Exhibit 10.27
SECURITY AGREEMENT dated as of January 11, 2000, among
KANSAS CITY SOUTHERN INDUSTRIES, INC., a Delaware corporation
("Holdings"), THE KANSAS CITY SOUTHERN RAILWAY COMPANY, INC., a
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Missouri corporation (the "Borrower"), each other Subsidiary of
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Holdings listed on Schedule I hereto or becoming a party hereto
as provided in Section 7.15 (collectively, the "Subsidiary
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Grantors"; Holdings, the Borrower and the Subsidiary Grantors
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being referred to collectively as the "Grantors") and THE CHASE
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MANHATTAN BANK, ("Chase"), as collateral agent (in such capacity,
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the "Collateral Agent"), for the Secured Parties (as defined in
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the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of January 11, 2000
(as amended, supplemented or otherwise modified from time to time, the "Credit
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Agreement"), among Holdings, the Borrower, the lenders from time to time party
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thereto (the "Lenders") and Chase, as administrative agent (in such capacity,
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the "Administrative Agent"), collateral agent (in such capacity, the "Collateral
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Agent") and issuing bank (in such capacity, the "Issuing Bank"), and (b) the
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Guarantee Agreement and the other Loan Documents referred to in the Credit
Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in the Credit
Agreement. The obligations of the Lenders to make such Loans and of the Issuing
Bank to issue such Letters of Credit are conditioned upon, among other things,
the execution and delivery by the Grantors of an agreement in the form hereof to
secure the Obligations.
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. (a) Unless the context
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otherwise requires, all capitalized terms used but not otherwise defined herein
shall have the meanings set forth in the Credit Agreement and all references to
the Uniform Commercial Code shall mean the Uniform Commercial Code in effect in
the State of New York as of the date hereof.
(b) As used herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may become obligated
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to any Grantor under, with respect to or on account of an Account.
"Account Rights" shall mean all Accounts and all right, title and interest
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in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests,
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liens and pledges, whether voluntary or involuntary, in each case whether now
existing or owned or hereafter arising or acquired.
"Accounts" shall mean any and all right, title and interest of any Grantor
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to payment for goods and services sold or leased, including any such right
evidenced by chattel paper, whether due or to become due, whether or not it has
been earned by performance, and whether now or hereafter acquired or arising in
the future, including payments due from Affiliates of the Grantors.
"Chattel Paper" shall mean (a) a writing or writings which evidence both a
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monetary obligation and a security interest in or a lease of specific Equipment
and (b) all other property now or hereafter constituting "chattel paper" under
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions, in each case that are now or hereafter owned
by Grantor.
"Collateral" shall mean all (a) Account Rights, (b) Documents, (c)
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Inventory, (d) Chattel Paper, (e) Contract Rights, (f) Equipment, (g) General
Intangibles, (h) cash and cash accounts, (i) Intellectual Property, (j)
Investment Property and (k) Proceeds; provided that "Collateral" shall not
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include any Excluded Asset.
"Commodity Account" shall mean an account maintained by a Commodity
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Intermediary in which a Commodity Contract is carried for a Commodity Customer.
"Commodity Contract" shall mean a commodity futures contract, an option on
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a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a Commodity Intermediary for a
Commodity Customer.
"Commodity Customer" shall mean a person for whom a Commodity Intermediary
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carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a person who is registered as a
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futures commission merchant under the federal commodities laws or (b) a person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Contract Rights" shall mean the rights of any Grantor to ▇▇▇▇ and receive
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payment for completed work under any and all contracts, agreements or purchase
orders.
"Copyright License" shall mean any written agreement, now or hereafter in
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effect, granting any right to any Grantor under any Copyright now or hereafter
owned by any third party, and all rights of such Grantor under any such
agreement.
"Copyrights" shall mean all of the following now owned or hereafter
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acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office or
any similar offices in any other country.
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"Credit Agreement" shall have the meaning assigned to such term in the
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preliminary statement of this Agreement.
"Documents" shall mean all instruments, certificates representing shares of
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capital securities, files, records, ledger sheets and documents covering or
relating to any of the Collateral.
"Entitlement Holder" shall mean a person identified in the records of a
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Securities Intermediary as the person having a Security Entitlement against the
Securities Intermediary. If a person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such person is the
Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings and all
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tangible personal property similar to any of the foregoing, including Rolling
Stock, tools, parts and supplies of every kind and description, and all
improvements, accessions or appurtenances thereto, that are now or hereafter
owned by any Grantor. The term Equipment shall include Fixtures.
"Excluded Asset" means (i) any asset listed on Schedule II hereto and (ii)
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any other asset subject to a Lien permitted pursuant to Section 6.02(viii) of
the Credit Agreement to the extent the agreement creating such Lien or the
Indebtedness secured by such Lien prohibits the granting of a second Lien on
such asset; provided that upon the termination of all prior Liens on any of the
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foregoing assets, such asset shall cease to be an excluded asset.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a person
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or a share, participation or other interest in a person or in property or an
enterprise of a person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another person in a Securities Account if the
Securities Intermediary has expressly agreed with the other person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
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hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of action
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and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Account Rights) now owned or hereafter acquired by
any Grantor, including all rights and interests in partnerships, limited
partnerships, limited liability companies and other unincorporated entities,
corporate or other business records, indemnification claims and contract rights
(including (a) rights under leases, whether entered into as lessor or lessee
(but excluding real estate leases), (b) rights under any Hedging Agreement, (c)
any intercompany payment obligations not evidenced by any instrument, (d) any
written agreement, now or hereafter in effect, granting any right to any third
party under any Copyright now or hereafter owned by any Grantor or which such
Grantor otherwise has the right to license, and all rights of such Grantor under
any such agreement, (e) any written agreement, now or hereafter in effect,
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned
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by any Grantor or which any Grantor otherwise has the right to license, is in
existence, and all rights of any Grantor under any such agreement, (f) any
written agreement, now or hereafter in effect, granting any right to any third
party to use any Trademark now or hereafter owned by any Grantor or which such
Grantor otherwise has the right to license, and all rights of such Grantor under
any such agreement, and (g) other agreements, goodwill, registrations,
franchises, tax refund claims and any letter of credit, guarantee, claim,
security interest or other security held by or granted to any Grantor to secure
payment by an Account Debtor of any of the Account Rights).
"Intellectual Property" shall mean all intangible, intellectual and similar
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property of any Grantor of every kind and nature now owned or hereafter acquired
by any Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
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hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated or
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uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
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License or other license or sublicense to which any Grantor is a party, other
than those licenses or license agreements which by their terms prohibit (or as
to which applicable law prohibits) assignment or a grant of a security interest
by such Grantor.
"Obligations" shall mean (a) the due and punctual payment of (i) the
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principal of and interest (including interest accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether allowed or allowable in such proceeding) on the Loans, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
Holdings, the Borrower or any other Subsidiary to the Secured Parties under the
Credit Agreement or any other Loan Document, (b) the due and punctual payment
and performance of all covenants, agreements, obligations, and liabilities of
the Loan Parties, monetary or otherwise, under or pursuant to the Credit
Agreement and the other Loan Documents and (c) the due and punctual payment of
all obligations of the Borrower under each Hedging Agreement entered into (i)
prior to the date hereof with any counterparty that is a Lender (or an Affiliate
thereof) on the date hereof or (ii) on or after the date hereof with any
counterparty that is a Lender, in either case to
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provide protection against interest rate fluctuations (or an Affiliate thereof)
at the time such Hedging Agreement is entered into in either case to provide
protection against interest rate fluctuations.
"Patent License" shall mean any written agreement, now or hereafter in
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effect, granting to any Grantor any right to make, use or sell any invention on
which a Patent, now or hereafter owned by any third party, is in existence, and
all rights of any Grantor under any such agreement.
"Patents" shall mean all of the following now owned or hereafter acquired
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by any Grantor: (a) 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 pending applications in the United States Patent
and Trademark Office or any similar offices in any other country and (b) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the form
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of Exhibit C to the Credit Agreement or any other form approved by the
Collateral Agent, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of the Borrower.
"Proceeds" shall mean any consideration received from the sale, exchange,
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license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other Person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include, (a) any claim of any Grantor against any third
party for (and the right to ▇▇▇ and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor or
licensed to any Grantor under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned by any Grantor
or licensed under a Trademark License or injury to the goodwill associated with
or symbolized by any Trademark now or hereafter owned by any Grantor, (iii)
past, present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
to a Grantor under a Copyright License and (b) any and all other amounts from
time to time paid or payable under or in connection with any of the Collateral.
"Rolling Stock" shall mean any gondola, boxcar, tanker, locomotive or
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railcar of any type.
"Securities" shall mean any obligations of an issuer or any shares,
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participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code (other than as
expressly excluded by Section 8-103(c), (e), and (f) of such Article).
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"Securities Account" shall mean an account to which a Financial Asset is
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or may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.
"Security Entitlements" shall mean the rights and property interests of an
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Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in Section
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2.01.
"Securities Intermediary" shall mean (a) a clearing corporation or (b) a
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person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.
"Trademark License" shall mean any written agreement, now or hereafter in
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effect, granting to any Grantor any right to use any Trademark now or hereafter
owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
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acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration
applications filed in connection therewith, including registrations and
registration applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country or any
political subdivision thereof, and all extensions or renewals thereof, (b) all
goodwill associated therewith or symbolized thereby and (c) all other assets,
rights and interests that uniquely reflect or embody such goodwill.
SECTION 1.02. Rules of Interpretation. The rules of interpretation
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specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II
Security Interest
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SECTION 2.01. Security Interest. As security for the payment or
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performance, as the case may be, in full of the Obligations and any extensions,
renewals, modifications or refinancings of the Obligations, each Grantor hereby
mortgages and pledges to the Collateral Agent, its successors and assigns, for
the ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
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foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements (including fixture filings), continuation statements,
filings with the United States Patent and Trademark Office or United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as Secured Party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
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granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
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in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. The Perfection Certificate has been duly prepared,
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completed and executed and the information set forth therein is correct and
complete. Fully executed Uniform Commercial Code financing statements
(including fixture filings, as applicable) or other appropriate filings,
recordings or registrations containing a description of the Collateral have been
delivered to the Collateral Agent for filing in each governmental, municipal or
other office specified in Schedule 6 to the Perfection Certificate, which are
all the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a legal, valid and
perfected security interest in favor of the Collateral Agent (for the ratable
benefit of the Secured Parties) in respect of all Collateral in which the
Security Interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements or, the change of any Grantor's name, location,
identity or corporate structure, with respect to the filing of financing
statements or amendments to filed financing statements.
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SECTION 3.03. Validity of Security Interest. The Security Interest
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constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations and (b) a perfected
security interest in all Collateral in which a security interest may be
perfected by filing, recording or registering a financing statement or analogous
document in the United States (or any political subdivision thereof) and its
territories and possessions pursuant to the Uniform Commercial Code or other
applicable law in such jurisdictions. The Security Interest is and shall be
prior to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02 of the
Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
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Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement. No Grantor has filed or
consented to the filing of (a) any financing statement or analogous document
under the Uniform Commercial Code or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for Liens expressly permitted pursuant to
Section 6.02 of the Credit Agreement.
SECTION 3.05 Intellectual Property. (a) On the date hereof, all
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material Intellectual Property is valid, subsisting, unexpired and enforceable,
has not been abandoned and does not infringe the intellectual property rights of
any other person.
(b) None of the Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor.
(c) No holding decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of, or such
Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(d) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
(e) Fully executed security agreements in the form hereof and containing a
description of all Collateral consisting of Intellectual Property shall have
been received and recorded within three months after the execution of this
Agreement with respect to United States Patents and United States registered
Trademarks (and Trademarks for which United States registration applications are
pending) and within one month after the execution of this Agreement with respect
to United States registered Copyrights by the United States Patent and Trademark
Office and the United States Copyright Office pursuant to 35 U.S.C. (S) 261, 15
U.S.C. (S) 1060 or 17 U.S.C. (S) 205 and the regulations thereunder, as
applicable, and otherwise as may be required pursuant to the laws of any other
necessary jurisdiction, to protect the validity of and to establish a legal,
valid and perfected security interest in favor of the Collateral Agent (for the
ratable benefit of the Secured Parties) in respect of all Collateral consisting
of Patents, Trademarks and Copyrights in which a security interest may be
perfected by filing, recording or registration in the
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United States (or any political subdivision thereof) and its territories and
possessions, or in any other necessary jurisdiction, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
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Business. (a) Each Grantor agrees promptly to notify the Collateral Agent in
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writing of any change (i) in its corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of its chief executive office, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. Each Grantor agrees within 30 days of the occurrence of
any change referred to in the preceding sentence to make all filings under the
Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Collateral.
Each Grantor agrees promptly to notify the Collateral Agent if any material
portion of the Collateral owned or held by such Grantor is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned by it as is
consistent with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to those
in which such Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail satisfactory to the
Collateral Agent showing the identity, amount and location of any and all
Collateral.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
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and expense, take any and all actions necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted pursuant to Section 6.02 of the Credit Agreement and which
has a material adverse effect on the value of the Collateral.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
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expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in connection with
the execution and delivery of this Agreement, the granting of the Security
Interest and the filing of any financing statements (including fixture filings)
or other documents in connection herewith or therewith. If any amount payable
to any Grantor under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
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instrument shall be immediately pledged and delivered to the Collateral Agent,
duly endorsed in a manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by adding additional schedules hereto to specifically
identify any asset or item that may constitute Collateral; provided, however,
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that any Grantor shall have the right, exercisable within 10 days after it has
been notified by the Collateral Agent of the specific identification of such
Collateral, to advise the Collateral Agent in writing of any inaccuracy of the
representations and warranties made by such Grantor hereunder with respect to
such Collateral. Each Grantor agrees that it will use its best efforts to take
such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.04. Inspection and Verification. The Collateral Agent and such
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persons as the Collateral Agent may reasonably designate shall have the right,
upon reasonable notice and at reasonable times at the Grantors' own cost and
expense, to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss the Grantors' affairs with the officers of the
Grantors and their independent accountants and to verify under reasonable
procedures, in accordance with Section 5.09 of the Credit Agreement, the
validity, amount, quality, quantity, value, condition and status of, or any
other matter relating to, the Collateral, including, in the case of Accounts or
Collateral in the possession of any third person, by contacting Account Debtors
or the third person possessing such Collateral for the purpose of making such a
verification. The Collateral Agent shall have the absolute right to share any
information it gains from such inspection or verification with any Secured
Party.
SECTION 4.05. Taxes; Encumbrances. At its option and after notice
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pursuant to Section 7.01, the Collateral Agent may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by the Credit Agreement or this Agreement, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.06 shall be
-----------------
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.06. Assignment of Security Interest. If at any time any Grantor
--------------------------------
shall take a security interest in any property of an Account Debtor or any other
person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent. Such assignment
need not be filed of public record unless necessary to continue the perfected
status of the security interest against creditors of and transferees from the
Account Debtor or other person granting the security interest.
SECTION 4.07. Continuing Obligations of the Grantors. Each Grantor shall
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remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.08. Use and Disposition of Collateral. None of the Grantors
---------------------------------
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the Collateral and each
Grantor shall remain at all times in possession of the Collateral owned by it,
except that (a) Inventory may be sold in the ordinary course of business and (b)
unless and until the Collateral Agent shall notify the Grantors that an Event of
Default shall have occurred and be continuing and that during the continuance
thereof the Grantors shall not sell, convey, lease, assign, transfer or
otherwise dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantors may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document. Without limiting
the generality of the foregoing, each Grantor agrees that it shall not permit
any Inventory with an aggregate fair market value in excess of $100,000 to be in
the possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the
Collateral Agent and to waive and release any Lien held by it with respect to
such Inventory, whether arising by operation of law or otherwise..
SECTION 4.09. Limitation on Modification of Accounts. None of the
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Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Account Rights, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.10. Insurance. (a) The Grantors, at their own expense, shall
---------
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment in accordance with Section 5.07 of the Credit
Agreement.
(b) Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Event of Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the
Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.10, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
(c) Each Grantor agrees to cause all insurance policies related to the
insurance described in clause (a) of this Section 4.10 to be endorsed or
otherwise amended to include a lender's loss payable endorsement, in form and
substance reasonably satisfactory to the Collateral Agent.
SECTION 4.11. Legend. Each Grantor shall legend, in form and manner
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satisfactory to the Collateral Agent, its books, records and documents
evidencing or pertaining to Account Rights with an appropriate reference to the
fact that such Account Rights have been assigned to the Collateral Agent for the
benefit of the Secured Parties and that the Collateral Agent has a security
interest therein.
SECTION 4.12. Intellectual Property. (a) Each Grantor agrees that it
---------------------
will not, nor will it permit any of its licensees to, do any act, or omit to do
any act, whereby any Patent which is material to the conduct of such Grantor's
business may become invalidated or dedicated to the public, and agrees that it
shall continue to ▇▇▇▇ any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its maximum rights
under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral
Agent's security interest in such Patent, Trademark or Copyright, and each
Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute
and file such writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed; such power, being coupled with an interest,
is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, to maintain and pursue each material application relating
to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant
or registration) and to maintain each issued Patent and each registration of the
Trademarks and Copyrights that is material to the conduct of any Grantor's
business, including timely filings of applications for renewal, affidavits of
use, affidavits of incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition, interference and
cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly ▇▇▇ for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals by the
licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
ARTICLE V
Power of Attorney
SECTION 5.01. Power of Attorney. Each Grantor irrevocably makes,
-----------------
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for each Grantor and in each Grantor's
name or otherwise, for the use and benefit of the Collateral Agent and the
Secured Parties, upon the occurrence and during the continuance of an Event of
Default (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to sign the name of any Grantor on any invoice or ▇▇▇▇ of lading
relating to any of the Collateral; (d) to send verifications of Account Rights
to any Account Debtor; (e) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (f) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent;
and (h) to use, sell, assign, transfer, pledge, make any agreement with respect
to or otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided, however, that nothing herein contained
-----------------
shall be construed as requiring or obligating the Collateral Agent or any
Secured Party to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantors for the purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other Loan Document
with respect to the Collateral or any part thereof or impose any obligation on
the Collateral Agent or any Secured Party to proceed in any particular manner
with respect to the Collateral or any part thereof, or in any way limit the
exercise by the Collateral Agent or any Secured Party of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and during the
---------------------
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine (other
than in violation of any then-existing licensing arrangements to the extent that
waivers cannot be obtained) and (b) with or without legal process and with or
without prior notice or demand for performance, to take possession of the
Collateral and without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or removing
the Collateral, exercise any Grantor's right to ▇▇▇▇ and receive payment for
completed work, and, generally, to exercise any and all rights afforded to a
Secured Party under the Uniform Commercial Code or other applicable law.
Without limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing any Collateral which constitutes a "security" under
applicable securities law for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
which such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice (which
each Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent's intention to make
any sale of Collateral. Such notice, in the case of a public sale, shall state
the time and place for such sale and, in the case of a sale at a broker's board
or on a securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion thereof, will
first be offered for sale at such board or exchange. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Collateral Agent may fix and state in the notice (if any) of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply
-----------------------
the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations, including all court costs and the fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property. For the
---------------------------------------------
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral
Agent may be exercised, at the option of the Collateral Agent, upon the
occurrence and during the continuation of an Event of Default; provided that any
license, sub-license or other transaction entered into by the Collateral Agent
in accordance herewith shall be binding upon the Grantors notwithstanding any
subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices hereunder shall
-------
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 9.01 of the Credit Agreement. All communications and
notices hereunder to any Grantor shall be given to Holdings.
SECTION 7.02. Security Interest Absolute. All rights of the Collateral
--------------------------
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
---------------------------------
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter this Agreement shall be binding upon such Grantor and the
Collateral Agent and their respective successors and assigns and shall inure to
the benefit of such Grantor, the Collateral Agent and the other Secured Parties
and their respective successors and assigns, except that no Grantor shall have
the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement or the Credit
Agreement. This Agreement shall be construed as a separate agreement with
respect to each Grantor and may be amended, modified, supplemented, waived or
released with respect to any Grantor without the approval of any other Grantor
and without affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
----------------------
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. (a)
-----------------------------------------------------
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees, disbursements and other charges of its counsel and of any experts or
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement (including the customary fees and charges of
the Collateral Agent for any audits conducted by it or on its behalf with
respect to the Account Rights or Inventory), (ii) the custody or preservation
of, or the sale of, collection from or other realization upon any of the
Collateral, (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
--------
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Collateral Agent or any other Secured Party. All amounts due
under this Section 7.06 shall be payable on written demand therefor and shall
bear interest at the rate specified in clause (c)(ii) of Section 2.13 of the
Credit Agreement.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
------------------
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Collateral Agent and the Grantor or Grantors with respect to which
such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.02 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of the
------------
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 7.04), and
shall become effective as provided in Section 7.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used herein are for
--------
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
-------------------------------------------
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security Interest shall
-----------
terminate when all the Obligations (other than wholly contingent indemnification
obligations) have been indefeasibly paid in full, the Lenders have no further
commitment to lend, the LC Exposure has been reduced to zero and the Issuing
Bank has no further commitment to issue Letters of Credit under the Credit
Agreement, at which time the Collateral Agent shall execute and deliver to the
Grantors, at the Grantors' expense, all Uniform Commercial Code termination
statements, terminations and reassignments for mortgages and assignments of
copyrights, patents and trademarks, and similar documents which the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 7.14
shall be without recourse to or warranty by the Collateral Agent.
SECTION 7.15. Additional Grantors. Pursuant to Section 5.12 of the Credit
-------------------
Agreement, each Significant Subsidiary (other than any Foreign Subsidiary) that
was not in existence or was not a Significant Subsidiary on the date of the
Credit Agreement is required to enter into this Agreement as a Grantor upon
becoming such a Subsidiary. Upon execution and delivery by the Collateral Agent
and such a Subsidiary of a Supplement in the form of Annex 1 hereto, such
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any such
instrument shall not require the consent of any Grantor hereunder. The rights
and obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
SECTION 7.16. Releases and Termination. This Agreement and the security
------------------------
interest granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full, the Lenders have no further commitment to lend, the
LC Exposure has been reduced to zero and the Issuing Bank has no further
commitment to issue Letters of Credit under the Credit Agreement. Upon such
Termination, the Collateral Agent shall execute and deliver to the Grantors, at
the Grantors' expense, all Uniform Commercial Code termination statements and
similar documents which the Grantors shall reasonably request to evidence such
termination. Any execution and delivery of termination statements or documents
pursuant to this Section 7.15 shall be without recourse to or warranty by the
Collateral Agent. A Subsidiary Grantor shall automatically be released from its
obligations hereunder and the security interest in the Collateral of such
Subsidiary Grantor shall be automatically released in the event that all the
Equity Interests of such Subsidiary Grantor shall be sold, transferred or
otherwise disposed of to a person other than Holdings, the Borrower or an
Affiliate of Holdings in a transaction permitted under the terms of the Credit
Agreement. Any Collateral granted hereunder shall be released (automatically
and without further action on the part of the Collateral Agent) upon the sale,
transfer or other disposition of such Collateral to a transferee other than
Holdings, the Borrower or an Affiliate of Holdings, to the extent that such
sale, transfer or other disposition is permitted under the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
KANSAS CITY SOUTHERN INDUSTRIES,
INC.,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Designated Person
THE KANSAS CITY SOUTHERN RAILWAY
COMPANY,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Sr. VP & Corporate
Secretary
CAYMEX TRANSPORATION, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Designated Person
GATEWAY EASTERN RAILWAY
COMPANY,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
__________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Designated Person
GATEWAY WESTERN RAILWAY
COMPANY,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: VP & Secretary
GLOBAL TERMINALING SERVICES, INC.
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Designated Person
KCS TRANSPORTATION COMPANY,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Designated Person
KANSAS CITY SOUTHERN LINES, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Sr. VP & Secretary
SCC HOLDINGS, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Designated Person
MID-SOUTH MICROWAVE, INC.,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: VP & Treasury
▇▇▇▇-▇▇▇▇▇▇ CORPORATION,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: VP & Secretary
SOUTHERN DEVELOPMENT COMPANY,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Designated Person
SOUTHERN INDUSTRIAL SERVICES,
INC.,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: VP & Treasurer
TRANS-SERVE, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: VP & Secretary
▇▇▇▇▇, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Designated Person
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: VP
Annex 1 to the
Security Agreement
SUPPLEMENT NO. dated as of [ ] to the Security Agreement
dated as of January 11, 2000, among THE KANSAS CITY SOUTHERN
INDUSTRIES, INC., a Delaware corporation ("Holdings"), KANSAS
--------
CITY SOUTHERN RAILWAY COMPANY, INC., a Delaware corporation (the
"Borrower"), each other Subsidiary of Holdings listed on Schedule
--------
I thereto or becoming a party thereto as provided in Section 7.15
thereof (collectively, the "Subsidiary Grantors"; Holdings, the
-------------------
Borrower and the Subsidiary Grantors being referred to
collectively as the "Grantors") and THE CHASE MANHATTAN BANK,
--------
("Chase"), as collateral agent (in such capacity, the "Collateral
----- ----------
Agent"), for the Secured Parties (as defined in the Credit
-----
Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of January 11,
2000 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Holdings, the Borrower, the lenders from time to time
----------------
party thereto (the "Lenders"), and Chase, as administrative agent (in such
-------
capacity, the "Administrative Agent"), collateral agent (in such capacity, the
--------------------
"Collateral Agent") and issuing bank (in such capacity, the "Issuing Bank"), and
----------------- ------------
(b) the Guarantee Agreement and the other Loan Documents referred to in the
Credit Agreement.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of the Security Agreement provides that additional
Subsidiaries may become Grantors under the Security Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned
Subsidiary (the "New Grantor") is executing this Supplement in accordance with
-----------
the requirements of the Credit Agreement to become a Grantor under the Security
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Obligations (as defined
in the Credit Agreement), does hereby create and grant to the Collateral Agent,
its successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Grantor's right, title and interest in and to the Collateral (as defined in the
Security Agreement) of the New Grantor. Each reference to a "Grantor" in the
-------
Security Agreement shall be deemed to include the New Grantor. The Security
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing and
given as provided in Section 7.01 of the Security Agreement. All communications
and notices hereunder to the New Grantor shall be given to it in care of the
Borrower.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the
Collateral Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name of New Grantor],
by
Name:
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by
Name:
Title:
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
----------------------
Description Location
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