SECURITY AGREEMENT

Exhibit 10.12

 

SECURITY AGREEMENT

dated as of March 26, 2009

among

SBARRO, INC.,

as Borrower,

SBARRO HOLDINGS, LLC,

as Holdings,

THE OTHER LOAN PARTIES FROM TIME TO TIME PARTY HERETO,

and

NATIXIS, NEW YORK BRANCH,

as Collateral Agent

 

TABLE OF CONTENTS ¹

 

1	The Table of Contents is not a part of the Security Agreement.

 

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Schedules:

 

Exhibits:

 

 

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SECURITY AGREEMENT dated as of March 26, 2009 (as amended, restated, modified or supplemented from time to time, this “ Agreement ”) among SBARRO HOLDINGS, LLC, a Delaware limited liability company (“ Holdings ”), SBARRO, INC., a New York corporation (the “ Borrower ”), the other LOAN PARTIES from time to time party hereto, NATIXIS, NEW YORK BRANCH, as collateral agent for the Credit Parties (as defined herein) (in such capacity, together with its successors, the “ Collateral Agent ”).

Holdings and the Borrower propose to enter into the Second Lien Credit Agreement dated as of March 26, 2009 (as amended, restated, modified, supplemented, restructured or refinanced from time to time, the “ Credit Agreement ”) among Holdings, the Borrower, the banks and other lending institutions from time to time party thereto (each a “ Lender ” and, collectively, the “ Lenders ”), Natixis, New York Branch, as administrative agent and collateral agent (together with its successor or successors in each such capacity, the “ Administrative Agent ” and the “ Collateral Agent ”).

The Lender, the Administrative Agent, the Collateral Agent and their respective successors and assigns are herein referred to individually as a “ Credit Party ” and collectively as the “ Credit Parties ”.

To induce the Credit Parties to enter into the Credit Agreement and the other Loan Documents referred to therein (collectively with the Credit Agreement, the “ Loan Documents ”), and as a condition precedent to the obligations of the Credit Parties under the Credit Agreement, Holdings and certain Subsidiaries of Holdings (each a “ Subsidiary Guarantor ” and, collectively, the “ Subsidiary Guarantors ”) and, together with Holdings, each other Person that becomes a guarantor and the respective successors and permitted assigns of each of the foregoing, the “ Guarantors ” and together with the Borrower, each a “ Loan Party ” and, collectively the “ Loan Parties ”, have agreed, jointly and severally, to provide a guaranty of all obligations of the Borrower and the other Loan Parties under or in respect of the Loan Documents.

As a further condition precedent to the obligations of the Lenders under the Loan Documents, each Loan Party has agreed or will agree to grant a continuing security interest in favor of the Collateral Agent in and to the Collateral to secure the Credit Obligations. Accordingly, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Terms Defined in the Credit Agreement . Terms defined in the Credit Agreement have the respective meanings set forth therein, unless otherwise defined in this Article I .

Section 1.02 Terms Defined in the UCC . Unless otherwise defined herein or in the Credit Agreement or the context otherwise requires, the following terms, together with any

uncapitalized terms used herein which are defined in the UCC, have the respective meanings provided in the UCC: (i) As-Extracted Collateral; (ii) Certificated Security; (iii) Chattel Paper; (iv) Documents; (v) Electronic Chattel Paper; (vi) Financial Asset; (vii) Instruments; (viii) Inventory; (ix) Investment Property; (x) Payment Intangibles; (xi) Proceeds; (xii) Securities Account; (xiii) Securities Intermediary; (xiv) Security; (xv) Security Certificate; (xvi) Security Entitlements; and (xvii) Uncertificated Security.

Section 1.03 Additional Definitions . Terms defined in the introductory section hereof have the respective meanings set forth therein. The following additional terms, as used herein, have the following respective meanings:

“ Account Control Agreement ” means (i) with respect to a Deposit Account, a deposit account control agreement, substantially in the form of Exhibit C hereto or otherwise containing reasonably acceptable terms and in form and substance reasonably acceptable to the Collateral Agent, among one or more Loan Parties, the Collateral Agent and the bank which maintains such Deposit Account (execution of such agreement shall be conclusive evidence of such approval) and (ii) with respect to a Securities Account, a securities account control agreement, substantially in the form of Exhibit B to the Pledge Agreement or otherwise containing reasonably acceptable terms and in form and substance reasonably acceptable to the Collateral Agent (which approval shall be deemed given by execution of such agreement), among one or more Loan Parties, the Collateral Agent and the Securities Intermediary which maintains such Securities Account, in each case as the same may be amended, modified or supplemented from time to time.

“ Account Debtor ” means an “account debtor” (as defined in the UCC), and also means and includes Persons obligated to pay negotiable instruments and other Receivables.

“ Accounts ” means (i) all “accounts” (as defined in the UCC), (ii) all of the rights of any Loan Party in, to and under all purchase orders for goods, services or other property, (iii) all of the rights of any Loan Party to any goods, services or other property represented by any of the foregoing (including returned or repossessed goods and unpaid seller’s rights of rescission, replevin, reclamation and rights to stoppage in transit) and (iv) all monies due to or to become due to any Loan Party under any and all contracts for any of the foregoing (in each case, whether or not yet earned by performance on the part of such Loan Party), including, without limitation, the right to receive the Proceeds of said purchase orders and contracts, and all Supporting Obligations of any kind given by any Person with respect to all or any of the foregoing.

“ Bankruptcy Code ” means title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“ Bankruptcy Law ” means the Bankruptcy Code and all other liquidation, receivership, moratorium, conservatorship, assignment for the benefit of creditors, insolvency or similar federal, state or foreign law for the relief of debtors.

“ Claims ” means all “commercial tort claims” (as defined in the UCC), including, without limitation, each of the claims described on Schedule 1.03 hereto, as such Schedule may be amended, modified or supplemented from time to time, and also means and includes all

 

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claims, causes of action and similar rights and interests (however characterized) of a Loan Party, whether arising in contract, tort or otherwise, and whether or not subject to any action, suit, investigation or legal, equitable, arbitration or administrative proceedings.

“ Collateral ” has the meaning set forth in Section 2.02 of this Agreement.

“ Collateral Accounts ” means any Securities Accounts or Deposit Accounts established with or in the possession or under the control of the Collateral Agent into which cash or cash Proceeds of any Collateral are deposited from time to time, collectively.

“ Collateral Agent ” means Natixis, New York Branch, in its capacity as collateral agent for the Credit Parties, and its successor or successors in such capacity.

“ Computer Hardware ” means all computer and other electronic data processing hardware of a Loan Party, whether now or hereafter owned, licensed or leased by such Loan Party, including, without limitation, all integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer hardware, all documentation, flowcharts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes associated with any of the foregoing and all options, warranties, services contracts, program services, test rights, maintenance rights, support rights, renewal rights and indemnifications relating to any of the foregoing.

“ Contracts ” shall mean, collectively, with respect to each Loan Party, the Loan Documents, all sale, service, performance, equipment or property lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or third party or intercompany), between such Loan Party and any third party, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof.

“ Copyright ” shall mean for any Loan Party, all United States and foreign copyrights (including community designs), including but not limited to copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications referred to in Schedule 12 to any Loan party’s Perfection Certificate (as such schedule may be amended, modified or supplemented from time to time by such Loan Party), (ii) all extensions and renewals thereof, (iii) all rights and privileges corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit.

“ Copyright Agreement ” means a grant of Security Interest in United States Copyrights, substantially in the form of Exhibit B to this Agreement, between one or more Loan Parties and the Collateral Agent, as the same may be amended, modified or supplemented from time to time.

 

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“ Copyright License ” means any agreement now or hereafter in existence granting to any Loan Party any rights, whether exclusive or non-exclusive, to use another Person’s works protected by their copyrights or copyright applications, or pursuant to which any Loan Party has granted to any other Person, any right, whether exclusive or non-exclusive, with respect to any Copyright, whether or not registered, including, without limitation, the Copyright Licenses described on Schedule 12 to any Loan Party’s Perfection Certificate (as each such schedule may be amended, modified or supplemented from time to time by such Loan Party).

“ Credit Obligations ” means “Second Lien Credit Obligations” as such term is defined in the Credit Agreement.

“ Deposit Accounts ” means all “deposit accounts” (as defined in the UCC) and also means and includes all demand, time, savings, passbook or similar accounts maintained by a Loan Party with a bank or other financial institution, whether or not evidenced by an Instrument, all cash and other funds held therein and all passbooks related thereto and all certificates and Instruments, if any, from time to time representing, evidencing or deposited into such deposit accounts.

“ Direct Exposure ” has the meaning set forth in Section 2.08 of this Agreement.

“ Domestic Subsidiary ” means with respect to any Person each Subsidiary of such Person that is organized under the laws of the United States, the District of Columbia or any State, and “ Domestic Subsidiaries ” means any two or more of them.

“ Equipment ” means all “equipment” (as defined in the UCC), including all items of machinery, equipment, Computer Hardware, furnishings and fixtures of every kind, whether or not affixed to real property, as well as all motor vehicles, automobiles, trucks, trailers, railcars, barges and vehicles of every description, handling and delivery equipment, all additions to, substitutions for, replacements of or accessions to any of the foregoing, all attachments, components, parts (including spare parts) and accessories whether installed thereon or affixed thereto and all fuel for any thereof and all options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights and indemnification relating to any of the foregoing.

“ Event of Default ” means one or more Events of Default, as such term is defined in the Credit Agreement.

“ Excepted Instruments ” has the meaning specified in Section 4.06 .

“ Excluded Contract ” means at any date any rights or interest of a Loan Party in, to or under any agreement, contract, license, instrument, document, healthcare insurance receivable or other general intangible (referred to solely for purposes of this definition as a “ Contract ”) to the extent that such Contract by the express terms of a valid and enforceable restriction in favor of a Person who is not a Group Company, (i) prohibits, or requires any consent or establishes any other condition for, an assignment thereof or a grant of a security interest therein by a Loan Party, or (ii) provides that a grant of a security interest therein by a Loan Party would result in a forfeiture of such Loan Parties’ rights thereunder, would give any party to such Contract other than a Group Company a right to terminate its obligations thereunder, or is permitted only with

 

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the consent of another Person, if the requirement to obtain such consent is legally enforceable and such consent has not been obtained; provided that (i) rights to payment under any such Contract otherwise constituting an Excluded Contract by virtue of this definition shall be included in the Collateral to the extent permitted thereby or by Section 9-406, Section 9-407, Section 9-408 or Section 9-409 of the UCC, and (ii) all Proceeds paid or payable to any Loan Party from any sale, transfer or assignment of such Contract and all rights to receive such Proceeds shall be included in the Collateral.

“ Excluded Equipment ” means at any date any Equipment of a Loan Party which is subject to, or secured by, a Capital Lease Obligation or Purchase Money Indebtedness which is permitted under Section 7.01 of the Credit Agreement if and to the extent that (i) the express terms of a valid and enforceable restriction in favor of a Person who is not a Group Company contained in the agreements or documents granting or governing such Capital Lease Obligation or Purchase Money Indebtedness prohibit, or require any consent or establish any other conditions for, an assignment thereof, or a grant of a security interest therein, by a Loan Party or provide that a grant of a security interest therein by a Loan Party would result in a forfeiture of such Loan Parties’ rights thereunder and (ii) such restriction relates only to the asset or assets acquired by a Loan Party with the Proceeds of such Capital Lease Obligation or Purchase Money Indebtedness or the asset or assets acquired by such Loan Party with the proceeds of another Capital Lease Obligation or Purchase Money Indebtedness provided by the same Person; provided that all Proceeds paid or payable to any Loan Party from any sale, transfer or assignment or other voluntary or involuntary disposition of such Equipment and all rights to receive such Proceeds shall be included in the Collateral to the extent not otherwise required to be paid to the holder of the Capital Lease Obligation or Purchase Money Indebtedness secured by such Equipment.

“ Exempt Deposit Accounts ” has the meaning set forth in the Credit Agreement.

“ First Lien Finance Party ” means “Finance Party” as defined in the First Lien Security Agreement.

“ First Lien Security Agreement ” means the Security Agreement, dated as of January 31, 2007, among Holdings, the Borrower, the loan parties from time to time party thereto, and the First Lien Collateral Agent.

“ Foreign Subsidiary ” means with respect to any Person, any Subsidiary of such Person that is not a Domestic Subsidiary of such Person.

“ General Intangibles ” means all “general intangibles” (as defined in the UCC) and also means and includes (i) all Payment Intangibles and other obligations and indebtedness owing to any Loan Party (other than Accounts), from whatever source arising, (ii) all Claims, Judgments and/or Settlements, (iii) all rights or claims in respect of refunds for taxes paid, (iv) all rights in respect of any pension plans or similar arrangements maintained for employees of any Loan Party or any ERISA Affiliate, (v) all interests in limited liability companies and/or partnerships which interests do not constitute Securities, (vi) all Supporting Obligations of any kind given by any Person with respect to all or any of the foregoing, (vii) all of such Loan Party’s rights, title and interest in, to and under all Contracts and insurance policies (including all rights and remedies relating to monetary damages, including indemnification rights and remedies,

 

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and claims for damages or other relief pursuant to or in respect of any Contract and (viii) all licenses, consents, permits, variances, certifications, authorizations and approvals, however characterized, now or hereafter acquired or held by such Loan Party, including building permits, certificates of occupancy, environmental certificates, industrial permits or licenses and certificates of operation.

“ Intellectual Property ” means all Patents, Trademarks, Copyrights, Licenses, rights in intellectual property, goodwill, trade names, service marks, trade secrets, inventions, methods, procedures, formulae, recipes, confidential or proprietary technical and business information, know-how, trademark rights arising out of domain names, mask works, customer lists, vendor lists, subscription lists, databases and related documentation, registrations, franchises and all other intellectual or other similar property rights.

“ Insolvency or Liquidation Proceeding ” means (i) any voluntary or involuntary case or proceeding under the Bankruptcy Code or any other Bankruptcy Law with respect to any Loan Party, (ii) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Loan Party or with respect to a material portion of their respective assets, (iii) any liquidation, dissolution, reorganization or winding up of any Loan Party whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (iv) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Loan Party.

“ Judgments ” means all judgments, decrees, verdicts, decisions or orders issued in resolution of or otherwise in connection with a Claim, whether or not final or subject to appeal, and including all rights of enforcement relating thereto and any and all Proceeds thereof.

“ Letter-of-Credit Right ” means all “letter-of-credit rights” (as defined in the UCC) and also means and includes all rights of a Loan Party to demand payment or performance under a letter of credit (as defined in Article V of the UCC).

“ License ” means any Patent License, Trademark License, Copyright License, Software License or other license or sublicense as to which any Loan Party is a party (other than those license agreements constituting Excluded Contracts; provided that rights to payments under any such license shall be included in the Collateral to the extent permitted thereby or by Sections 9-406 and 9-408 of the UCC).

“ Liquid Investments ” has the meaning set forth in Section 2.10 of this Agreement.

“ Loan Party ” means Holdings, the Borrower, and each Guarantor, and “ Loan Parties ” means all of them, collectively.

“ Patent ” means any of the following, whether now existing or hereafter arising, invented, developed, reduced to practice, acquired or owned by a Loan Party:

(i) the United States and foreign patents described on Schedule XII to any Loan Party’s Perfection Certificate (as each such schedule may be amended, modified or supplemented from time to time by such Loan Party) and any renewals thereof;

 

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(ii) all reissues, reexaminations, divisions, continuations, continuations, revisions, restorations, renewals or extensions thereof;

(iii) all claims for, and rights to sue for, past, present or future infringement of any of the foregoing;

(iv) all income, royalties, damages and payments now or hereafter due or payable with respect to any of the foregoing, including damages and payments for past, present or future infringements thereof and payments and damages under all Patent Licenses in connection therewith; and

(v) all rights corresponding to any of the foregoing whether arising under the Laws of the United States or any foreign country or otherwise.

“ Patent and Trademark Agreement ” means a grant of Security Interest in United States Patents and Trademarks, substantially in the form of Exhibit A to this Agreement, between one or more Loan Parties and the Collateral Agent, as the same may be amended, modified or supplemented from time to time.

“ Patent License ” means any agreement now or hereafter in existence granting to any Loan Party any right, whether exclusive or non-exclusive, with respect to any Person’s patent or any invention now or hereafter in existence, whether or not patentable, or pursuant to which any Loan Party has granted to any other Person any right, whether exclusive or non-exclusive, with respect to any Patent or any invention now or hereafter in existence, whether or not patentable and whether or not a Patent or application for Patent is in or hereafter comes into existence on such invention, including, without limitation, the Patent Licenses described on Schedule 12 to any Loan Party’s Perfection Certificate (as each such schedule may be amended, modified or supplemented from time to time by such Loan Party).

“ Perfection Certificate ” means with respect to each Loan Party a certificate, substantially in the form of Exhibit F-3 to the Credit Agreement, completed and supplemented with the schedules and attachments contemplated thereby to the reasonable satisfaction of the Collateral Agent.

“ Permitted Lien ” means any Lien referred to in, and permitted by, Section 7.02 of the Credit Agreement.

“ Receivables ” means all Accounts, all Payment Intangibles, all Instruments, all Chattel Paper, all Electronic Chattel Paper, all Letter-of-Credit Rights and all Supporting Obligations supporting or otherwise relating to any of the foregoing.

“ Recordable Intellectual Property ” means Intellectual Property the transfer of which is required to be recorded in the United States Patent and Trademark Office or the United States Copyright Office in order to be effective against subsequent third party transferees; provided that the following shall not be considered “Recordable Intellectual Property” hereunder: (i) unregistered United States Copyrights and (ii) non-exclusive Licenses.

“ Reinvestment Funds ” shall have the meaning specified in the Credit Agreement.

 

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“ Relevant Contingent Exposure ” has the meaning set forth in Section 2.08 of this Agreement.

“ Requisite Priority Lien ” means a valid and perfected security interest in favor of the Collateral Agent for the benefit of the Credit Parties and securing the Credit Obligations.

“ Security Interest ” means the security interest granted pursuant to Section 2.01 hereof in favor of the Collateral Agent for the benefit of the Credit Parties securing the Credit Obligations.

“ Settlements ” means all right, title and interest of a Loan Party in, to and under any settlement agreement or other agreement executed in settlement or compromise of any Claim, including all rights to enforce such agreements and all payments thereunder or arising in connection therewith.

“ Software ” means all “software” (as defined in the UCC), and also means and includes all software programs, whether now or hereafter owned, licensed or leased by a Loan Party, designed for use on Computer Hardware, including all operating system software, utilities and application programs in whatever form and whether or not embedded in goods, all source code and object code in magnetic tape, disk or hard copy format or any other listings whatsoever, all firmware associated with any of the foregoing all documentation, flowcharts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes associated with any of the foregoing, and all options, warranties, services contracts, program services, test rights, maintenance rights, support rights, renewal rights and indemnifications relating to any of the foregoing.

“ Software License ” means any agreement (whether such agreement is also a Copyright License, Patent License and/or Trademark License) now or hereafter in existence granting to any Loan Party any right, whether exclusive or non-exclusive, to use another Person’s Software, or pursuant to which any Loan Party has granted to any other Person any right, whether exclusive or non-exclusive, to use any Software, whether or not subject to any registration.

“ Supporting Obligation ” means a Letter-of-Credit Right, Guaranty Obligation or other secondary obligation supporting or any Lien securing the payment or performance of one or more Receivables, General Intangibles, Documents or Investment Property.

“ Trademark ” means any of the following, whether now existing or hereafter arising used, acquired or owned by a Loan Party:

(i) the United States and foreign trademarks described on Schedule 12 to any Loan Party’s Perfection Certificate (as each such schedule may be amended, modified or supplemented from time to time) and any renewals thereof;

(ii) all other trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, certification marks, collective marks, brand names, slogans, trademark rights arising out of domain names and trade dress (whether statutory or common law) which are or have been used in the United States, any state, province, territory or possession thereof, or in any other place, nation or jurisdiction, along with

 

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all prints and labels on which any of the foregoing have appeared or appear, package and other designs, and any other source or business identifiers, and general intangibles of like nature, and the rights in any of the foregoing which arise under applicable Law;

(iii) the goodwill of the business symbolized thereby or associated with each of the foregoing;

(iv) all registrations and applications in connection therewith, including registrations and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof;

(v) all reissues, extensions and renewals thereof;

(vi) all claims for, and rights to sue for, past, present or future infringements of any of the foregoing;

(vii) all income, royalties, damages and payments now or hereafter due or payable with respect to any of the foregoing, including damages and payments for past, present or future infringements thereof and payments and damages under all Trademark Licenses in connection therewith; and

(viii) all rights corresponding to any of the foregoing whether arising under the Laws of the United States or any foreign country or otherwise.

“ Trademark License ” means any agreement now or hereafter in existence granting to any Loan Party any right, whether exclusive or non-exclusive, to use another Person’s trademarks or trademark applications, or pursuant to which any Loan Party has granted to any other Person any right, whether exclusive or non-exclusive, to use any Trademark, whether or not registered, including, without limitation, the Trademark Licenses described on Schedule 12 to any Loan Party’s Perfection Certificate (as each such schedule may be amended, modified or supplemented from time to time by such Loan Party) and the rights to prepare for sale, sell and advertise for sale all of the inventory now or hereafter owned by any Loan Party and now or hereafter covered by such license agreements.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if by reason of mandatory provisions of Law, the perfection, the effect of perfection or non-perfection or the priority of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “UCC” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

Section 1.04 Terms Generally . The definitions in Sections 1.02 and 1.03 shall apply equally to both the singular and plural forms of the terms defined, except for terms defined in both the singular and the plural form. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes”

 

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and “including” shall be deemed to be followed by the phrase “without limitation”. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Unless otherwise expressly provided herein, the word “day” means a calendar day.

ARTICLE II

THE SECURITY INTERESTS

Section 2.01 Grant of Security Interests . To secure the due and punctual payment of the Credit Obligations, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing or due or to become due, in accordance with the terms thereof and to secure the performance of all of the obligations of each Loan Party hereunder and under the other Loan Documents in respect of the Credit Obligations of each Loan Party, each Loan Party hereby grants to the Collateral Agent for the benefit of the Credit Parties a security interest in, and each Loan Party hereby pledges and collaterally assigns to the Collateral Agent for the benefit of the Credit Parties, all of such Loan Party’s right, title and interest in, to and under the Collateral.

Section 2.02 Collateral .

(a) All right, title and interest of each Loan Party in, to and under the following property, whether now owned or existing or hereafter created or acquired by a Loan Party, whether tangible or intangible, and regardless of where located, are herein collectively referred to as the “ Collateral ”:

(i) all Receivables;

(ii) all Inventory;

(iii) all General Intangibles;

(iv) all Intellectual Property;

(v) all Documents and all Supporting Obligations of any kind given by any Person with respect thereto;

(vi) all Equipment;

(vii) all Investment Property and all Supporting Obligations of any kind given by any Person with respect thereto;

(viii) all Deposit Accounts;

(ix) all As-Extracted Collateral;

(x) the Collateral Accounts, all cash and other property deposited therein or credited thereto from time to time, the Liquid Investments made pursuant to

 

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Section 2.09 and other monies and property of any kind of any Loan Party maintained with or in the possession of or under the control of the First Lien Collateral Agent or the Collateral Agent, as applicable, subject to the terms of the Intercreditor Agreement;

(xi) all books and records (including customer lists, credit files, computer programs, printouts and other computer materials and records) of each Loan Party pertaining to any of the Collateral; and

(xii) to the extent not otherwise included, all Proceeds of all or any of the Collateral described in clauses (i)  through (x)  hereof;

provided , however , that Collateral shall not include: (s) shares of capital stock or other equity interests of Subsidiaries of a Foreign Subsidiary or capital stock or other equity interests in excess of 65% of all classes of capital stock or other equity interests issued by a first tier Foreign Subsidiary of any Loan Party; (t) any intent-to-use (ITU) United States trademark application for which an amendment to allege use or statement of use has not been filed under 15 U.S.C. § 1051(c) or 15 U.S.C. § 1051(d), respectively, or, if filed, has not been deemed in conformance with 15 U.S.C. § 1051(a) or (c) in each case, only to the extent the grant of security interest in such intent-to-use Trademark is in violation of 15 U.S.C. § 1060 and only unless and until a “Statement of Use” or “Amendment to Allege Use” is filed, has been deemed in conformance with 15 U.S.C. § 1051(a) and (c) or examined and accepted, respectively, by the United States Patent and Trademark Office; (u) any Equity Interest in a non-Wholly-Owned Subsidiary existing on the date hereof or formed after the Closing Date, in each case to the extent the grant of a security interest therein is prohibited by the governing organizational documents of such non-Wholly Owned Subsidiary; (v) Excluded Contracts; (w) government licenses and permits to the extent that applicable Law prohibits the grant of a security interest in such license or permit; (x) Excluded Equipment; (y) Exempt Deposit Accounts or (z) any Equity Interest in a Permitted Joint Venture, to the extent the applicable joint venture agreement or governing documents of such joint venture prohibits the grant of a Security Interest in such Equity Interest or if such grant would cause a default under such joint venture agreement or would result in a forfeiture of any Loan Party’s rights thereunder.

(b) Subject to the terms of the Intercreditor Agreement, notwithstanding anything herein to the contrary, the foregoing Section 2.02(a) shall not require the creation or perfection of pledges of or security interests in particular assets if and for so long as, in the reasonable judgment of the Administrative Agent (confirmed in writing by notice to the Borrower), the cost or effort of creating or perfecting such pledges or security interests in such assets shall be excessive in view of the benefits to be obtained by the Credit Parties therefrom. Subject to the terms of the Intercreditor Agreement, the Administrative Agent may grant extensions of time for the perfection of security interests in particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of any Loan Party on such date) where it reasonably determines, in consultation with the Borrower, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the other Loan Documents.

Section 2.03 Continuing Liability of Each Loan Party . Notwithstanding anything herein to the contrary, nothing contained herein shall affect the liability of each Loan Party

 

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to observe and perform all the terms and conditions to be observed and performed by it under any contract, agreement, warranty or other obligation with respect to the Collateral (except following any change in owner or control of any Loan Party resulting from the exercise by the Collateral Agent of its rights hereunder). Neither the Collateral Agent nor any Credit Party shall have any obligation or liability under any such contract, agreement, warranty or obligation by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Credit Party of any payment relating to any Collateral, nor shall the Collateral Agent or any Credit Party be required to perform or fulfill any of the obligations of any Loan Party with respect to any of the Collateral, to make any inquiry as to the nature or sufficiency of any payment received by it or the sufficiency of the performance of any party’s obligations with respect to any Collateral. Furthermore, neither the Collateral Agent nor any Credit Party shall be required to file any claim or demand to collect any amount due or to enforce the performance of any party’s obligations with respect to the Collateral.

Section 2.04 Security Interests Absolute . All rights of the Collateral Agent, all security interests hereunder and all obligations of each Loan Party hereunder are unconditional and absolute and independent and separate from any other security for or guaranty of the Credit Obligations, whether executed by such Loan Party, any other Loan Party or any other Person. Without limiting the generality of the foregoing, the obligations of each Loan Party hereunder shall not be released, discharged or otherwise affected or impaired by:

(i) any extension, renewal, settlement, compromise, acceleration, waiver or release in respect of any obligation of any other Loan Party under any Loan Document or any other agreement or instrument evidencing or securing any Credit Obligation, by operation of Law or otherwise;

(ii) any change in the manner, place, time or terms of payment of any Credit Obligation or any other amendment, supplement or modification to any Loan Document or any other agreement or instrument evidencing or securing any Credit Obligation;

(iii) any release, non-perfection or invalidity of any direct or indirect security for any Credit Obligation, any sale, exchange, surrender, realization upon, offset against or other action in respect of any direct or indirect security for any Credit Obligation or any release of any other obligor or Loan Parties in respect of any Credit Obligation;

(iv) any change in the existence, structure or ownership of any Loan Party, or any insolvency, bankruptcy, reorganization, arrangement, readjustment, composition, liquidation or other similar proceeding affecting any Loan Party or its assets or any resulting disallowance, release or discharge of all or any portion of any Credit Obligation;

(v) the existence of any claim, set-off or other right which any Loan Party may have at any time against the Borrower, any other Loan Party, any Agent, any other Credit Party, or any other Person, whether in connection herewith or any unrelated transaction; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

 

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(vi) any invalidity or unenforceability relating to or against the Borrower or any other Loan Party for any reason of any Loan Document or any other agreement or instrument evidencing or securing any Credit Obligation or any provision of applicable Law or regulation purporting to prohibit the payment by the Borrower or any other Loan Party of any Credit Obligation;

(vii) any failure by any Credit Party: (A) to file or enforce a claim against any Loan Party or its estate in an Insolvency or Liquidation Proceeding; (B) to give notice of the existence, creation or incurrence by any Loan Party of any new or additional indebtedness or obligation under or with respect to the Credit Obligations; (C) to commence any action against any Loan Party; (D) to disclose to any Loan Party any facts which such Credit Party may now or hereafter know with regard to any Loan Party; or (E) to proceed with due diligence in the collection, protection or realization upon any collateral securing the Credit Obligations;

(viii) any direction as to application of payment by the Borrower, any other Loan Party or any other Person;

(ix) any subordination by any Credit Party of the payment of any Credit Obligation to the payment of any other liability (whether matured or unmatured) of any Loan Party to its creditors;

(x) any act or failure to act by the Collateral Agent or any other Credit Party under this Agreement or otherwise which may deprive any Loan Party of any right to subrogation, contribution or reimbursement against any other Loan Party or any right to recover full indemnity for any payments made by such Loan Party in respect of the Credit Obligations; or

(xi) any other act or omission to act or delay of any kind by any Loan Party or any Credit Party or any other Person or any other circumstance whatsoever which might, but for the provisions of this clause, constitute a legal or equitable discharge of any Loan Party’s obligations hereunder, except that a Loan Party may assert the defense of final payment full of the Credit Obligations.

Each Loan Party has irrevocably and unconditionally delivered this Agreement to the Collateral Agent, for the benefit of the Credit Parties, and the failure by any other Person to sign this Agreement or a security agreement similar to this Agreement or otherwise shall not discharge the obligations of any Loan Party hereunder.

This Agreement shall remain fully enforceable against each Loan Party irrespective of any defenses that any other Loan Party may have or assert in respect of the Credit Obligations, including, without limitation, failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, except that a Loan Party may assert the defense of final payment in full of the Credit Obligations.

Section 2.05 Continuing Liabilities Under Collateral . Notwithstanding anything herein to the contrary, (i) nothing contained herein shall affect the liability of each Loan Party for all obligations under the Collateral and nothing contained herein is intended or shall be

 

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a delegation of duties to the Collateral Agent respective of any Credit Party, (ii) each Loan Party shall remain liable under each of the agreements included in the Collateral, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof (except following any change in owner or control of any Loan Party resulting from the exercise by the Collateral Agent of its rights hereunder) and neither the Collateral Agent nor any Credit Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Agent nor any Credit Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral and (iii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Loan Party from any of its duties or obligations under the contracts and agreements included in the Collateral.

Section 2.06 Reserved .

Section 2.07 Reserved .

Section 2.08 Reserved .

Section 2.09 Reserved .

Section 2.10 Investment of Funds in Collateral Accounts . Amounts on deposit in the Collateral Accounts shall be invested and re-invested from time to time in such Liquid Investments as the Borrower shall determine, which Liquid Investments shall be held in the name and be under the control of the First Lien Collateral Agent or the Collateral Agent, as applicable, in accordance with the terms of the Intercreditor Agreement; provided that, if an Event of Default has occurred and is continuing, the First Lien Collateral Agent or the Collateral Agent, as applicable, in accordance with the terms of the Intercreditor Agreement, may liquidate or cause the liquidation of any such Liquid Investments and apply or cause to be applied the proceeds thereof in the manner specified in Section 5.05 of the First Lien Security Agreement or Section 5.05 , as applicable. For this purpose, “ Liquid Investments ” means Cash Equivalents maturing within 30 days after a Cash Equivalent is acquired by or on behalf of the First Lien Collateral Agent or the Collateral Agent, as applicable, in accordance with the terms of the Intercreditor Agrrement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants that:

Section 3.01 Title to Collateral . Other than financing statements or other similar or equivalent documents or instruments with respect to the Security Interests and Permitted Liens, no authorized financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording is effective to perfect a Lien on such Collateral. No Collateral having a value individually or collectively in excess of $1,000,000 (other than Inventory in transit, Inventory in the possession of a carrier, warehouseman, or similar bailee or equipment absent for repair or replacement) is in the possession or control of any Person (other

 

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than a Loan Party or its employees or a Person with a Permitted Lien that is prior to that of the Administrative Agent) asserting any claim thereto or security interest therein, except that the Collateral Agent (on behalf of itself and the Credit Parties) or their respective designees, may have possession and/or control of Collateral as contemplated hereby and by the other Loan Documents.

Section 3.02 Validity, Perfection and Priority of Security Interests .

(a) The Security Interest constitutes a valid security interest under the UCC securing the Credit Obligations.

(b) When Uniform Commercial Code financing statements stating that the same covers “all assets of the Debtor”, “all personal property of the Debtor” or words of similar import or containing the description of Collateral set forth on Exhibit E hereto shall have been timely and properly filed in the offices specified in Schedule 4.01 hereto, the Security Interests will constitute a Requisite Priority Lien in all right, title and interest of such Loan Party in the Collateral to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all other Li