
___ day of ______, 1999
[BANK]
By:_____________________________
Name:
Title:
Customer hereby agrees and consents to all of the terms and conditions of the
foregoing Blocked Account Agreement and authorizes and directs Bank to take any
and all action required or requested by the Collateral Agent or otherwise
necessary to implement and maintain compliance with such terms and conditions.
[CUSTOMER]
By:_____________________________
Name:
Title:
B-5
[BANK]
______ __, 1999
Page 1
SECURITY AGREEMENT
EXHIBIT C
Form of Security Agreement Supplement
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _________, between [name of
Subsidiary Guarantor] (the "New Lien Grantor") and CITIBANK, N.A., as Collateral
Agent.
WHEREAS, Marvel Enterprises, Inc., the Lien Grantors party thereto and
CITIBANK, N.A., as Collateral Agent, are parties to a Security Agreement dated
as of April 1, 1999 (as heretofore amended, supplemented or otherwise modified,
the "Security Agreement");
WHEREAS, terms defined in the Security Agreement (or whose definitions are
incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein; and
WHEREAS, [name of New Lien Grantor] desires to become a party to the
Security Agreement as an additional Lien Grantor thereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. (a) In order to secure the full and
punctual payment of the Secured Obligations of the New Lien Grantor in
accordance with the terms thereof, the New Lien Grantor grants to the Collateral
Agent for the benefit of the Secured Parties a continuing security interest in
all of the following assets of the New Lien Grantor, whether now owned or
existing or hereafter acquired or arising and regardless of where located (the
"New Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Instruments;
(v) (x) Equity Interests in any U.S. Person now owned or hereafter
beneficially owned by such New Lien Grantor, (y) the lesser of all voting
Equity Interests in any Foreign Person
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[BANK]
______ __, 1999
Page 2
now owned or hereafter beneficially acquired by such New Lien Grantor and
65% of all voting Equity Interests in such Foreign Person held by any
Person and (z) all nonvoting Equity Interests in any Foreign Person now
owned or hereafter beneficially acquired by such New Lien Grantor and, in
each case, all rights and privileges of such New Lien Grantor with respect
to such Equity Interests, and all dividends, distributions and other
payments with respect thereto;
(vi) Other Investment Property;
(vii) The Collateral Accounts, all cash deposited therein from time to
time, the Liquid Investments made pursuant to Section 9(G) of the Security
Agreement and other monies and property of any kind of the New Lien Grantor
in the possession or under the control of the Collateral Agent;
(viii) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such New Lien Grantor pertaining to any of the
Collateral; and
(ix) All Proceeds of all or any of the Collateral described in Clauses
1(A)(i) through 1(A)(viii) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of the New Lien Grantor
with respect to any of the Collateral or any transaction in connection
therewith.
2. Delivery of Collateral. Concurrently with delivering this Security
Agreement Supplement to the Collateral Agent, the New Lien Grantor is complying
with the provisions of Section 4 of the Security Agreement with respect to all
stock certificates and other certificates representing Equity Interests or Other
Pledged Securities (if any) included in the New Collateral and all Instruments
(if any) included in the New Collateral.
3. Party to Security Agreement. Upon delivery of this Security Agreement
Supplement to the Collateral Agent, the New Lien Grantor will become a party to
the Security Agreement and will thereafter have all of the rights and
obligations of a Lien Grantor thereunder and be bound by all of the provisions
thereof as fully as if the New Lien Grantor were one of the original parties
thereto.
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[BANK]
______ __, 1999
Page 3
4. Representations and Warranties.2 (a) The New Lien Grantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of [jurisdiction of incorporation].
(b) The New Lien Grantor has delivered a Perfection Certificate to the
Collateral Agent. The information set forth therein is correct and complete as
of the date hereof. Within 60 days of the date hereof, the New Lien Grantor
shall furnish to the Collateral Agent file search reports from each UCC filing
office confirming the filing information set forth in such Perfection
Certificate.
(c) The execution and delivery of this Security Agreement Supplement by the
New Lien Grantor and the performance by it of its obligations under the Security
Agreement as supplemented hereby are within its corporate or other powers, have
been duly authorized by all necessary corporate or other action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of its articles or certificate of incorporation
or by-laws or other constitutive documents, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it or result in the
creation or imposition of any Lien (other than the Liens created by the
Collateral Documents) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a valid and
binding agreement of the New Lien Grantor, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and general principles of equity.
(e) Each of the representations and warranties set forth in Section 2 of
the Security Agreement is true and correct as applied to the New Lien Grantor
and the New Collateral.
5. Governing Law. This Security Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
--------
2 Modify as needed for any Subsidiary Guarantor that is not a corporation.
C-3
[BANK]
______ __, 1999
Page 4
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
Supplement to be duly executed by their respective authorized officers as of the
day and year first above written.
[Name of New Lien Grantor]
By:_________________________
Name:
Title:
CITIBANK, N.A.,
as Collateral Agent
By:________________________
Name:
Title:
C-4
[BANK]
______ __, 1999
Page 5
SECURITY AGREEMENT SUPPLEMENT
SCHEDULE 1
EQUITY INTERESTS OWNED BY
NEW LIEN GRANTOR
Number of Shares
State of Percentage or Units (if
Name Organization Owned certificated)
-------------- ----------------- --------------- -------------------
C-5