EXHIBIT 3
COLLATERAL AGREEMENT
made by
RECOTON CORPORATION
and certain of its Subsidiaries
in favor of
THE CHASE MANHATTAN BANK,
as Collateral Agent
Dated as of September 8, 1999
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINED TERMS....................................................1
1.1 Definitions....................................................1
1.2 Other Definitional Provisions..................................5
SECTION 2. GRANT OF SECURITY INTEREST.....................................5
2.1 Description of Collateral......................................5
2.2 Grant of Security for First Priority Obligations...............6
2.3 Grant of Security for Second Priority Obligations..............6
2.4 Grant of Security for Third Priority Obligations...............6
2.5 Creation of Liens..............................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................7
3.1 Title; No Other Liens..........................................7
3.2 Priority of Liens..............................................7
3.3 Chief Executive Office.........................................7
3.4 Inventory and Equipment........................................8
3.5 Farm Products..................................................8
3.6 Pledged Securities.............................................8
3.7 Accounts.......................................................8
3.8 Intellectual Property..........................................8
SECTION 4. COVENANTS......................................................9
4.1 Delivery of Instruments and Chattel Paper......................9
4.2 Maintenance of Property; Insurance.............................9
4.3 Payment of Obligations........................................10
4.4 Maintenance of Perfected Security Interests; Further
Documentation...............................................10
4.5 Changes in Locations, Name, etc...............................10
4.6 Notices.......................................................11
4.7 Indemnification. .............................................11
4.8 Accounts......................................................11
4.9 Pledged Securities............................................12
4.10 Intellectual Property.........................................13
SECTION 5. REMEDIAL PROVISIONS...........................................15
5.1 Certain Matters Relating to Accounts..........................15
5.2 Communications with Obligors; Grantors Remain Liable..........15
5.3 Pledged Stock.................................................16
5.4 Proceeds to be Turned Over To Collateral Agent................17
5.5 Application of Proceeds.......................................17
5.6 Code and Other Remedies.......................................17
5.7 Registration Rights...........................................18
5.8 Waiver; Deficiency............................................19
SECTION 6. THE COLLATERAL AGENT..........................................19
6.1 Collateral Agent's Appointment as Attorney-in-Fact, etc.......19
6.2 Duty of Collateral Agent......................................21
6.3 Execution of Financing Statements.............................21
6.4 Authority of Collateral Agent.................................22
SECTION 7. MISCELLANEOUS.................................................22
7.1 Amendments in Writing.........................................22
7.2 Notices.......................................................22
7.3 No Waiver by Course of Conduct; Cumulative Remedies...........22
7.4 Successors and Assigns........................................22
7.5 Set-Off.......................................................22
7.6 Counterparts..................................................23
7.7 Severability..................................................23
7.8 Section Headings..............................................23
7.9 Integration...................................................23
7.10 GOVERNING LAW.................................................23
7.11 Submission To Jurisdiction; Waivers...........................24
7.12 Acknowledgements..............................................24
7.13 WAIVER OF JURY TRIAL..........................................24
7.14 Additional Grantors...........................................25
7.15 Releases......................................................25
COLLATERAL AGREEMENT, dated as of September 8, 1999, made by each of
the signatories hereto (together with any other entity that may become a party
hereto as provided herein, the "GRANTORS"), in favor of THE CHASE MANHATTAN
BANK, as collateral agent (in such capacity, the "COLLATERAL AGENT") for the
Secured Creditors (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the LIFO Lenders (such term, and the other capitalized terms
used in these Recitals, having the meanings hereinafter referred to) have agreed
to extend credit in an aggregate principal amount of up to $50,000,000 to
Recoton Corporation, a New York corporation (the "BORROWER"), pursuant to the
Credit Agreement dated as of September 8, 1999 (as amended and in effect from
time to time, the "LIFO CREDIT AGREEMENT"), among the Borrower, the financial
institutions party thereto as lenders (the "LIFO LENDERS"), and The Chase
Manhattan Bank, as administrative agent for the Lenders (in such capacity, the
"LIFO AGENT", and together with the LIFO Lenders and the LIFO Issuing Bank, the
"LIFO CREDITORS");
WHEREAS, in connection with the execution and delivery of the LIFO
Credit Agreement, each Grantor (other than the Borrower) has entered into the
Guarantee dated September 8, 1999 (as amended and in effect from time to time,
the "LIFO GUARANTEE"), in favor of the LIFO Credit Agreement (for the benefit of
the LIFO Lenders) guaranteeing the payment and performance obligations of the
Borrower under the LIFO Credit Agreement;
WHEREAS, the Existing Senior Creditors have extended credit to the
Borrower pursuant to the Existing Credit Agreement and the Senior Note
Agreements and, pursuant to the Existing Guarantees, the Guarantors have
guaranteed the obligations of the Borrower thereunder.
WHEREAS, it is a condition precedent to the effectiveness of the LIFO
Credit Agreement and Master Restructuring Agreement and the transactions
contemplated thereby that this Agreement be executed and delivered by the
parties hereto in order to grant the Collateral Agent a first priority Lien to
secure the LIFO Obligations and a second priority Lien to secure the Existing
Senior Obligations;
NOW, THEREFORE, in consideration of the premises and to induce the
LIFO Agent and the LIFO Lenders to enter into the LIFO Credit Agreement and to
induce the LIFO Lenders to make their respective extensions of credit to the
Borrower and to induce the Secured Creditors to enter into the Master
Restructuring Agreement, each Grantor hereby agrees with the Collateral Agent,
for the ratable benefit of the Secured Creditors, as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms used
herein that are defined in Appendix A to the Master Restructuring Agreement
shall have the meanings given to them therein, and the following terms which are
defined in the Uniform Commercial Code in effect in the State of New York on the
date hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, Farm Products, Instruments, Inventory and Investment Property.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"COLLATERAL": as defined in Section 2 of this Agreement.
"CONTRACTS": all contracts and agreements to which any Grantor is a
party and the terms of which do not prohibit (unless such term is waived by
the other party thereto) the granting by such Grantor of a security
interest therein, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (a) all rights
of such Grantor to receive moneys due and to become due to it thereunder or
in connection therewith, (b) all rights of such Grantor to damages arising
out of or for breach or default in respect thereof and (c) all rights of
such Grantor to exercise all remedies thereunder.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in SCHEDULE 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
SCHEDULE 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright, to the extent, in each case
where any Grantor is a licensee under any such written agreement, the grant
by such Grantor of a security interest pursuant to this Agreement is not
prohibited by such written agreement.
"DEPOSIT ACCOUNTS": any bank account set forth on Schedule 1.13(b) to
MRA Appendix B.
"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); PROVIDED, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Account or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to ▇▇▇ at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
"INTERCOMPANY NOTE": any Note from any Subsidiary to the Borrower, the
Borrower to any Subsidiary or any Subsidiary to any other Subsidiary.
"ISSUER": any Person identified on Schedule 2 attached hereto as an
issuer of Pledged Stock.
"MASTER RESTRUCTURING AGREEMENT": as defined in the recitals hereto.
"NY UCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"OBLIGATIONS": the First Priority Obligations, and the Second Priority
Obligations and the Third Priority Obligations.
"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in SCHEDULE
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, to the extent,
in each case where any Grantor is a grantee under any such agreement, the
grant by such Grantor of a security interest pursuant to this Agreement is
not prohibited by such agreement.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, all
Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business or promissory notes made by employees in
favor of any Grantor in an aggregate amount not to exceed $2,000,000) or
any Investment Property.
"PLEDGED SECURITIES": the collective reference to the Pledged Notes
and the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Person that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect or any Investment Property, PROVIDED that, in any case
"Pledged Stock" shall not include more than 65% of each class of Capital
Stock of any First Tier Excluded Foreign Subsidiary and shall not include
any of the Capital Stock of RAC-FSC.
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the
date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"SECURED OBLIGATIONS": First Priority Obligations, the Second Priority
Obligations and the Third Priority Obligations.
"SECURITIES ACT": the Securities Act of 1933, as amended.
"TRADEMARKS": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including any of the
foregoing referred to in SCHEDULE 6, and (ii) the right to obtain all
renewals thereof.
"TRADEMARK LICENSE": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark,
including any of the foregoing referred to in SCHEDULE 6, to the extent, in
each case where any Grantor is a grantee under any such agreement, the
grant by such Grantor of a security interest pursuant to this Agreement is
not prohibited by such agreement.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
SECTION 2. GRANT OF SECURITY INTEREST
2.1 DESCRIPTION OF COLLATERAL. All of the following property now owned
or at any time hereafter acquired by any Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest is
collectively referred as the "COLLATERAL":
(a) all Accounts;
(b) all Chattel Paper;
(c) all Collateral Accounts (and all cash, money and instruments at
any time on deposit in the Collateral Accounts, all investments made and
interest earned in respect of such cash and monies and all proceeds of any
of the foregoing);
(d) all Copyrights;
(e) all Copyright Licenses;
(f) all Deposit Accounts;
(g) all Documents;
(h) all Equipment;
(i) all General Intangibles;
(j) all Instruments (including, without limitation, Instruments
representing other Collateral or evidencing Proceeds thereof);
(k) all Intellectual Property (to the extent assignable);
(l) all Inventory;
(m) all Investment Property;
(n) all Patents;
(o) all Patent Licenses;
(p) all Pledged Securities;
(q) all Trademarks;
(r) all Trademark Licenses;
(s) all books and records pertaining to the Collateral; and
(t) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
2.2 GRANT OF SECURITY FOR FIRST PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the First Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the First Priority Obligations, a first priority security
interest in the Collateral.
2.3 GRANT OF SECURITY FOR SECOND PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Second Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the Second Priority Obligations, a second priority security
interest in the Collateral.
2.4 GRANT OF SECURITY FOR THIRD PRIORITY OBLIGATIONS. As collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Third Priority
Obligations, each Grantor hereby grants to the Collateral Agent, for the benefit
of the holders of the Third Priority Obligations, a third priority security
interest in the Collateral.
2.5 CREATION OF LIENS. As set forth in the separate granting clauses
contained in subsections 2.1 through 2.3 above, it is the intent of the Grantor,
the LIFO Lenders, the LIFO Agent and the Collateral Agent that this Agreement
shall create three separate and distinct Liens in favor of the Collateral Agent,
for the benefit of the holders of the First Priority Obligations, the Second
Priority Obligations and the Third Priority Obligations, as the case may be.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce (i) the LIFO Agent and the LIFO Lenders to enter into the
LIFO Credit Agreement, (ii) the LIFO Lenders to make their respective extensions
of credit to the Borrower thereunder, and (iii) the Existing Senior Creditors to
restructure and modify their Existing Senior Obligations provided in the Master
Restructuring Agreement, each Grantor hereby represents and warrants to the
Secured Creditors that:
3.1 TITLE; NO OTHER LIENS. Except for the separate and distinct
security interests granted to the Collateral Agent pursuant to this Agreement
and the other Permitted Liens, the Grantors own each item of the Collateral free
and clear of any and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to this Agreement or as are permitted pursuant to the LIFO
Credit Agreement and MRA Appendix B.
3.2 PRIORITY OF LIENS. Other than with respect to any Collateral in
which a security interest cannot be perfected by any action within the United
States, the security interests granted pursuant to this Agreement (a) upon
delivery to the Collateral Agent of stock certificates or other documents
representing the Pledged Stock (together with undated stock powers duly executed
in blank relating thereto), delivery to the Collateral Agent of the Pledged
Notes, duly endorsed in blank by the appropriate Grantor and completion of the
filings and other actions specified on SCHEDULE 3 (which, in the case of all
filings referred to on said Schedule, have been delivered to the Collateral
Agent in completed and duly executed form) will constitute valid perfected
security interests in all of the Collateral located in the United States in
favor of the Collateral Agent, for the ratable benefit of the Secured Creditors,
as collateral security for such Grantor's Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor (except, in each case,
under the circumstances provided to the contrary in the Code or in the Uniform
Commercial Code in effect in any applicable jurisdiction) and (b) are prior to
all other Liens on the Collateral in existence on the date hereof except for (i)
unrecorded Permitted Liens which have priority over the Liens on the Collateral
by operation of law and (ii) Liens described on SCHEDULE 7.
3.3 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or principal place of business are specified on SCHEDULE 4.
3.4 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on SCHEDULE
5.
3.5 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
3.6 PLEDGED SECURITIES. (a) The shares of Pledged Stock pledged or to
be pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
3.7 ACCOUNTS. (a) No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Collateral Agent.
(b) The place where each Grantor keeps its records concerning its
Accounts is at its chief executive office specified in Section 3.3 or at the
Borrower's corporate headquarters.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Accounts will at such times
be accurate in all material respects.
3.8 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all Intellectual
Property that are registered Copyrights, Copyright Licenses, Patents, patent
applications, Patent Licenses, registered Trademarks, Trademark Licenses and
other material Trademarks currently in use owned by such Grantor in its own name
on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and, to the best
of such Grantor's knowledge, does not infringe in any material respect the
intellectual property rights of any other Person, subject to the disclosure made
in SCHEDULE 6.
(c) Except as set forth in SCHEDULE 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) Except as disclosed in SCHEDULE 6, no action or proceeding is
pending, or, to the knowledge of such Grantor, threatened, on the date hereof
(i) seeking to limit, cancel or question the validity of any Intellectual
Property or such Grantor's ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
Intellectual Property.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Collateral Agent and the
Secured Creditors that, from and after the date of this Agreement until the
Obligations shall have been paid in full and this Agreement shall have
terminated and the security interests created hereby shall have been released:
4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper not constituting Investment Property, such
Instrument or Chattel Paper shall promptly be delivered to the Collateral Agent,
duly indorsed in a manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.
4.2 MAINTENANCE OF PROPERTY; INSURANCE. (a) Such Grantor will maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event general liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business, which policies, within 30 days after the
Restructuring Effective Date, shall name the Collateral Agent as a loss payee
for the proceeds of any such policy covering damage to tangible Property of the
Borrower and its Subsidiaries; and furnish to the Collateral Agent or any
Secured Creditor at the Borrower's expense, upon such Person's written request,
full information as to the insurance carried.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Collateral Agent of
written notice thereof, (ii) name the Collateral Agent as an additional insured
party or loss payee, (iii) if reasonably requested by the Collateral Agent,
include a breach of warranty clause, (iv) be from an insurer and in amounts
reasonably satisfactory to the Collateral Agent and (v) be reasonably
satisfactory to the Collateral Agent in all other material respects.
(c) Such Grantor shall annually deliver to the Collateral Agent and
the Secured Creditors a renewal notice of a reputable insurance broker with
respect to such insurance at least 15 days prior to the expiration of such
insurance and reports of a reputable insurance broker with respect to such
insurance as the Collateral Agent may from time to time reasonably request.
4.3 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such payment thereof could not reasonably be expected to result in a Material
Adverse Effect.
4.4 MAINTENANCE OF PERFECTED SECURITY INTERESTS; FURTHER
DOCUMENTATION. (a) Such Grantor shall maintain the security interests created by
this Agreement as perfected security interests (to the extent the security
interests in such Collateral can be perfected by filing of one or more financing
statements or by possession of such Collateral by the Collateral Agent) having
at least the priority described in Section 3.2 and shall defend such security
interests against the claims and demands of all Persons whomsoever, except for
Permitted Liens.
(b) Such Grantor will furnish to the Collateral Agent and the Secured
Creditors from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
4.5 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except in
the case of clause (i) below upon 10 days' prior written notice (or in the case
of Inventory to be located at a location owned or leased by a non-Grantor, 15
days' subsequent written notice) and in the case of clause (ii) upon 30 days'
prior written notice to the Collateral Agent and delivery to the Collateral
Agent of (a) all additional executed financing statements and other documents
requested by the Collateral Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (b) if applicable, a
written supplement to SCHEDULE 5 showing any additional location at which
Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5;
(ii) change the location of its chief executive office or principal
place of business, as the case may be or jurisdiction of organization, from
that referred to in Section 3.3; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Collateral Agent in
connection with this Agreement would become misleading.
4.6 NOTICES. Such Grantor will advise the Collateral Agent and the
Secured Creditors promptly after obtaining knowledge, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Permitted Liens) on, or claim against, any of the Collateral of which it becomes
aware; and
(b) the occurrence of any other event of which it becomes aware which
could reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the security interests created hereby taken as a
whole.
4.7 INDEMNIFICATION. Each Grantor agrees to pay, and to save the
Collateral Agent and the Secured Creditors harmless from, any and all
liabilities, reasonable costs and expenses.(including, without limitation,
reasonable legal fees and expenses) (i) with respect to, or resulting from any
delay in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral and (iii) in connection with any of the
transactions contemplated by this Agreement.
4.8 ACCOUNTS. (a) Other than in the ordinary course of business
(including sales incentive programs) and consistent with the Grantor's past
practices, but subject to reasonable business judgment standards, such Grantor
will not (i) grant any extension of the time of payment of any Account, (ii)
compromise or settle any Account for less than the full amount thereof, (iii)
release, wholly or partially, any Person liable for the payment of any Account,
(iv) allow any credit or discount whatsoever on any Account or (v) amend,
supplement or modify any Account in any manner that could adversely affect the
value thereof except to the extent such actions are reflected in applicable
reserves.
(b) Such Grantor will deliver to the Collateral Agent a copy of each
written demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount
(for the Grantors as a whole) of the then outstanding Accounts.
(c) The amount represented by each Grantor to the Collateral Agent as
owing by each account debtor or by all account debtors in respect of the
Accounts will at such time be the correct amount actually owing by such account
debtor or debtors thereunder (except for de minimis or immaterial inaccuracies).
(d) Without the prior written consent of the Collateral Agent, the
Grantors will not fail to exercise promptly and diligently each and every
material right which it may have under each agreement giving rise to an Account
(other than any right of termination), unless any such failure could not
reasonably be expected to materially adversely affect the value of such Account
as Collateral or in the exercise of such Grantor's reasonable business judgment,
the exercise of such rights would not be commercially reasonable in light of the
amount of the relevant Account (taking into consideration the business
relationship with the relevant account debtor).
(e) The Grantors will not remove its books and records from the
location specified in paragraph 3.7(b) (unless the Collateral Agent is given 30
days prior written notice).
(f) In any suit, proceeding or action brought by the Collateral Agent
or any Secured Creditor under any Account for any sum owing thereunder, or to
enforce any provisions of any Contract, the relevant Grantor will save,
indemnify and keep the Collateral Agent and such Secured Creditor harmless from
and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor thereunder, arising out of a breach by such Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or its
successors from such Grantor.
4.9 PLEDGED SECURITIES. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer or any Investment Property, whether in addition
to, in substitution of, as a conversion of, or in exchange for, any shares of
the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Collateral Agent and the Secured Creditors, hold
the same in trust for the Collateral Agent and the Secured Creditors and deliver
the same forthwith to the Collateral Agent in the exact form received, duly
indorsed by such Grantor to the Collateral Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by such
Grantor and with, if the Collateral Agent so requests, signature guaranteed, to
be held by the Collateral Agent, subject to the terms hereof, as additional
collateral security for the Obligations, PROVIDED, HOWEVER, that in no event
shall the amount of Pledged Stock held by the collateral Agent hereunder exceed
65% of each class of Capital Stock of any First Tier Excluded Foreign
Subsidiary. After the occurrence and during the continuance of a Default or
Event of Default, any sums paid upon or in respect of the Pledged Securities
upon the liquidation or dissolution of any Issuer shall be paid over to the
Collateral Agent to be held by it hereunder as additional collateral security
for the Obligations, and in case any distribution of capital shall be made on or
in respect of the Pledged Securities or any property shall be distributed upon
or with respect to the Pledged Securities pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Collateral Agent, be delivered to
the Collateral Agent to be held by it hereunder as additional collateral
security for the Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Collateral Agent, hold such money or property in trust for the Secured
Creditors, segregated from other funds of such Grantor, as additional collateral
security for the Obligations.
(b) Without the prior written consent of the Collateral Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) except as permitted by the Credit Agreement, sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the LIFO Credit Agreement), (iii) create, incur or permit
to exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or otherwise
permitted by the LIFO Credit Agreement or (iv) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the Collateral
Agent to sell, assign or transfer any of the Pledged Securities or Proceeds
thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in Section 4.9(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Sections
5.3(c) and 5.7 of this Agreement shall apply to it, MUTATIS MUTANDIS, with
respect to all actions that may be required of it pursuant to Section 5.3(c) or
5.7 of this Agreement with respect to the Pledged Securities issued by it.
4.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods, if any, or services as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (ii) maintain as in the
past the quality of products, if any, and services offered under such Trademark
except as such Grantor shall determine in the exercise of its reasonable
business judgment in connection with the repositioning of its products, (iii)
use such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any ▇▇▇▇ which is confusingly similar or a colorable imitation of such
Trademark unless the Collateral Agent, for the ratable benefit of the Secured
Creditors, shall obtain a perfected security interest in such ▇▇▇▇ pursuant to
this Agreement, and (v) not do (and use commercially reasonable efforts to
prevent any licensee or sublicensee thereof from doing) any act or knowingly
omit to do any act whereby such Trademark may become invalidated or impaired in
any way if such invalidity or impairment would have a Material Adverse Effect.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public if such act would have a Material Adverse
Effect.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not do (and will use commercially
reasonable efforts to prevent any licensee or sublicensee thereof from doing)
any act or knowingly omit to do any act whereby any material portion of the
Copyrights may become invalidated or otherwise impaired if such invalidity or
impairment would have a Material Adverse Effect. Such Grantor will not (either
itself or through licensees) do any act whereby any material portion of the
Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any Intellectual Property to infringe the intellectual
property rights of any other Person if such infringement could reasonably be
expected to have a Material Adverse Effect.
(e) Such Grantor will promptly notify the Collateral Agent if it knows
of any material adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office, such Grantor shall report such filing to the
Collateral Agent as required pursuant to the LIFO Credit Agreement. Upon request
of the Collateral Agent, such Grantor shall execute and deliver, and have
recorded, any and all agreements, instruments, documents, and papers as the
Collateral Agent may reasonably request to evidence the Collateral Agent's and
the Secured Creditors' security interest in any Copyright, Patent or Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all commercially reasonable steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability, unless the failure to take such action is not reasonably
likely to result in a Material Adverse Effect.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Collateral Agent after it learns thereof and ▇▇▇ for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
(i) Nothing contained in this Section 4.10 shall operate or be
construed to require any Grantor to initiate or file any new applications to
register any Trademark or Copyright.
SECTION 5. REMEDIAL PROVISIONS
5.1 CERTAIN MATTERS RELATING TO ACCOUNTS. (a) The Collateral Agent
shall have the right to make test verifications of the Accounts in any manner
and through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Collateral Agent may
reasonably require in connection with such test verifications. At any time and
from time to time, upon the Collateral Agent's reasonable request and at the
expense of the relevant Grantor, such Grantor shall cause its independent public
accountants or others satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and test verifications
of, and trial balances for, the Accounts.
(b) At the Collateral Agent's request at any time after the occurrence
and during the continuance of a Default or Event of Default, each Grantor shall
deliver to the Collateral Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Accounts,
including, without limitation, all original orders, invoices and shipping
receipts, though such Grantor may retain copies thereof for its records.
5.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Collateral Agent in its own name or in the name of others may at any time after
the occurrence and during the continuance of an Event of Default communicate
with obligors under the Accounts to verify with them to the Collateral Agent's
satisfaction the existence, amount and terms of any Accounts.
(b) Upon the request of the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Accounts that the Accounts have been assigned to the
Collateral Agent for the ratable benefit of the Secured Creditors and that
payments in respect thereof shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Collateral Agent nor any Secured Creditor shall have any obligation or liability
under any Account (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Collateral Agent or any Secured
Creditor of any payment relating thereto, nor shall the Collateral Agent or any
Secured Creditor be obligated in any manner to perform any of the obligations of
any Grantor under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
5.3 PLEDGED STOCK. (a) Unless an Event of Default shall have occurred
and be continuing and the Collateral Agent shall have given notice to the
relevant Grantor of the Collateral Agent's intent to exercise its corresponding
rights pursuant to Section 5.3(b), each Grantor shall be permitted to receive
all cash dividends paid in respect of the Pledged Stock and all payments made in
respect of the Pledged Notes, in each case paid in the normal course of business
of the relevant Issuer and to exercise all voting and corporate rights with
respect to the Pledged Securities; PROVIDED, HOWEVER, that no vote shall be cast
or corporate right exercised or other action taken which, in the Collateral
Agent's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the LIFO Credit
Agreement, this Agreement or the Master Restructuring Agreement.
(b) If an Event of Default shall occur and be continuing and the
Collateral Agent shall give notice of its intent to exercise such rights to the
relevant Grantor or Grantors, (i) the Collateral Agent shall have the right to
receive any and all cash dividends, payments or other Proceeds paid in respect
of the Pledged Securities and make application thereof to the Obligations in
such order as the Collateral Agent may determine in accordance with the Master
Restructuring Agreement, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Collateral Agent or its nominee, and the
Collateral Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Pledged Securities as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Collateral Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Collateral Agent may determine), all without liability except
to account for property actually received by it, but the Collateral Agent shall
have no duty to any Grantor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(c) Each Issuer acknowledges and consents to the pledge herein of the
Pledged Stock issued by it. Each Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply
with any instruction received by it from the Collateral Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Collateral Agent.
5.4 PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT. In addition to the
rights of the Collateral Agent and the Secured Creditors specified in Section
5.1 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Collateral Agent and the Secured Creditors, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Collateral Agent in the exact form received by such Grantor (duly indorsed
by such Grantor to the Collateral Agent, if required). All Proceeds received by
the Collateral Agent hereunder shall be held by the Collateral Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Collateral Agent in the Collateral Account (or by such Grantor
in trust for the Collateral Agent and the Secured Creditors) shall continue to
be held as collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 5.5.
5.5 APPLICATION OF PROCEEDS. If an Event of Default shall have
occurred and be continuing, at any time at the Collateral Agent's election, the
Collateral Agent may apply all or any part of Proceeds held in the Collateral
Account in payment of the Obligations in accordance with Section 4.3 of the
Master Restructuring Agreement.
5.6 CODE AND OTHER REMEDIES. If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Secured Creditors, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, the Collateral Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below or any notice otherwise expressly required in
the LIFO Loan Documents) to or upon any Grantor or any other Person (all and
each of which demands, defenses, advertisements and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of the Collateral Agent or any Secured Creditor or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Collateral Agent, or any Secured Creditor
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Collateral Agent's request, to assemble the Collateral
and make it available to the Collateral Agent at places which the Collateral
Agent shall reasonably select, whether at such Grantor's premises or elsewhere.
The Collateral Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 5.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Collateral Agent and the Secured Creditors hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Obligations, in such order as the
Collateral Agent may elect in accordance with the Master Restructuring
Agreement, and only after such application and after the payment by the
Collateral Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Collateral Agent account for the surplus, if any, to any Grantor. To the extent
permitted by applicable law, each Grantor waives all claims, damages and demands
it may acquire against the Collateral Agent or any Secured Creditor arising out
of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
5.7 REGISTRATION RIGHTS. (a) If the Collateral Agent shall determine
to exercise its right to sell any or all of the Pledged Stock pursuant to
Section 5.6 or otherwise hereunder, and if in the opinion of the Collateral
Agent it is necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Collateral Agent, necessary or advisable to register
the Pledged Stock, or that portion thereof to be sold, under the provisions of
the Securities Act, (ii) use its best efforts to cause the registration
statement relating thereto to become effective and to remain effective for a
period of one year from the date of the first public offering of the Pledged
Stock, or that portion thereof to be sold, and (iii) make all amendments thereto
and/or to the related prospectus which, in the opinion of the Collateral Agent,
are necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Collateral Agent shall designate and to make available
to its security holders, as soon as practicable, an earnings statement (which
need not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Each Grantor recognizes that the Collateral Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Collateral
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its 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 Stock pursuant to this Section 5.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 5.7 will cause irreparable injury to the Collateral Agent and the
Secured Creditors, that the Collateral Agent and the Secured Creditors have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 5.7 shall be specifically
enforceable against such Grantor, and such Grantor 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 under any
Operative Agreement.
5.8 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the Code.
Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay its Obligations
and the fees and disbursements of any attorneys employed by the Collateral Agent
or any Secured Creditor to collect such deficiency.
SECTION 6. THE COLLATERAL AGENT
6.1 COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a) Each
Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate actions and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Collateral Agent the power and right, on behalf of such Grantor, without notice
to or assent by such Grantor, to do any or all of the following:
(i) in the case of any Account, at any time when any Event of Default
shall have occurred and is continuing, in the name of such Grantor or its
own name, or otherwise, take possession of and indorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Collateral Agent for the
purpose of collecting any and all such moneys due under any Account,
Instrument or General Intangible or with respect to any other Collateral
whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver,
and have recorded, any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence the Collateral
Agent's and the Secured Creditors' security interests in such Intellectual
Property and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.6
or 5.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (ii) ask or demand for, collect, and receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (iii) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (vi) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Collateral Agent may
deem appropriate; (vii) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Collateral Agent shall in its sole
discretion determine; and (viii) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent were the absolute
owner thereof for all purposes, and do, at the Collateral Agent's option
and such Grantor's expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve or
realize upon the Collateral and the Collateral Agent's and the Secured
Creditors' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6.1(a) unless an Event of Default shall have
occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the LIFO Credit Agreement, from the
date of payment by the Collateral Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
6.2 DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent, any Secured Creditor
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Collateral Agent and the Secured Creditors
hereunder are solely to protect the Collateral Agent's and the Secured
Creditors' interests in the Collateral and shall not impose any duty upon the
Collateral Agent or any Secured Creditor to exercise any such powers. The
Collateral Agent and the Secured Creditors shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
6.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of
the Code and any other applicable law, each Grantor authorizes the Collateral
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.
6.4 AUTHORITY OF COLLATERAL AGENT. Each Grantor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as among the Collateral Agent and the Secured
Creditors, be governed by the Master Restructuring Agreement, and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Collateral Agent and the Grantors, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Secured Creditors with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 7. MISCELLANEOUS
7.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written agreement executed by the Collateral Agent (at the direction of the
Directing Party) and each Grantor directly affected thereby.
7.2 NOTICES. All notices, requests and demands to or upon the
Collateral Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 8.6 of the Master Restructuring Agreement at the
addresses set forth on Schedule 1 hereto.
7.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither the
Collateral Agent nor any Secured Creditor shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Collateral Agent or any Secured Creditor, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Collateral Agent or any Secured Creditor of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Collateral Agent or such Secured Creditor would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Collateral Agent, the Secured Creditors and their successors and assigns;
PROVIDED that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Collateral Agent.
7.5 SET-OFF. Each Grantor hereby irrevocably authorizes the Collateral
Agent and each Secured Creditor at any time and from time to time during the
continuance of an Event of Default, without prior notice to such Grantor or any
other Grantor, any such notice being expressly waived by each Grantor, to
set-off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Collateral Agent or such Secured Creditor to or for the credit or
the account of such Grantor, or any part thereof in such amounts as the
Collateral Agent or such Secured Creditor may elect, against and on account of
the obligations and liabilities of such Grantor to the Collateral Agent or such
Secured Creditor hereunder and claims of every nature and description of the
Collateral Agent or such Secured Creditor against such Grantor, in any currency,
whether arising hereunder or under any Operative Agreement, or otherwise, as the
Collateral Agent or such Secured Creditor may elect, whether or not the
Collateral Agent or any Secured Creditor has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Collateral Agent and each Secured Creditor shall notify such
Grantor promptly of any such set-off and the application made by the Collateral
Agent or such Secured Creditor of the proceeds thereof, PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent and each Secured Creditor under
this Section 7.5 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Collateral Agent or such
Secured Creditor may have.
7.6 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
7.7 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7.8 SECTION HEADINGS. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
7.9 INTEGRATION. This Agreement and the Operative Agreements represent
the agreement of the Grantors, the Collateral Agent and the Secured Creditors
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Collateral Agent or
any Secured Creditor relative to subject matter hereof and thereof not expressly
set forth or referred to herein, or in any Operative Agreement.
7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
7.11 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Agreement or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 7.2 or at such other address
of which the Collateral Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to ▇▇▇ in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
7.12 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Operative Agreements to which it
is a party;
(b) neither the Collateral Agent nor any Secured Creditor has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any other Operative Agreement and the
relationship between the Grantors, on the one hand, and the Collateral
Agent and the Secured Creditors, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Operative
Agreements or otherwise exists by virtue of the transactions contemplated
hereby among the Secured Creditors or among the Grantors and the Secured
Creditors.
7.13 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
7.14 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Subsection 1.14(e) of
MRA Appendix B shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
7.15 RELEASES. (a) At such time as the Obligations shall have been
paid in full or cash collateralized, the Commitments have been terminated and no
Letters of Credit shall be outstanding, the Collateral shall be released from
the Liens created hereby, and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Collateral Agent and
each Grantor hereunder shall terminate, all without delivery of any instrument
or performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors. At the request and sole expense of any Grantor following
any such termination, the Collateral Agent shall deliver to such Grantor any
Collateral held by the Collateral Agent hereunder, and execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Operative
Agreements, then the Collateral Agent, at the request and sole expense of such
Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Guarantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Operative Agreements; PROVIDED
that the Borrower shall have delivered to the Collateral Agent, at least ten
Business Days prior to the date of the proposed release, a written request for
release identifying the relevant Guarantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrower stating
that such transaction is in compliance with the Operative Agreements.
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agreement to be duly executed and delivered as of the date first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
Name: Stuart Mont
Title: Chief Operating Officer
Executive Vice President
SUBSIDIARIES
Christie Design Corporation, a Delaware
corporation
InterAct Accessories, Inc., a Delaware
corporation
Recoton Audio Corporation, a Delaware
corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a
California corporation
Recoton Japan, Inc., an Illinois corporation
Recoton International Holdings, Inc., a
Delaware corporation
Recoton European Holdings, Inc., a
Delaware corporation
AAMP of Florida, Inc., a Florida corporation
By: /S/ STUART MONT
Name: Stuart Mont
Title: Vice President
Annex 1 to
COLLATERAL AGREEMENT
ASSUMPTION AGREEMENT, dated as of ________________, _____, made by
______________________________, a ______________ corporation (the "ADDITIONAL
GRANTOR"), in favor of THE CHASE MANHATTAN BANK, as collateral agent (in such
capacity, the "COLLATERAL AGENT") for the Secured Creditors. All capitalized
terms not defined herein shall have the meaning ascribed to them in the
Guarantee and Collateral Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the LIFO Credit Agreement requires the Additional Grantor to
become a party to the Collateral Agreement and to the Collateral Agency
Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Collateral Agreement and
the Collateral Agency Agreement;
NOW, THEREFORE, IT IS AGREED:
1. COLLATERAL AGREEMENT. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 7.14 of the Collateral
Agreement, hereby becomes a party to the Collateral Agreement as a Grantor
thereunder and to the Collateral Agency Agreement, in each case with the same
force and effect as if originally named therein as a Grantor or a party thereto
and, without limiting the generality of the foregoing, hereby expressly assumes
all obligations and liabilities of a Grantor under the Collateral Agreement and
a party to the Collateral Agency Agreement. The information set forth in Annex
1-A hereto is hereby added to the information set forth in Schedules
____________* to the Collateral Agreement. The Additional Grantor hereby
represents and warrants that each of the representations and warranties
contained in Section 3 of the Collateral Agreement is true and correct on and as
the date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.
-------------
* Refer to each Schedule which needs to be supplemented.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
Name:
Title:
ACKNOWLEDGMENT AND CONSENT*
The undersigned hereby acknowledges receipt of a copy of the Collateral
Agreement, dated as of September 8, 1999 (the "AGREEMENT"), made by the Grantors
parties thereto for the benefit of The Chase Manhattan Bank, as Collateral
Agent. The undersigned agrees for the benefit of the Collateral Agent and the
Secured Creditors as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Collateral Agent promptly in writing of
the occurrence of any of the events described in Section 4.6(a) of the
Agreement.
3. The terms of Sections 5.3 and 5.7 of the Agreement shall apply to it,
MUTATIS MUTANDIS, with respect to all actions that may be required of it
pursuant to Section 5.3 or 5.7 of the Agreement.
[NAME OF ISSUER]
By ----------------------------
Name:
Title:
Address for Notices:
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Fax: --------------------------
* To be delivered by any Issuer which is not party to this Guarantee and
Collateral Agreement.