Exhibit 4.6
SECURITY AGREEMENT
SECURITY AGREEMENT ("Agreement") dated as of December 29, 1997 among
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TUESDAY MORNING CORPORATION, a Delaware corporation ("Borrower"); EACH OF THE
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SUBSIDIARIES party hereto (the "Subsidiary Guarantors"); and FLEET NATIONAL
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BANK, as administrative agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "Administrative
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Agent").
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Borrower, the Subsidiary Guarantors, certain lenders, ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Co., as Arranger and Syndication Agent, and the Administrative Agent are parties
to a Credit Agreement dated as of the date hereof (as amended, amended and
restated or otherwise modified and supplemented and in effect from time to time,
the "Credit Agreement"), providing, subject to the terms and conditions thereof,
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for extensions of credit (by the making of loans and the issuance of letters of
credit) to be made by said lenders to Borrower.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Debtor (as
hereinafter defined) has agreed to pledge, mortgage and grant a security
interest in the Pledged Collateral (as hereinafter defined) as security for the
Secured Obligations (as hereinafter defined). Accordingly, the parties hereto
agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
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used herein as defined therein. In addition, as used herein:
"Accounts" see Section 3(f) hereof.
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"Agreement" see the introduction hereto.
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"Collateral Account" see Section 4.01(a) hereof.
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"Contracts" shall mean all contracts, undertakings, or other
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agreements, including, without limitation, all documents, agreements and
instruments relating to any Acquisition, as the same may be amended from time to
time, and including, without limitation, (a) all rights of any Debtor to receive
moneys due and to become due thereunder or in connection therewith, (b) all
rights of any Debtor to damages arising out of or for breach or default in
respect thereof, and (c) all rights of any Debtor to exercise remedies
thereunder.
"Copyright Collateral" shall mean all Copyrights, whether now owned or
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hereafter acquired by any Debtor, including each Copyright identified in Annex 2
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hereto. Notwithstanding the foregoing, the Copyright Collateral does not and
shall not include any Copyright that would be rendered invalid, abandoned, void
or unenforceable by reason of its being included as part of Copyright
Collateral.
"Copyrights" shall mean all copyrights, copyright registrations and
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applications for copyright registrations, including, without limitation, all
renewals and extensions thereof, the right to recover for all
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past, present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Debtor" shall mean each of Borrower and each Subsidiary Guarantor.
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"Documents" see Section 3(l) hereof.
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"Equipment" see Section 3(j) hereof.
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"Instruments" see Section 3(g) hereof.
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"Intellectual Property" shall mean, collectively, all Copyright
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Collateral, all Patent Collateral and all Trademark Collateral, together with
(a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements granted
to any Debtor with respect to any of the foregoing, in each case whether now or
hereafter owned or used including, without limitation, the licenses or other
agreements with respect to the Copyright Collateral, the Patent Collateral or
the Trademark Collateral, listed in Annex 5 hereto; (c) all information,
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customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys, engineering
reports, test reports, manuals, materials standards, processing standards,
performance standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data and other information relating
to sales or service of products now or hereafter manufactured; (e) all
accounting information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer
programs used for the compilation or printout of such information, knowledge,
records or data; (f) all licenses, consents, permits, variances, certifications
and approvals of governmental agencies now or hereafter held by any Debtor; and
(g) all causes of action, claims and warranties now or hereafter owned or
acquired by the Debtors in respect of any of the items listed above.
"Interests" shall mean, as to any Debtor (i) all right, title and
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interest, now existing or hereafter acquired, of such Debtor in any LLC but not
any of its obligations from time to time as a member (unless the Administrative
Agent shall become a member as a result of its express exercise of remedies
herein) of any LLC; (ii) any and all moneys due and to become due to such Debtor
now or in the future by way of a distribution made to such Debtor in its
capacity as a member of or an owner of any LLC; (iii) any other Property of any
LLC to which such Debtor now or in the future may be entitled in its capacity as
a member of or an owner of any LLC by way of distribution, return of capital or
otherwise; (iv) any other claim in respect of any LLC to which such Debtor now
or in the future may be entitled in its capacity as a member of or an owner of
any LLC and its Property, including any rights under any operating agreement or
other agreement governing or pertaining to such interests; (v) the certificates,
if any, representing all such rights and interests; (vi) all rights of such
Debtor under each limited liability company or operating agreement of each LLC;
and (vii) to the extent not otherwise included, all proceeds of any of the
foregoing.
"Inventory" see Section 3(h) hereof.
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"Issuers" shall mean, collectively, the respective corporations
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identified beneath the names of the Debtors on Annex 1A hereto under the caption
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"Issuer," together with any corporation created or acquired after the date
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hereof, the capital stock of which is required to be pledged hereunder pursuant
to this Agreement or the Credit Agreement.
"LLC" shall mean, collectively, the respective limited liability
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companies identified beneath the name of the Debtors on Annex 1A hereto under
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the caption "LLC", together with any limited liability company created or
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acquired after the date hereof, the Interests in which are required to be
pledged hereunder pursuant to this Agreement or the Credit Agreement.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
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other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Partnership" shall mean, collectively, the respective partnerships
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identified beneath the name of the Debtors on Annex 1A hereto under the caption
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"Partnership", together with any partnerships created or acquired after the date
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hereof, the Partnership Interests in which are required to be pledged hereunder
pursuant to this Agreement or the Credit Agreement.
"Partnership Interests" shall mean, as to any Debtor (i) all right,
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title and interest, now existing or hereafter acquired, of such Debtor in any
Partnership but not any of its obligations from time to time as a partner
(unless the Administrative Agent shall become a partner as a result of its
express exercise of remedies herein) of any Partnership; (ii) any and all moneys
due and to become due to such Debtor now or in the future by way of a
distribution made to such Debtor in its capacity as a member of or an owner of
any Partnership; (iii) any other Property of any Partnership to which such
Debtor now or in the future may be entitled in its capacity as a member of or an
owner of any Partnership by way of distribution, return of capital or otherwise;
(iv) any other claim in respect of any Partnership to which such Debtor now or
in the future may be entitled in its capacity as a member of or an owner of any
Partnership and its Property, including any rights under any partnership
agreement or other document governing or pertaining to such interests; (v) the
certificates, if any, representing all such rights and interests; (vi) all
rights of such Debtor under each partnership agreement or limited partnership
agreement of each Partnership; and (vii) to the extent not otherwise included,
all proceeds of any of the foregoing.
"Patent Collateral" shall mean all Patents, whether now owned or
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hereafter acquired by any Debtor, including each Patent identified in Annex 3
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hereto, excluding, however, the Patents identified as "Excluded Patents" on said
Annex 3. Notwithstanding the foregoing, the Patent Collateral does not and
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shall not include any Patent that would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of Patent Collateral.
"Patents" shall mean all patents and patent applications, including,
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without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect thereto,
including, without limitation, damages and payments
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for past or future infringements thereof, the right to ▇▇▇ for past, present and
future infringements thereof, and all rights corresponding thereto throughout
the world.
"Permitted Encumbrances" shall mean (a) with respect to the Securities
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Collateral, the Intellectual Property Collateral, the Collateral Account and the
proceeds of each of the foregoing, Liens of the type described in clause (b),
(h), (k) and (w) of the definition of Permitted Liens and (b) with respect to
all other Pledged Collateral, Liens of the type described in clauses (a), (b),
(c), (f), (g), (h), (j), (k), (m), (n), (o), (p), (q), (r), (t), (u), (v) and,
to the extent the original Lien is permitted hereunder, (l), of the definition
of Permitted Liens.
"Pledged Collateral" see Section 3 hereof.
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"Pledged Interests" see Section 3(d) hereof.
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"Pledged Obligations" shall mean all of each Debtor's right, title and
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interest, if any, in and to any and all obligations owed to such Debtor by any
Person, whether now existing or hereafter incurred, and in and to all collateral
granted to such Debtor or for the benefit of such Debtor as collateral security
for such obligations.
"Pledged Securities" shall mean the Pledged Interests and the Pledged
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Stock, collectively.
"Pledged Stock" see Section 3(a) hereof.
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"Prior Liens" shall mean (a) the Liens set forth on Schedule 3 hereto
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and (b) with respect to each applicable type of Pledged Collateral, Permitted
Encumbrances, but only to the extent that the law or regulation creating or
authorizing such Lien provides that such Lien must be superior to the Lien and
security interest created and evidenced by this Agreement.
"Secured Obligations" shall mean, collectively, (a) the principal of
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and interest (including any interest that would accrue but for the provisions of
the Bankruptcy Code) on the Loans made by the Lenders to, and the Notes held by
each Lender of, Borrower and all other amounts from time to time owing to the
Creditors by Borrower under the Credit Documents, including, without limitation,
all Reimbursement Obligations and interest thereon, (b) all obligations of
Borrower or any other Obligor arising under any Swap Contract between Borrower
or any other Obligor and any Lender or any Affiliate of any Lender, (c) all
obligations of the Subsidiary Guarantors under the Credit Agreement and the
other Credit Documents (including, without limitation, in respect of their
Guarantees under Section 6 of the Credit Agreement), and (d) all obligations of
the Debtors to the Creditors hereunder.
"Securities Act" shall mean the United States Securities Act of 1933,
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as amended.
"Securities Collateral" shall mean, collectively, the Pledged
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Collateral described in clauses (a) through (e) of Section 3 hereof and the
proceeds of and to any such property and, to the extent related to any such
property or such proceeds, all books, correspondence, credit files, records,
invoices and other papers.
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"Trademark Collateral" shall mean all Trademarks, whether now owned or
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hereafter acquired by any Debtor, including each Trademark identified in Annex 4
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hereto. Notwithstanding the foregoing, the Trademark Collateral does not and
shall not include any Trademark that would be rendered invalid, abandoned, void
or unenforceable by reason of its being included as part of the Trademark
Collateral.
"Trademarks" shall mean all trade names, trademarks and service marks,
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logos, trademark and service ▇▇▇▇ registrations, and applications for trademark
and service ▇▇▇▇ registrations, including, without limitation, all renewals of
trademark and service ▇▇▇▇ registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service ▇▇▇▇.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
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effect from time to time in each applicable jurisdiction.
"Voting Powers" see Section 5.04(a)(2) hereof.
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Section 2. Representations, Warranties and Covenants. Each Debtor
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represents and warrants to and covenants and agrees with the Creditors that:
(a) Such Debtor is the sole beneficial (and, with respect to the
Pledged Securities, record) owner of, or holds valid and subsisting leases
or licenses to, the Pledged Collateral in which it purports to grant a
security interest pursuant to Section 3 hereof and no Lien exists or will
exist upon such Pledged Collateral at any time (and no right or option to
acquire the same (other than those, if any, arising in the ordinary course
of business with respect to Dispositions permitted under the Credit
Agreement) exists in favor of any other Person), except for Prior Liens,
Permitted Encumbrances and the pledge and security interest in favor of the
Administrative Agent for the benefit of the Lenders created or provided for
herein, which pledge and security interest shall constitute a first
priority perfected pledge and security interest in and to all of such
Pledged Collateral (except with respect to Pledged Collateral as to which
perfection is not presently required) subject only to Prior Liens and
except for permitted dispositions each Debtor will make no assignment,
pledge, hypothecation or transfer of, or create or permit to exist any
security interest in or other Lien on, the Pledged Collateral, other than
Prior Liens, Permitted Encumbrances and the Lien pursuant hereto; and,
subject to Section 5.04 hereof, will cause any and all Pledged Securities,
to the extent certificated, whether for value paid by any Debtor or
otherwise, to be forthwith deposited with the Administrative Agent and
pledged or assigned hereunder.
(b) The Pledged Stock represented by the certificates identified
under the name of such Debtor in Annex 1A hereto is, and all other Pledged
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Stock in which such Debtor shall hereafter grant a security interest
pursuant to Section 3 hereof will be, duly authorized, validly existing,
fully paid and non-assessable and none of such Pledged Stock is or will be
subject to any contractual restric
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tion, or any restriction under the charter or by-laws of the respective
Issuer of such Pledged Stock, upon the transfer of such Pledged Stock
(except for any such restriction contained herein or in the Credit
Agreement or as permitted by the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified
under the name of such Debtor in Annex 1A hereto constitutes (x) with
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respect to each Subsidiary other than a Foreign Subsidiary all of the
issued and outstanding shares of capital stock of any class of such Issuers
beneficially owned by such Debtor, and (y) with respect to each first tier
Foreign Subsidiary, all of the issued and outstanding shares of capital
stock of any class of such Issuers beneficially owned by such Debtor which
in the aggregate represent not less than (and, subject to Section 3(a)
hereof, not more than) 65% of the total combined voting power of all
classes of capital stock of any such Issuer (in each case, whether or not
registered in the name of such Debtor) and said Annex 1A correctly
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identifies, as at the date hereof, or, with respect to any Issuer created
or acquired after the date hereof, as of the date of pledge hereunder, the
respective Issuers of such Pledged Stock, the respective class and par
value of the shares comprising such Pledged Stock and the respective number
of shares (and registered owners thereof) represented by each such
certificate.
(d) The Pledged Obligations identified on Annex 1B hereto constitute
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all of the Pledged Obligations of such corporations as identified on Annex
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1B hereto, and, other than the Pledged Obligations, no Debtor owns,
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directly or indirectly, any other Pledged Obligations of any Subsidiary
(other than a Foreign Subsidiary).
(e) Annexes 2, 3 and 4 hereto, respectively, set forth under the name
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of such Debtor a complete and correct list of all material Copyrights,
Patents and Trademarks owned by such Debtor on the date hereof, which have
been registered or for which an application for registration has been made.
Except pursuant to licenses and other user agreements entered into by such
Debtor in the ordinary course of business that are listed in Annex 5
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hereto, (i) such Debtor owns and possesses the right to use, and has done
nothing to authorize or enable any other Person to use, any Copyright,
Patent or Trademark listed in said Annexes 2, 3 and 4, and (ii) all
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registrations listed in said Annexes 2, 3 and 4 are valid and in full force
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and effect. Except as may be set forth in said Annex 5, such Debtor owns
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and possesses the right to use all Copyrights, Patents and Trademarks
material to its business.
(f) Annex 5 hereto sets forth a complete and correct list of all
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material licenses and other user agreements included in the Intellectual
Property.
(g) To such Debtor's knowledge: (i) except as set forth in Annex 5
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hereto, there is no violation by others of any right of such Debtor with
respect to any material Copyright, Patent or Trademark listed in Annexes 2,
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3 and 4 hereto, respectively, under the name of such Debtor, and (ii) such
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Debtor is not infringing in any respect upon any material Copyright, Patent
or Trademark of any other Person; and no proceedings have been instituted
or are pending against such Debtor or, to such Debtor's knowledge,
threatened, and no claim
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against such Debtor has been received by such Debtor, alleging any such
violation, except as may be set forth in said Annex 5.
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(h) Any goods now or hereafter produced by such Debtor or any of its
Subsidiaries included in the Pledged Collateral have been and will be
produced by such Debtor in compliance with the applicable requirements of
the Fair Labor Standards Act of 1938, as amended, except where the failure
to comply could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(i) The Interests of each Debtor identified under the name of such
Debtor on Annex 1A hereto pledged hereunder, and in respect of which a
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security interest has been granted hereunder, constitute all of the issued
and outstanding Interests, limited liability company interests or other
ownership or equity interests in any LLC owned by the Debtors; the
Partnership Interests of each Debtor identified under the name of such
Debtor on Annex 1A hereto pledged hereunder, and in respect of which a
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security interest has been granted hereunder, constitute all of the issued
and outstanding Partnership Interests or other ownership or equity
interests in any Partnership owned by the Debtors; and none of the Pledged
Interests is or will be subject to any contractual restriction, or any
restriction under the organizational or other organic documents of the
respective issuer of such Pledged Interests upon the transfer of such
Pledged Interests (except for any such restriction contained herein or in
the Credit Agreement or as permitted by the Credit Agreement). The Pledged
Interests have been duly authorized and validly issued, and all payments
required to be made by any holder of such Pledged Interests in respect of
such interests have been made.
(j) Each Debtor has the corporate power and authority to grant the
security interest in the Pledged Collateral pursuant to this Agreement and
has taken all necessary corporate action to grant the security interest in
the Pledged Collateral pursuant to this Agreement.
(k) None of the Pledged Stock constitutes margin stock, as defined in
Regulation G or Regulation U of the Board of Governors of the Federal
Reserve System.
(l) Other than Prior Liens and Permitted Encumbrances, no security
agreement, financing statement, equivalent security or lien instrument or
continuation statement covering all or part of the Pledged Collateral is on
file or of record in any public office, except such as may have been or
will be filed in favor of the Administrative Agent in favor of the
Creditors pursuant to this Agreement.
(m) Upon filing of the financing statements in the offices referred
to on Schedule 1 hereto, the security interest created by this Agreement in
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all Pledged Collateral other than the Pledged Securities and other Pledged
Collateral which is either not disclosed in the financing statements or as
to which filing a financing statement is not the sole perfection method
will constitute a valid, perfected first priority security interest
(subject to prior liens) in such Pledged Collateral to the extent provided
in the Uniform Commercial Code, enforceable in accordance with its terms
against all creditors of such Debtor and any Persons purporting to purchase
any such Pledged Col
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lateral from such Debtor, except as enforcement of such security interest
may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or general equitable principles (whether
considered in a proceeding in equity or at law), and except that the
priority of any security interest is subject to the priority rules
established by the Uniform Commercial Code and the enforceability of any
security interest against other creditors and purchasers is subject to the
provisions of the Uniform Commercial Code and of the Credit Agreement and
other Credit Documents that provide in certain circumstances for purchasers
and other creditors to take free of a prior perfected or unperfected
security interest or otherwise limit the enforceability, priority or effect
of any such security interest.
(n) The Interests in each LLC and the Partnership Interests in each
Partnership are not represented by certificates.
(o) Each Debtor's principal place of business, chief executive office
and the place where its records concerning the Pledged Collateral are kept
is at the address listed on Schedule 2 hereto, and such Pledgor will not
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change such principal place of business or chief executive office or remove
such records without giving the Administrative Agent at least 30 days prior
written notice thereof and taking such action to maintain the perfection or
priority of the Administrative Agent's security interest in the Pledged
Collateral as is necessary or reasonably requested by the Administrative
Agent; and such Debtor will not change its name, identity or structure in
any manner, or take any other action, which might make any financing
statement filed in respect of the Pledged Collateral seriously misleading
unless it shall have given the Administrative Agent at least 30 days prior
written notice thereof.
(p) No consent or approval of any Governmental Authority or any
securities exchange or any other Person was or is necessary for the
validity of the security interest granted herein and the pledge effected
hereby.
(q) By virtue of the execution and delivery by the Debtors of this
Agreement, when the Pledged Securities, certificates, instruments or other
documents representing or evidencing such Pledged Securities are delivered
to the Administrative Agent in accordance with this Agreement, duly
endorsed or, in the case of Pledged Securities constituting uncertificated
securities, when the steps required by Articles 8 and 9 of the Uniform
Commercial Code have been taken to perfect the Administrative Agent's
security interest therein, the security interest created by this Agreement
in the Pledged Securities to the extent provided in the Uniform Commercial
Code is enforceable in accordance with its terms against all creditors of
such Debtor and any Person purporting to purchase any such Pledged
Collateral from such Debtor, except as enforcement of such security
interest may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or general equitable principles (whether
considered in a proceeding in equity or at law), and except that the
priority of any security interest is subject to the priority rules
established by the Uniform Commercial Code and the enforceability of any
security interest against other creditors and purchasers is sub-
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ject to the provisions of the Uniform Commercial Code and of the Credit
Agreement and other Credit Documents that provide in certain circumstances
for purchasers and other creditors to take free of a prior perfected or
unperfected security interest or otherwise limit the enforceability,
priority or effect of any such security interest.
(r) There are no restrictions upon the voting rights associated with,
or upon the transfer of, any of the Pledged Securities. The Pledged
Securities are not subject to any put, call, option or other right in favor
of any other Person whatsoever.
(s) Neither the execution and delivery of this Agreement by each
Debtor nor the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof (i) violates any Debtor's, or any of its
Subsidiaries', charter or by-laws or any organizational or other organic
document of any Issuer, LLC or Partnership, (ii) violates the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease, instrument
or other document to which any Debtor, or any of its Subsidiaries, is a
party, or by which any of them may be bound or to which any of their
Property may be subject, which violation or conflict, individually or in
the aggregate, would have a Material Adverse Effect, or a material adverse
effect on the value of the Pledged Collateral taken as a whole or a
material adverse effect on the security interests hereunder (it being
understood that each Debtor makes no representation that upon foreclosure
the fair market value or fair value or any particular value would be
realized), or (iii) conflicts with any law, order, rule or regulation
applicable to any Debtor, or any of its Subsidiaries, of any Governmental
Authority having jurisdiction over any Debtor, or any of its Subsidiaries,
or their Property, or (iv) results in or requires the creation or
imposition of any Lien (other than the Lien contemplated hereby) upon or
with respect to any of the Property now owned or hereafter acquired by any
Debtor, or any of its Subsidiaries.
(t) Upon reasonable request to a Debtor, the Administrative Agent
shall have full and free access during normal business hours to all of the
books, correspondence and records of such Debtor relating to the Pledged
Collateral, and the Administrative Agent and its representatives may
examine the same, take extracts therefrom and make photocopies thereof, and
such Debtor agrees to render to the Administrative Agent, at such Debtor's
cost and expense, such clerical and other assistance as may be reasonably
requested by the Administrative Agent with regard thereto.
(u) In the event that the Administrative Agent desires to exercise
any remedies, voting or consensual rights or attorney-in-fact powers set
forth in this Agreement and determines it necessary to obtain any approvals
or consents of any Governmental Authority or any other Person therefor,
then, upon the reasonable request of the Administrative Agent, each Debtor
agrees to use its diligent best efforts to assist and aid the
Administrative Agent to obtain as soon as practicable any necessary
Approvals for the exercise of any such remedies, rights and powers.
(v) There are no voting trusts or other agreements or understandings
to which any Debtor is a party or by which it may be bound
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with respect to voting, managerial consent, election or other rights of any
Debtor relating to the Pledged Securities.
(w) Such Debtor is not in default in the payment of any portion of
any mandatory capital contribution, if any, required to be made under any
agreement to which such Debtor is a party relating to its Interests or
Partnership Interests, and such Debtor is not in violation of any other
material provisions of any such agreement to which such Debtor is a party,
or otherwise in default or violation thereunder; no Interest or Partnership
Interest is subject to any defense, offset or counterclaim, nor have any of
the foregoing been asserted or alleged against such Debtor by any Person
with respect thereto and as of the date hereof, there are no certificates,
instruments, documents or other writings (other than the operating
agreements, partnership agreements and certificates, if any, delivered to
the Administrative Agent) which evidence any Interest or Partnership
Interest of such Debtor.
Section 3. Pledged Collateral; Registration of Pledge of Pledged
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Interests; Acknowledgments; Delivery of Pledged Securities and Pledged
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Obligations. (a) As collateral security for the prompt payment in full when
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due (whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations owing by such Debtor, each Debtor hereby pledges and mortgages to
the Administrative Agent, for the benefit of the Creditors as hereinafter
provided, and grants to the Administrative Agent, for the benefit of the
Creditors as hereinafter provided, a security interest in, all of such Debtor's
right, title and interest in the following property, whether now owned by such
Debtor or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Pledged Collateral"):
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(a) the shares of common and/or preferred stock of the Issuers
represented by the certificates identified in Annex 1A hereto under the
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name of such Debtor and each other corporation hereafter acquired or formed
by any Debtor and all other shares of capital stock of whatever class of
the Issuers now or hereafter owned by such Debtor and all Equity Rights of
any such Issuer which is a first tier Foreign Subsidiary owned by any
Debtor, in each case together with the certificates evidencing the same,
subject, in the case of any Foreign Subsidiary, to the limitation that
shares of capital stock of any such Issuer which represent in excess of 65%
of the combined voting power of all classes of capital stock of such Issuer
shall not be pledged and that no shares of any Foreign Subsidiary which is
not a first tier Foreign Subsidiary shall be pledged; provided, however,
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that if following a change in the relevant sections of the Code or the
regulations, rules, rulings, notices or other official pronouncements
issued or promulgated thereunder which would permit a pledge of 66-2/3% or
more of the total combined voting power of all classes of capital stock of
any Foreign Subsidiary entitled to vote without causing the undistributed
earnings of such Foreign Subsidiary as determined for United States Federal
income taxes to be treated as a deemed dividend to the Debtors for United
States Federal income tax purposes, then the 65% limitation set forth above
shall no longer be applicable and the Debtors shall duly pledge and deliver
to the Administrative Agent such of the capital stock not theretofore
required to be pledged hereunder (collectively, the "Pledged Stock");
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(b) all shares, securities, moneys or Property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) all Pledged Obligations identified on Annex 1B hereto under the
--------
name of any Debtor; provided, however, if following a change in the
-------- -------
relevant sections of the Code or the regulations, rules, rulings, notices
or other official pronouncements issued or promulgated thereunder which
would permit a pledge of any promissory note issued by any Foreign
Subsidiary without causing the undistributed earnings of such Foreign
Subsidiary as determined for United States Federal income taxes to be
treated as a deemed dividend to the Pledgor for United States Federal
income tax purposes, then each Debtor shall duly pledge and deliver to the
Administrative Agent such of the Pledged Obligations of each Foreign
Subsidiary not theretofore required to be pledged hereunder;
(d) all Interests or Partnership Interests now or hereinafter owned
by any Debtor and any limited liability company interest, partnership
interest or other ownership or equity securities or certificate (including,
without limitation, any certificate representing a distribution in
connection with any reclassification, increase or reduction of capital or
any certificate issued in connection with any reorganization), option or
rights, whether in addition to, in substitution of, as a conversion of, or
in exchange for Interests or Partnership Interests, or otherwise in respect
thereof (collectively, the "Pledged Interests");
-----------------
(e) without affecting the obligations of such Debtor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which an Issuer, LLC or
Partnership is not the surviving corporation, all shares of each class of
the capital stock of the successor corporation or interests or certificates
of the successor limited liability company or partnership owned by the
Debtors (unless such successor is such Debtor itself) formed by or
resulting from such consolidation or merger;
(f) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Debtor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Debtor in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to such Debtor under any
guarantee (including a letter of credit) of the purchase price of
Inventory or Equipment sold by such Debtor and all tax refunds (such
accounts, general intangibles and moneys due and to become due being herein
called collectively "Accounts");
--------
(g) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Debtor evidencing,
representing, arising from or existing in respect of, relating to, or
securing or otherwise supporting the payment of, any of the Accounts,
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including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments");
-----------
(h) all inventory (as defined in the Uniform Commercial Code) of such
Debtor, all goods obtained by such Debtor in exchange for such inventory,
any products made or processed from such inventory including all
substances, if any, commingled therewith or added thereto, and any such
inventory as is temporarily out of such Debtor's custody or possession,
including inventory held by others on consignment, inventory on the
premises of others and items in transit (herein collectively called
"Inventory");
----------
(i) all intellectual property and all other accounts or general
intangibles (each as defined in the Uniform Commercial Code) which is not
otherwise within the definition of Intellectual Property or Accounts;
(j) all equipment (as defined in the Uniform Commercial Code) of such
Debtor, including all Motor Vehicles (herein collectively called
"Equipment");
---------
(k) all Contracts;
(l) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of such Debtor covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
---------
(m) all rights, claims and benefits of such Debtor against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by such Debtor, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;
(n) the balance from time to time in the Collateral Account;
(o) all other tangible and intangible personal property and fixtures
of such Debtor, including, without limitation, all proceeds, products,
accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Debtor described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by any Debtor in respect of any of the
items listed above) and, to the extent related to any property described in
said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Debtor or any
computer bureau or service company from time to time acting for such
Debtor; and
(p) all Intellectual Property.
Notwithstanding the foregoing, the Pledged Collateral does not and shall not
include any Contract, lease or license (or any property subject to any
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such lease or license) to which any Debtor is a party which would be rendered
void or unenforceable by reason of its being included as part of the Pledged
Collateral or which is not assignable by its terms, or any property subject to a
purchase money security interest permitted under the Credit Agreement which
under the terms of such purchase money security interest or related
documentation may not be further encumbered or transferred, unless a consent to
the assignment has been received by such Debtor and/or the Administrative Agent.
(b) Concurrently with the execution of this Agreement and with the
creation or acquisition of any securities or interests in any Issuer, LLC or
Partnership the securities or interests in which are required pursuant to the
terms hereof or of the Credit Agreement to be pledged hereunder, each Debtor
shall deliver to the Administrative Agent an Acknowledgment in form of Exhibit B
---------
hereto of each Issuer, LLC or Partnership whose securities or interests are
Pledged Securities hereunder.
(c) Each Debtor hereby delivers to the Administrative Agent all of
the certificates evidencing the Pledged Stock owned by such Debtor which is
represented by certificates, endorsed in blank or accompanied with appropriate
undated stock powers executed in blank. If at any time any Pledged Stock which
is not represented by a certificate shall be represented by one or more
certificates, then each Debtor shall promptly deliver the same to the
Administrative Agent accompanied by stock powers duly executed in blank, with
signature properly guaranteed. All other shares of Pledged Stock subsequently
acquired by each Debtor shall be pledged to the Administrative Agent and if
represented by a certificate, certificates representing the same shall be
delivered to the Administrative Agent contemporaneously with the acquisition
thereof, accompanied by stock powers duly executed in blank, with signature
properly guaranteed.
(d) Each Debtor has executed and delivered to the Administrative
Agent such financing statements as the Administrative Agent has requested with
respect to that portion of the Pledged Collateral in which a Lien may be
perfected by the filing of a financing statement against such Debtor. Each
Debtor has caused the Lien of the Administrative Agent in and to the Interests
and the Partnership Interests to be registered upon the books of the issuers of
such Interests and Partnership Interests. If at any time any Interests or
Partnership Interests shall be represented by one or more certificates or by any
documents that are instruments (as defined in the Uniform Commercial Code), then
the appropriate Debtor shall promptly deliver the same to the Administrative
Agent accompanied by duly executed transfer powers endorsed in blank respecting
such certificates or documents, with signature properly guaranteed.
(e) Each Debtor hereby delivers to the Administrative Agent all of
the promissory notes, instruments and agreements evidencing the Pledged
Obligations held by such Debtor in suitable form for transfer by endorsement and
delivery or accompanied by duly executed instruments of transfer or assignment
in blank. If any Debtor shall become entitled to receive or shall receive any
promissory notes, instruments or agreements constituting Pledged Collateral
after the date hereof (including, without limitation, any certificate
representing any distribution in connection with any recapitalization,
reclassification or increase or reduction of capital, or issued in connection
with any reorganization of the obligor on any Pledged Obligations) in respect of
the Pledged Obligations, such Debtor agrees: (i) to accept the same as the
agent of the Administrative Agent, (ii) to hold the same in trust on behalf of
and for the benefit of the Ad-
-14-
ministrative Agent, and (iii) to deliver any and all promissory notes,
instruments or agreements evidencing the same to the Administrative Agent within
ten (10) days following the receipt thereof by such Debtor, in the exact form
received, with the endorsement in blank of such Debtor when necessary and with
an appropriate undated instrument of transfer or assignment duly executed in
blank (with signature properly guaranteed), to be held by the Administrative
Agent subject to the terms of this Agreement, as additional Pledged Collateral.
(f) Each delivery of such Pledged Securities or Pledged Obligations
after the date hereof shall be accompanied by a schedule describing the
securities and/or indebtedness theretofore and then being pledged hereunder,
which schedule shall be attached hereto and made a part hereof. Each schedule
so delivered shall supersede any prior schedules so delivered.
Notwithstanding the foregoing provisions of this Section 3, the
Pledged Collateral shall not include property or assets hereafter acquired by
Debtor in accordance with clause (g), (h) or (l) of the definition of Permitted
Liens in the Credit Agreement; provided, that at such time, in the case of
--------
clause (g) or (l), as such property or asset is no longer subject to any Lien or
security interest securing purchase money or Capital Lease in respect of such
property or asset, or in the case of clause (h) at the said time as such
property or asset is no longer subject to any Lien or security interest
permitted under such clause (h), such property or asset shall (without any act
or delivery by any Person) constitute Pledged Collateral hereunder.
Section 4. Cash Proceeds of Collateral.
---------------------------
4.01. Collateral Account.
------------------
(a) There is hereby established with the Administrative Agent a cash
collateral account (the "Collateral Account") in the name and under the control
------------------
of the Administrative Agent (1) into which there shall be deposited from time to
time (i) the cash proceeds (including pursuant to any Disposition thereof) of
any of the Pledged Collateral (other than in accordance with 9.19 of the Credit
Agreement), (ii) the cash proceeds of any Taking or Destruction or loss of title
with respect to any Real Property (including proceeds of Casualty Events and
proceeds of insurance covering the Pledged Collateral or any Real Property), and
(iii) any cash in respect of any Pledged Collateral which the Administrative
Agent is entitled to pursuant to Section 5.04 hereof, and (2) into which the
Debtors may from time to time deposit any additional amounts that any of them
wishes to pledge to the Administrative Agent for the benefit of the Lenders as
additional collateral security hereunder and which, as provided in Section 10 of
the Credit Agreement, it is required to pledge as additional collateral security
hereunder.
(b) The balance from time to time in the Collateral Account shall
constitute part of the Pledged Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided. So
long as no Event of Default has occurred and is continuing, the Administrative
Agent shall, subject to the further provisions hereof, remit the collected
balance outstanding to the credit of the Collateral Account to or upon the order
of the respective Debtor as such Debtor shall from time to time instruct;
provided, however, that any amounts deposited
-------- -------
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in the Collateral Account in respect of any Disposition effected pursuant to
Section 9.06(g) or (h) or 9.19(A)(i)(d) of the Credit Agreement or Casualty
Events or Takings, Destructions or loss of title with respect to Real Property
shall be disbursed to the relevant Debtor in periodic installments upon
submission of reasonable evidence that such amount is to be applied as permitted
by Section 2.10(a) or 9.19 of the Credit Agreement, and any amounts deposited in
the Collateral Account in respect of prepayments or reductions of Loans or
Commitments under Section 2.10 of the Credit Agreement which are to be applied
to LIBOR Loans as provided in the penultimate sentence of Section 2.10(b) of the
Credit Agreement shall be held by the Administrative Agent until the end of the
respective Interest Periods of such LIBOR Loans at which time, whether or not an
Event of Default has occurred, the Administrative Agent shall cause such monies
to be applied to such LIBOR Loans. However, at any time following the occurrence
and during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 11.03 of the Credit
Agreement, shall) in its (or their) sole and absolute discretion apply or cause
to be applied (subject to collection) the balance from time to time outstanding
to the credit of the Collateral Account to the payment of the Secured
Obligations in the manner specified in Section 5.09 hereof. The balance from
time to time in the Collateral Account shall be subject to withdrawal only as
provided herein.
(c) If requested by Borrower and agreed to by any Lender that is an
Original Lender, and subject to documentation reasonably satisfactory to the
Administrative Agent and such Lender, the Administrative Agent shall designate
such Lender as a collateral sub-agent for the Administrative Agent in respect of
all or any portion of the Collateral Account and provide written notice to
Borrower of such designation.
4.02. Proceeds of Accounts. At any time after the occurrence and
--------------------
during the continuance of an Event of Default, each Debtor shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent), or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent, pursuant to which such Debtor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account. All payments made to the
Administrative Agent as provided in the preceding sentence shall be immediately
deposited in the Collateral Account. In addition to the foregoing, each Debtor
agrees that, at any time after the occurrence and during the continuance of an
Event of Default if the proceeds of any Pledged Collateral hereunder (including
the payments made in respect of Accounts) shall be received by it, such Debtor
shall as promptly as possible deposit such proceeds into the Collateral Account.
Until so deposited, all such proceeds shall be held in trust by such Debtor for
and as the property of the Administrative Agent and the Lenders and shall not be
commingled with any other funds or property of such Debtor.
4.03. Investment of Balance in Collateral Account. Amounts on
-------------------------------------------
deposit in the Collateral Account shall be invested from time to time in such
Permitted Investments as the Borrower (or, after the occurrence and
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during the continuance of an Event of Default, the Administrative Agent) shall
determine, which Permitted Investments shall be held in the name and be under
the control of the Administrative Agent; provided, however, that (i) at any time
-------- -------
after the occurrence and during the continuance of an Event of Default, the
Administrative Agent may (and, if instructed by the Lenders as specified in
Section 11.03 of the Credit Agreement, shall) in its (or their) sole and
absolute discretion at any time and from time to time elect to liquidate any
such Permitted Investments and to apply or cause to be applied the proceeds
thereof to the payment of the Secured Obligations in the manner specified in
Section 5.09 hereof, and (ii) if requested by the Borrower, such Permitted
Investments may be held in the name and under the control of one or more of the
Lenders (and in that connection each Lender, pursuant to Section 11.04 of the
Credit Agreement, has agreed that such Permitted Investments shall be held by
such Lender as a collateral sub-agent for the Administrative Agent hereunder).
4.04. Cover for Letter of Credit Liabilities. Amounts deposited into
--------------------------------------
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 10 thereof shall be held by the
Administrative Agent in a separate sub-account (designated "Letter of Credit
Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
-----
outstanding from time to time, and second as collateral security for the other
------
Secured Obligations hereunder, which funds shall be retained by the
Administrative Agent in the Collateral Account (as provided in this Agreement as
collateral security in the first instance for the Letter of Credit Liabilities)
until such time as all Letters of Credit shall have been terminated and all of
the Letter of Credit Liabilities paid in full.
Section 5. Covenants; Further Assurances; Remedies. In furtherance
---------------------------------------
of the grant of the pledge and security interest pursuant to Section 3 hereof,
the Debtors hereby jointly and severally agree with each Lender and the
Administrative Agent as follows:
5.01. Delivery and Other Perfection. Each Debtor shall:
-----------------------------
(a) if there shall be received by such Debtor any of the above-
described shares, securities or property required to be pledged by such
Debtor under clauses (a), (b), (c), (d) and (e) of Section 3 hereof or any
distribution of capital shall be made on or in respect of the Pledged
Interests or any Property shall be distributed upon or with respect to the
Pledged Interests pursuant to the recapitalization or reclassification of
the capital of any LLC or Partnership, or pursuant to the reorganization
thereof, forthwith either (x) transfer and deliver to the Administrative
Agent such shares, capital, Property or securities so received by such
Debtor (together with the certificates for any such shares and securities
duly endorsed in blank or accompanied by undated stock powers duly executed
in blank), all of which thereafter shall be held by the Administrative
Agent, pursuant to the terms of this Agreement, as part of the Pledged
Collateral, or (y) take such other action as the Administrative Agent shall
reasonably deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, capital or Property in said clauses
(a), (b), (c), (d) and (e) and until such time of transfer hold such
shares, securities, money, property or capital in trust for the sole
benefit of the Lenders, segregated from the other property of each Debtor;
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(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, however, that so long as no Event of Default shall have
-------- -------
occurred and be continuing, such Debtor may retain for collection in the
ordinary course any Instruments received by such Debtor in the ordinary
course of business and the Administrative Agent shall, promptly upon
request of such Debtor, make appropriate arrangements for making any other
Instrument pledged by such Debtor available to such Debtor for purposes of
presentation, collection or renewal (any such arrangement to be effected,
to the extent deemed appropriate by the Administrative Agent, against trust
receipt or like document);
(c) maintain the security interest created by this Agreement as a
first priority perfected security interest subject only to Prior Liens and
Permitted Encumbrances and except to the extent perfection is not required
hereunder and defend such security interest against claims and demands of
all Persons whomsoever and give, execute, deliver, file and/or record any
financing statement, continuation statement, notice, instrument, document,
agreement or other papers that may be necessary or desirable (in the
reasonable judgment of the Administrative Agent) to create, preserve,
perfect or validate the security interest granted pursuant hereto or to
enable the Administrative Agent to exercise and enforce its rights
hereunder with respect to such pledge and security interest (and each
Debtor authorizes the Administrative Agent to file any such financing or
continuation statement without the signature of each Debtor to the extent
permitted by applicable law), including, without limitation, after the
occurrence and during the continuance of an Event of Default, causing any
or all of the Securities Collateral to be transferred of record into the
name of the Administrative Agent or its nominee (and the Administrative
Agent agrees that if any Securities Collateral is transferred into its name
or the name of its nominee, the Administrative Agent will thereafter
promptly give to the respective Debtor copies of any notices and
communications received by it with respect to the Securities Collateral)
and if any amount payable under or in connection with any of the Interests
or Partnership Interests shall be or become evidenced by any instrument
(including any promissory note) or chattel paper (in each case as defined
in the Uniform Commercial Code), such instrument or chattel paper shall be
immediately delivered to the Administrative Agent, duly endorsed in a
manner satisfactory to the Administrative Agent, to be held as Pledged
Collateral pursuant to this Agreement;
(d) keep full and accurate books and records relating to the Pledged
Collateral, and stamp or otherwise ▇▇▇▇ all such material books and records
in such manner as the Administrative Agent may reasonably require in order
to reflect the security interests granted by this Agreement;
(e) furnish to the Administrative Agent upon its request, but not
more than quarterly, statements and schedules further identifying and
describing the material Copyright Collateral, the material Patent
Collateral and the material Trademark Collateral, respectively, and such
other reports in connection with such Copyright Collateral, Patent
Collateral and Trademark Collateral, as the Administrative Agent may
reasonably request, all in reasonable detail;
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(f) promptly upon the reasonable request of the Administrative Agent,
following receipt by the Administrative Agent of any statements, schedules
or reports pursuant to clause (e) above, modify this Agreement by amending
Annexes 2, 3 and/or 4 hereto, as the case may be, to include any material
---------------------
Copyright, Patent or Trademark that becomes part of the Pledged Collateral
under this Agreement;
(g) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Pledged
Collateral;
(h) upon the occurrence and during the continuance of any Event of
Default, permit representatives of the Administrative Agent to be present
at such Debtor's place of business to receive copies of all communications
and remittances relating to the Pledged Collateral, and forward copies of
any notices or communications received by such Debtor with respect to the
Pledged Collateral, all in such manner as the Administrative Agent may
require;
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
such Debtor hereby authorizes the Administrative Agent so to notify) each
account debtor in respect of any Accounts or Instruments that such Pledged
Collateral has been assigned to the Administrative Agent for the benefit of
the Lenders hereunder, and that any payments due or to become due in
respect of such Pledged Collateral are to be made directly to the
Administrative Agent; and
(j) to the extent permitted by law, pay, and save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect
to, or resulting from any delay in paying, any and all stamp, excise, sales
or other similar taxes which may be payable or determined to be payable
with respect to any of the Pledged Collateral or in connection with any of
the transactions contemplated by this Agreement.
5.02. Other Financing Statements and Liens. Without the prior
------------------------------------
written consent of the Administrative Agent (granted with the authorization of
the Lenders as specified in Section 11.03 of the Credit Agreement), no Debtor
shall file or suffer to be on file, or authorize or permit to be filed or to be
on file, in any jurisdiction, any financing statement or like instrument with
respect to the Pledged Collateral in which the Administrative Agent is not named
as the sole secured party for the benefit of the Lenders other than with respect
to Prior Liens and Permitted Encumbrances.
5.03. Preservation of Rights. Regardless of whether or not there
----------------------
shall have occurred any Event of Default, the Administrative Agent may institute
and maintain, or cause in its name or in the name of the Debtors to be
instituted and maintained, such suits and proceedings as the Administrative
Agent may reasonably deem to be necessary or expedient to prevent any impairment
of the security interest in or perfection of the Pledged Collateral in
contravention of the terms of the Credit Documents. Without limiting their
right to make dispositions or abandonments of Collateral to the extent permitted
by the Credit Agreement, the Debtors agree not to knowingly take or permit to be
taken any action which would impair
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the Pledged Collateral or the Administrative Agent's rights in the Pledged
Collateral. The Administrative Agent shall not be required to take steps
necessary to preserve any rights against prior parties to any of the Pledged
Collateral.
5.04. Special Provisions Relating to Certain Collateral.
-------------------------------------------------
(a) Pledged Securities and Pledged Obligations.
------------------------------------------
(1) The Debtors will cause the Pledged Stock to constitute at all
times, with respect to (x) any Issuer other than a Foreign Subsidiary, all of
the shares of each class of capital stock of each such Issuer then owned by any
Debtor, and (y) any first tier Foreign Subsidiary, such amount of the shares of
capital stock of each such Issuer as will (subject to Section 3(a) hereof)
result in not less than (nor greater than) 65% of the total combined voting
power of all classes of capital stock of any such Issuer.
(2) So long as no Event of Default shall have occurred and be
continuing, the Debtors shall have the right to exercise all voting, consensual,
partnership, managerial and membership rights and powers and other powers of
ownership pertaining to the Pledged Securities (collectively, the "Voting
------
Powers") for all purposes not inconsistent with the terms of this Agreement, the
------
other Credit Documents or any other instrument or agreement referred to herein
or therein; provided, however, that each Debtor agrees that no vote shall be
-------- -------
cast or membership or partnership right exercised or other action taken which
materially impair the Pledged Securities (other than pursuant to a transaction
expressly permitted under the Credit Agreement) or which would be inconsistent
with or result in any violation of any provision of any of this Agreement or any
other Credit Document. The Administrative Agent shall execute and deliver to
the Debtors or cause to be executed and delivered to the Debtors all such
proxies, powers of attorney, dividend and other orders, and all such
instruments, in each case without recourse or warranty, as the Debtors may
reasonably request for the purpose of enabling the Debtors to exercise the
Voting Powers that they are entitled to exercise pursuant to this Section
5.04(a)(2). Upon the occurrence and during the continuance of an Event of
Default, at the Administrative Agent's sole and absolute option and following
written notice from the Administrative Agent to the Debtors (such written notice
to be effective immediately upon the giving thereof as provided below) all
rights of the Debtors to exercise the Voting Powers they are entitled to
exercise pursuant to this Section 5.04(a)(2), and the obligations of the
Administrative Agent under this Section 5.04(a)(2), shall cease, and all such
Voting Powers shall thereupon become transferred to and vested in the
Administrative Agent, which shall have the sole and exclusive right and
authority to exercise such Voting Powers, including, without limitation, the
right to act by shareholder, partner, member or other interestholder consent.
Such authorization shall constitute an irrevocable voting proxy from each Debtor
to the Administrative Agent or, at the Administrative Agent's option, to the
Administrative Agent's nominee.
(3) Subject to Section 5.04(a)(4) below, the Debtors shall be
entitled to receive and retain any dividends or distributions on the Pledged
Securities to the extent that the payment of such dividends is permitted by the
Credit Agreement.
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(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Pledged Securities shall be paid directly to the
Administrative Agent and retained by it as part of the Pledged Collateral,
subject to the terms of this Agreement, and, if the Administrative Agent shall
so request in writing, the Debtors jointly and severally agree to execute and
deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end; provided, however, that
-------- -------
if such Event of Default is cured, any such dividend or distribution theretofore
paid to the Administrative Agent shall (except to the extent theretofore applied
to the Secured Obligations) promptly be returned by the Administrative Agent to
the Debtors, without interest and without recourse or warranty.
(5) The Administrative Agent, on behalf of the Lenders, shall have
the right (in its sole and absolute discretion) to hold the Pledged Securities
in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent)
or the name of the applicable Debtor, endorsed or assigned in blank or in favor
of the Administrative Agent. The applicable Debtor will promptly give to the
Administrative Agent copies of any notices or other communications received by
it with respect to Pledged Securities registered in the name of such Pledgor.
The Administrative Agent shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any reasonable purpose consistent with this Agreement.
(6) Upon the occurrence and during the continuance of an Event of
Default, in order to fully effectuate the Administrative Agent's Voting Powers
pertaining to the Pledged Securities, such Debtor, upon the request of the
Administrative Agent, shall secure (if not already secured by the Administrative
Agent) executed resignations of the officers, directors or representatives of
any members committee of or the officers or directors of the general partner of
each issuer whose securities constitute Pledged Securities in order that the
Administrative Agent may elect or appoint the officers, directors or
representatives of such members committee of or the officers or directors of the
general partner of such issuer. After the occurrence and during the continuance
of any such Event of Default, this Section 5.04(a)(6) shall constitute and grant
an irrevocable proxy which shall become effective and shall entitle the
Administrative Agent, at its election, to vote the Pledged Securities upon any
and all corporate, limited liability company or partnership matters; provided,
--------
however, that the foregoing proxy shall be construed so that, and shall be
-------
limited to the extent necessary so that, the Administrative Agent shall not be
or become liable as a general partner or member.
(7) So long as no Event of Default has occurred and be continuing,
and to the extent not prohibited by the Credit Agreement, each Debtor shall be
entitled to receive and retain principal and interest payments, if any, paid on
the Pledged Obligations.
(8) Upon the occurrence and during the continuance of an Event of
Default, (i) all rights of each Debtor to receive or demand, as the case may be,
principal and interest payments which such Debtor is authorized to receive or
demand pursuant to Section 5.04(a)(7) shall cease,
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and all such rights shall thereupon become vested in the Administrative Agent,
which shall have the sole and exclusive right and authority to receive or
demand, as the case may be, and retain such principal and interest payments (and
all other payments in respect of the Pledged Obligations); in addition, all
principal and interest payments (and all other payments in respect of the
Pledged Obligations) which are received by any Debtor contrary to the provisions
of this Section 5.07(a)(8) shall be received in trust for the benefit of the
Administrative Agent, shall be segregated from other property or funds of such
Debtor and shall be forthwith delivered to the Administrative Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement), and
(ii) all rights of each Debtor to exercise any rights and powers (including the
right to receive and retain payments on the Pledged Obligations) which it would
otherwise be entitled to exercise pursuant to Section 5.04(a)(7) shall cease,
and all such rights shall thereupon become vested in the Administrative Agent,
which shall have the sole and exclusive right and authority to exercise all such
rights and powers until such Event of Default shall have been cured or waived in
accordance with the Credit Agreement, at which time all such rights shall
thereupon become revested in such Debtor and amounts not applied to Loans shall
be remitted to such Debtor. Any and all money and other Property paid over to or
received by the Administrative Agent as Pledged Collateral and retained by the
Administrative Agent pursuant to the provisions of this Section 5.04(a)(8) shall
be retained by the Administrative Agent in the Collateral Account upon receipt
of money or other property and shall be applied in accordance with the
provisions of Section 5.09 hereof. Upon the occurrence and during the
continuance of an Event of Default, each Debtor further agrees that so long as
the Pledged Obligations continue to be Pledged Collateral under this Agreement,
such Debtor will not permit any of the notes, instruments or other agreements
evidencing the Pledged Obligations to be amended, modified or changed in any
way, nor will such Obligor accept any waiver, indulgence, modification or other
departure by any obligor under such Pledged Obligations from any provision of
the Pledged Obligations, without first obtaining written consent of the
Administrative Agent.
(9) Each Debtor hereby represents and warrants that it has made its
own arrangements for keeping informed of changes or potential changes affecting
the Pledged Securities and the Pledged Obligations (including, without
limitation, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights of the
Pledged Securities), and each Debtor agrees that the Administrative Agent shall
have no responsibility or liability for informing such Debtor of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto.
(10) The Administrative Agent may, upon the occurrence and during the
continuation of an Event of Default, without notice and at its option, transfer
or register the Pledged Securities and the Pledged Obligations or any part
thereof, into its or its nominee's name, or endorse any of the Pledged
Obligations for negotiation, without any indication that such Pledged Collateral
is subject to the security interest hereunder.
(b) Intellectual Property.
---------------------
(1) For the purpose of enabling the Administrative Agent, during the
continuance of an Event of Default, to exercise rights and remedies under
Section 5.05 hereof at such time as the Administrative Agent shall be lawfully
entitled to exercise such rights and remedies, and for no
-22-
other purpose, each Debtor hereby grants to the Administrative Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to such Debtor) to use, assign, license
or sublicense any of the Intellectual Property now owned or hereafter acquired
by such Debtor, 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 or
printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 9.06 of the Credit Agreement that limit the
right of the Debtors to dispose of their respective property, so long as no
Event of Default shall have occurred and be continuing, the Debtors will be
permitted to exploit, use, enjoy, protect, license, sublicense, assign, abandon,
sell, dispose of or take other actions with respect to the Intellectual Property
in the ordinary course of the business of the Debtors. In furtherance of the
foregoing, unless an Event of Default shall have occurred and be continuing, the
Administrative Agent shall from time to time, upon the request of the respective
Debtor, execute and deliver any instruments, certificates or other documents, in
the form so requested, that such Debtor shall have certified are appropriate (in
its judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to Section 5.04(b)(1) as to any
specific Intellectual Property). Further, upon the payment in full of all of
the Secured Obligations (other than contingent obligations and indemnities which
survive) and cancellation or termination of the Commitments and Letter of Credit
Liabilities or earlier expiration of this Agreement or release of the Pledged
Collateral, the Administrative Agent shall grant back to the Debtors the license
granted pursuant to Section 5.04(b)(1). The exercise of rights and remedies
under Section 5.05 hereof by the Administrative Agent shall not terminate the
rights of the holders of any licenses or sublicenses theretofore granted by the
Debtors in accordance with the first sentence of this Section 5.04(b)(2).
(c) Motor Vehicles. At any time after the occurrence and during the
--------------
continuance of an Event of Default, each Debtor shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles, and any other
Equipment covered by certificates of title or ownership, owned by it with the
Administrative Agent listed as lienholder.
5.05. Events of Default; Remedies; Etc. During the period during
--------------------------------
which an Event of Default shall have occurred and be continuing:
(a) each Debtor shall, at the request of the Administrative Agent,
assemble the Pledged Collateral owned by it at such place or places in the
contiguous United States, reasonably convenient to both the Administrative
Agent and such Debtor, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Pledged Collateral
and may extend the time of payment, arrange for payment in installments, or
otherwise modify the terms, of any of the Pledged Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Pledged Collateral of a secured party
-23-
under the Uniform Commercial Code (whether or not the Uniform Commercial
Code is in effect in the jurisdiction where the rights and remedies are
asserted) and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Pledged
Collateral as if the Administrative Agent were the sole and absolute owner
thereof (and each Debtor agrees to take all such action as may be
appropriate to give effect to such right);
(d) the Administrative Agent in its sole and absolute discretion may,
in its name or in the name of the Debtors or otherwise, demand, ▇▇▇ for,
collect or receive any money or property at any time payable or receivable
on account of or in exchange for any of the Pledged Collateral, but shall
be under no obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior
written notice to the Debtors of the time and place, with respect to the
Pledged Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents, sell,
lease, assign or otherwise dispose of all or any part of such Pledged
Collateral, at such place or places as the Administrative Agent deems best,
and for cash or for credit or for future delivery (without thereby assuming
any credit risk), at public or private sale, without demand of performance
or notice of intention to effect any such disposition or of the time or
place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Administrative Agent or any Lender
or anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Pledged Collateral so disposed of at any public sale (or, to
the extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind, including
any right or equity of redemption (statutory or otherwise), of the Debtors,
any such demand, notice and right or equity being hereby expressly waived
and released. In the event of any sale, assignment, or other disposition
of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included, and the Debtors shall supply to the Administrative Agent or its
designee, for inclusion in such sale, assignment or other disposition, all
Intellectual Property relating to such Trademark Collateral. The
Administrative Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned, subject to
notice as may be required by law. In case any sale of all or any part of
the Pledged Collateral is made on credit or for future delivery, the
Pledged Collateral so sold may be retained by the Administrative Agent
until the sale price is paid in full by the purchaser or purchasers
thereof, but the Administrative Agent shall not incur any liability in case
any such purchaser or purchasers shall fail to take up and pay for the
Pledged Collateral so sold and, in case of any such failure, such Pledged
Collateral may be sold again upon like notice. For purposes hereof, (i) a
written agreement to purchase the Pledged Collateral or any portion thereof
-24-
shall be treated as a sale thereof, (ii) the Administrative Agent shall be
free to carry out such sale pursuant to such agreement, and (iii) no Debtor
shall be entitled to the return of the Pledged Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the
Administrative 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 Administrative Agent may proceed by a suit or suits at law or in equity
to foreclose upon the Pledged Collateral and to sell the Pledged 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. Any sale pursuant to the provisions of this Section
5.05 shall be deemed to conform to the commercially reasonable standards as
provided in Section 9-504(3) of the Uniform Commercial Code or its
equivalent in other jurisdictions. If under mandatory requirements of
applicable law, the Administrative Agent shall be required to make
disposition of the Pledged Collateral within a period of time that does not
permit the giving of notice to the Debtors as herein before provided, the
Administrative Agent need give the Debtors only such notice of disposition
as shall be reasonably practicable in view of such mandatory requirements
of law.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.
The Debtors recognize that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Administrative Agent may be compelled, with respect to any sale of all or any
part of the Pledged Securities or Pledged Obligations, to limit purchasers to
those who will agree, among other things, to acquire such Pledged Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. The Debtors acknowledge that any such private sales may be at
prices and on terms less favorable to the Administrative Agent and the Debtors
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Administrative Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Securities or Pledged Obligations
for the period of time necessary to permit the respective Issuer or issuer
thereof to register it for public sale.
Anything herein to the contrary notwithstanding, in any such event the
Administrative Agent, in its sole and absolute discretion, (i) may proceed to
make a private sale of the Pledged Securities notwithstanding that a
registration statement for the purpose of registering such Pledged Securities or
part thereof shall have been filed under such Securities Act, (ii) may approach
and negotiate with a single possible purchaser to effect such sale, and (iii)
may restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Pledged Securities or part thereof. In the
event of any such sale, the Administrative Agent shall incur no responsibility
or liability to any Debtor for selling all or any part of the Pledged Securities
at a price which the Administrative Agent may in good ▇▇▇▇▇ ▇▇▇▇ reasonable
under the
-25-
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until the registration as aforesaid.
Each of the Debtors further agrees to use its diligent best efforts to
do or cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Pledged Securities or Pledged Obligations
pursuant to this Section 5.05 valid and binding and in compliance with any and
all other applicable Requirements of Law, but none of the Debtors shall have an
obligation to register or qualify such sale under any federal or state
securities laws. Each of the Debtors further agrees that a breach of any of the
covenants contained in this Section 5.05 will cause irreparable injury to the
Administrative Agent and the Lenders, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 5.05 shall
be specifically enforceable against such Debtor, and, to the extent permitted by
law, such Debtor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred and is continuing.
5.06. Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Pledged Collateral pursuant to Section 5.05 hereof
are insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Debtors shall remain liable for
any deficiency.
5.07. Removals, Name Change, Etc. Without at least 30 days' prior
--------------------------
written notice to the Administrative Agent, no Debtor shall (i) maintain any of
its books and records with respect to the Pledged Collateral at any office or
maintain its principal place of business at any place other than at the address
set forth in Schedule 2 hereto, or permit any Inventory or Equipment to be
----------
located anywhere, other than at one of the locations identified in Annex 6
-------
hereto or at the premises of a Person processing or storing such Inventory (if
as to any Inventory or Equipment with an aggregate fair market value in excess
of $1.0 million such Person has executed Uniform Commercial Code Financing
Statements naming such Debtor as secured party (which financing statements are
hereby assigned to the Administrative Agent) or such Person has executed a
supplier subordination agreement satisfactory to the Majority Lenders in form
and substance) or in transit from one of such locations to another, or (ii)
change its corporate name, or the name under which it does business, from the
name shown on the signature pages hereto.
5.08. Private Sale. No Creditor shall incur liability as a result of
------------
the sale of the Pledged Collateral, or any part thereof, at any private sale
pursuant to Section 5.05 hereof conducted in a commercially reasonable manner.
Each Debtor hereby waives any claims against any Creditor arising by reason of
the fact that the price at which the Pledged Collateral may have been sold at
any such private sale held in a commercially reasonable manner was less than the
price that might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations, even if the Administrative Agent
accepts the first offer received and does not offer the Pledged Collateral to
more than one offeree.
5.09. Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 5.09, the
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proceeds of any collection, sale or other realization of all or any part of the
Pledged Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent under Section 4 hereof or this Section 5, shall be applied
by the Administrative Agent:
First, to the payment of the reasonable costs and expenses of such
-----
collection, sale or other realization, including out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all reasonable expenses incurred and advances made
by the Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each case
----
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
Finally, to the payment to the respective Debtor, or its successors or
-------
assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 5, "proceeds" of Pledged Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Pledged Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Debtors or any issuer of or obligor on
any of the Pledged Collateral. Notwithstanding the foregoing, the proceeds of
any cash or other amounts held in the "Letter of Credit Liabilities Sub-Account"
of the Collateral Account pursuant to Section 4.04 hereof shall be applied first
-----
to the Letter of Credit Liabilities outstanding from time to time, and second to
------
the other Secured Obligations in the manner provided above in this Section 5.09.
5.10. Attorney-in-Fact. Without limiting any rights or powers
----------------
granted by this Agreement to the Administrative Agent while no Event of Default
has occurred and is continuing, upon the occurrence and during the continuance
of any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Debtor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, upon and during the
continuance of any Event of Default, so long as the Administrative Agent shall
be entitled under this Section 5 to make collections in respect of the Pledged
Collateral, the Administrative Agent shall have the right and power to receive,
endorse and collect all checks made payable to the order of any Debtor
representing any dividend, payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same.
Each Debtor agrees, in the absence of willful wrongdoing or gross negligence,
that neither the Administrative Agent nor any of its agents, designees or
attorneys-in-fact will be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 5.10.
5.11. Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement and upon the acquisition or creation of any
securities of or interests in any Issuer, LLC or Partnership the securities
-27-
or interests in which are required to be pledged hereunder, each Debtor shall
(i) file such financing statements and other documents in such offices as the
Administrative Agent may request to perfect the security interests granted by
Section 3 of this Agreement, (ii) deliver to the Administrative Agent all
certificates identified in Annex 1A hereto, accompanied by undated stock powers
--------
duly executed in blank, and (iii) deliver to the Administrative Agent all
Pledged Obligations identified on Schedule 1B hereto.
-----------
5.12. Termination. When all Secured Obligations shall have been paid
-----------
in full (other than surviving indemnities and other contingent obligations) and
the Commitments of the Lenders under the Credit Agreement and all Letter of
Credit Liabilities shall have expired or been terminated, this Agreement shall
terminate, and the Administrative Agent shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Pledged Collateral and money received
in respect thereof, to or on the order of the respective Debtor and to be
released and canceled all licenses and rights referred to in Section 5.04(b)
hereof. The Administrative Agent shall also execute and deliver to the
respective Debtor upon such termination or upon the sale or other disposition of
Property permitted by Section 9.06 of the Credit Agreement such Uniform
Commercial Code termination statements, certificates for terminating the Liens
on the Motor Vehicles and such other documentation as shall be reasonably
requested by the respective Debtor to effect the termination and release of the
Liens on the Pledged Collateral.
5.13. Expenses. The Debtors jointly and severally agree to pay to
--------
the Administrative Agent all reasonable out-of-pocket expenses (including
reasonable expenses for legal services of every kind) of, or incident to, the
enforcement of any of the provisions of this Section 5, or performance by the
Administrative Agent of any obligations of the Debtors in respect of the Pledged
Collateral which the Debtors have failed or refused to perform, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Pledged Collateral, and for the care of the
Pledged Collateral and defending or asserting rights and claims of the
Administrative Agent in respect thereof, by litigation or otherwise, including
expenses of insurance, and all such expenses shall be Secured Obligations to the
Administrative Agent secured under Section 3 hereof.
5.14. Further Assurances. Each Debtor agrees that, from time to time
------------------
upon the written request of the Administrative Agent, such Debtor will execute
and deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
5.15. Irrevocable Authorization and Instruction to Issuers, LLCs and
--------------------------------------------------------------
Partnerships. Each of the Debtors hereby authorizes and instructs each Issuer,
------------
LLC and Partnership to comply with any instruction received by it from the
Administrative Agent in writing that (a) states that an Event of Default has
occurred and is continuing, and (b) is otherwise in accordance with the terms of
this Agreement and any other Credit Document to which it is a party, without any
other or further instructions from such Debtor, and such Debtor agrees that each
Issuer, LLC and Partnership shall be fully protected in so complying.
-28-
5.16. Effect of Sale, etc. (a) Any sale or resales pursuant to the
-------------------
provisions of this Agreement, whether under any right or power granted hereby or
thereby or pursuant to any legal proceedings, shall operate to divest, to the
full extent permitted by applicable law, each Debtor of all right, title,
interest, claim and demand whatsoever either at law or in equity, of, in and to
the Pledged Collateral, or any part thereof, so sold, and any Property so sold
shall, to the full extent permitted by applicable law, be free and clear of any
and all rights of redemption by, through or under such Debtor. At any such sale
any Lender may bid for and purchase the Pledged Collateral sold, to the full
extent permitted by applicable law, and may make payment therefor as set forth
in clause (b) of this Section 5.16, and any such Lender so purchasing any such
Pledged Collateral, upon compliance with the terms of sale, may hold, retain and
dispose of such Pledged Collateral without further accountability.
(b) The receipt by the Administrative Agent, or by any Person
authorized under any judicial proceedings to make such sale, of the proceeds of
any such sale shall be a sufficient discharge to any purchaser of the Pledged
Collateral, or of any part thereof, sold as aforesaid; and no such purchaser
shall be bound to see to the application of such proceeds, or be bound to
inquire as to the authorization, necessity or propriety of any such sale. In
the event that, at any such sale, any Lender is the successful purchaser, it
shall be entitled, for the purpose of making settlement or payment, to use and
apply such Pledged Collateral to the Secured Obligations by crediting thereon
the amount apportionable and applicable thereto out of the net proceeds of such
sale.
Section 6. Miscellaneous.
-------------
6.01. No Waiver. No failure on the part of the Administrative Agent
---------
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy.
6.02. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York without regard to
principles of conflicts of law thereof.
6.03. Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.02.
6.04. Waivers, Etc. The terms of this Agreement may be waived,
------------
altered or amended only by an instrument in writing duly executed by each Debtor
and the Administrative Agent (with the consent of the Lenders as specified in
Section 11.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon each Creditor, each holder of any of the Secured Obligations and
each Debtor.
6.05. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of each
Debtor, the Creditors and each holder of any of the Secured Obliga-
-29-
tions (provided, however, that no Debtor shall assign or transfer its rights or
--------- --------
obligations hereunder without the prior written consent of the Creditors).
6.06. Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08. Agents. The Administrative Agent may employ agents and
------
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.09. Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Creditors in order
to carry out the intentions of the parties hereto as nearly as may be possible,
and (ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
6.10. Administrative Agent Not a Member. Nothing contained in this
---------------------------------
Agreement shall be construed or interpreted (a) to transfer to the
Administrative Agent or any Lender any of the obligations of a partner of a
Partnership or a member or manager of any LLC, or (b) to constitute the
Administrative Agent or any Lender a partner of a Partnership or a member or
manager of any LLC.
6.11. Restoration of Rights and Remedies. If the Administrative
----------------------------------
Agent shall have instituted any proceeding to enforce any right or remedy under
this Agreement and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the Administrative Agent,
then and in every such case the Administrative Agent and the Debtors and the
Lenders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions under this Agreement and
under the other Credit Documents, and thereafter all rights and remedies of the
Administrative Agent shall continue as though no such proceeding had been
instituted.
6.12. Cumulative Remedies. No remedy under this Agreement is
-------------------
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given under this
Agreement or otherwise existing; nor shall the giving, taking or enforcement of
any other or additional security, collateral or guaranty for the payment or
performance of the Secured Obligations operate to prejudice, waive or affect the
security of this Agreement or any rights, powers or remedies under this
Agreement, nor shall the Administrative Agent or any Lender be required to look
first to, enforce or exhaust any such other or additional security, collateral
or guaranties.
6.13. [Intentionally Omitted]
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6.14. Waivers by Debtors. (a) Except as otherwise provided in this
------------------
Agreement, THE DEBTORS HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT'S TAKING
POSSESSION OR THE ADMINISTRATIVE AGENT'S DISPOSITION OF ANY OF THE PLEDGED
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICES AND
HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
DEBTORS WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE THEREOF, and, to the full extent permitted by applicable
law, each Debtor hereby further waives:
(i) all damages occasioned by such taking of possession except
any damages which are the direct result of the Administrative Agent's gross
negligence, bad faith or willful misconduct;
(ii) all other requirements as to the time, place and terms of
sale or other requirements, with respect to the enforcement of the
Administrative Agent's rights and powers hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
marshaling of assets, extension or moratorium, existing at law or in
equity, by statute or otherwise, now or hereafter in force, in order to
prevent or delay the enforcement of this Agreement or the sale or other
disposition of the Pledged Collateral or any portion thereof, and each
Debtor, for itself and all who may claim under it, insofar as it now or
hereafter lawfully may, hereby waives all such rights.
(b) Each Debtor hereby waives notice of acceptance of this Agreement
and of extensions of credit under the Credit Documents or under any other
agreement, note, document or instrument now or at any time or times hereafter
executed by such Debtor and delivered to the Administrative Agent or any Lender.
Each Debtor further waives presentment and demand for payment of any of the
Secured Obligations, protest and notice of dishonor or default with respect to
any of the Secured Obligations, and all other notices to which such Debtor might
otherwise be entitled, except as otherwise expressly provided in this Agreement
or in the other Credit Documents.
(c) Each Debtor (to the extent that it may lawfully do so) covenants
that it will not at any time insist upon or plead, or in any manner claim or
take the benefit or advance of, any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any time
hereafter in force that, but for this waiver, might be applicable to any sale
made under any judgment, order or decree based on this Agreement or any other
Credit Document; and each Debtor (to the extent that it may lawfully do so)
hereby expressly waives and relinquishes all benefit and advance of any and all
such laws and hereby covenants that it will not hinder, delay or impede the
execution of any power in this Agreement or therein granted and delegated to the
Administrative Agent, but that it will suffer and permit the execution of every
such power as though no such law or laws had been made or enacted.
6.15. Additional Collateral. Without notice or consent of any Debtor
---------------------
and without impairment of the security interests and rights created by this
Agreement, the Administrative Agent may accept from any person or persons
additional collateral or other security for the Secured Obligations. Neither
the creation of the security interests created hereunder nor the acceptance of
any such additional collateral or security shall pre-
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vent the Administrative Agent from resorting to such additional collateral or
security or to the Pledged Collateral, in any order without affecting the
Administrative Agent's rights hereunder.
6.16. Obligations Absolute. Subject to non-waivable provisions of
--------------------
applicable law, the liability of each Debtor under this Agreement shall remain
in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by (a) any change in the
time, place or manner of payment of all or any of the Secured Obligations, or in
any other term of the Credit Documents, the Notes, any waiver, indulgence,
renewal, extension, amendment or modification of or addition, consent or
supplement to or deletion from or any other action or inaction under or in
respect of the Notes or any other Credit Document or any assignment or transfer
thereof; (b) any lack of validity or enforceability, in whole or in part, of the
Notes or any other Credit Document; (c) any furnishing of any additional
security for the Secured Obligations or any acceptance thereof or any release or
non-perfection of any security interest in the Pledged Collateral; (d) any
limitation on any party's liability or obligations under the Notes or any other
Credit Document; (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to a
Debtor, or any action taken with respect to this Agreement by any trustee or
receiver, or by any court, in any such proceeding, whether or not any Debtor
shall have notice or knowledge of any of the foregoing; (f) any exchange,
release or amendment or waiver of or consent to departure from any agreement
pursuant to which a Lien is created in favor of the Administrative Agent for the
benefit of the Creditors, pursuant to which a person other than any Debtor has
granted a security interest; or (g) to the extent permitted by law, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any Debtor.
6.17. Waiver of Jury Trial. Each Debtor and the Administrative Agent
--------------------
each hereby irrevocably waives all right to a trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement or the
transactions contemplated hereby.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
TUESDAY MORNING CORPORATION
By:____________________________________
Name:
Title:
TMI HOLDINGS, INC.
By:____________________________________
Name:
Title:
TUESDAY MORNING, INC.
By:____________________________________
Name:
Title:
FRIDAY MORNING, INC.
By:____________________________________
Name:
Title:
TMIL CORPORATION
By:____________________________________
Name:
Title:
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FLEET NATIONAL BANK,
as Administrative Agent
By:____________________________________
Name:
Title:
ANNEX 1A TO
SECURITY AGREEMENT
------------------
PLEDGED STOCK
-------------
TUESDAY MORNING CORPORATION
---------------------------
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
[NAME OF DEBTOR]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
[NAME OF DEBTOR]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
[Name of Debtor]
Certificate Registered
Issuer Nos. Owner Number of Shares
------ ----------- ---------- ----------------
PLEDGED INTERESTS
-----------------
[Name of Debtor]
LLC Interests
--- ---------
Partnership Partnership Interests
----------- ----------------------
ANNEX 1B TO
SECURITY AGREEMENT
------------------
PLEDGED OBLIGATIONS
-------------------
[Name of Debtor]:
Original Final
Name of Principal Date of Maturity
Obligor Amount Note Date
------- --------- ------- --------
ANNEX 2 TO
SECURITY AGREEMENT
------------------
COPYRIGHTS
----------
ANNEX 3 TO
SECURITY AGREEMENT
------------------
PATENTS
-------
ANNEX 4 TO
SECURITY AGREEMENT
------------------
TRADEMARKS
----------
ANNEX 5 TO
SECURITY AGREEMENT
------------------
LICENSE AND OTHER USER AGREEMENTS
---------------------------------
ANNEX 6 TO
SECURITY AGREEMENT
------------------
INVENTORY LOCATIONS
-------------------
SCHEDULE 1 TO
SECURITY AGREEMENT
------------------
Uniform Commercial Code Filings
-------------------------------
State Filing Office Document Filed
----- ------------- --------------
SCHEDULE 2 TO
SECURITY AGREEMENT
------------------
Principal Place of Business, Chief Executive Office
and Location of Records
---------------------------------------------------
SCHEDULE 3 TO
SECURITY AGREEMENT
------------------
Prior Liens
-----------
EXHIBIT A TO
SECURITY AGREEMENT
------------------
INITIAL TRANSACTION STATEMENT
[Date]
To: Fleet National Bank, as Administrative Agent
[Address]
Attention: [Name]
This statement is to advise you that a pledge of the following
uncertificated securities has been registered in the name of [Name], as
Administrative Agent, as follows:
1. Uncertificated Securities:
The entire limited liability company interests of each of [Name
Debtors] in the undersigned [limited liability company] [partnership].
2. Registered Owners:
[Name]
[Address]
Taxpayer Identification Number: [ ]
[Name]
[Address]
Taxpayer Identification Number: [ ]
3. Registered Pledgee:
[Name], as Administrative Agent
Taxpayer Identification Number: [ ]
4. There are no liens or restrictions of the undersigned limited
liability company and no adverse claims to which the uncertificated
securities are or may be subject known to the undersigned [limited
liability company] [partnership].
5. The pledge was registered on [Date].
-2-
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF
THE TIME OF ITS ISSUANCE. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO
RIGHTS ON THE RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR
A SECURITY.
Very truly yours,
[ ]
By: ______________________
Title:
EXHIBIT B TO
SECURITY AGREEMENT
------------------
ACKNOWLEDGMENT AND CONSENT
[ ] (the "[ ]") hereby acknowledges receipt of a copy
of the foregoing Security Agreement (the "Security Agreement"; terms used herein
------------------
and not defined herein shall have the meaning given to them in the Security
Agreement) and agrees to be bound thereby and to comply with the terms thereof
insofar as such terms are applicable to it. [ ] agrees that the terms
of paragraph 5.05 of the Security Agreement shall apply to it, mutatis mutandis,
------- --------
with respect to all actions that may be required of it under or pursuant to or
arising out of Section 5.05 of the Security Agreement.
[Date] [ ]
By: ________________________
Title:
Address for notices: