EXHIBIT 10.14
GUARANTEE AND COLLATERAL AGREEMENT
dated as of
January 31, 2003,
among
WKI Holding Company, Inc.,
the Subsidiary Parties
identified herein,
and
JPMORGAN CHASE BANK,
as Collateral Agent
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. Credit Agreement . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Other Defined Terms . . . . . . . . . . . . . . . . . . 2
ARTICLE II Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.01. Guarantee . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Guarantee of Payment . . . . . . . . . . . . . . . . . .9
SECTION 2.03. No Limitations, Etc . . . . . . . . . . . . . . . . . .10
SECTION 2.04. Reinstatement . . . . . . . . . . . . . . . . . . . . .10
SECTION 2.05. Agreement To Pay; Subrogation . . . . . . . . . . . . .11
SECTION 2.06. Information . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE III Pledge of Securities . . . . . . . . . . . . . . . . . . . . .11
SECTION 3.01. Pledge . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.02. Delivery of the Pledged Collateral . . . . . . . . . . 12
SECTION 3.03. Representations, Warranties and Covenants . . . . . . .12
SECTION 3.04. Certification of Limited Liability Company and Limited
Partnership Interests . . . . . . . . . . . . . . . . .13
SECTION 3.05. Registration in Nominee Name; Denominations . . . . . .14
SECTION 3.06. Voting Rights; Dividends and Interest, Etc . . . . . . 14
ARTICLE IV Security Interests in Personal Property . . . . . . . . . . . .15
SECTION 4.01. Security Interest . . . . . . . . . . . . . . . . . . .15
SECTION 4.02. Representations and Warranties . . . . . . . . . . . . 17
SECTION 4.03. Covenants . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 4.04. Other Actions . . . . . . . . . . . . . . . . . . . . .22
SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright
Collateral . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.06. Lockbox System . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5.01. Remedies Upon Default . . . . . . . . . . . . . . . . .28
SECTION 5.02. Application of Proceeds . . . . . . . . . . . . . . . .29
SECTION 5.03. Grant of License to Use Intellectual Property . . . . .30
SECTION 5.04. Securities Act, etc . . . . . . . . . . . . . . . . . .30
SECTION 5.05. Registration, etc . . . . . . . . . . . . . . . . . . .31
ARTICLE VI Indemnity, Subrogation and Subordination . . . . . . . . . . . 31
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SECTION 6.01. Indemnity and Subrogation . . . . . . . . . . . . . . .31
SECTION 6.02. Contribution and Subrogation . . . . . . . . . . . . . 32
SECTION 6.03. Subordination . . . . . . . . . . . . . . . . . . . . .32
ARTICLE VII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.01. Notices . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 7.02. Security Interest Absolute . . . . . . . . . . . . . . 33
SECTION 7.03. Survival of Agreement . . . . . . . . . . . . . . . . .33
SECTION 7.04. Binding Effect; Several Agreement . . . . . . . . . . .33
SECTION 7.05. Successors and Assigns . . . . . . . . . . . . . . . . 33
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification .33
SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact . . . . . .35
SECTION 7.08. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .35
SECTION 7.09. Waivers; Amendment . . . . . . . . . . . . . . . . . . 35
SECTION 7.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . 36
SECTION 7.11. Severability . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.12. Counterparts . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.13. Headings . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.14. Jurisdiction; Consent to Service of Process. . . . . . 36
SECTION 7.15. Termination or Release . . . . . . . . . . . . . . . . 37
SECTION 7.16. Additional Subsidiaries . . . . . . . . . . . . . . . .38
SECTION 7.17. Right of Setoff . . . . . . . . . . . . . . . . . . . .38
SECTION 7.18. References to Credit Agreements and Indenture . . . . .38
Schedules
Schedule I Subsidiary Parties
Schedule II Equity Interests; Debt Securities
Schedule III Commercial Tort Claims
Schedule IV Excluded Inventory
Schedule 4.06(d) ▇▇▇▇▇▇ Bank Lockbox Agreement
Schedule V Intellectual Property
Schedule VI Insurance Requirements
Schedule VII Excluded Licenses
Exhibits
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Exhibit I Form of Supplement to the Guarantee and
Collateral Agreement
Exhibit II Form of Perfection Certificate
Exhibit III Form of Lockbox Agreement
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GUARANTEE AND COLLATERAL AGREEMENT dated as of January 31,
2003 (this "Agreement"), among WKI HOLDING COMPANY, INC., a
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Delaware corporation (the "Company"), the Subsidiary Parties
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identified herein and JPMORGAN CHASE BANK, a New York banking
corporation ("JPMCB"), as collateral agent (in such capacity, the
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"Collateral Agent") for the Secured Parties (as defined below).
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A. Reference is made to (a) the Intercreditor Agreement dated as
of January 31, 2003 (as amended, supplemented, waived or otherwise modified from
time to time, the "Intercreditor Agreement"), among the Collateral Agent, the
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Company and each of the Secured Parties; (b) the Revolving Credit Agreement
dated as of January 31, 2003 (as amended, supplemented, waived or otherwise
modified from time to time, the "Revolving Credit Agreement"), among the
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Company, the lenders from time to time party thereto (the "Revolving Lenders")
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and JPMCB, as administrative agent (the "Revolving Agent"), (c) the Term Loan
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Credit Agreement dated as of January 31, 2003 (as amended, supplemented, waived
or otherwise modified from time to time, the "Term Loan Credit Agreement"),
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among the Company, the lenders from time to time party thereto (the "Term Loan
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Lenders") and JPMCB, as administrative agent (the "Term Loan Agent") (JPMCB, in
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its capacity as the Revolving Agent and the Term Loan Agent, the "Administrative
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Agent") and (d) the Indenture dated as of January 31, 2003 (as amended,
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supplemented, waived or otherwise modified from time to time, the "Indenture"),
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for the 12% Senior Subordinated Notes due 2010 (the "Senior Subordinated Notes")
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among the Company, U.S. Bank National Association, as trustee (the "Trustee"),
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and the Subsidiary Guarantors party thereto (the "Subsidiary Guarantors").
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B. The Revolving Lenders have agreed to extend credit to the
Company in an aggregate principal amount of up to $75,000,000 pursuant to the
Revolving Credit Agreement.
C. The Term Loan Lenders have agreed to accept the obligations of
the Company under the Term Loan Credit Agreement in an aggregate principal
amount of 240,050,000 as partial consideration for the termination and discharge
of all obligations owed to the Term Loan Lenders under the Old Credit Agreement
(as defined in the Term Loan Credit Agreement) pursuant to the terms and
conditions of the Emergence Plan.
D. The holders of the Senior Subordinated Notes (the
"Noteholders") have agreed to accept the obligations of the Company under the
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Indenture as partial consideration for the termination and discharge of all
obligations owed to the Term Loan Lenders under the Old Credit Agreement
pursuant to the terms and conditions of the Emergence Plan.
E. The obligations of the Revolving Lenders to extend credit to
the Company and of the Term Loan Lenders and the Noteholders to accept the
Company's obligations under the Term Loan Credit Agreement and the Indenture,
respectively, are conditioned upon, among other things, the execution and
delivery of this Agreement. The Subsidiary Parties are affiliates of the
Company, will derive substantial benefits from the extension of credit to the
Company pursuant to the Revolving Credit Agreement and the acceptance of the
Company's obligations under the Term Loan Credit Agreement and the Indenture and
are willing to execute and deliver this Agreement in order to induce the
Revolving Lenders, the Term Loan Lenders and Noteholders, respectively, to
extend such credit and accept such obligations.
Accordingly, each of the parties hereto agrees as follows:
ARTICLE I
Definitions
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SECTION 1.01. Credit Agreement. Capitalized terms used in this
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Agreement and not otherwise defined herein have the meanings specified in the
Revolving Credit Agreement. All terms defined in the New York UCC (as defined
herein) and not defined in this Agreement have the meanings specified therein;
the term "instrument" shall have the meaning specified in Article 9 of the New
York UCC.
(b) The rules of construction specified in Section 1.03 of the
Revolving Credit Agreement also apply to this Agreement.
SECTION 1.02. Other Defined Terms. As used in this Agreement, the
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following terms have the meanings specified below:
"Account Debtor" means any Person who is or who may become obligated
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to any Grantor under, with respect to or on account of an Account.
"Actionable Default" means any Event of Default under and as defined
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in (a) the Revolving Credit Agreement, (b) the Term Loan Credit Agreement or (c)
the Indenture.
"Administrative Agent" has the meaning assigned to such term in the
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preamble hereto.
"Agreement" has the meaning assigned to such term in the preamble
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hereto.
"Article 9 Collateral" has the meaning assigned to such term in
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Section 4.01.
"Collateral" means Article 9 Collateral and Pledged Collateral.
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"Collateral Agent" has the meaning assigned to such term in the
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preamble hereto.
"Collection Deposit Account" means a lockbox account of a Grantor
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maintained for the benefit of the Secured Parties with the Collateral Agent or
with a Sub-Agent pursuant to a Lockbox Agreement.
"Company" has the meaning assigned to such term in the preamble
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hereto.
"Concentration Account" means the cash collateral account established
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at the office of JPMorgan Chase Bank located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, in the name of the Collateral Agent, for purposes of this Agreement.
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"Copyright License" means any written agreement, now or hereafter in
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effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or that any Grantor otherwise has the right to
license, or granting any right to any Grantor under any Copyright now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Copyrights" means all of the following now owned or hereafter
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acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule V.
"Credit Agreements" means (a) the Revolving Credit Agreement and (b)
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the Term Loan Credit Agreement.
"Default" means any event or condition which constitutes an Actionable
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Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Actionable Default.
"Excluded Inventory" means the Inventory described on Schedule IV and
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all proceeds thereof.
"Federal Securities Laws" has the meaning assigned to such term in
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Section 5.04.
"General Fund Account" means the account number 0000642546 established
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at the office of JPMorgan Chase Bank located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ in the name of World Kitchen, Inc.
"General Intangibles" means all "General Intangibles" as defined in
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the New York UCC, including all choses in action and causes of action and all
other intangible personal property of any Grantor of every kind and nature
(other than Accounts) now owned or hereafter acquired by any Grantor, including
corporate or other business records, indemnification claims, contract rights
(including rights under leases, whether entered into as lessor or lessee, Swap
Agreements and other agreements), Intellectual Property, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor to secure payment by an Account Debtor of any of the Accounts.
"Grantors" means the Company and the Subsidiary Parties.
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"Guarantors" means the Subsidiary Parties.
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"Indenture" has the meaning assigned to such term in the preamble
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hereto.
"Indenture Documents" means the Indenture, the Senior Subordinated
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Notes, this Agreement, the Intercreditor Agreement, and the other Indenture
Security Documents.
"Indenture Security Documents" has the meaning assigned to the term
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"Security Documents" in the Indenture.
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"Intellectual Property" means all intellectual and similar property of
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every kind and nature now owned or hereafter acquired by any Grantor, including
inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets,
domain names, confidential or proprietary technical and business information,
know-how, show-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.
"Intercreditor Agreement" has the meaning assigned to such term in the
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preamble hereto.
"JPMCB" has the meaning assigned to such term in the preamble hereto.
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"Lenders" means (a) the Revolving Lenders and (b) the Term Loan
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Lenders.
"License" means any Patent License, Trademark License, Copyright
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License or other license or sublicense agreement to which any Grantor is a
party, other than those license or sublicense agreements (a) in existence on the
date hereof and listed on Schedule V and (b) entered into after the date hereof,
in each case that by their terms prohibit a grant of a security interest by such
Grantor as licensee thereunder provided, that (i) in the case of clause (b),
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such Grantor has used commercially reasonable efforts to prevent the inclusion
of such a prohibition over such license or sublicense and (ii) in the case of
any licenses or sublicenses excluded pursuant to clauses (a) and (b), such
licenses or sublicenses, individually or in the aggregate, are not material to
the business of such Grantor.
"Loans" means (a) the Revolving Loans and (b) the Term Loans.
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"Lockbox Agreement" means a Lockbox Agreement substantially in the
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form of Exhibit III, among the applicable Grantors, the Collateral Agent and the
Sub-Agent.
"Lockbox System" has the meaning assigned to such term in Section
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4.06(a).
"New York UCC" means the Uniform Commercial Code as from time to time
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in effect in the State of New York.
"Noteholders" has the meaning assigned to such term in the preamble
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hereto.
"Noteholder Obligations" means (a) the due and punctual payment by the
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Company of (i) the principal of and interest (including interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Senior Subordinated Notes, when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise and interest on the overdue principal of and interest on
the Senior Subordinated Notes (including, in each case, interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) and
4
(ii) all other monetary obligations of the Company to any of the Noteholder
Secured Parties under the Indenture and each of the other Indenture Documents,
including obligations to pay fees, expense reimbursement obligations and
indemnification obligations, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), (b) the due and
punctual performance of all other obligations of the Company owed to any
Noteholder Secured Party under or pursuant to the Indenture, the Senior
Subordinated Notes and each of the other Indenture Documents, and (c) the due
and punctual payment and performance of all the obligations of each Grantor owed
to any Noteholder Secured Party under or pursuant to this Agreement, the
Indenture, the Senior Subordinated Notes and each of the other Indenture
Documents.
"Noteholder Secured Parties" means the (a) the Noteholders, (b) JPMCB,
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as administrative agent under the Indenture, (c) the Trustee, (d) the Collateral
Agent, (e) the beneficiaries of each indemnification obligation undertaken by
the Company or any Subsidiary Guarantor under any Indenture Document and (f) the
successors and assigns of each of the foregoing.
"Obligations" means (a) the Revolving Obligations, (b) the Term Loan
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Obligations and (c) the Noteholder Obligations.
"Old Credit Agreement" has the meaning assigned to such term in the
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Term Loan Credit Agreement.
"Patent License" means any written agreement, now or hereafter in
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effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or that any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" means all of the following now owned or hereafter acquired
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by any Grantor: (a) all letters patent of the United States or the equivalent
thereof in any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or the equivalent thereof
in any other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any similar
offices in any other country, including those listed on Schedule V, and (b) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.
"Perfection Certificate" means a certificate substantially in the form
----------------------
of Exhibit II, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Financial Officer and the chief
legal officer of the Company.
"Pledged Collateral" has the meaning assigned to such term in Section
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3.01.
"Pledged Debt Securities" has the meaning assigned to such term in
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Section 3.01.
5
"Pledged Securities" means any promissory notes, stock certificates or
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other securities now or hereafter included in the Pledged Collateral, including
all certificates, instruments or other documents representing or evidencing any
Pledged Collateral.
"Pledged Stock" has the meaning assigned to such term in Section 3.01.
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"Proceeds" has the meaning specified in Section 9-102 of the New York
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UCC.
"Revolving Agent" has the meaning assigned to such term in the
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preamble hereto.
"Revolving Credit Agreement" has the meaning assigned to such term in
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the preamble hereto.
"Revolving Lenders" has the meaning assigned to such term in the
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preamble hereto.
"Revolving Loan Documents" means the Revolving Credit Agreement, this
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Agreement, the Intercreditor Agreement, the other Revolving Security Documents
and the documentation relating to any Letter of Credit.
"Revolving Loans" means the loans made by the Revolving Lenders to the
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Company pursuant to the Revolving Credit Agreement.
"Revolving Obligations" means (a) the due and punctual payment by the
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Company of (i) the principal of and interest (including interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Revolving Loans, when and as due, whether at maturity, by acceleration, upon
one or more dates set for prepayment or otherwise and interest on the overdue
principal of and interest on the Revolving Loans (including, in each case,
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, whether allowed or allowable in such
proceeding), (ii) each payment required to be made by the Company under the
Revolving Credit Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements, interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) thereon and obligations to provide cash
collateral, and (iii) all other monetary obligations of the Company to any of
the Revolving Secured Parties under the Revolving Credit Agreement and each of
the other Revolving Loan Documents, including obligations to pay fees, expense
reimbursement obligations and indemnification obligations, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), (b) the due and punctual performance of all other
obligations of the Company owed to any Revolving Secured Party under or pursuant
to the Revolving Credit Agreement and each of the other Revolving Loan
Documents,(c) the due and punctual payment and performance of all the
obligations of each other Grantor owed to any Revolving Secured Party under or
pursuant to this Agreement and each of the other Revolving Loan Documents and
(d) the due and punctual payment and performance of all obligations of each
Grantor under each Swap Agreement that (i) is in effect on the Effective Date
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with a counterparty that is a Revolving Lender or an Affiliate of a Revolving
Lender as of the Effective Date or (ii) is entered into after the Effective Date
with any counterparty that is a Revolving Lender or an Affiliate of a Revolving
Lender at the time such Swap Agreement is entered into.
"Revolving Secured Parties" means (a) the Revolving Lenders, (b) the
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Revolving Agent, (c) the Issuing Bank, (d) the Collateral Agent, (e) each
counterparty to any Swap Agreement with a Grantor the obligations under which
constitute Revolving Obligations, (f) the beneficiaries of each indemnification
obligation undertaken by any Grantor under any Revolving Loan Document and (g)
the successors and assigns of each of the foregoing.
"Revolving Security Documents" has the meaning assigned to the term
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"Security Documents" in the Revolving Credit Agreement.
"Secured Parties" means (a) the Revolving Secured Parties, (b) the
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Term Loan Secured Parties and (c) the Noteholder Secured Parties.
"Security Documents" means (a) the Revolving Security Documents, (b)
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the Term Loan Security Documents and (c) the Indenture Security Documents.
"Security Interest" has the meaning assigned to such term in Section
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4.01.
"Senior Subordinated Notes" has the meaning assigned to such term in
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the preamble hereto.
"Specified Deposit Accounts" means (a) account number 323-137504 and
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(b) account number 586-900454, in each case located at JPMorgan Chase Bank in
the name of a Grantor.
"Sub-Agent" means a JPMCB, as Sub-Agent under the Lockbox Agreement.
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"Subsidiary Guarantors" has the meaning assigned to such term in the
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preamble hereto.
"Subsidiary Party" means (a) the Subsidiaries identified on Schedule I
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and (b) each other Subsidiary that becomes a party to this Agreement as a
Subsidiary Party after the Effective Date.
"Term Loan Agent" has the meaning assigned to such term in the
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preamble hereto.
"Term Loan Credit Agreement" has the meaning assigned to such term in
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the preamble hereto.
"Term Loan Lenders" has the meaning assigned to such term in the
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preamble hereto.
"Term Loan Documents" means the Term Loan Credit Agreement, this
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Agreement, the Intercreditor Agreement and the other Term Loan Security
Documents.
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"Term Loan Obligations" means (a) the due and punctual payment by the
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Company of (i) the principal of and interest (including interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Term Loans, when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise and interest on the overdue
principal of and interest on the Term Loans (including in each case, interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, whether allowed or allowable in such proceeding) and
(ii) all other monetary obligations of the Company to any of the Term Loan
Secured Parties under the Term Loan Credit Agreement and each of the other Term
Loan Documents, including obligations to pay fees, expense reimbursement
obligations and indemnification obligations, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), (b)
the due and punctual performance of all other obligations of the Company owed to
any Term Loan Secured Party under or pursuant to the Term Loan Credit Agreement
and each of the other Term Loan Documents, and (c) the due and punctual payment
and performance of all the obligations of each other Grantor owed to any Term
Loan Secured Party under or pursuant to this Agreement and each of the other
Term Loan Documents.
"Term Loans" means the loans made by the Term Loan Lenders to the
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Company pursuant to the Term Loan Credit Agreement.
"Term Loan Secured Parties" means (a) the Term Loan Lenders, (b) the
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Term Loan Agent, (c) the Collateral Agent, (d) the beneficiaries of each
indemnification obligation undertaken by any Grantor under any Term Loan
Document and (e) the successors and assigns of each of the foregoing.
"Term Loan Security Documents" has the meaning assigned to the term
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"Security Documents" in the Term Loan Credit Agreement.
"Trademark License" means any written agreement, now or hereafter in
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effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or that any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" means all of the following now owned or hereafter
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acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof (if any), and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office or any similar offices in any State of the United States or any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule V, (b) all goodwill
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associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.
"Transaction Documents" means (a) the Revolving Loan Documents, (b)
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the Term Loan Documents and (c) the Indenture Documents.
"Trustee" has the meaning assigned to such term in the preamble
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hereto.
ARTICLE II
Guarantee
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SECTION 2.01. Guarantee. Each Guarantor unconditionally guarantees,
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jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, the due and punctual payment and performance of the
Revolving Obligations and the Term Loan Obligations. Each Guarantor further
agrees that the Revolving Obligations and the Term Loan Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Revolving Obligation or Term Loan Obligation. Each
Guarantor waives presentment to, demand of payment from and protest to the
Company or any other Grantor of any of the Revolving Obligations or the Term
Loan Obligations, and also waives notice of acceptance of its guarantee and
notice of protest for nonpayment.
SECTION 2.02. Guarantee of Payment. Each Guarantor further agrees
---------------------
that its guarantee hereunder constitutes a guarantee of payment when due and not
of collection, and waives any right to require that any resort be had by the
Collateral Agent, any other Revolving Secured Party or any other Term Loan
Secured Party to any security held for the payment of the Revolving Obligations
or the Term Loan Obligations or to any balance of any deposit account or credit
on the books of the Collateral Agent, any other Revolving Secured Party or any
other Term Loan Secured Party in favor of the Company or any other Person.
SECTION 2.03. No Limitations, Etc. (a) Except for termination of a
--------------------
Guarantor's obligations hereunder as expressly provided in Section 7.15, the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the Revolving
Obligations, the Term Loan Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by (i) the failure of the
Collateral Agent, any other Revolving Secured Party or any other Term Loan
Secured Party to assert any claim or demand or to enforce any right or remedy
under the provisions of any Revolving Loan Document, Term Loan Document or
otherwise; (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Revolving Loan Document,
Term Loan Document or any other agreement, including with respect to any other
Guarantor under this Agreement; (iii) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of, the
guarantees pursuant to the Indenture; (iv) the failure to perfect any security
9
interest in, or the release of, any security held by the Collateral Agent or any
other Secured Party for the Obligations; (v) any default, failure or delay,
wilful or otherwise, in the performance of the Obligations; or (vi) any other
act or omission that may or might in any manner or to any extent vary the risk
of any Guarantor or otherwise operate as a discharge of any Guarantor as a
matter of law or equity (other than the indefeasible payment in full in cash of
all the Revolving Obligations and the Term Loan Obligations). Each Guarantor
expressly authorizes the Collateral Agent, for the benefit of the Secured
Parties, to take and hold security for the payment and performance of the
Revolving Obligations and the Term Loan Obligations, to exchange, waive or
release any or all such security (with or without consideration), to enforce or
apply such security and direct the order and manner of any sale thereof in its
reasonable discretion or to release or substitute any one or more other
guarantors or obligors upon or in respect of the Revolving Obligations and the
Term Loan Obligations, all without affecting the obligations of any Guarantor
hereunder.
(b) To the fullest extent permitted by applicable law, each Guarantor
waives any defense based on or arising out of any defense of the Company or any
other Grantor or the unenforceability of the Revolving Obligations or the Term
Loan Obligations or any part thereof from any cause, or the cessation from any
cause of the liability of the Company or any other Grantor, other than the
indefeasible payment in full in cash of all the Revolving Obligations and the
Term Loan Obligations. Subject to the terms and conditions of the Intercreditor
Agreement, the Collateral Agent, the other Revolving Secured Parties and the
other Term Loan Secured Parties may, at their election, foreclose on any
security held by one or more of them by one or more judicial or nonjudicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Revolving Obligations or the Term Loan
Obligations, make any other accommodation with the Company or any other Grantor
or exercise any other right or remedy available to them against the Company or
any other Grantor, without affecting or impairing in any way the liability of
any Guarantor hereunder except to the extent the Revolving Obligations and the
Term Loan Obligations have been fully and indefeasibly paid in full in cash. To
the fullest extent permitted by applicable law, each Guarantor waives any
defense arising out of any such election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Company or any other Grantor, as the case may be, or any security.
SECTION 2.04. Reinstatement. Each Guarantor agrees that its
--------------
guarantee hereunder shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of any Revolving Obligation
or Term Loan Obligation is rescinded or must otherwise be restored by the
Collateral Agent, any other Revolving Secured Party or any other Term Loan
Secured Party upon the bankruptcy or reorganization of the Company, any other
Grantor or otherwise.
SECTION 2.05. Agreement To Pay; Subrogation. In furtherance of the
------------------------------
foregoing and not in limitation of any other right that the Collateral Agent,
any other Revolving Secured Party or any other Term Loan Secured Party has at
law or in equity against any Guarantor by virtue hereof, upon the failure of the
Company or any other Grantor to pay any Revolving Obligation or Term Loan
Obligation when and as the same shall become due, whether on an interest payment
date, at maturity, by acceleration, after notice of prepayment or otherwise,
10
each Guarantor hereby promises to and will forthwith pay, or cause to be paid,
to the Collateral Agent for distribution to the applicable Secured Parties in
cash the amount of such unpaid Revolving Obligation and Term Loan Obligation.
Upon payment by any Guarantor of any sums to the Collateral Agent as provided
above, all rights of such Guarantor against the Company or any other Guarantor
arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subject to
Article VI.
SECTION 2.06. Information. Each Guarantor assumes all responsibility
------------
for being and keeping itself informed of the Company's and each other
Guarantor's financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Revolving Obligations and the Term
Loan Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent, the other Revolving Secured Parties or the other Term Loan Secured
Parties will have any duty to advise such Guarantor of information known to it
or any of them regarding such circumstances or risks.
ARTICLE III
Pledge of Securities
--------------------
SECTION 3.01. Pledge. As security for the payment or performance, as
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the case may be, in full of the Obligations, each Grantor hereby assigns and
pledges to the Collateral Agent, its successors and assigns, for the benefit of
the Secured Parties, and hereby grants to the Collateral Agent, its successors
and assigns, for the benefit of the Secured Parties, a security interest in, all
of such Grantor's right, title and interest in, to and under (a) the shares of
capital stock and other Equity Interests owned by it and listed on Schedule II
and any other Equity Interests obtained in the future by such Grantor and the
certificates representing all such Equity Interests (the "Pledged Stock"),
-------------
provided that the Pledged Stock (i) shall be limited to 65% of the issued and
--------
outstanding voting Equity Interests of any Foreign Subsidiary and (ii) shall not
include the Equity Interests in World Kitchen do Brasil Ltda., unless World
Kitchen do Brasil Ltda. is not liquidated or dissolved in accordance with the
Credit Agreements and the Indenture prior to December 31, 2003; (b)(i) the debt
securities listed opposite the name of such Grantor on Schedule II, (ii) any
debt securities in the future issued to such Grantor and (iii) the promissory
notes and any other instruments evidencing such debt securities (the "Pledged
-------
Debt Securities"); (c) all other property that may be delivered to and held by
---------------
the Collateral Agent pursuant to the terms of this Section 3.01; (d) subject to
Section 3.06, all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, in exchange for or upon the conversion of,
and all other Proceeds received in respect of, the securities referred to in
clauses (a) and (b) above and the property referred to in clause (c) above; (e)
subject to Section 3.06, all rights and privileges of such Grantor with respect
to the securities and other property referred to in clauses (a), (b), (c) and
(d) above; and (f) all Proceeds of any of the foregoing (the items referred to
in clauses (a) through (f) above being collectively referred to as the "Pledged
-------
Collateral").
----------
TO HAVE AND TO HOLD the Pledged Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or incidental
thereto, unto the Collateral Agent, its successors and assigns, for the benefit
11
of the Secured Parties, forever; subject, however, to the terms, covenants and
------- -------
conditions hereinafter set forth.
SECTION 3.02. Delivery of the Pledged Collateral. (a) Each Grantor
-----------------------------------
agrees promptly to deliver or cause to be delivered to the Collateral Agent any
and all Pledged Securities (other than the Stock Certificates listed on Schedule
II(b)), provided that the stock certificates representing the Equity Interests
--------
in World Kitchen Mexico, S. de ▇.▇. de CV, WKM, S.dw.L.de.C.V. and World Kitchen
Canada (EHI) shall be delivered within 30 days of the Effective Date, to the
extent required by Section 5.13(d) of the Revolving Credit Agreement.
(b) Each Grantor will cause any Indebtedness for borrowed money owed
to such Grantor by any Person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
hereof.
(c) Upon delivery to the Collateral Agent, (i) any Pledged Securities
shall be accompanied by stock powers duly executed in blank or other instruments
of transfer satisfactory to the Collateral Agent and by such other instruments
and documents as the Collateral Agent may reasonably request and (ii) all other
property composing part of the Pledged Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Grantor and such other
instruments or documents as the Collateral Agent may reasonably request. Each
delivery of Pledged Securities shall be accompanied by a schedule describing the
securities, which schedule shall be attached hereto as Schedule II and made a
part hereof, provided that failure to attach any such schedule hereto shall not
--------
affect the validity of such pledge of such Pledged Securities. Each schedule so
delivered shall supplement any prior schedules so delivered.
SECTION 3.03. Representations, Warranties and Covenants. The
------------------------------------------
Grantors jointly and severally represent, warrant and covenant to and with the
Collateral Agent, for the benefit of the Secured Parties, that:
(a) Schedule II correctly sets forth the percentage of the issued and
outstanding shares of each class of the Equity Interests of the issuer thereof
represented by such Pledged Stock and includes all Equity Interests, debt
securities and promissory notes required to be pledged hereunder in order to
satisfy the Collateral and Guarantee Requirement;
(b) the Pledged Stock and Pledged Debt Securities have been duly and
validly authorized and issued by the issuers thereof and (i) in the case of
Pledged Stock (other than any interests in any limited liability company), are
fully paid and nonassessable and (ii) in the case of Pledged Debt Securities,
are legal, valid and binding obligations of the issuers thereof;
(c) except for the security interests granted hereunder, each Grantor
(i) is and, subject to any transfers made in compliance with the Credit
Agreements and the Indenture, will continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II as owned by
such Grantor, (ii) holds the same free and clear of all Liens, other than Liens
created by this Agreement, Permitted Encumbrances and transfers made in
compliance with the Credit Agreements and the Indenture, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
12
any security interest in or other Lien on, the Pledged Collateral, other than
Liens created by this Agreement, Permitted Encumbrances and transfers made in
compliance with the Credit Agreements and the Indenture, and (iv) will defend
its title or interest hereto or therein against any and all Liens (other than
the Liens created by this Agreement and Permitted Encumbrances), however,
arising, of all Persons;
(d) except for restrictions and limitations imposed by the
Transaction Documents or securities laws generally, the Pledged Collateral is
and will continue to be freely transferable and assignable, and, except as
permitted by the terms of the Credit Agreements and the Indenture, none of the
Pledged Collateral is or will be subject to any option, right of first refusal,
shareholders agreement, charter or by-law provisions or contractual restriction
of any nature that might prohibit, impair, delay or otherwise affect the pledge
of such Pledged Collateral hereunder, the sale or disposition thereof pursuant
hereto or the exercise by the Collateral Agent of rights and remedies hereunder;
(e) each Grantor has the power and authority to pledge the Pledged
Collateral pledged by it hereunder in the manner hereby done or contemplated;
(f) no consent or approval of any Governmental Authority, any
securities exchange or any other Person was or is necessary to the validity of
the pledge effected hereby (other than such as have been obtained and are in
full force and effect);
(g) by virtue of the execution and delivery by the Grantors of this
Agreement, when any Pledged Securities are delivered to the Collateral Agent in
accordance with this Agreement, the Collateral Agent will obtain a legal, valid
and perfected lien upon and security interest in such Pledged Securities as
security for the payment and performance of the Obligations; and
(h) the pledge effected hereby is effective to vest in the Collateral
Agent, for the benefit of the Secured Parties, the rights of the Collateral
Agent in the Pledged Collateral as set forth herein.
SECTION 3.04. Certification of Limited Liability Company and Limited
------------------------------------------------------
Partnership Interests. Each interest in any domestic limited liability company
----------------------
or limited partnership controlled by any Grantor and pledged hereunder shall be
represented by a certificate and in the organizational documents of such limited
liability company or limited partnership, the Grantor shall elect to treat such
interests as a "security" within the meaning of Article 8 of the New York UCC
and shall be governed by Article 8 of the New York UCC.
SECTION 3.05. Registration in Nominee Name; Denominations. The
--------------------------------------------
Collateral Agent, on behalf of the Secured Parties, 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 Grantor, endorsed or assigned in blank or in favor of the Collateral
Agent. Each Grantor will promptly give to the Collateral Agent copies of any
notices or other communications received by it with respect to Pledged
Securities registered in the name of such Grantor. The Collateral Agent shall
at all times (a) after the occurrence and during the continuance of an
Actionable Default or (b) with the consent of the Company, have the right to
13
exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.
SECTION 3.06. Voting Rights; Dividends and Interest, Etc. (a) Unless
-------------------------------------------
and until an Actionable Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of
this Agreement, the Credit Agreements, the Indenture and the other
Transaction Documents; provided that such rights and powers shall not be
--------
exercised in any manner that could materially and adversely affect the
rights inuring to a holder of any Pledged Securities or the rights and
remedies of any of the Collateral Agent or the other Secured Parties under
this Agreement, the Credit Agreements, the Indenture or any other
Transaction Document or the ability of the Secured Parties to exercise the
same.
(ii) The Collateral Agent shall execute and deliver to each Grantor,
or cause to be executed and delivered to such Grantor, all such proxies,
powers of attorney and other instruments as such Grantor may reasonably
request for the purpose of enabling such Grantor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant to
subparagraph (i) above.
(iii) Each Grantor shall be entitled to receive and retain any and
all dividends, interest, principal and other distributions paid on or
distributed in respect of the Pledged Securities to the extent and only to
the extent that such dividends, interest, principal and other distributions
are permitted by, and otherwise paid or distributed in accordance with, the
terms and conditions of the Credit Agreements, the Indenture, the other
Transaction Documents and applicable laws; provided that any noncash
--------
dividends, interest, principal or other distributions that would constitute
Pledged Stock or Pledged Debt Securities, whether resulting from a
subdivision, combination or reclassification of the outstanding Equity
Interests of the issuer of any Pledged Securities or received in exchange
for Pledged Securities or any part thereof, or in redemption thereof, or as
a result of any merger, consolidation, acquisition or other exchange of
assets to which such issuer may be a party or otherwise, shall be and
become part of the Pledged Collateral, and, if received by any Grantor,
shall not be commingled by such Grantor with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in
trust for the benefit of the Collateral Agent and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement).
(b) Upon the occurrence and during the continuance of an Actionable
Default, all rights of any Grantor to dividends, interest, principal or other
distributions that such Grantor is authorized to receive pursuant to paragraph
(a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall have the sole and exclusive
right and authority to receive and retain such dividends, interest, principal or
other distributions. All dividends, interest, principal or other distributions
received by any Grantor contrary to the provisions of this Section 3.06 shall be
held in trust for the benefit of the Collateral Agent, shall be segregated from
other property or funds of such Grantor and shall be forthwith delivered to the
14
Collateral Agent in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 5.02. After all Actionable
Defaults have been cured or waived and (i) the Company has delivered to the
Collateral Agent a certificate to that effect or (ii) the Company and the
required parties under the Credit Agreements and the Indenture, as applicable,
have executed a waiver or waivers of such Actionable Default, the Collateral
Agent shall, promptly repay to each Grantor (without interest) all dividends,
interest, principal or other distributions that such Grantor would otherwise be
permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section
3.06 and that remain in such account.
(c) Upon the occurrence and during the continuance of an Actionable
Default, all rights of any Grantor to exercise the voting and consensual rights
and powers it is entitled to exercise pursuant to paragraph (a)(i) of this
Section 3.06, and the obligations of the Collateral Agent under paragraph
(a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall have the sole and exclusive
right and authority to exercise such voting and consensual rights and powers;
provided that, unless otherwise directed by the requisite Secured Parties in
--------
accordance with the Intercreditor Agreement, the Collateral Agent shall have the
right from time to time following and during the continuance of an Actionable
Default to permit the Grantors to exercise such rights. After all Actionable
Defaults have been cured or waived and (i) the Company has delivered to the
Collateral Agent a certificate to that effect or (ii) the Company and the
required parties under the Credit Agreements and the Indenture, as applicable,
have executed a waiver or waivers of such Actionable Default, each Grantor will
have the right to exercise the voting and consensual rights and powers that such
Grantor would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) above.
ARTICLE IV
Security Interests in Personal Property
---------------------------------------
SECTION 4.01. Security Interest. (a) As security for the payment or
------------------
performance, as the case may be, in full of the Obligations, each Grantor hereby
assigns and pledges to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, a security
interest (the "Security Interest") in all right, title and interest in or to any
-----------------
and all of the following assets and properties now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Article 9 Collateral"):
--------------------
(i) all Accounts including, without limitation, the Specified Deposit
Accounts;
(ii) all Chattel Paper;
(iii) all cash and Deposit Accounts;
15
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Inventory;
(ix) all Investment Property;
(x) all Letter-of-credit rights;
(xi) all commercial tort claims set forth on Schedule III;
(xii) all books and records pertaining to the Article 9 Collateral;
(xiii) all Fixtures; and
(xiv) to the extent not otherwise included, all Proceeds, Supporting
Obligations and products of any and all of the foregoing, including cash held in
the Lockbox System and the Specified Deposit Accounts, and all collateral
security and guarantees given by any Person with respect to any of the
foregoing;
provided, however, that notwithstanding anything to the contrary in
-------- -------
this Section 4.01, the term "Article 9 Collateral" shall not include any
Excluded Inventory.
(b) Each Grantor hereby irrevocably authorizes the Collateral Agent
at any time and from time to time to file in any relevant jurisdiction any
initial financing statements (including fixture filings) with respect to the
Article 9 Collateral or any part thereof and amendments thereto that contain the
information required by Article 9 of the Uniform Commercial Code of each
applicable jurisdiction for the filing of any financing statement or amendment,
including (i) whether such Grantor is an organization, the type of organization
and any organizational identification number issued to such Grantor, (ii) in the
case of a financing statement filed as a fixture filing a sufficient description
of the real property to which such Article 9 Collateral relates and (iii) a
description of collateral that describes such property in any other manner as
the Collateral Agent may reasonably determine is necessary or advisable to
ensure the perfection of the security interest in the Article 9 Collateral
granted to the Collateral Agent, including describing such property as "all
assets" or "all property." Each Grantor agrees to provide such information to
the Collateral Agent promptly upon request.
Each Grantor also ratifies its authorization for the Collateral Agent
to file in any relevant jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof.
The Collateral Agent is further authorized to file with the United
States Patent and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) such documents as
16
may be necessary or advisable for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.
(c) The Security Interest is granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or in any way alter
or modify, any obligation or liability of any Grantor with respect to or arising
out of the Article 9 Collateral.
SECTION 4.02. Representations and Warranties. The Grantors jointly
-------------------------------
and severally represent and warrant to the Collateral Agent and the Secured
Parties that:
(a) Each Grantor has good and valid rights in and title to the
Article 9 Collateral with respect to which it has purported to grant a Security
Interest hereunder and has full power and authority to grant to the Collateral
Agent the Security Interest in such Article 9 Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval that has been obtained and is in full force and effect.
(b) The Perfection Certificate has been duly prepared, completed and
executed and the information set forth therein, including the exact legal name
of each Grantor, is correct and complete as of the Effective Date. Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations containing a
description of the Article 9 Collateral that have been prepared by the
Collateral Agent based upon the information provided to the Collateral Agent in
the Perfection Certificate for filing in each governmental, municipal or other
office specified in Schedule 6 to the Perfection Certificate (or specified by
notice from the Company to the Collateral Agent after the Effective Date in the
case of filings, recordings or registrations required by Sections 5.03(a) and
5.12 of the Revolving Credit Agreement, Sections 5.03(a) and 5.12 of the Term
Loan Credit Agreement or Sections 15.01 and 15.02 of the Indenture) constitute
all the filings, recordings and registrations (other than filings required to be
made in the United States Patent and Trademark Office and the United States
Copyright Office in order to perfect the Security Interest in Article 9
Collateral consisting of United States Patents, United States registered
Trademarks and United States registered Copyrights) that are necessary to
publish notice of and protect the validity of and to establish a legal, valid
and perfected security interest in favor of the Collateral Agent (for the
benefit of the Secured Parties) in respect of all Article 9 Collateral in which
the Security Interest may be perfected by filing, recording or registration in
the United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements or amendments. Each Grantor represents and warrants
that a fully executed agreement in the form hereof containing a description of
all Article 9 Collateral consisting of Intellectual Property with respect to
United States Patents (and Patents for which United States registration
applications are pending), United States registered Trademarks (and Trademarks
for which United States registration applications are pending) and United States
registered Copyrights (and Copyrights for which United States registration
applications are pending) has been delivered to the Collateral Agent for
recording with the United States Patent and Trademark Office and the United
17
States Copyright Office pursuant to 35 U.S.C. Sec. 261, 15 U.S.C. Sec. 1060 or
17 U.S.C. Sec. 205 and the regulations thereunder, as applicable, and otherwise
as may be required pursuant to the laws of any other applicable jurisdiction and
reasonably requested by the Collateral Agent, to protect the validity of and to
establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the benefit of the Secured Parties) in respect of all
Article 9 Collateral consisting of such Intellectual Property in which a
security interest may be perfected by recording with the United States Patent
and Trademark Office and the United States Copyright Office, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Article 9 Collateral consisting of
Patents, Trademarks and Copyrights (or registration or application for
registration thereof) acquired or developed after the date hereof).
(c) The Security Interest constitutes (i) a legal and valid security
interest in all the Article 9 Collateral securing the payment and performance of
the Obligations, (ii) subject to the filings described in Section 4.02(b), a
perfected security interest in all Article 9 Collateral in which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the Uniform
Commercial Code or other applicable law in such jurisdictions and (iii) a
security interest that shall be perfected in all Article 9 Collateral in which a
security interest may be perfected upon the receipt and recording of this
Agreement with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable and otherwise as may be required pursuant
to the laws of any other applicable jurisdiction. The Security Interest is and
shall be prior to any other Lien on any of the Article 9 Collateral, other than
Liens expressly permitted to be prior to the Security Interest pursuant to
Section 6.02 of the Revolving Credit Agreement, Section 6.02 of the Term Loan
Credit Agreement and Section 4.14 of the Indenture.
(d) The Article 9 Collateral is owned by the Grantors free and clear
of any Lien, other than Liens expressly permitted pursuant to Section 6.02 of
the Revolving Credit Agreement, Section 6.02 of the Term Loan Credit Agreement
and Section 4.14 of the Indenture. As of the Effective Date, none of the
Grantors has filed or consented to the filing of (i) any financing statement or
analogous document under the Uniform Commercial Code or any other applicable
laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor
assigns any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with the United States Patent and Trademark
Office or the United States Copyright Office or (iii) any assignment in which
any Grantor assigns any Article 9 Collateral or any security agreement or
similar instrument covering any Article 9 Collateral with any foreign
governmental, municipal or other office, which financing statement or analogous
document, assignment, security agreement or similar instrument is still in
effect, except, in each case, for Liens expressly permitted pursuant to Section
6.02 of the Revolving Credit Agreement, Section 6.02 of the Term Loan Credit
Agreement and Section 4.14 of the Indenture.
(e) None of the Grantors holds any Commercial Tort Claim as of the
Effective Date except as indicated on Schedule III.
18
(f) All Accounts have been originated by the Grantors and all
Inventory has been acquired by the Grantors in the ordinary course of business.
SECTION 4.03. Covenants. (a) Each Grantor agrees promptly to notify
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the Collateral Agent in writing of any change (i) in its legal name, (ii) in the
location of any office in which it maintains books or records relating to
Article 9 Collateral owned by it or any office or facility at which Article 9
Collateral owned by it is located (including the establishment of any new such
office or facility), (iii) in its identity or type of organization or corporate
structure, (iv) in its Federal Taxpayer Identification Number or organizational
identification number or (v) in its jurisdiction of organization. Each Grantor
agrees promptly to provide the Collateral Agent with certified organizational
documents reflecting any of the changes described in the immediately preceding
sentence. Each Grantor agrees not to effect or permit any change referred to in
the first sentence of this paragraph (a) unless all filings have been made under
the Uniform Commercial Code or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a valid,
legal and perfected first priority security interest in all the Article 9
Collateral. Each Grantor agrees promptly to notify the Collateral Agent if any
material portion of the Article 9 Collateral owned or held by such Grantor is
damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense,
such complete and accurate records with respect to the Article 9 Collateral
owned by it as is consistent with its current practices and in accordance with
reasonably prudent and standard practices used in industries that are the same
as or similar to those in which such Grantor is engaged, but in any event to
include complete accounting records indicating all payments and proceeds
received with respect to any part of the Article 9 Collateral, and, at such time
or times as the Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules in form
and detail satisfactory to the Collateral Agent showing the identity, amount and
location of any and all Article 9 Collateral.
(c) Each year, at the earliest time of delivery of annual financial
statements with respect to the preceding fiscal year required pursuant to any of
Section 5.01(a) of the Revolving Credit Agreement, Section 5.01(a) of the Term
Loan Agreement or Section 4.02(d) of the Indenture, the Company shall deliver to
the Collateral Agent a certificate executed by a Financial Officer and the chief
legal officer of the Company (i) setting forth the information required pursuant
to Section 2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of the Perfection Certificate
delivered on the Effective Date or the date of the most recent certificate
delivered pursuant to this Section 4.03(c) and (ii) certifying that all Uniform
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description of the
Collateral have been filed of record in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i) of
this Section 4.03(c) to the extent necessary to protect and perfect the Security
Interest for a period of not less than 18 months after the date of such
certificate (except as noted therein with respect to any continuation statements
to be filed within such period). Each certificate delivered pursuant to this
Section 4.03(c) shall identify in substantially the format of Schedule V to this
Agreement all Intellectual Property of any Grantor in existence on the date
thereof and not then listed on such Schedules or previously so identified to the
Collateral Agent.
19
(d) Each Grantor shall, at its own expense, take any and all actions
necessary (i) to defend title against all Persons to all Article 9 Collateral
that, individually or in the aggregate, is material to such Grantor's business
and (ii) to defend the Security Interest of the Collateral Agent in the Article
9 Collateral and the priority thereof against any Lien not expressly permitted
pursuant to Section 6.02 of the Revolving Credit Agreement, Section 6.02 of the
Term Loan Credit Agreement or Section 4.14 of the Indenture.
(e) Each Grantor agrees, at its own expense, to execute, acknowledge,
deliver and cause to be duly filed all such further instruments and documents
and take all such actions as the Collateral Agent may from time to time request
to better assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any fees and taxes
required in connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing statements
(including fixture filings) or other documents in connection herewith or
therewith. If any amount payable under or in connection with any of the Article
9 Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Collateral Agent, duly endorsed in a manner satisfactory to the
Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule V or adding additional
schedules hereto to specifically identify any asset or item that may constitute
Copyrights, Licenses, Patents or Trademarks; provided that any Grantor shall
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have the right, exercisable within 10 days after it has been notified by the
Collateral Agent of the specific identification of such Article 9 Collateral, to
advise the Collateral Agent in writing of any inaccuracy of the representations
and warranties made by such Grantor hereunder with respect to such Article 9
Collateral. Each Grantor agrees that it will use its commercially reasonable
efforts to take such action as shall be necessary in order that all
representations and warranties hereunder shall be true and correct with respect
to such Article 9 Collateral within 30 days after the date it has been notified
by the Collateral Agent of the specific identification of such Article 9
Collateral.
(f) The Collateral Agent and such Persons as the Collateral Agent may
reasonably designate shall have the right, at the Grantors' own cost and
expense, to inspect the Article 9 Collateral, all records related thereto (and
to make extracts and copies from such records) and the premises upon which any
of the Article 9 Collateral is located, upon reasonable advance notice to the
respective Grantor and at reasonable times, to discuss the Grantors' affairs
with the officers of the Grantors and their independent accountants and to
verify under reasonable procedures, in accordance with Section 5.03 of the
Revolving Credit Agreement, Section 5.03 of the Term Loan Credit Agreement and
Sections 15.01 and 15.02 of the Indenture, the validity, amount, quality,
quantity, value, condition and status of, or any other matter relating to, the
Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral
in the possession of any third person, by contacting Account Debtors or the
third person possessing such Article 9 Collateral for the purpose of making such
a verification. The Collateral Agent shall have the absolute right to share any
information it gains from such inspection or verification with any Secured
Party.
20
(g) At its option, the Collateral Agent may discharge past due taxes,
assessments, charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Article 9 Collateral and not permitted pursuant
to Section 6.02 of the Revolving Credit Agreement, Section 6.02 of the Term Loan
Credit Agreement or Section 4.14 of the Indenture, and may pay for the
maintenance and preservation of the Article 9 Collateral to the extent any
Grantor fails to do so as required by the Credit Agreements, the Indenture and
this Agreement, and each Grantor jointly and severally agrees to reimburse the
Collateral Agent on demand for any payment made or any expense incurred by the
Collateral Agent pursuant to the foregoing authorization; provided, however,
--------
that nothing in this Section 4.03(g) shall be interpreted as excusing any
Grantor from the performance of, or imposing any obligation on the Collateral
Agent or any Secured Party to cure or perform, any covenants or other promises
of any Grantor with respect to taxes, assessments, charges, fees, Liens,
security interests or other encumbrances and maintenance as set forth herein or
in the other Transaction Documents.
(h) If at any time any Grantor shall take a security interest in any
property of an Account Debtor or any other Person to secure payment and
performance of an Account, such Grantor shall promptly assign such security
interest to the Collateral Agent to the extent permitted by any contracts or
arrangements to which such property is subject. Such assignment need not be
filed of public record unless necessary to continue the perfected status of the
security interest against creditors of and transferees from the Account Debtor
or other Person granting the security interest.
(i) Each Grantor shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it under each
material contract, agreement or instrument relating to the Article 9 Collateral,
all in accordance with the terms and conditions thereof, and each Grantor
jointly and severally agrees to indemnify and hold harmless the Collateral Agent
and the Secured Parties from and against any and all liability for such
performance.
(j) None of the Grantors shall make or permit to be made an
assignment, pledge or hypothecation of the Article 9 Collateral or shall grant
any other Lien in respect of the Article 9 Collateral, except as expressly
permitted by the Credit Agreements and the Indenture. None of the Grantors
shall make or permit to be made any transfer of the Article 9 Collateral and
each Grantor shall remain at all times in possession of the Article 9 Collateral
owned by it, except that (i) Inventory and used, obsolete or surplus equipment
may be sold in the ordinary course of business and (ii) the Grantors may use and
dispose of the Article 9 Collateral in any lawful manner not inconsistent with
the provisions of this Agreement, the Credit Agreements, the Indenture and any
other Transaction Document. Without limiting the generality of the foregoing,
each Grantor agrees that it shall not permit any Inventory to be in the
possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have acknowledged in writing, in
form and substance reasonably satisfactory to the Collateral Agent, that such
warehouseman, agent, bailee or processor holds the Inventory for the benefit of
the Collateral Agent subject to the Security Interest and shall act upon the
instructions of the Collateral Agent without further consent from the Grantor,
and that such warehouseman, bailee, agent or processor further agrees to waive
and release any Lien held by it with respect to such Inventory, whether arising
by operation of law or otherwise; provided, however, that such requirement shall
-------- -------
21
not apply to Inventory (i) located in a warehouse leased by a Grantor during the
period ending 30 days after the date of this Agreement or (ii) located at retail
stores of any Grantor if the Revolving Agent waives such requirement after its
evaluation of the Borrowing Base pursuant to the last sentence of Section
5.09(b) of the Revolving Credit Agreement.
(k) None of the Grantors will, without the Collateral Agent's prior
written consent, grant any extension of the time of payment of any Accounts
included in the Article 9 Collateral, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or partly, any Person
liable for the payment thereof or allow any credit or discount whatsoever
thereon, other than extensions, credits, discounts, compromises or settlements,
granted or made in the ordinary course of business.
(l) The Grantors, at their own expense, shall maintain or cause to be
maintained insurance covering physical loss or damage to the Inventory and
Equipment in accordance with the requirements set forth in Schedule IV hereto,
Section 5.07 of the Revolving Credit Agreement, Section 5.07 of the Term Loan
Credit Agreement and Section 13.01(n) of the Indenture. Each Grantor
irrevocably makes, constitutes and appoints the Collateral Agent (and all
officers, employees or agents designated by the Collateral Agent) as such
Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during
the continuance of an Actionable Default, of making, settling and adjusting
claims in respect of Article 9 Collateral under policies of insurance, endorsing
the name of such Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and for making all
determinations and decisions with respect thereto. In the event that any
Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of the Grantors hereunder or any Actionable Default, in
its sole discretion, obtain and maintain such policies of insurance and pay such
premium and take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in connection with
this Section 4.03(l), including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable, upon demand, by
the Grantors to the Collateral Agent and shall be additional Obligations secured
hereby.
(m) Each Grantor shall maintain, in form and manner reasonably
satisfactory to the Collateral Agent, its Chattel Paper and its books, records
and documents evidencing or pertaining thereto with an appropriate reference to
the fact that such Chattel Paper has been assigned to the Collateral Agent for
the benefit of the Secured Parties and that the Collateral Agent has a security
interest therein.
SECTION 4.04. Other Actions. In order to further insure the
--------------
attachment, perfection and priority of, and the ability of the Collateral Agent
to enforce, the Collateral Agent's security interest in the Article 9
Collateral, each Grantor agrees, in each case at such Grantor's own expense, to
take the following actions with respect to the following Article 9 Collateral:
(a) Instruments and Tangible Chattel Paper. If any Grantor shall at
---------------------------------------
any time hold or acquire any Instruments or Tangible Chattel Paper, such Grantor
shall forthwith endorse, assign and deliver the same to the Collateral Agent,
22
accompanied by such instruments of transfer or assignment duly executed in blank
as the Collateral Agent may from time to time reasonably request.
(b) Investment Property. Except to the extent otherwise provided in
--------------------
Article III, if any Grantor shall at any time hold or acquire any Certificated
Securities, such Grantor shall forthwith endorse, assign and deliver the same to
the Collateral Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as the Collateral Agent may from time to time specify.
If any securities now or hereafter acquired by any Grantor are uncertificated
and are issued to such Grantor or its nominee directly by the issuer thereof,
such Grantor shall immediately notify the Collateral Agent thereof and, at the
Collateral Agent's request and option, pursuant to an agreement in form and
substance reasonably satisfactory to the Collateral Agent, either (i) cause the
issuer to agree to comply with instructions from the Collateral Agent as to such
securities, without further consent of any Grantor or such nominee, or (ii)
arrange for the Collateral Agent to become the registered owner of the
securities. If any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by any Grantor are held by such
Grantor or its nominee through a securities intermediary or commodity
intermediary, such Grantor shall immediately notify the Collateral Agent thereof
and, at the Collateral Agent's request and option, pursuant to an agreement in
form and substance reasonably satisfactory to the Collateral Agent, either (A)
cause such securities intermediary or commodity intermediary (as the case may
be) to agree to comply with entitlement orders or other instructions from the
Collateral Agent to such securities intermediary as to such securities or other
investment property (as the case may be), or to apply any value distributed on
account of any commodity contract as directed by the Collateral Agent to such
commodity intermediary, in each case without further consent of any Grantor or
such nominee, or (B) in the case of Financial Assets or other Investment
Property held through a securities intermediary, arrange for the Collateral
Agent to become the entitlement holder with respect to such investment property,
with the Grantor being permitted, only with the consent of the Collateral Agent,
to exercise rights to withdraw or otherwise deal with such investment property.
The Collateral Agent agrees with each of the Grantors that the Collateral Agent
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by any
Grantor, unless an Actionable Default has occurred and is continuing, or, after
giving effect to any such investment and withdrawal rights, would occur. The
provisions of this paragraph (c) shall not apply to any financial assets
credited to a securities account for which the Collateral Agent is the
securities intermediary.
(c) Electronic Chattel Paper and Transferable Records. If any
--------------------------------------------------
Grantor at any time holds or acquires an interest in any Electronic Chattel
Paper or any "transferable record," as that term is defined in Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, such Grantor shall promptly notify the Collateral Agent
thereof and, at the request of the Collateral Agent, shall take such action as
the Collateral Agent may reasonably request to vest in the Collateral Agent
control under New York UCC Section 9-105 of such Electronic Chattel Paper or
control under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record. The Collateral Agent agrees with such Grantor that the
Collateral Agent will arrange, pursuant to procedures reasonably satisfactory to
23
the Collateral Agent and so long as such procedures will not result in the
Collateral Agent's loss of control, for the Grantor to make alterations to the
Electronic Chattel Paper or transferable record permitted under UCC Section
9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in control to allow without loss of control, unless
an Actionable Default has occurred and is continuing or would occur after taking
into account any action by such Grantor with respect to such Electronic Chattel
Paper or transferable record.
(d) Letter-of-Credit Rights. If any Grantor is at any time a
------------------------
beneficiary under a letter of credit now or hereafter issued in favor of such
Grantor, such Grantor shall promptly notify the Collateral Agent thereof and, at
the request and option of the Collateral Agent, such Grantor shall, pursuant to
an agreement in form and substance reasonably satisfactory to the Collateral
Agent, either (i) arrange for the issuer and any confirmer of such letter of
credit to consent to an assignment to the Collateral Agent of the proceeds of
any drawing under the letter of credit or (ii) arrange for the Collateral Agent
to become the transferee beneficiary of the letter of credit, with the
Collateral Agent agreeing, in each case, that the proceeds of any drawing under
the letter of credit are to be paid to the applicable Grantor unless an
Actionable Default has occurred or is continuing.
(e) Commercial Tort Claims. If any Grantor shall at any time hold or
-----------------------
acquire a Commercial Tort Claim, the Grantor shall promptly notify the
Collateral Agent thereof in a writing signed by such Grantor including a summary
description of such claim and grant to the Collateral Agent in writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to the Collateral Agent.
SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright
---------------------------------------------------
Collateral. (a) Each Grantor agrees that it will not do any act or omit to do
-----------
any act (and will exercise commercially reasonable efforts to prevent its
licensees from doing any act or omitting to do any act) whereby any Patent that
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to ▇▇▇▇ any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration or claim of trademark or service ▇▇▇▇ to the
extent necessary and sufficient to establish and preserve its maximum rights
under applicable law and (iv) not knowingly use or knowingly permit the use of
such Trademark in violation of any third party rights.
(c) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each work covered by a Copyright material to the conduct
of such Grantor's business, continue to publish, reproduce, display, adopt and
distribute the work with appropriate copyright notice as necessary and
24
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
(d) Each Grantor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of such Grantor's business may become abandoned, lost or dedicated
to the public, or of any materially adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country) regarding such
Grantor's ownership of any such Patent, Trademark or Copyright, its right to
register the same, or its right to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for any Patent with
the United States Patent and Trademark Office or for the registration of any
Trademark or Copyright with the United States Patent and Trademark Office, the
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, unless it promptly informs the Collateral Agent thereof,
and, upon the request of the Collateral Agent, executes and delivers any and all
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent's security interest in such
Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral
Agent as its attorney-in-fact to execute and file such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power, being coupled with an interest, is irrevocable.
(f) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancelation proceedings against third parties.
(g) In the event that any Grantor has reason to believe that any
Article 9 Collateral consisting of a material Patent, Trademark or Copyright has
been or is about to be infringed, misappropriated or diluted by a third party,
such Grantor shall promptly notify the Collateral Agent and shall, if consistent
with good business judgment, promptly ▇▇▇ for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as are appropriate
under the circumstances to protect such Article 9 Collateral.
(h) Upon and during the continuance of an Actionable Default, each
Grantor shall use its best efforts to obtain all requisite consents or approvals
from the licensor under each Copyright License, Patent License or Trademark
25
License to effect the assignment of all such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
(i) Within 30 days of the date of this Agreement, each Grantor shall
have made all necessary filings and taken all necessary steps to cause the
Patents and Trademarks listed on Schedule V(b) to be filed with the United
States Patent and Trademark Office under the correct name of such Grantor.
SECTION 4.06. Lockbox System. (a) The Grantors have established in
---------------
the name of the Collateral Agent, and subject to the control of the Collateral
Agent pursuant to the Lockbox Agreement, for the benefit of the Collateral Agent
and the other Secured Parties, a system of lockboxes and related accounts (the
"Lockbox System") with JPMorgan Chase Bank into which the Proceeds of all
--------------
Accounts and Inventory shall be deposited and forwarded to the Collateral Agent
in accordance with the Lockbox Agreements.
(b) Except with respect to the Accounts described in clause (d)
below, the Grantors shall (x) cause all Account Debtors (and any other Person
obligated to make payments on Accounts or in respect of Inventory) to pay, and
all Accounts Receivable to be paid, into the Specified Deposit Accounts and the
Grantors shall promptly give and maintain standing instructions to the Account
Debtors to such effect and (y) promptly deposit all other payments received by
it on account of Accounts and Inventory, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in the Specified
Deposit Accounts in precisely the form in which received (but with any
endorsements of such Grantor necessary for deposit or collection), and until
they are so deposited, such payments shall be held in trust by such Grantor for
and as the property of the Collateral Agent.
(c) Without the prior written consent of the Collateral Agent, no
Grantor shall, in a manner adverse to the Lenders or the Noteholders, change the
general instructions given to Account Debtors in respect of payment on Accounts
to be deposited in the Specified Deposit Accounts. Until the Collateral Agent
shall have advised the Grantors to the contrary, each Grantor shall, and the
Collateral Agent hereby authorizes each Grantor to, enforce and collect all
amounts owing on the Inventory and Accounts, for the benefit and on behalf of
the Collateral Agent and the other Secured Parties, provided that such privilege
--------
may at the option of the Collateral Agent be terminated upon the occurrence and
during the continuance of any Actionable Default.
(d) The Grantors shall give and maintain standing instructions that
all amounts in the Specified Deposit Accounts shall be transferred into the
Concentration Account at the end of each Business Day and shall not change such
instructions without the prior written consent of the Collateral Agent. All
Proceeds stemming from the sale of a substantial portion of the Collateral
(other than Proceeds of Inventory and Accounts) that have been received by a
Grantor on any Business Day will be transferred into the Concentration Account
on such Business Day.
(e) The Grantors shall cause all Proceeds of Inventory and Accounts
(other than Excluded Inventory) relating to the retail stores of the Grantors to
be transferred into the Concentration Account not less than two times per week.
26
World Kitchen, Inc. shall cause the lockbox agreement named on Schedule 4.06(d)
to be closed not later than 90 days from the date hereof.
(f) The applicable Grantors have executed the Lockbox Agreement with
respect to the Concentration Account. The Concentration Account is, and shall
remain, under the sole dominion and control of the Collateral Agent. Each
Grantor acknowledges and agrees that (i) such Grantor has no right of withdrawal
from the Concentration Account, (ii) the funds on deposit in the Concentration
Account shall continue to be collateral security for all the Obligations and
(iii) upon the occurrence and during the continuance of an Actionable Default,
at the Collateral Agent's election, the funds on deposit in the Concentration
Account may be applied as provided in Section 5.02. So long as no Actionable
Default has occurred and is continuing, the Collateral Agent shall promptly
remit any funds on deposit in the Concentration Account to the General Fund
Account and the Company shall have the right, at any time and from time to time,
to withdraw such amounts from the General Fund Account as it shall deem to be
necessary or desirable.
(g) Effective upon notice to the Grantors from the Collateral Agent
after the occurrence and during the continuance of an Actionable Default (which
notice may be given by telephone if promptly confirmed in writing), the
Concentration Account will, without any further action on the part of any
Grantor, the Collateral Agent or any Sub-Agent, convert into a closed lockbox
account under the exclusive dominion and control of the Collateral Agent in
which funds are held subject to the rights of the Collateral Agent hereunder.
Each Grantor irrevocably authorizes the Collateral Agent to notify the Sub-Agent
(i) of the occurrence of an Actionable Default and (ii) of the matters referred
to in this paragraph (d). Following the occurrence of an Actionable Default,
the Collateral Agent may instruct the Sub-Agent to transfer immediately all
funds held in each deposit account to the Concentration Account. Each Grantor
hereby agrees to irrevocably direct the Sub-Agent to comply with the
instructions of the Collateral Agent with respect to the relevant Collection
Deposit Account without further consent from the Grantor or any other Person.
(h) The Grantors shall not amend, modify or change the Lockbox System
in any manner without the prior written consent of the Collateral Agent. The
Grantors shall not open any new deposit account (i) without the prior written
consent of the Collateral Agent and (ii) unless the applicable Grantor executes,
and causes the depositary bank to execute, a deposit account control agreement
in form and substance satisfactory to the Collateral Agent.
ARTICLE V
Remedies
--------
SECTION 5.01. Remedies Upon Default. Upon the occurrence and during
----------------------
the continuance of an Actionable Default, each Grantor agrees to deliver each
item of Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Article 9
Collateral consisting of Intellectual Property, on demand, to cause the Security
Interest to become an assignment, transfer and conveyance of any of or all such
Article 9 Collateral by the applicable Grantors to the Collateral Agent, or to
license or sublicense, whether general, special or otherwise, and whether on an
27
exclusive or nonexclusive basis, any such Article 9 Collateral throughout the
world on such terms and conditions and in such manner as the Collateral Agent
shall determine (other than in violation of any then-existing licensing
arrangements to the extent that waivers cannot be obtained), and (b) with or
without legal process and with or without prior notice or demand for
performance, to take possession of the Article 9 Collateral and without
liability for trespass to enter any premises where the Article 9 Collateral may
be located for the purpose of taking possession of or removing the Article 9
Collateral and, generally, to exercise any and all rights afforded to a secured
party under the Uniform Commercial Code or other applicable law. Without
limiting the generality of the foregoing, each Grantor agrees that the
Collateral Agent shall have the right, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral at a public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale of securities (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale of Collateral the Collateral Agent shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives and releases (to the extent permitted by
law) all rights of redemption, stay, valuation and appraisal that such Grantor
now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
The Collateral Agent shall give the applicable Grantors ten days'
written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the New York UCC or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice of such sale. At any
such sale, the Collateral , or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Collateral Agent may (in its
sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section 5.01, any Secured Party may bid for or purchase for
cash, free (to the extent permitted by law) from any right of redemption, stay,
28
valuation or appraisal on the part of any Grantor (all said rights being also
hereby waived and released to the extent permitted by law), the Collateral or
any part thereof offered for sale and such Secured Party may, upon compliance
with the terms of sale, hold, retain and dispose of such property without
further accountability to any Grantor therefor. For purposes hereof, a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof; the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and no Grantor shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all
Actionable Defaults shall have been remedied and the Obligations paid in full.
As an alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to
the provisions of this Section 5.01 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-610(b) of the New
York UCC or its equivalent in other jurisdictions.
SECTION 5.02. Application of Proceeds. The Collateral Agent shall
------------------------
apply the proceeds of any collection or sale of Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such collection or sale or otherwise in
connection with this Agreement, any other Transaction Document or any of
the Obligations, including all court costs and the fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Transaction Document on
behalf of any Grantor and any other costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Transaction Document;
SECOND, to the Collateral Agent for distribution to the Secured
Parties as provided in Section 4.01 of the Intercreditor Agreement for the
payment in full of the Obligations owed to the Secured Parties; and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
Subject to the terms of the Intercreditor Agreement, the Collateral Agent shall
have absolute discretion as to the time of application of any such proceeds,
moneys or balances in accordance with this Agreement. Upon any sale of
Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.
29
SECTION 5.03. Grant of License to Use Intellectual Property. For the
----------------------------------------------
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Agreement at such time as the Collateral Agent shall be lawfully entitled
to exercise such rights and remedies, each Grantor hereby grants to the
Collateral Agent an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to use, license or
sublicense any of the Article 9 Collateral consisting of Intellectual Property
now owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
license by the Collateral Agent may be exercised, at the option of the
Collateral Agent, upon the occurrence and during the continuation of an
Actionable Default, provided that any license, sublicense or other transaction
--------
entered into by the Collateral Agent in accordance herewith shall be binding
upon the Grantors notwithstanding any subsequent cure of an Actionable Default.
SECTION 5.04. Securities Act, etc. In view of the position of the
--------------------
Grantors in relation to the Pledged Collateral, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the "Federal Securities Laws") with respect to any
-----------------------
disposition of the Pledged Collateral permitted hereunder. Each Grantor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Collateral, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Collateral could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Collateral under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Grantor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Collateral, limit the 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. Each Grantor acknowledges
and agrees that in light of such restrictions and limitations, the Collateral
Agent, in its sole and absolute discretion, (a) may proceed to make such a sale
whether or not a registration statement for the purpose of registering such
Pledged Collateral or part thereof shall have been filed under the Federal
Securities Laws and (b) may approach and negotiate with a single potential
purchaser to effect such sale. Each Grantor acknowledges and agrees that any
such sale might result in prices and other terms less favorable to the seller
than if such sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Collateral at a price that the
Collateral Agent, in its sole and absolute discretion, may in good ▇▇▇▇▇ ▇▇▇▇
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might have been realized if the sale were deferred
until after registration as aforesaid or if more than a single purchaser were
approached. The provisions of this Section 5.04 will apply notwithstanding the
existence of a public or private market upon which the quotations or sales
prices may exceed substantially the price at which the Collateral Agent sells.
30
SECTION 5.05. Registration, etc. Each Grantor agrees that, upon the
------------------
occurrence and during the continuance of an Actionable Default, if for any
reason the Collateral Agent desires to sell any of the Pledged Collateral at a
public sale, it will, at any time and from time to time, upon the written
request of the Collateral Agent, use its best efforts to take or to cause the
issuer of such Pledged Collateral to take such action and prepare, distribute
and/or file such documents, as are required or advisable in the reasonable
opinion of counsel for the Collateral Agent to permit the public sale of such
Pledged Collateral. Each Grantor further agrees to indemnify, defend and hold
harmless the Collateral Agent, each other Secured Party, any underwriter and
their respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of legal
counsel), and claims (including the costs of investigation) that they may incur
insofar as such loss, liability, expense or claim arises out of or is based upon
any alleged untrue statement of a material fact contained in any prospectus (or
any amendment or supplement thereto) or in any notification or offering
circular, or arises out of or is based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the statements
in any thereof not misleading, except insofar as the same may have been caused
by any untrue statement or omission based upon information furnished in writing
to such Grantor or the issuer of such Pledged Collateral by the Collateral Agent
or any other Secured Party expressly for use therein. Each Grantor further
agrees, upon such written request referred to above, to use its best efforts to
qualify, file or register, or cause the issuer of such Pledged Collateral to
qualify, file or register, any of the Pledged Collateral under the Blue Sky or
other securities laws of such states as may be requested by the Collateral Agent
and keep effective, or cause to be kept effective, all such qualifications,
filings or registrations. Each Grantor will bear all costs and expenses of
carrying out its obligations under this Section 5.05. Each Grantor acknowledges
that there is no adequate remedy at law for failure by it to comply with the
provisions of this Section 5.05 and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
this Section 5.05 may be specifically enforced.
ARTICLE VI
Indemnity, Subrogation and Subordination
----------------------------------------
SECTION 6.01. Indemnity and Subrogation. In addition to all such
--------------------------
rights of indemnity and subrogation as the Guarantors may have under applicable
law (but subject to Section 6.03), the Company agrees that (a) in the event a
payment shall be made by any Guarantor under this Agreement in respect of any
Obligation, the Company shall indemnify such Guarantor for the full amount of
such payment and such Guarantor shall be subrogated to the rights of the Person
to whom such payment shall have been made to the extent of such payment and (b)
in the event any assets of any Guarantor shall be sold pursuant to this
Agreement or any other Security Document to satisfy in whole or in part an
Obligation, the Company shall indemnify such Guarantor in an amount equal to the
greater of the book value or the fair market value of the assets so sold.
SECTION 6.02. Contribution and Subrogation. Each Guarantor (a
-----------------------------
"Contributing Guarantor") agrees (subject to Section 6.03) that, in the event a
----------------------
payment shall be made by any other Guarantor hereunder in respect of any
31
Obligation or assets of any other Guarantor shall be sold pursuant to any
Security Document to satisfy any Obligation owed to any Secured Party and such
other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified
------------------
by the Company as provided in Section 6.01, the Contributing Guarantor shall
indemnify the Claiming Guarantor in an amount equal to the amount of such
payment or the greater of the book value or the fair market value of such
assets, as the case may be, in each case multiplied by a fraction of which the
numerator shall be the net worth of the Contributing Guarantor on the date
hereof and the denominator shall be the aggregate net worth of all the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto pursuant to Section 7.16, the date of the supplement hereto executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to
a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the
rights of such Claiming Guarantor under Section 6.01 to the extent of such
payment.
SECTION 6.03. Subordination. (a) Notwithstanding any provision of
--------------
this Agreement to the contrary, all rights of the Guarantors under Sections 6.01
and 6.02 and all other rights of indemnity, contribution or subrogation under
applicable law or otherwise shall be fully subordinated to the indefeasible
payment in full in cash of the Obligations. No failure on the part of the
Company or any Guarantor to make the payments required by Sections 6.01 and 6.02
(or any other payments required under applicable law or otherwise) shall in any
respect limit the obligations and liabilities of any Guarantor with respect to
its obligations hereunder, and each Guarantor shall remain liable for the full
amount of the obligations of such Guarantor hereunder.
(b) Each Guarantor hereby agrees that all Indebtedness and other
monetary obligations owed by it to any other Guarantor or any Subsidiary shall
be fully subordinated to the indefeasible payment in full in cash of the
Obligations.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. Notices. All communications and notices hereunder
--------
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.01 of the Revolving Credit Agreement. All
communications and notices hereunder to any Subsidiary Party shall be given to
it in care of the Company as provided in Section 9.01 of the Revolving Credit
Agreement.
SECTION 7.02. Security Interest Absolute. All rights of the
---------------------------
Collateral Agent hereunder, the Security Interest, the security interest in the
Pledged Collateral and all obligations of each Grantor and Guarantor hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreements, the Indenture, any other Transaction
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreements, the Indenture, any other Transaction Document or any
other agreement or instrument, (c) any exchange, release or non-perfection of
any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might otherwise
32
constitute a defense available to, or a discharge of, any Grantor or Guarantor
in respect of the Obligations or this Agreement.
SECTION 7.03. Survival of Agreement. All covenants, agreements,
----------------------
representations and warranties made by the Grantors in the Transaction Documents
and in the certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Transaction Document shall be
considered to have been relied upon by the Secured Parties and shall survive the
execution and delivery of the Transaction Documents and the making of any Loans,
issuance of any Letters of Credit, acceptance of any obligations and issuance of
any Senior Subordinated Notes, regardless of any investigation made by any
Secured Party or on its behalf and notwithstanding that the Administrative
Agent, the Collateral Agent, the Issuing Bank, any Lender, or any Noteholder may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended under the Revolving Credit Agreement
or any obligation is accepted under the Term Loan Credit Agreement or the
Indenture, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan, any Senior Subordinated Note or any fee,
or any other amount payable under any Transaction Document is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated.
SECTION 7.04. Binding Effect; Several Agreement. This Agreement
----------------------------------
shall become effective as to any Grantor when a counterpart hereof executed on
behalf of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective permitted successors and assigns, and shall inure to the
benefit of such Grantor, the Collateral Agent and the other Secured Parties and
their respective permitted successors and assigns, except that no Grantor shall
have the right to assign or transfer its rights or obligations hereunder or any
interest herein or in the Collateral (and any such assignment or transfer shall
be void) except as expressly contemplated by this Agreement, the Credit
Agreements or the Indenture. This Agreement shall be construed as a separate
agreement with respect to each Grantor and may be amended, modified,
supplemented, waived or released with respect to any Grantor without the
approval of any other Grantor and without affecting the obligations of any other
Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this Agreement any
-----------------------
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective permitted successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification.
------------------------------------------------------
(a) The parties hereto agree that the Collateral Agent shall be entitled to
reimbursement of its expenses incurred hereunder as provided in Section 9.03 of
the Revolving Credit Agreement, Section 9.03 of the Term Loan Credit Agreement
and Section 4.16 of the Indenture.
(b) Without limitation of its indemnification obligations under the
other Transaction Documents, each Grantor jointly and severally agrees to
indemnify the Collateral Agent and each of the other Indemnitees (defined as
such in any of Section 9.03 of the Revolving Credit Agreement, Section 9.03 of
33
the Term Loan Credit Agreement or Section 4.17 of the Indenture) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of, the execution,
delivery or performance of this Agreement or any claim, litigation,
investigation or proceeding relating hereto, or to the Collateral, whether or
not any Indemnitee is a party thereto; provided that such indemnity shall not,
--------
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section 7.06 shall remain operative and in full force and
effect regardless of the termination of this Agreement or any other Transaction
Document, the consummation of the transactions contemplated hereby, the
repayment of any of the Obligations, the invalidity or unenforceability of any
term or provision of this Agreement or any other Transaction Document, or any
investigation made by or on behalf of the Collateral Agent or any other Secured
Party. All amounts due under this Section 7.06 shall be payable on written
demand therefor.
SECTION 7.07. Collateral Agent Appointed Attorney-in-Fact. Each
--------------------------------------------
Grantor hereby appoints the Collateral Agent the attorney-in-fact of such
Grantor for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which appointment
is irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Collateral Agent shall have the right, upon the occurrence
and during the continuance of an Actionable Default, with full power of
substitution either in the Collateral Agent's name or in the name of such
Grantor, (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Collateral or any part thereof; (b) to demand, collect, receive payment
of, give receipt for and give discharges and releases of all or any of the
Collateral; (c) to ask for, demand, ▇▇▇ for, collect, receive and give
acquittance for any and all moneys due or to become due under and by virtue of
any Collateral; (d) to sign the name of any Grantor on any invoice or ▇▇▇▇ of
lading relating to any of the Collateral; (e) to send verifications of Accounts
to any Account Debtor; (f) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (g) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; (h) to notify, or to require any Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent; and (i) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as fully and completely as though the
Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, that nothing herein contained shall be construed as requiring or
--------
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
34
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor 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 wilful misconduct.
SECTION 7.08. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 7.09. Waivers; Amendment. (a) No failure or delay by the
-------------------
Administrative Agent, the Collateral Agent, the Issuing Bank, any Lender, any
Noteholder or any other Secured Party in exercising any right, power or remedy
hereunder or under any other Transaction Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy, or any abandonment or discontinuance of steps to enforce such a right,
power or remedy, preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The rights, powers and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank, the Lenders and
the Noteholders hereunder and under the other Transaction Documents are
cumulative and are not exclusive of any rights, powers or remedies that they
would otherwise have. No waiver of any provision of this Agreement or consent
to any departure by any Grantor therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section 7.09 and Section
7.04 of the Intercreditor Agreement, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan, issuance
of a Letter of Credit, acceptance of the obligations or issuance of a Senior
Subordinated Note shall not be construed as a waiver of any Default, regardless
of whether the Administrative Agent, the Collateral Agent, the Issuing Bank, any
Lender or any Noteholder may have had notice or knowledge of such Default at the
time. No notice or demand on any Grantor in any case shall entitle any Grantor
to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantors with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with the Intercreditor Agreement, Section 9.02 of the Revolving
Credit Agreement, Section 9.02 of the Term Loan Credit Agreement and Sections
9.01 and 9.02 of the Indenture.
SECTION 7.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
---------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS
35
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.10.
SECTION 7.11. Severability. Any provision of this Agreement held to
-------------
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability in
such jurisdiction of the remaining provisions hereof; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
SECTION 7.12. Counterparts. This Agreement may be executed in
-------------
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract, and shall become effective as provided in
Section 7.04. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 7.13. Headings. Article and Section headings and the Table
---------
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 7.14. Jurisdiction; Consent to Service of Process. (a) Each
--------------------------------------------
of the Grantors hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
other Transaction Document, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Transaction Document shall affect any
right that the Administrative Agent, the Collateral Agent, the Issuing Bank, any
Lender or any Noteholder may otherwise have to bring any action or proceeding
relating to this Agreement or any other Transaction Document against any Grantor
or Guarantor, or its properties, in the courts of any jurisdiction.
(b) Each of the Grantors hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
36
action or proceeding arising out of or relating to this Agreement or any other
Transaction Document in any court referred to in paragraph (a) of this Section
7.14. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement or any other Transaction Document will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
SECTION 7.15. Termination or Release. (a) This Agreement, the
-----------------------
guarantees made herein, the Security Interest and all other security interests
granted hereby shall terminate when (i) all the Revolving Obligations and the
Term Loan Obligations have been indefeasibly paid in full and the Lenders have
no further commitment to lend under the Credit Agreements, the LC Exposure has
been reduced to zero, the Issuing Bank has no further obligations to issue
Letters of Credit and (ii)(x) the Noteholder Obligations have been paid in full,
(y) a satisfaction and discharge of the Indenture has occurred pursuant to
Article 8 thereto or (z) the Company exercises its legal defeasance option or
covenant defeasance option pursuant to Article 8 of the Indenture.
(b) A Subsidiary Party shall automatically be released from its
obligations hereunder and the security interests in the Collateral of such
Subsidiary Party shall be automatically released upon the consummation of any
transaction permitted by the Credit Agreements and the Indenture as a result of
which such Subsidiary Party ceases to be a Subsidiary of the Company; provided
--------
that the requisite Secured Parties shall have consented to such transaction (to
the extent required by the Credit Agreements and the Indenture) and the terms of
such consent did not provide otherwise.
(c) Upon any sale or other transfer by any Grantor of any Collateral
that is permitted under the Credit Agreements and the Indenture to any Person
that is not a Grantor, or upon the effectiveness of any written consent to the
release of the security interest granted hereby in any Collateral pursuant to
Section 9.02 of the Revolving Credit Agreement, Section 9.02 of the Term Loan
Credit Agreement and Section 15.03 of the Indenture, the security interest in
such Collateral shall be automatically released.
(d) In connection with any termination or release pursuant to
paragraph (a), (b) or (c) of this Section 7.15, the Collateral Agent shall
execute and deliver to any Grantor at such Grantor's expense all documents that
such Grantor shall reasonably request to evidence such termination or release.
Any execution and delivery of documents pursuant to this Section 7.15 shall be
without recourse to or warranty by the Collateral Agent.
SECTION 7.16. Additional Subsidiaries. Pursuant to Section 5.12 of
------------------------
the Revolving Credit Agreement, Section 5.12 of the Term Loan Credit Agreement
and Section 4.11 of the Indenture, each Subsidiary of a Grantor that was not in
existence or not a Subsidiary on the date of the Credit Agreements and the
Indenture and is not a Foreign Subsidiary is required to enter into this
Agreement as a Subsidiary Party upon becoming such a Subsidiary. Upon execution
and delivery by the Collateral Agent and a Subsidiary of an instrument in the
37
form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Party
hereunder with the same force and effect as if originally named as a Subsidiary
Party herein. The execution and delivery of any such instrument shall not
require the consent of any other Grantor hereunder. The rights and obligations
of each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Agreement.
SECTION 7.17. Right of Setoff. To the extent permitted by the
----------------
Intercreditor Agreement, if an Actionable Default shall have occurred and be
continuing, each Lender and each of its Affiliates and each Noteholder and each
of its Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other obligations at any time owing by such Lender or Affiliate or Noteholder or
Affiliate to or for the credit or the account of any Subsidiary Party against
any of and all the obligations of such Subsidiary Party now or hereafter
existing under this Agreement owed to such Lender or Noteholder, irrespective of
whether or not such Lender or Noteholder shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each
Lender and Noteholder under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender or Noteholder may
have.
SECTION 7.18. References to Credit Agreements and Indenture. Upon
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the indefeasible payment in full of the Revolving Obligations (and the reduction
of the LC Exposure to zero and the termination of all commitments to lend or
provide Letters of Credit under the Revolving Credit Agreement), the Term Loan
Obligations or the Noteholder Obligations (or a satisfaction and discharge of
the Indenture pursuant to Article 8 thereto or the exercise by the Company of
its legal defeasance or covenant defeasance option pursuant to Article 8 of the
Indenture), all references in this Agreement to the terms of the Revolving
Credit Agreement, the Term Loan Credit Agreement or the Indenture, as the case
may be, shall become null and void, except with respect to any provisions
thereof that expressly survive the termination thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
WKI HOLDING COMPANY, INC.,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
WORLD KITCHEN, INC.,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
38
EKCO GROUP, LLC,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
WORLD KITCHEN (GHC), LLC,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
EKCO HOUSEWARES, INC.,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
EKCO MANUFACTURING OF OHIO, INC.,
by
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
WKI LATIN AMERICA HOLDING, LLC,
by
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
39
JPMORGAN CHASE BANK, as Collateral Agent,
by
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
40
Schedule I to
the Guarantee and
Collateral Agreement
SUBSIDIARY PARTIES
World Kitchen, Inc.
EKCO Group, LLC
World Kitchen (GHC), LLC
EKCO Housewares, Inc.
EKCO Manufacturing of Ohio, Inc.
WKI Latin America Holding, LLC