SECURITY AGREEMENT
SECURITY AGREEMENT, dated April 23, 2004, made by each of the
Grantors referred to below, in favor of Silver Point Finance, LLC, a Delaware
limited liability company, in its capacity as collateral agent for the Agents
and the Lenders (as such terms are defined below) party to the Financing
Agreement referred to below (in such capacity, together with any successor
collateral agent, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, aaiPharma Inc., a Delaware corporation (the
"Parent"), Applied Analytical Industries Learning Center, Inc., a Delaware
corporation ("Applied Analytical"), AAI Technologies, Inc., a Delaware
corporation ("AAI Technologies"), AAI Properties, Inc., a North Carolina
corporation ("AAI Properties"), AAI Japan, Inc., a Delaware corporation ("AAI
Japan"), Kansas City Analytical Services, Inc., a Kansas corporation
("Analytical Services"), AAI Development Services, Inc., a Massachusetts
corporation ("AAI Development-MA"), aaiPharma LLC, a Delaware limited liability
company ("Pharma LLC") and AAI Development Services, Inc., a Delaware
corporation ("AAI Development-DE", and together with Parent, Applied Analytical,
AAI Technologies, AAI Properties, AAI Japan, Analytical Services, AAI
Development-MA and Pharma LLC, each a "Borrower" and collectively, the
"Borrowers"), the financial institutions from time to time party thereto (each a
"Lender" and collectively, the "Lenders"), the Collateral Agent and Bank of
America, N.A., as administrative agent for the Lenders (in such capacity, the
"Administrative Agent" and together with the Collateral Agent, each an "Agent"
and collectively, the "Agents") are parties to a Financing Agreement, dated as
of April 23, 2004 (such agreement, as amended, restated, supplemented or
otherwise modified from time to time, including any replacement agreement
therefor, being hereinafter referred to as the "Financing Agreement");
WHEREAS, pursuant to the Financing Agreement, the Lenders have
agreed to make certain loans, which will include a subfacility for the issuance
of letters of credit (each a "Loan" and collectively, the "Loans"), to the
Borrowers in an aggregate principal amount at any one time outstanding not to
exceed the Total Commitment (as defined in the Financing Agreement);
WHEREAS, it is a condition precedent to the Lenders making any
Loan, issuing any Letter of Credit and providing any other financial
accommodation to the Borrowers pursuant to the Financing Agreement that each
Grantor shall have executed and delivered to the Collateral Agent a security
agreement providing for the grant to the Collateral Agent for the benefit of the
Agents and the Lenders of a security interest in substantially all of the
personal property of such Grantor;
WHEREAS, the Grantors are mutually dependent on each other in
the conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Grantor often being provided through
financing obtained by the other Grantors and the ability to obtain such
financing being dependent on the successful operations of all of the Grantors as
a whole; and
WHEREAS, each Grantor has determined that the execution,
delivery and performance of this Agreement directly benefit, and are in the best
interest of, such Grantor.
NOW, THEREFORE, in consideration of the premises and the
agreements herein and in order to induce the Lenders to make and maintain the
Loans, issue the Letters of Credit and provide other financial accommodations to
the Borrowers pursuant to the Financing Agreement, the Grantors hereby jointly
and severally agree with the Collateral Agent, for the benefit of the Agents and
the Lenders, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Financing Agreement or in Article 9 of
the Uniform Commercial Code as in effect from time to time in the State of New
York (the "Code") and which are not otherwise defined herein shall have the same
meanings herein as set forth therein; provided that terms used herein which are
defined in the Code as in effect in the State of New York on the date hereof
shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as the Collateral Agent may otherwise
determine.
(b) The following terms shall have the respective meanings
provided for in the Code: "Accounts", "Cash Proceeds", "Chattel Paper",
"Commercial Tort Claim", "Commodity Account", "Commodity Contracts", "Deposit
Account", "Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Record", "Security Account", "Software", and "Supporting Obligations".
(c) As used in this Agreement, the following terms shall have
the respective meanings indicated below, such meanings to be applicable equally
to both the singular and plural forms of such terms:
"Copyright Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses for registered
copyrights set forth in Schedule II hereto).
"Copyrights" means all domestic and foreign copyrights,
whether registered or unregistered, including, without limitation, all copyright
rights throughout the universe (whether now or hereafter arising) in any and all
media (whether now or hereafter developed), in and to all original works of
authorship fixed in any tangible medium of expression, acquired or used by any
Grantor (including, without limitation, all registered copyrights described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
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"Intellectual Property" means the Copyrights, Trademarks and
Patents.
"Licenses" means the Copyright Licenses, the Trademark
Licenses and the Patent Licenses, in each case, that are Material Contracts.
"Patent Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to manufacture, use or sell any
invention covered by any Patent (including, without limitation, the Patent
Licenses set forth in Schedule II hereto).
"Patents" means all domestic and foreign letters patent,
design patents, utility patents, industrial designs, inventions, trade secrets,
ideas, concepts, methods, techniques, processes, proprietary information,
technology, know-how, formulae, rights of publicity and other general
intangibles of like nature, now existing or hereafter acquired (including,
without limitation, all domestic letters patent, design patents, utility patents
and industrial designs registered with the United States Patent and Trademark
Office described in Schedule II hereto), all applications, registrations and
recordings thereof (including, without limitation, applications, registrations
and recordings 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), and all reissues, divisions, continuations,
continuations in part and extensions or renewals thereof.
"Trademark Licenses" means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensor or licensee
and providing for the grant of any right concerning any Trademark, together with
any goodwill connected with and symbolized by any such trademark licenses,
contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or
hereafter covered by such licenses (including, without limitation, the Trademark
Licenses described in Schedule II hereto).
"Trademarks" means all domestic and foreign trademarks,
service marks, collective marks, certification marks, trade names, business
names, d/b/a's, Internet domain names, trade styles, designs, logos and other
source or business identifiers and all general intangibles of like nature, now
or hereafter owned, adopted, acquired or used by any Grantor (including, without
limitation, all registered domestic trademarks, trade names, d/b/a's, and
Internet domain names described in Schedule II hereto), all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings 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), and
all reissues, extensions or renewals thereof, together with all goodwill of the
business symbolized by such marks and all customer lists, formulae and other
Records of any Grantor relating to the distribution of products and services in
connection with which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security
for all of the Obligations (as defined in Section 3 hereof), each Grantor hereby
pledges and assigns to the Collateral Agent, and grants to the Collateral Agent,
for the benefit of the Agents and the Lenders, a continuing security interest
in, all personal property of such Grantor, wherever located
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and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (the
"Collateral"), including, without limitation, the following:
(a) all Accounts;
(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI
hereto;
(d) all Deposit Accounts, all cash, and all other
property from time to time deposited therein and the monies and property in the
possession or under the control of any Agent or any Lender or any affiliate,
representative, agent or correspondent of any Agent or any Lender;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without
limitation, all Payment Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation,
Promissory Notes);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all
Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property
of such Grantor (whether or not subject to the Code), including, without
limitation, all bank and other accounts and all cash and all investments
therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of such
Grantor described in the preceding clauses of this Section 2 (including, without
limitation, any proceeds of insurance thereon and all causes of action, claims
and warranties now or hereafter held by such Grantor in respect of any of the
items listed above), and all books, correspondence, files and other Records,
including, without limitation, all tapes, disks, cards, Software, data and
computer programs in the possession of or under the control of such Grantor or
any other Person from time to time acting for such Grantor that at any time
evidence or contain information
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relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash
Proceeds, and products of any and all of the foregoing Collateral;
in each case howsoever such Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise). Notwithstanding
anything to the contrary set forth above, the types or items of Collateral
described above shall not include any rights or interests in any contract,
permit, license, or license agreement covering real or personal property, if
under the terms of such contract, permit, license, or license agreement, or
applicable law with respect thereto, the valid grant of a security interest or
Lien therein to the Collateral Agent is prohibited and such prohibition has not
been or is not waived or the consent of the other party to such contract,
permit, license, or license agreement has not been or is not otherwise obtained
or under applicable law such prohibition cannot be waived; provided, that, the
foregoing exclusion shall in no way be construed (i) to apply if any such
prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or
other applicable law or (ii) so as to limit, impair or otherwise affect the
Collateral Agent's unconditional continuing security interests in and Liens upon
any rights or interests of a Grantor in or to monies due or to become due under
any such contract, permit, license, or license agreement; provided further that
immediately upon the ineffectiveness, lapse or termination of any such
prohibition on the grant of a security interest or Lien, the Collateral shall
include, and such Grantor shall be deemed to have granted a security interest
in, all such right, title and interests as if such prohibition had never been in
effect.
SECTION 3. Security for Obligations. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the Obligations.
Section 4. Representations and Warranties. Each Grantor
jointly and severally represents and warrants as follows:
(a) Schedule I hereto sets forth as of the Effective Date
(i) the exact legal name of each Grantor and (ii) the organizational
identification number of each Grantor or states that no such organizational
identification number exists.
(b) Each Grantor (i) is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization as set
forth on Schedule I hereto other than to the extent that the failure to be in
good standing in such state or jurisdiction could not reasonably be expected to
have a Material Adverse Effect, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and to
execute, deliver and perform this Agreement and each other Loan Document to be
executed and delivered by it pursuant hereto and to consummate the transactions
contemplated hereby and thereby, and (iii) is duly qualified to do business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, other than in such jurisdictions where the
failure to be so qualified and in good standing could not reasonably be expected
to have a Material Adverse Effect.
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(c) The execution, delivery and performance by each
Grantor of this Agreement and each other Loan Document to which such Grantor is
or will be a party (i) have been duly authorized by all necessary action, (ii)
do not and will not contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of partnership or partnership
agreement, as applicable, or any applicable law, the Senior Subordinated Note
Indenture or any material term of any Material Contract, (iii) do not and will
not result in or require the creation of any Lien (other than pursuant to any
Loan Document) upon or with respect to any of its properties and (iv) do not and
will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to it or its operations or any of its properties.
(d) This Agreement is, and each other Loan Document to
which any Grantor is or will be a party, when executed and delivered, will be, a
legal, valid and binding obligation of such Grantor, enforceable against such
Grantor in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally.
(e) There is no pending or, to the best knowledge of any
Grantor, threatened action, suit, proceeding or claim affecting any Grantor or
its properties, before any Governmental Authority or any arbitrator, or any
order, judgment or award by any Governmental Authority or arbitrator, that could
reasonably be expected to adversely affect the grant by any Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Collateral Agent of any of its rights or
remedies hereunder.
(f) All Federal, state and local tax returns and other
reports required by applicable law to be filed by any Grantor have been filed,
or extensions have been obtained, and all taxes, assessments and other
governmental charges imposed upon any Grantor or any property of such Grantor
(including, without limitation, all federal income and social security taxes on
employees' wages and all sales taxes) and which have become due and payable on
or prior to the date hereof have been paid, except (i) as of the date hereof, to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with GAAP and (ii) after the date hereof, as permitted by
Section 7.01(c) of the Financing Agreement.
(g) All Equipment, Fixtures, Goods and Inventory (except
for Equipment, Goods and Inventory in transit) now existing are, and all
Equipment, Fixtures, Goods and Inventory hereafter existing will be, located
and/or based at the addresses specified therefor in Schedule III hereto (as
amended, supplemented or otherwise modified from time to time in accordance with
Section 5(b) hereof) or at any other locations at which any Grantor has
Collateral with a fair market value of less than $50,000, individually for any
location, and $500,000 in the aggregate for all such locations. Each Grantor's
chief place of business and chief executive office, the place where such Grantor
keeps its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidencing by Promissory Notes or other Instruments except for
Promissory Notes evidencing aggregate Indebtedness of not more than $250,000.
Set forth in Schedule IV hereto is a complete and accurate list, as of the date
of this Agreement, of each
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Deposit Account, Securities Account and Commodities Account of each Grantor,
together with the name and address of each institution at which each such
Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto
is a complete and correct list of each trade name used by each Grantor.
(h) Each Grantor has delivered to the Collateral Agent
complete and correct copies of each License described in Schedule II hereto,
including all schedules and exhibits thereto, which represents all of the
Licenses existing on the date of this Agreement. Each such License sets forth
the entire agreement and understanding of the parties thereto relating to the
subject matter thereof, and there are no other material agreements, arrangements
or understandings, written or oral, relating to the matters covered thereby or
the rights of any Grantor or any of its Affiliates in respect thereof. Each such
License now existing is, and each other License will be, the legal, valid and
binding obligation of the Grantor party thereto and, to the best knowledge of
such Grantor, the other parties thereto, enforceable against such parties in
accordance with its terms (except to the extent that any such License is
terminated by a Grantor upon a determination by such Grantor in its reasonable
business judgment that such License is no longer material and useful to the
conduct of the business of the Grantors, taken as a whole). No default by any
Grantor, or, to the best knowledge of each Grantor, any other party thereto has
occurred under any material term of any such License, nor does any defense,
offset, deduction or counterclaim exist thereunder in favor of any such party.
(i) The Grantors own and control, or otherwise possess
adequate rights to use, the Trademarks, Patents and Copyrights, which are the
only trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, and rights of publicity
necessary to conduct their business in substantially the same manner as
conducted as of the date hereof. Schedule II hereto sets forth a true and
complete list of all Licenses and registered United States Intellectual Property
owned or used by each Grantor as of the date hereof. Except as set forth on
Schedule II, all such Intellectual Property set forth on Schedule II is
subsisting and in full force and effect, has not been adjudged invalid or
unenforceable, is valid and enforceable and has not been abandoned in whole or
in part (except to the extent that any such Intellectual Property is determined
by the Grantors in their reasonable business judgment to no longer be material
and useful to the conduct of the business of the Grantors taken as a whole).
Except as set forth on Schedule II, no such Intellectual Property set forth on
Schedule II is the subject of any licensing or franchising agreement. Except as
set forth on Schedule II, no Grantor has any knowledge of any conflict with the
rights of others to any Intellectual Property material to the business of the
Grantors, taken as a whole, and, to the best knowledge of each Grantor, no
Grantor is now infringing or in conflict with any such rights of others in any
material respect and no other Person is now infringing or in conflict in any
material respect with any such properties, assets and rights owned or used by
any Grantor. Except as set forth in Schedule II, no Grantor has received any
written notice that it is violating or has violated the trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity or other intellectual property rights of
any third party.
(j) Subject to Section 7.02(c) of the Financing
Agreement, the Grantors are and will be at all times the sole and exclusive
owners of, or otherwise have and will have adequate rights in, the Collateral
free and clear of any Lien except for (i) the Lien created by this
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Agreement and (ii) the Permitted Liens. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording or filing office except (A) such as may have been filed
in favor of the Collateral Agent relating to this Agreement and (B) such as may
have been filed to perfect or protect any Permitted Lien.
(k) The exercise by the Collateral Agent of any of its
rights and remedies hereunder will not contravene any law, the Senior
Subordinated Note Indenture or any material term of any Material Contract and
will not result in, or require the creation of, any Lien upon or with respect to
any of its properties.
(l) No authorization or approval or other action by, and
no notice to or filing with, any Governmental Authority or other regulatory
body, or any other Person, is required for (i) the grant by any Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral or (ii) the exercise by the Collateral Agent of any of its rights and
remedies hereunder, except (A) for the filing under the Uniform Commercial Code
as in effect in the applicable jurisdiction of the financing statements
described in Schedule V hereto, all of which financing statements have been duly
filed and are in full force and effect, (B) with respect to the perfection of
the security interest created hereby in the registered United States
Intellectual Property or for which registration is pending, for the recording of
the appropriate Assignment for Security, substantially in the form of Exhibit A
hereto in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, (C) with respect to the perfection of the
security interest created hereby in foreign Intellectual Property and Licenses,
any actions necessary to perfect a security interest in such foreign
Intellectual Property and Licenses which actions are not required hereunder, (D)
with respect to the perfection of the security interest created hereby in motor
vehicles for which the title to such motor vehicles is governed by a certificate
of title or ownership (collectively, the "Motor Vehicles"), for the submission
of an appropriate application requesting that the Lien of the Collateral Agent
be noted on the certificate of title or ownership, completed and authenticated
by the applicable Grantor, together with the certificate of title, with respect
to each Motor Vehicle, to the appropriate state agency, (E) with respect to any
action that may be necessary to obtain control in Collateral described in
Sections 5(i) and 5(k) hereof, the taking of such action, (F) actions required
under applicable securities laws, and (G) the taking possession of all
Documents, Chattel Paper, Instruments and cash constituting Collateral.
(m) This Agreement creates in favor of the Collateral
Agent for the benefit of the Agents and the Lenders a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Collateral Agent's having possession of all Instruments,
Documents, Chattel Paper and cash constituting Collateral and obtaining control
of all Collateral described in Sections 5(i) and 5(k) hereof from time to time,
the recording of the appropriate Assignment for Security executed pursuant
hereto in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable with respect to the registered United States
Intellectual Property set forth on Schedule II hereto, the submission of an
appropriate application requesting that the Lien of the Collateral Agent be
noted on the certificate of title or ownership, completed and authenticated by
the applicable Grantor, together with the certificate of title or ownership,
with respect to such Motor Vehicles, to the applicable state agency, and the
filing of the financing statements described in Schedule V hereto and, with
respect to the registered United States Intellectual Property hereafter existing
and not covered by an
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appropriate Assignment for Security, the recording in the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, of
appropriate instruments of assignment, result in the perfection of such security
interests in the Collateral located in the United States. Such security
interests are, or in the case of Collateral in which any Grantor obtains rights
after the date hereof, will be, perfected, first priority security interests,
subject only to the Permitted Liens and the taking of actions described in this
Section 4(m).
(n) As of the date hereof, no Grantor holds any
Commercial Tort Claims or is aware of any such pending claims, except for such
claims described in Schedule VI.
(o) The partnership interests or membership interests of
each Grantor in each of its Subsidiaries that is a partnership or a limited
liability company are not (i) dealt in or traded on securities exchanges or in
securities markets, (ii) securities for purposes of Article 8 of any relevant
Uniform Commercial Code, (iii) investment company securities within the meaning
of Section 8-103 of any relevant Uniform Commercial Code and (iv) evidenced by a
certificate. Such partnership interests or membership interests constitute
General Intangibles.
SECTION 5. Covenants as to the Collateral. So long as any of
the Obligations shall remain outstanding and all Commitments shall not have
expired or terminated, unless the Collateral Agent shall otherwise consent in
writing:
(a) Further Assurances. Each Grantor will at its expense,
at any time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action consistent with such
Grantor's obligations hereunder and under the Financing Agreement and the other
Loan Documents that may be necessary or desirable or that the Collateral Agent
may reasonably request in order to (i) enable the Collateral Agent perfect and
protect the security interest purported to be created hereby; (ii) enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder in
respect of the Collateral; or (iii) otherwise effect the purposes of this
Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper, Licenses and Records pertaining to the Collateral with a legend, in form
and substance satisfactory to the Collateral Agent, indicating that such Chattel
Paper, License or Collateral is subject to the security interest created hereby,
(B) if any Account shall be evidenced by Promissory Notes or other Instruments
or Chattel Paper, delivering and pledging to the Collateral Agent hereunder such
Promissory Notes, Instruments or Chattel Paper, duly endorsed and accompanied by
executed instruments of transfer or assignment, all in form and substance
reasonably satisfactory to the Collateral Agent, (C) executing and filing (to
the extent, if any, that such Grantor's signature is required thereon) or
authenticating the filing of, such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that the Collateral
Agent may reasonably request in order to perfect and preserve the security
interest purported to be created hereby, (D) furnishing to the Collateral Agent
from time to time statements and schedules further identifying and describing
the Collateral and such other reports in connection with the Collateral as the
Collateral Agent may reasonably request, all in reasonable detail, (E) if any
Collateral with a book value in excess of $250,000 shall be in the possession of
a third party, notifying such Person of the Collateral Agent's security interest
created hereby and using commercially reasonable efforts to obtain a written
acknowledgment from such Person that such Person holds possession of the
Collateral for the benefit of the Collateral Agent, which such written
acknowledgement shall be in form and substance
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reasonably satisfactory to the Collateral Agent, (F) if at any time after the
date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly
notifying the Collateral Agent in a writing signed by such Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing
shall incorporate the provisions hereof and shall be in form and substance
reasonably satisfactory to the Collateral Agent, (G) if requested by the
Collateral Agent after the occurrence and during the continuance of an Event of
Default, causing the Collateral Agent to be listed as the lienholder, for the
benefit of the Agents and the Lenders, on each certificate of title or ownership
with respect to each Motor Vehicle or other item of Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or item of
Equipment that is subject to a purchase money security interest or other
Permitted Lien) and within five (5) Business Days of such request deliver
evidence of the same to the Collateral Agent and (H) taking all commercially
reasonable actions required by any earlier versions of the Uniform Commercial
Code or by other law, as applicable, in any relevant Uniform Commercial Code
jurisdiction.
(b) Location of Equipment and Inventory. Each Grantor
will keep the Equipment and Inventory (other than Equipment and Inventory sold
in accordance with Section 5(g) hereof or in accordance with the terms of the
Financing Agreement and Equipment and Inventory in transit) at (i) one or more
of the locations specified therefor in Schedule III hereto, (ii) upon not less
than ten (10) days' prior written notice to the Collateral Agent accompanied by
a new Schedule III hereto indicating each new location of the Equipment and
Inventory, at such other locations in the continental United States, as the
Grantors may elect, or (iii) at any other locations at which any Grantor has
Collateral with a fair market value of less than $50,000, individually for any
location, and $500,000 in the aggregate for all such locations; provided that
(x) all commercially reasonable action has been taken to grant to the Collateral
Agent a perfected, first priority security interest in such Equipment and
Inventory (subject only to Permitted Liens), and (y) the Collateral Agent's
rights in such Equipment and Inventory, including, without limitation, the
existence, perfection and priority of the security interest created hereby in
such Equipment and Inventory, are not adversely affected thereby.
(c) Condition of Equipment. Each Grantor will maintain or
cause the Equipment which is necessary or used in the proper conduct of its
business to be maintained and preserved in good condition, repair and working
order, ordinary wear and tear excepted, and will forthwith, or in the case of
any loss or damage to any Equipment promptly after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may reasonably request to such end.
(d) Taxes, Etc. Each Grantor jointly and severally agrees
to pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Equipment and Inventory, except
to the extent otherwise provided in the Financing Agreement.
(e) Insurance. Section 7.01(h) of the Financing Agreement
is incorporated herein by reference as an affirmative covenant by each Grantor
as though it were a "Loan Party" under such Section 7.01(h) and shall apply
mutatis mutandis to the Grantors.
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(f) Provisions Concerning the Accounts and the Licenses.
(i) No Grantor shall, except as otherwise
permitted by the Financing Agreement, change (A) its name, identity or
organizational structure, (B) its jurisdiction of incorporation as set forth in
Section 4(b) hereof, or (c) its chief executive office as set forth on Schedule
III hereto. Each Grantor shall (x) promptly notify the Collateral Agent upon
obtaining an organizational identification number, if on the date hereof such
Grantor did not have such identification number, and (y) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Collateral Agent pursuant to the terms of the Financing Agreement to inspect and
make abstracts from such Records and Chattel Paper.
(ii) Each Grantor will, except as otherwise
provided in this subsection (f), continue to collect, at its own expense, all
amounts due or to become due under the Accounts. In connection with such
collections, each Grantor may (and, upon the occurrence and during the
continuance of an Event of Default, at the Collateral Agent's direction, will)
take such action as such Grantor or the Collateral Agent may deem necessary or
advisable to enforce collection or performance of the Accounts; provided,
however, that the Collateral Agent shall have the right at any time, upon the
occurrence and during the continuance of an Event of Default, to notify the
Account Debtors or obligors under any Accounts of the assignment of such
Accounts to the Collateral Agent and to direct such Account Debtors or obligors
to make payment of all amounts due or to become due to such Grantor thereunder
directly to the Collateral Agent or its designated agent and, upon such
notification and at the expense of such Grantor and to the extent permitted by
law, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by any Grantor of a notice
from the Collateral Agent that the Collateral Agent has notified, intends to
notify, or has enforced or intends to enforce a Grantor's rights against the
Account Debtors or obligors under any Accounts as referred to in the proviso to
the immediately preceding sentence, (A) all amounts and proceeds (including
Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of the Collateral Agent hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Agent or its designated agent in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either (i)
credited to the Loan Account so long as no Event of Default shall have occurred
and be continuing or (ii) if an Event of Default shall have occurred and be
continuing, applied as specified in Section 7(b) hereof, and (B) such Grantor
will not adjust, settle or compromise the amount or payment of any Account or
release wholly or partly any Account Debtor or obligor thereof or allow any
credit or discount thereon. In addition, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent may (in its sole and
absolute discretion) direct any or all of the banks and financial institutions
with which any Grantor either maintains a Deposit Account or a lockbox or
deposits the proceeds of any Accounts to send immediately to the Collateral
Agent or its designated agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent or its designated agent shall (in the
sole and absolute discretion of the Collateral Agent) be held as additional
Collateral for the Obligations or distributed in accordance with Section 7
hereof.
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(iii) Upon the occurrence and during the
continuance of any breach or default under any material term of any License
described on Schedule II hereto by any party thereto other than a Grantor, (A)
the relevant Grantor will, promptly and in any event within 5 Business Days
after obtaining knowledge thereof, give the Collateral Agent written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto, (B) no Grantor will, without the
prior written consent of the Collateral Agent, declare or waive any such breach
or default or affirmatively consent to the cure thereof or exercise any of its
remedies in respect thereof, and (C) after the occurrence and during the
continuance of an Event of Default, each Grantor will, upon written instructions
from the Collateral Agent and at such Grantor's expense, take such action as the
Collateral Agent may deem necessary or advisable in respect thereof.
(iv) Each Grantor will, at its expense, promptly
deliver to the Collateral Agent a copy of each notice or other communication
received by it by which any other party to any License referred to in Schedule
II hereto (A) declares a breach or default by a Grantor of any material term
thereunder, (B) terminates such License or (C) purports to exercise any of its
rights or affect any of its obligations thereunder, together with a copy of any
reply by such Grantor thereto.
(v) Each Grantor will exercise promptly and
diligently in a commercially reasonable manner each and every right which it may
have under each License referred to on Schedule II hereto (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each such License and, except as set forth in the next
sentence, will take all action reasonably necessary to maintain such Licenses in
full force and effect during the term of such License. No Grantor will, without
the prior written consent of the Collateral Agent (which consent shall not be
unreasonably withheld), cancel, terminate, amend or otherwise modify in any
respect, or waive any provision of, any such License except for the termination
of Licenses that the Grantors reasonably determine in good faith to no longer be
material and useful to the business of the Grantors, taken as a whole.
(g) Transfers and Other Liens.
(i) Except to the extent expressly permitted by
Section 7.02(c) of the Financing Agreement, no Grantor will sell, assign (by
operation of law or otherwise), lease, license, exchange or otherwise transfer
or dispose of any of the Collateral.
(ii) Except to the extent expressly permitted by
Section 7.02(a) of the Financing Agreement, no Grantor will create, suffer to
exist or grant any Lien upon or with respect to any Collateral.
(h) Intellectual Property.
(i) If applicable, each Grantor has duly
executed and delivered the applicable Assignment for Security in the form
attached hereto as Exhibit A. Each Grantor (either itself or through licensees)
will, and will cause each licensee thereof to, take all action necessary to
maintain all of the Intellectual Property useful in the conduct of the business
of the Grantors, taken as a whole in full force and effect, including, without
limitation, using the proper
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statutory notices and markings and using the Trademarks on each applicable
trademark class of goods in order to so maintain the Trademarks in full force,
free from any claim of abandonment for non-use, and no Grantor will do any act
or knowingly omit to do any act whereby any such Intellectual Property may
become invalidated; provided, however, that so long as no Event of Default has
occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or
work, that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with Intellectual Property substantially
similar to the Intellectual Property that may be abandoned or otherwise become
invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such replacement Intellectual Property is
subject to the Lien created by this Agreement, (C) that is substantially the
same as another Intellectual Property that is in full force, so long the failure
to use or maintain such Intellectual Property does not materially adversely
affect the validity of such replacement Intellectual Property and so long as
such other Intellectual Property is subject to the Lien and security interest
created by this Agreement, or (D) that such Grantor determines in good faith is
not material and useful to the conduct of the business of the Grantors, taken as
a whole. Each Grantor will cause to be taken all necessary steps in any
proceeding before the United States Patent and Trademark Office and the United
States Copyright Office or any similar office or agency in any other country or
political subdivision thereof to maintain each registration of the registered
United States Intellectual Property (other than the Intellectual Property
described in the proviso to the immediately preceding sentence), including,
without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
payment of maintenance fees, filing fees, taxes or other governmental fees. If
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, the Grantors shall (x) upon
obtaining knowledge of such infringement, misappropriation, dilution or other
violation, promptly notify the Collateral Agent and (y) to the extent the
Grantors shall deem appropriate under the circumstances, promptly ▇▇▇ for
infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as the
Grantors shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent, from
time to time upon the Collateral Agent's reasonable request, statements and
schedules further identifying and describing the registered United States
Intellectual Property and Licenses, and such other reports in connection with
the registered United States Intellectual Property and Licenses described on
Schedule II hereto as the Collateral Agent may request, all in reasonable
detail. Following receipt by the Collateral Agent of any such statements,
schedules or reports, the Grantors shall modify this Agreement by amending
Schedule II hereto to include any registered United States Intellectual Property
or License, as the case may be, which becomes part of the Collateral under this
Agreement, and shall execute and authenticate such documents and do such acts as
shall be necessary or, in the reasonable judgment of the Collateral Agent,
advisable to subject such registered United States Intellectual Property and
Licenses to the Lien and security interest created by this Agreement.
Notwithstanding anything herein to the contrary, upon the occurrence and during
the continuance of an Event of Default, no Grantor may abandon or otherwise
permit any Intellectual Property to become invalid without the prior written
consent of the Collateral Agent, and if any Intellectual Property is infringed,
misappropriated, diluted or otherwise violated in any
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material respect by a third party, the Grantors will take such action as the
Collateral Agent shall deem appropriate under the circumstances to protect such
Intellectual Property.
(ii) If any Grantor shall, either itself or
through any agent, employee, licensee or designee, file an application for the
registration of any Trademark or Copyright or the issuance of any Patent with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, or in any similar office or agency of the United States
or any country or any political subdivision thereof, such Grantor shall give the
Collateral Agent written notice of such filing within 5 Business Days thereof.
Upon request of the Collateral Agent, each Grantor shall execute, authenticate
and deliver any and all assignments, agreements, instruments, documents and
papers as the Collateral Agent may reasonably request to evidence the Collateral
Agent's security interest hereunder in such Intellectual Property and the
General Intangibles of such Grantor relating thereto or represented thereby, and
each Grantor hereby appoints the Collateral Agent its attorney-in-fact to
execute and/or authenticate and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed, and
such power (being coupled with an interest) shall be irrevocable until the
termination of all Commitments, the indefeasible repayment of all of the
Obligations in full and the termination of each of the Loan Documents.
(i) Deposit, Commodities and Securities Accounts. Within
30 days of the date hereof, each Grantor shall cause each bank and other
financial institution referred to in Schedule IV hereto to execute and deliver
to the Collateral Agent a control agreement, in form and substance reasonably
satisfactory to the Collateral Agent, duly executed by such Grantor and such
bank or financial institution, or enter into other arrangements in form and
substance reasonably satisfactory to the Collateral Agent, pursuant to which
such institution shall irrevocably agree, inter alia, that (i) it will comply at
any time with the instructions originated by the Collateral Agent to such bank
or financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of such Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in
the absence of a continuing Event of Default, (ii) all cash, Commodity
Contracts, securities, Investment Property and other items of such Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Collateral Agent, (iii) any right of set off,
banker's Lien or other similar Lien, security interest or encumbrance shall be
fully waived as against the Collateral Agent, other than rights of set off for
the payment of its service fees and other charges directly related to the
administration of such accounts or for returned checks or other items of payment
to the extent provided in such arrangements and (iv) upon receipt of written
notice from the Collateral Agent during the continuance of an Event of Default,
such bank or financial institution shall immediately send to the Collateral
Agent by wire transfer (to such account as the Collateral Agent shall specify,
or in such other manner as the Collateral Agent shall direct) all such cash, the
value of any Commodity Contracts, securities, Investment Property and other
items held by it. Without the prior written consent of the Collateral Agent, no
Grantor shall make or maintain any Deposit Account, Commodity Account or
Securities Account except for the accounts set forth in Schedule IV hereto. The
provisions of this paragraph 5(i) shall not apply to (i) Deposit Accounts for
which the Collateral Agent is the depositary, (ii) fiduciary accounts of the
Grantors, and (iii) Deposit Accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of a
Grantor's salaried employees.
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(j) Motor Vehicles.
(i) If requested by the Collateral Agent after
the occurrence and during the continuance of an Event of Default, each Grantor
shall deliver to the Collateral Agent originals of the certificates of title or
ownership for all Motor Vehicles owned by it with the Collateral Agent listed as
lienholder, for the benefit of the Agents and the Lenders; provided that the
Collateral Agent shall not be required to be listed as the lienholder if a Motor
Vehicle is subject to a purchase money security interest permitted by Section
7.02(a) of the Financing Agreement.
(ii) Each Grantor hereby appoints the Collateral
Agent as its attorney-in-fact, effective upon the occurrence and during the
continuance of an Event of Default and terminating upon the termination of this
Agreement, for the purpose of (A) executing on behalf of such Grantor title or
ownership applications for filing with appropriate state agencies to enable
Motor Vehicles now owned or hereafter acquired by such Grantor to be retitled
and the Collateral Agent listed as lienholder thereof, (B) filing such
applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, such
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the Motor Vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until the termination of all Commitments, the indefeasible payment in full of
all of the Obligations and the termination of the Loan Documents.
(iii) Any certificates of title or ownership
delivered pursuant to the terms hereof shall be accompanied by odometer
statements for each Motor Vehicle covered thereby to the extent available.
(k) Control. Each Grantor hereby agrees to take any or
all action that may be necessary or advisable or that the Collateral Agent may
reasonably request that is consistent with the terms of this Agreement and the
other Loan Documents in order for the Collateral Agent to obtain control in
accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with respect
to the following Collateral: (i) Deposit Accounts, (ii) Electronic Chattel
Paper, (iii) Investment Property and (iv) Letter-of-Credit Rights.
(l) Inspection and Reporting. Each Grantor shall permit
the Agents or any agents or representatives thereof or such professionals or
other Persons as the Agents and the Lenders may designate (i) to examine and
make copies of and abstracts from such Grantor's records and books of account,
(ii) to visit and inspect its properties, (iii) to verify materials, leases,
notes, Accounts, Inventory and other assets of such Grantor from time to time,
(iv) to conduct audits, physical counts, appraisals and/or valuations, Phase I
and Phase II Environmental Site Assessments or examinations at the locations of
such Grantor and (v) to discuss such Grantor's affairs, finances and accounts
with any of its directors, officers, managerial employees, independent
accountants or any of its other representatives, in each case as provided in the
Financing Agreement.
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(m) Partnership and Limited Liability Company Interest.
No Grantor that is a partnership or a limited liability company shall, nor shall
any Grantor with any Subsidiary that is a partnership or a limited liability
company, permit such partnership interests or membership interests to (i) be
dealt in or traded on securities exchanges or in securities markets, (ii) become
a security for purposes of Article 8 of any relevant Uniform Commercial Code,
(iii) become an investment company security within the meaning of Section 8-103
of any relevant Uniform Commercial Code or (iv) be evidenced by a certificate.
Each Grantor agrees that such partnership interests or membership interests
shall constitute General Intangibles.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) Each Grantor hereby (i) authorizes the Collateral
Agent to file, one or more financing or continuation statements, and amendments
thereto, relating to the Collateral (including, without limitation, any such
financing statements that indicate the Collateral as "all assets" or words of
similar import) and (ii) ratifies such authorization to the extent that the
Collateral Agent has filed any such financing or continuation statements, or
amendments thereto, prior to the date hereof. A photocopy or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) Each Grantor hereby irrevocably appoints the
Collateral Agent as its attorney-in-fact and proxy, with full authority in the
place and stead of such Grantor and in the name of such Grantor or otherwise,
from time to time in the Collateral Agent's discretion, after the occurrence and
during the continuance of an Event of Default, to take any action and to execute
any instrument which the Collateral Agent may deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of a Grantor
under this Agreement), including, without limitation, (i) to obtain and adjust
insurance required to be paid to the Collateral Agent for the benefit of the
Agents and the Lenders pursuant to Section 5(e) hereof, (ii) to ask, demand,
collect, ▇▇▇ for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any Collateral, (iii) to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) or (ii) above, (iv) to file any
claims or take any action or institute any proceedings which the Collateral
Agent may deem necessary or desirable for the collection of any Collateral or
otherwise to enforce the rights of the Agents and the Lenders with respect to
any Collateral, and (v) to execute assignments, licenses and other documents to
enforce the rights of the Agents and the Lenders with respect to any Collateral.
This power is coupled with an interest and is irrevocable until the termination
of all Commitments, the indefeasible repayment of all of the Obligations in full
and the termination of each of the Loan Documents.
(c) For the purpose of enabling the Collateral Agent to
exercise rights and remedies hereunder, at such time as the Collateral Agent
shall be lawfully entitled to exercise such rights and remedies, and for no
other purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to any Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by any
Grantor, wherever the same may be located, 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 programs used for the compilation
-16-
or printout thereof. Notwithstanding anything contained herein to the contrary,
but subject to the provisions of the Financing Agreement that limit the right of
a Grantor to dispose of its property and Section 5(h) hereof, so long as no
Event of Default shall have occurred and be continuing, each Grantor may
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the ordinary
course of its business. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of a Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor's judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the termination of all Commitments, the indefeasible payment in
full of the all of the Obligations, and the termination of the Loan Documents,
the Collateral Agent (subject to Section 10(e) hereof) shall release and
reassign to the Grantors all of the Collateral Agent's right, title and interest
in and to the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever and at the Grantor's sole expense. The
exercise of rights and remedies hereunder by the Collateral Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by any Grantor in accordance with the second sentence of this clause
(c). Each Grantor hereby releases the Collateral Agent from any claims, causes
of action and demands at any time arising out of or with respect to any actions
taken or omitted to be taken by the Collateral Agent under the powers of
attorney granted herein other than actions taken or omitted to be taken through
the Collateral Agent's gross negligence or willful misconduct, as determined by
a final determination of a court of competent jurisdiction.
(d) If any Grantor fails to perform any agreement
contained herein as and when required, the Collateral Agent may itself perform,
or cause performance of, such agreement or obligation, in the name of such
Grantor or the Collateral Agent, and the expenses of the Collateral Agent
incurred in connection therewith shall be jointly and severally payable by the
Grantors pursuant to Section 8 hereof and shall be secured by the Collateral.
(e) The powers conferred on the Collateral Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession in such a manner as it would afford its own
property of a similar nature and the accounting for moneys actually received by
it hereunder, the Collateral Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i)
each Grantor shall remain liable under the Licenses and otherwise with respect
to any of the Collateral to the extent set forth therein to perform all of its
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights
hereunder shall not release any Grantor from any of its obligations under the
Licenses or otherwise in respect of the Collateral, and (iii) the Collateral
Agent shall not have any obligation or liability by reason of this Agreement
under the Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties
-17-
of any Grantor thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
SECTION 7. Remedies Upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Collateral, in addition to any other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) take absolute control of the Collateral,
including, without limitation, transfer into the Collateral Agent's name or into
the name of its nominee or nominees (to the extent the Collateral Agent has not
theretofore done so) and thereafter receive, for the benefit of the Agents and
the Lenders, all payments made thereon, give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require each Grantor to, and
each Grantor hereby agrees that it will at its expense and upon request of the
Collateral Agent forthwith, assemble all or part of the Collateral as directed
by the Collateral Agent and make it available to the Collateral Agent at a place
or places to be designated by the Collateral Agent that is reasonably convenient
to both parties, and the Collateral Agent may enter into and occupy any premises
owned or leased by any Grantor where the Collateral or any part thereof is
located or assembled for a reasonable period in order to effectuate the
Collateral Agent's rights and remedies hereunder or under law, without
obligation to any Grantor in respect of such occupation, and (iii) without
notice except as specified below and without any obligation to prepare or
process the Collateral for sale, (A) sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Collateral Agent may deem
commercially reasonable and/or (B) lease, license or dispose of the Collateral
or any part thereof upon such terms as the Collateral Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
or any other disposition of the Collateral shall be required by law, at least
five (5) days' prior notice to a Grantor of the time and place of any public
sale or the time after which any private sale or other disposition of the
Collateral is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale or other disposition of
Collateral regardless of notice of sale having been given. The Collateral Agent
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Each Grantor hereby
waives any claims against the Agents and the Lenders arising by reason of the
fact that the price at which the Collateral may have been sold at a private sale
was less than the price which might have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the Collateral Agent
accepts the first offer received and does not offer the Collateral to more than
one offeree, and waives all rights that such Grantor may have to require that
all or any part of the Collateral be marshalled upon any sale (public or
private) thereof. Each Grantor hereby acknowledges that (i) any such sale of the
Collateral by the Collateral Agent shall be made without warranty, (ii) the
Collateral Agent may specifically disclaim any warranties of title, possession,
quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and
(ii) above shall not adversely effect the commercial reasonableness of any such
sale of the Collateral. In addition to the foregoing, (i) upon notice to any
Grantor from the Collateral Agent, each Grantor shall cease any use of the
Intellectual Property or any trademark,
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patent or copyright similar thereto for any purpose described in such notice;
(ii) the Collateral Agent may, at any time and from time to time, upon five (5)
days' prior notice to any Grantor, license, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (iii) the Collateral Agent may, at any time, pursuant
to the authority granted in Section 6 hereof (such authority being effective
upon the occurrence and during the continuance of an Event of Default), execute
and deliver on behalf of a Grantor, one or more instruments of assignment of the
Intellectual Property (or any application or registration thereof), in form
suitable for filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral
and all Cash Proceeds received by the Collateral Agent in respect of any sale of
or collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Agent, be held by the Collateral Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Collateral Agent pursuant to Section 8 hereof) in
whole or in part by the Collateral Agent against, all or any part of the
Obligations in such order as the Collateral Agent shall elect, consistent with
the provisions of the Financing Agreement. Any surplus of such cash or Cash
Proceeds held by the Collateral Agent and remaining after termination of all
Commitments, the indefeasible payment in full of all of the Obligations, and the
termination of the Loan Documents, shall be paid over to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
(c) In the event that the proceeds of any such sale,
collection or realization are insufficient to pay all amounts to which the
Agents and the Lenders are legally entitled, the Grantors shall be jointly and
severally liable for the deficiency, together with interest thereon at the
highest rate specified in any applicable Loan Document for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs, expenses
and other client charges of any attorneys employed by the Collateral Agent to
collect such deficiency.
(d) Each Grantor hereby acknowledges that if the
Collateral Agent complies with any applicable state or federal law requirements
in connection with a disposition of the Collateral, such compliance will not
adversely affect the commercial reasonableness of any sale or other disposition
of the Collateral.
(e) The Collateral Agent shall not be required to marshal
any present or future collateral security (including, but not limited to, this
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of the Collateral Agent's
rights hereunder and in respect of such collateral security and other assurances
of payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that any Grantor lawfully may, such Grantor
hereby agrees that it will not invoke any law relating to the marshalling of
collateral which might cause delay in or impede the enforcement of the
Collateral Agent's rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the
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Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, each Grantor hereby irrevocably waives the benefits
of all such laws.
SECTION 8. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to defend,
protect, indemnify and hold each Indemnitee harmless from and against any and
all damages, losses, liabilities, obligations, penalties, fees, costs and
expenses (including, without limitation, reasonable legal fees, costs and
expenses of counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement); provided, however, that the Grantors shall not have any obligation
under this Section 8(a) to any Indemnitee caused by such Person's gross
negligence or willful misconduct, as determined by a final judgment of a court
of competent jurisdiction.
(b) Each Grantor jointly and severally agrees to pay to
the Collateral Agent upon demand the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral
Agent), which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder, or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to a Grantor, to it in care of the Administrative Borrower at its address
specified in the Financing Agreement and if to the Collateral Agent, to it at
its address specified in the Financing Agreement; or as to any such Person, at
such other address as shall be designated by such Person in a written notice to
such other Person complying as to delivery with the terms of this Section 9. All
such notices and other communications shall be effective (a) if sent by
certified mail, postage prepaid and return receipt requested, when received or
three (3) days after deposited in the mails, whichever occurs first, (b) if
telecopied, when transmitted and confirmation received, or (c) if delivered,
upon delivery.
SECTION 10. Security Interest Absolute. All rights of the
Agents, the Lenders and the L/C Issuer, all Liens and all obligations of each of
the Grantors hereunder shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of the Financing Agreement or any other
Loan Document, (b) any change in the time, manner or place of payment of, or in
any other term in respect of, all or any of the Obligations, or any other
amendment or waiver of or consent to any departure from the Financing Agreement
or any other Loan Document, (c) any exchange or release of, or non-perfection of
any Lien on any Collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Obligations, or (d) any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, any of the Grantors in respect of the Obligations. All
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authorizations and agencies contained herein with respect to any of the
Collateral are irrevocable and powers coupled with an interest.
SECTION 11. Miscellaneous.
(a) No amendment of any provision of this Agreement
(including any Schedule attached hereto) shall be effective unless it is in
writing and signed by each Grantor and the Collateral Agent, and no waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
therefrom, shall be effective unless it is in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of the Agents, the Lenders or
the L/C Issuer to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Agents, the Lenders and the L/C Issuer provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agents, the Lenders and
the L/C Issuer under any Loan Document against any party thereto are not
conditional or contingent on any attempt by such Person to exercise any of its
rights under any other Loan Document against such party or against any other
Person, including but not limited to, any Grantor.
(c) Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect until
the later of (A) the indefeasible payment in full of all of the Obligations and
(B) the termination of all Commitments and (ii) be binding on each Grantor and
all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Agents, the Lenders and the L/C Issuer hereunder, to the benefit
of the Agents, the Lenders and the L/C Issuer and their respective permitted
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, the Agents, the Lenders and the L/C
Issuer may assign or otherwise transfer their rights and obligations under this
Agreement and any other Loan Document in accordance with the provisions of the
Financing Agreement, to any other Person and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted to the Agents,
the Lenders and the L/C Issuer herein or otherwise. Upon any such permitted
assignment or transfer, all references in this Agreement to any such Agent, any
such Lender or the L/C Issuer shall mean the assignee of such Agent, such Lender
or such L/C Issuer. None of the rights or obligations of any Grantor hereunder
may be assigned or otherwise transferred without the prior written consent of
the Collateral Agent, and any such assignment or transfer shall be null and
void.
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(e) Upon the satisfaction in full of the Obligations and
the termination of the Loan Documents, (i) this Agreement and the security
interests and licenses created hereby shall terminate and all rights to the
Collateral shall revert to the Grantors and (ii) the Collateral Agent will, upon
the Grantors' request and at the Grantors' expense, without any representation,
warranty or recourse whatsoever, (A) return to the Grantors such of the
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof and (B) execute and deliver to the Grantors such
documents as the Grantors shall reasonably request to evidence such termination.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR
NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
(h) EACH OF THE GRANTORS (AND BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS AGREEMENT, THE COLLATERAL AGENT) WAIVES ANY RIGHT IT MAY HAVE
TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.
(i) Each Grantor irrevocably consents to the service of
process of any of the aforesaid courts in any such action, suit or proceeding by
the mailing of copies thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such
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Grantor at its address provided herein, such service to become effective ten
(10) days after such mailing.
(j) Nothing contained herein shall affect the right of
the Collateral Agent to serve process in any other manner permitted by law or
commence legal proceedings or otherwise proceed against any Grantor or any
property of any Grantor in any other jurisdiction.
(k) Each Grantor irrevocably and unconditionally waives
any right it may have to claim or recover in any legal action, suit or
proceeding referred to in this Section any special, exemplary, punitive or
consequential damages.
(l) Section headings herein are included for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
(m) This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together
constitute one in the same Agreement. Delivery of an executed counterpart of
this Agreement by facsimile shall be equally effective as delivery of an
original executed counterpart.
(n) All of the obligations of the Grantors hereunder are
joint and several. The Collateral Agent may, in its sole and absolute
discretion, enforce the provisions hereof against any of the Grantors and shall
not be required to proceed against all Grantors jointly or seek payment from the
Grantors ratably. In addition, the Collateral Agent may, in its sole and
absolute discretion, select the Collateral of any one or more of the Grantors
for sale or application to the Obligations, without regard to the ownership of
such Collateral, and shall not be required to make such selection ratably from
the Collateral owned by all of the Grantors. The release or discharge of any
Grantor by the Collateral Agent shall not release or discharge any other Grantor
from the obligations of such Person hereunder.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to
be executed and delivered by its officer thereunto duly authorized, as of the
date first above written.
GRANTORS:
AAIPHARMA INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Executive Vice President and Chief
Financial Officer
APPLIED ANALYTICAL INDUSTRIES
LEARNING CENTER, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
AAI TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
AAI PROPERTIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
AAI JAPAN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
KANSAS CITY ANALYTICAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
AAI DEVELOPMENT SERVICES, INC.
a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
AAIPHARMA LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
AAI DEVELOPMENT SERVICES, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Jr.
Vice President
Agreed and accepted this
23rd day of April 2004:
SILVER POINT FINANCE, LLC,
As Collateral Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Financial Officer