Exhibit 10.2
EXECUTION COPY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated as of January 10, 2005,
is made by EMPIRE RESORTS, INC., a Delaware corporation (the "COMPANY"), and
each of its Subsidiaries now or hereafter party hereto (such Subsidiaries,
together with Company, each, a "DEBTOR" and, collectively, the "DEBTORS"), in
favor of BANK OF SCOTLAND, as agent (together with its successor(s) thereto in
such capacity. "Agent") for the Banks, in light of the following:
WHEREAS, the Company and the other Debtors, certain lenders (the "BANKS")
and the Agent, have entered into Loan Agreement, dated as of January 10, 2005
(as amended, restated, supplemented or otherwise modified from time to time, the
"LOAN AGREEMENT"), pursuant to which the Banks have agreed to make available to
the Company a $10,000,000 senior secured revolving credit facility, and the
other Debtors have guaranteed the payment of Loans made by the Banks to the
Company pursuant to such credit facility;
WHEREAS, the Company desires to secure its Obligations under the Notes (as
defined in the Loan Agreement), the Loan Agreement and each other Loan Document
to which it is or may become a party and each other Debtor desires to secure its
Guaranty, the Notes, the Loan Agreement and each other Loan Document to which it
is or may become a party by granting to Agent, for the benefit of itself and the
Banks, security interests in the Collateral as set forth herein; and
WHEREAS, to induce the Banks to make Loans and Bank of Scotland to act in
its capacity as Agent, each Debtor desires to pledge, grant, transfer, and
assign to Agent, for the benefit of itself and the Banks, a security interest in
the Collateral to secure the Obligations, as provided herein.
NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and each intending to
be bound hereby, Agent and each Debtor agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. DEFINITIONS. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
As used in this Agreement, the following terms shall have the following
definitions:
"ACCOUNT" means an account (as that term is defined in the Code).
"ACCOUNT DEBTOR" means any Person who is obligated on an Account,
chattel paper, or a General Intangible.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 2.4(C).
"AGENT" has the meaning set forth in the preamble hereto.
"AGENT-RELATED PERSON" means the Agent, together with its Affiliates,
officers, directors, employees, attorneys, and agents.
"AGENT'S LIENS" means the liens granted by a Debtor to Agent under
this Agreement or the other Loan Documents to which such Debtor is a party.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"BOOKS" means, with respect to each Debtor, all of such Debtor's now
owned or hereafter acquired books and records (including all of its Records
indicating, summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of such Debtor's Records relating to its business operations or
financial condition, and all of its goods or General Intangibles related to such
information).
"CODE" means the Uniform Commercial Code, as in effect from time to
time in the State of New York; provided, however, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection,
priority, or remedies with respect to the Agent's Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "Code" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority, or remedies.
"COLLATERAL" means, with respect to each Debtor, all of such Debtor's
now owned or hereafter acquired right, title, and interest in and to each of the
following:
(a) all of its Accounts,
(b) all of its Books,
(c) all of its commercial tort claims described on SCHEDULE 3.6(d)
(and any supplement thereto pursuant to SECTION 2.4(b)),
(d) all of its Deposit Accounts,
(e) all of its Equipment,
(f) all of its General Intangibles,
(g) all of its Inventory,
(h) all of its Investment Property (including all of its securities
and Securities Accounts),
(i) all of its Negotiable Collateral,
(j) all of its Supporting Obligations,
-2-
(k) money or other assets of such Debtor that now or hereafter come
into the possession, custody, or control of the Agent, and
(l) the proceeds and products, whether tangible or intangible, of any
of the foregoing, including proceeds of insurance covering any or all of the
foregoing, and any and all Accounts, Books, Deposit Accounts, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, Supporting
Obligations, money, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
Notwithstanding the foregoing, the term Collateral shall in no event include (a)
any rights under any Account, contract, license or other agreement or any
General Intangible, in each case, to the extent that the grant of a security
interest under any Security Document (i) would invalidate the underlying rights
of such Debtor in such General Intangible, (ii) is prohibited by such Account,
contract, license, agreement, intellectual property or General Intangible
without the consent of any other party thereto (including applicable
Gaming/Racing Authorities, liquor agencies and authorities and other
Governmental Authorities) (provided, that each applicable Debtor agrees to use
its reasonable best efforts to obtain such consents), (iii) would give any other
party to such Account, contract, license, agreement or General Intangible the
right to terminate its obligations thereunder, or (iv) is not permitted without
consent, unless in each case, all necessary consents to such grant of a security
interest have been obtained from the other parties thereto; provided, however,
that nothing herein shall be intended to limit the affect of 9406 of the Code or
otherwise limit or restrict the conveyance by such Debtor of any rights under
any such Account, contracts, licenses, agreements or General Intangibles to the
extent which would not be violative of the restrictive terms thereof; or (b)
cash, other than cash deposited in Deposit Accounts or Security Accounts
(collectively, the "EXCLUDED ASSETS").
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"COMMERCIAL TORT CLAIM ASSIGNMENT" has the meaning set forth in
SECTION 2.4(b).
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"CONTROL AGREEMENT" means, with respect to the applicable Debtor, a
control agreement, in form and substance reasonably satisfactory to the Banks
and the Convertible Note Collateral Agent, executed and delivered by (a) such
Debtor, (b) the Agent, and (c) the applicable (i) securities intermediary (with
respect to a Securities Account of such Debtor) or (ii) bank (with respect to a
Deposit Account of such Debtor).
"CONVERTIBLE NOTE COLLATERAL AGENT" means The Bank of New York, as
collateral agent under the Convertible Note Indenture, and its successors and
assigns in such capacity.
"CONVERTIBLE NOTE INDENTURE" means the Indenture, dated as of July 26,
2004, between the Company and The Bank of New York, as trustee and collateral
agent, as the same may be amended and restated from time to time.
-3-
"DEBTOR" and "DEBTORS" have the meanings set forth in the preamble to
this Agreement.
"DEPOSIT ACCOUNT" means any deposit account (as that term is defined
in the Code).
"DISPOSITION" shall have the meaning ascribed to the term Asset Sale
in the Loan Agreement, and the words "DISPOSE" and "DISPOSAL" shall be
interpreted similarly.
"EQUIPMENT" means equipment (as that term is defined in the Code) and
includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), computer hardware, tools, parts, and goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"EXCLUDED ASSETS" is defined in the definition of the term
"Collateral".
"GENERAL INTANGIBLES" means general intangibles (as that term is
defined in the Code), including limited liability and limited partnership
interests, payment intangibles, contract rights, rights to payment, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trade secrets, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, insurance premium rebates, tax refunds, and tax
refund claims, and any other personal property other than Accounts, Deposit
Accounts, goods, Investment Property, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, or other
governmental or administrative body, instrumentality, board, department, or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 8.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 8.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
-4-
"INTELLECTUAL PROPERTY" means, with respect to any Debtor, all of such
Debtor's right, title and interest in and to all of the following now owned and
existing and hereafter arising, created or acquired property and products and
proceeds thereof:
(i) patents and patent applications, including, without
limitation, rights in the inventions and improvements described and
claimed therein, and those patents listed on EXHIBIT A attached hereto
and hereby made a part hereof, and (a) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
(b) all income, royalties, damages, proceeds and payments now and
hereafter due or payable under or with respect thereto, including,
without limitation, damages and payments for past or future
infringements thereof, (c) the right to xxx for past, present and
future infringements thereof, and (d) all rights corresponding thereto
throughout the world (all of the foregoing patents and applications,
together with the items described in clauses (a)-(d) of this clause
(i), are sometimes hereinafter referred to individually as a "PATENT"
and, collectively, as the "PATENTS"); and
(ii) trademarks, trademark registrations, trademark applications,
trade names and tradestyles, brand names, service marks, service xxxx
registrations and service xxxx applications, including, without
limitation, the trademarks, trade names, brand names, service marks
and applications and registrations thereof listed on EXHIBIT B
attached hereto and hereby made a part hereof, and (a) all renewals or
extensions thereof, (b) all income, royalties, proceeds, damages and
payments now and hereafter due or payable with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, (c) the right to xxx for past, present and
future infringements thereof, and (d) all rights corresponding thereto
throughout the world (all of the foregoing trademarks, trade names and
tradestyles, brand names, service marks and applications and
registrations thereof, together with the items described in clauses
(a)-(d) of this clause (ii), are sometimes hereinafter referred to
individually as a "TRADEMARK" and, collectively, as the "TRADEMARKS");
and
(iii) rights under or interests in any patent, trademark, or
copyright license agreements with any other Person (to the extent a
security interest may be granted in such rights without violating the
terms of any such license agreement) with respect to any of the
Intellectual Property or any other patent, trademark, service xxxx or
any application or registration thereof or any other trade name or
tradestyle between such Debtor and any other Person, whether such
Debtor is a licensor or licensee under any such license agreement,
including, without limitation, the licenses listed on EXHIBIT C
attached hereto and hereby made a part hereof (all of the foregoing
license agreements and such Debtor's rights thereunder are referred to
collectively as the "LICENSES"); and
(iv) the goodwill of such Debtor's business connected with and
symbolized by the Trademarks; and
-5-
(v) copyrights, copyright registrations and copyright
applications, used in the United States and elsewhere, including,
without limitation, the copyright registrations and copyright
applications listed on EXHIBIT D attached hereto and made a part
hereof, and (a) renewals or extensions thereof, (b) all income,
royalties, proceeds, damages and payments now and hereafter due and/or
payable with respect thereto, including, without limitation, damages
and payments for past or future infringements thereof, (c) the right
to xxx for past, present and future infringements thereof, and (d) all
rights corresponding thereto throughout the world (all of the
foregoing copyrights, copyright registrations and copyright
applications, together with the items described in clauses (a)-(d),
are sometimes hereinafter individually and/or collectively referred to
as the "COPYRIGHTS"); and
(vi) all trade secrets, formulas, processes, devices, know-how,
or compilations of information (including technical information and
non-technical information such as customer lists and marketing plans),
collectively referred to as trade secrets, which are not available to
others and which are maintained as confidential by such Debtor, and
the right to prevent misappropriation and unauthorized disclosures
thereof and all rights corresponding thereto throughout the world (all
of the foregoing trade secrets and associated rights are sometimes
hereinafter individually and/or collectively referred to as the "TRADE
SECRETS").
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of January 10, 2005, among the Debtors, the Convertible Note Collateral Agent
and the Agent, as amended and restated from time to time.
"INVENTORY" means inventory (as that term is defined in the Code).
"INVESTMENT PROPERTY" means investment property (as that term is
defined in the Code).
"LOAN DOCUMENTS" means, collectively, the Loan Agreement, the Notes,
this Agreement and the other Security Documents.
"NEGOTIABLE COLLATERAL" means letters of credit, letter of credit
rights, instruments, promissory notes, drafts, documents, and chattel paper
(including electronic chattel paper and tangible chattel paper).
"OBLIGATIONS" means all debts, principal, interest (including any
interest that, but for the commencement of an Insolvency Proceeding, would have
accrued), premiums, liabilities (including all amounts owed by any Debtor
pursuant hereto), obligations (including indemnification obligations), fees,
charges, costs, reasonable expenses (including any expenses that, but for the
commencement of an Insolvency Proceeding, would have accrued), guaranties,
covenants, and duties of any kind and description owing by any Debtor to the
Agent or any other Secured Party pursuant to or evidenced by the Loan Documents
and irrespective of whether for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all
reasonable expenses that any Debtor is required to pay or reimburse by the Loan
-6-
Documents, by law, or otherwise. Any reference in this Agreement to the
Obligations shall include all extensions, modifications, renewals or alterations
thereof, both prior and subsequent to any Insolvency Proceeding.
"PERMITTED DISPOSITIONS" means Dispositions consummated in accordance
with the terms of Section 8.8 of the Loan Agreement.
"PERMITTED PROTEST" means the right of any Debtor to protest any Lien
(other than any Lien that secures the Obligations), taxes (other than payroll
taxes or taxes that are the subject of a United States federal tax lien), or
rental payment, provided that (a) a reserve with respect to such obligation is
established on the Books of such Debtor in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted diligently by
such Debtor in good faith, and (c) while any such protest is pending, there will
be no impairment of the enforceability, validity, or priority of any of the
Agent's Liens.
"RECORD" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"SECURED PARTIES" means, collectively, the Agent and the Banks.
"SECURITIES ACCOUNT" means a securities account (as that term is
defined in the Code).
"SUPPORTING OBLIGATION" means a letter-of-credit right or secondary
obligation that supports the payment or performance of an Account, chattel
paper, document, General Intangible, instrument, or Investment Property.
"UNITED STATES" means the United States of America.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 12.7.
1.2. CODE. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein; provided, however, that to the extent that the Code is used to define
any term herein and such term is defined differently in different Articles of
the Code, the definition of such term contained in Article 9 shall govern.
1.3. CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms "includes" and "including" are not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
-7-
set forth herein). Any reference herein to the satisfaction or repayment in full
of the Obligations shall mean the repayment in full in cash of all Obligations
other than contingent indemnification Obligations. Any reference herein to any
Person shall be construed to include such Person's successors and assigns. Any
requirement of a writing contained herein shall be satisfied by the transmission
of a Record and any Record transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.
1.4. SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. CREATION OF SECURITY INTEREST.
2.1. GRANT OF SECURITY INTEREST. Each Debtor hereby grants to the Agent,
for the benefit of itself and the other Secured Parties, a continuing security
interest in all of its right, title, and interest in all currently existing and
hereafter acquired or arising Collateral of such Debtor in order to secure
prompt repayment of any and all of the Obligations in accordance with the terms
and conditions of the Loan Documents and in order to secure prompt performance
by such Debtor of each of its covenants and duties under the Loan Documents. The
Agent's Liens in and to the Collateral of such Debtor shall attach to all
Collateral of such Debtor without any further action on the part of the Agent or
such Debtor. Anything contained in this Agreement or any other Loan Document to
the contrary notwithstanding, except for Permitted Dispositions, no Debtor has
any authority, express or implied, to Dispose of any item or portion of the
Collateral.
2.2. NEGOTIABLE COLLATERAL. In the event that any Collateral of any
Debtor, including proceeds, is evidenced by or consists of Negotiable
Collateral, and to the extent that the perfection or priority of the Agent's
security interest is dependent on or enhanced by possession, such Debtor, shall
endorse and deliver physical possession of such Negotiable Collateral with an
individual value in excess of $20,000 to the Agent to be administered in
accordance with the terms of the Intercreditor Agreement.
2.3. COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, the Agent or the Agent's designee may (a) notify Account
Debtors of such Debtor that such Debtor's Accounts, chattel paper, or General
Intangibles have been assigned to the Agent or that the Agent has a security
interest therein, or (b) collect such Debtor's Accounts, chattel paper, or
General Intangibles directly and the collection costs and expenses arising in
connection therewith shall be for the account of such Debtor. Each Debtor agrees
that it will hold in trust for the Agent, as the Agent's trustee, any of its
Collections that it receives and immediately will deliver such Collections at
any time that an Event of Default is outstanding to the Agent in their original
form as received by such Debtor (together with any necessary endorsements).
2.4. FILING OF FINANCING STATEMENTS; COMMERCIAL TORT CLAIMS; DELIVERY OF
ADDITIONAL DOCUMENTATION REQUIRED.
(a) Each Debtor shall and hereby authorizes the Agent to file any
financing statement necessary or desirable to effectuate the transactions
contemplated by the Loan Documents, and any continuation statement or amendment
-8-
with respect thereto, in any appropriate filing office; provided, however, that
no such authorization shall obligate the Agent to make any such filing.
(b) If any Debtor acquires any commercial tort claims after the date
hereof for a claim of at least $20,000, such Debtor shall promptly (but in any
event within 5 Business Days after such acquisition) (i) deliver to the Agent a
written description of such commercial tort claim, (ii) execute and deliver a
supplement to this Agreement, pursuant to which such Debtor shall grant a
perfected security interest in all of its right, title and interest in and to
such commercial tort claim to the Agent, as security for the Obligations (a
"COMMERCIAL TORT CLAIM ASSIGNMENT") and (iii) not in limitation but in
furtherance of clause (c) below, file a financing statement or amendment to a
previously filed and effective financial statement describing such commercial
tort claim with sufficient particularity to the extent necessary to perfect the
Agent's Lien therein.
(c) Each Debtor shall prepare, execute and deliver to, and if
applicable, file, any and all financing statements, original financing
statements in lieu of continuation statements, amendments to financing
statements, fixture filings, security agreements, pledges, assignments,
Commercial Tort Claim Assignments, endorsements of certificates of title, and
all other documents (collectively, the "ADDITIONAL DOCUMENTS") as may be
necessary (and to the extent the Agent is a party thereto, in form and substance
reasonably satisfactory to the Agent) to create, perfect, and continue the
perfection of or to improve the priority of the Agent's Liens in the Collateral
of such Debtor (whether now owned or hereafter arising or acquired or tangible
or intangible), or to fully consummate all of the transactions contemplated
hereby and under the other Loan Documents. Not in limitation but in furtherance
of the foregoing, each Debtor shall comply with its obligations in the
immediately preceding sentence as such obligations relate to the preparation and
filing by it of a Code financing statement, together with any applicable filing
fees, within 10 days of the date hereof (or if later, the date it became a party
hereto) in the applicable filing office, and following the filing thereof shall
provide the Agent with evidence of the same. To the maximum extent permitted by
applicable law, such Debtor authorizes the Agent to execute any such Additional
Documents in such Debtor's name and authorizes the Agent to file such executed
Additional Documents in any appropriate filing office; provided, however, that
no such authorization shall obligate the Agent to take any such action. In
addition, no less frequently than annually, each Debtor shall (i) provide the
Agent with a report of all new material patents, patent applications,
trademarks, trademark applications, copyrights or copyright applications
acquired or generated by such Debtor during the prior period and (ii) cause to
be prepared, executed, and delivered to the Agent supplemental schedules to the
applicable Security Documents to identify such patents, copyrights, and
trademarks as being subject to the security interests created thereunder;
provided, however, that no Debtor shall register or apply to register with (A)
the United States Copyright Office any unregistered copyrights (whether in
existence on the Closing Date or thereafter acquired, arising, or developed)
unless within 30 days of any such registration or application for registration,
such Debtor executes and delivers to the Agent and files with the United States
Copyright Office a copy of this Agreement in proper form for filing,
supplemental schedules to this Agreement, or such other documentation as may be
necessary in order to perfect and continue the perfection of or protect the
Agent's Liens on such copyrights following such registration or (B) the United
States Patent and Trademark Office any unregistered patents or trademarks
-9-
(whether in existence on the Closing Date or thereafter acquired, arising, or
developed) unless within 30 days of any such registration or application for
registration, the applicable Person executes and delivers to the Agent and files
with the United States Patent and Trademark Office a copy of this Agreement in
proper form for filing, supplemental schedules to this Agreement, or such other
documentation as may be necessary in order to perfect and continue the
perfection of or protect the Agent's Liens on such patents or trademarks
following such registration. Each Debtor, to the extent it executes an
intellectual property and security agreement, shall submit such intellectual
property and security agreement for filing with the United States Copyright
Office or the United States Patent and Trademark Office, as applicable, together
with all necessary filing, registration or similar fees, within 15 days of the
date of the execution thereof, and following such submission thereof shall
provide the Agent with evidence of the same.
2.5. POWER OF ATTORNEY. Each Debtor hereby irrevocably makes, constitutes,
and appoints the Agent (and any of the Agent's officers, employees, or agents
designated by the Agent) as such Debtor's true and lawful attorney, with power
to (a) if such Debtor refuses to, or fails timely to execute and deliver any of
the documents described in SECTION 2.4, sign the name of such Debtor on any of
the documents described in SECTION 2.4, (b) at any time that an Event of Default
has occurred and is continuing, sign such Debtor's name on any invoice or xxxx
of lading relating to the Collateral of such Debtor, drafts against Account
Debtors, or notices to Account Debtors, (c) send requests for verification of
such Debtor's Accounts at any time when an Event of Default has occurred and is
continuing, (d) endorse such Debtor's name on any of its payment items
(including all of its Collections) that may come into the Agent's possession,
(e) at any time that an Event of Default has occurred and is continuing, make,
settle, and adjust all claims under such Debtor's policies of insurance and make
all determinations and decisions with respect to such policies of insurance, and
(f) at any time that an Event of Default has occurred and is continuing, settle
and adjust disputes and claims respecting such Debtor's Accounts, chattel paper,
or General Intangibles directly with Account Debtors, for amounts and upon terms
that the Agent determines to be reasonable, and the Agent may cause to be
executed and delivered any documents and releases that the Agent determines to
be necessary. The appointment of the Agent as such Debtor's attorney, and each
and every one of its rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations (other than contingent indemnification
obligations) have been paid and performed in full.
2.6. RIGHT TO INSPECT. The Agent (through any of its officers, employees,
or agents) shall have the right (but not the obligation) to inspect the Books
and make copies or abstracts thereof and to check, test, and appraise the
Collateral, or any portion thereof, in order to verify each Debtor's financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral at such reasonable times and intervals as the Agent
may designate, and so long as no Default or Event of Default has occurred and is
continuing, with reasonable prior notice. Not in limitation but in furtherance
of the immediately preceding sentence, the Agent shall have the right to inspect
each Debtor's premises and to examine such Debtor's books, records and
operations, including, without limitation, such Debtor's quality control
processes, and each Debtor agrees (i) to maintain the quality of any and all
products in connection with which the material Trademarks are used, consistent
with the quality of said products (as determined by such Debtor in its
commercially reasonable business judgment) and (ii) to provide the Agent, upon
the Agent's reasonable request from time to time, with a certificate of an
officer of such Debtor certifying such Debtor's compliance with the foregoing.
-10-
2.7. CONTROL AGREEMENTS. Each Debtor agrees that it will take all
commercially reasonable steps in order for the Agent to obtain control in
accordance with Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with
respect to all of its Securities Accounts, Deposit Accounts, electronic chattel
paper, Investment Property, and letter-of-credit rights (other than Deposit
Accounts and Securities Accounts having an average closing balance of less than
(i) $20,000, individually, or (ii) $50,000, in the aggregate, in each case, for
any five consecutive Business Day period). Upon the occurrence and during the
continuance of an Event of Default, the Agent may notify any bank or securities
intermediary subject to a Control Agreement to liquidate the applicable Deposit
Account or Securities Account or any related Investment Property maintained or
held thereby and remit the proceeds thereof to the Agent.
3. REPRESENTATIONS AND WARRANTIES.
In order to induce the Agent to enter into this Agreement, each Debtor
makes the following representations and warranties to the Agent which shall be
true, correct, and complete, in all material respects, as of the date such
Debtor became a party hereto, and such representations and warranties shall
survive the execution and delivery of this Agreement:
3.1. AS TO EQUITY INTERESTS OF SUBSIDIARIES. The Collateral comprised of
Capital Stock of any Issuer that is (a) a Subsidiary of such Debtor and (b) a
general partnership, limited partnership or limited liability company (i) are
not dealt in or traded on securities exchanges or in securities markets, (ii) do
not have terms expressly providing that they are securities governed by Article
8 of the Code as in effect in the jurisdiction in which such Issuer was formed,
and (iii) are not investment company securities, and are not, therefore,
"securities" governed by Article 8 of the Code.
3.2. NO ENCUMBRANCES. Such Debtor has good and marketable title to, or a
valid leasehold interest in, its personal property assets and such personal
property assets of such Debtor is free and clear of Liens except for Permitted
Liens.
3.3. EQUIPMENT. All of the Equipment of such Debtor is used or held for use
in its business and, except for Equipment that is substantially worn, damaged or
obsolete, is fit for such purposes.
3.4. LOCATION OF INVENTORY AND EQUIPMENT. The Inventory of such Debtor is
located at the locations identified on SCHEDULE 3.4 (as such Schedule may be
updated pursuant to SECTION 4.3).
3.5. INVENTORY RECORDS. Such Debtor keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its Inventory and
the book value thereof.
3.6. STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE OFFICE;
ORGANIZATIONAL IDENTIFICATION NUMBER; COMMERCIAL TORT CLAIMS.
(a) The jurisdiction of organization of such Debtor is set forth on
SCHEDULE 3.6(a).
-11-
(b) The chief executive office of such Debtor is located at the
address indicated on SCHEDULE 3.6(b) (as such Schedule may be updated pursuant
to SECTION 4.3).
(c) Such Debtor's organizational identification numbers, if any, are
identified on SCHEDULE 3.6(c).
(d) As of the date such Debtor became a party hereto, such Debtor did
not hold any commercial tort claims, except as set forth on SCHEDULE 3.6(d).
3.7. DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Such Debtor is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a material adverse effect on (A) the properties, business,
operations, earnings, assets, liabilities or condition (financial or otherwise)
of the Company and its Subsidiaries, taken as a whole, (B) the ability of such
Debtor to perform its obligations in all material respects under any Loan
Document or (C) the consummation of any of the transactions contemplated under
any of the Loan Documents (each, a "MATERIAL ADVERSE EFFECT").
(b) Set forth on SCHEDULE 3.7(b) is a complete and accurate list of
such Debtor's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization, (ii) the number of shares of each class of Capital Stock
authorized for each of such Subsidiaries, and (iii) the number and the
percentage of the outstanding shares of each such class owned directly or
indirectly by such Debtor. All of the outstanding Capital Stock of each such
Subsidiary that is a corporation has been, validly issued and is fully paid and
non-assessable.
(c) Except as set forth on SCHEDULE 3.7(b), there are no
subscriptions, options, warrants, or calls relating to any shares of such
Debtor's Subsidiaries' Capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. None of the
Debtor's Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of such Debtor's
Subsidiaries' Capital Stock or any security convertible into or exchangeable for
any such Capital Stock.
3.8. DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by such Debtor of this
Agreement and the other Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of such Debtor.
(b) The execution, delivery, and performance by such Debtor of this
Agreement and the other Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, or local law or regulation
applicable to such Debtor, the Governing Documents of such Debtor, or any order,
judgment, or decree of any court or other Governmental Authority binding on such
Debtor, except where such violation could not reasonably be expected to have a
Material Adverse Effect, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
contractual obligation of such Debtor, except such conflict or breach which
-12-
could not reasonably be expected to have a Material Adverse Effect, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of such Debtor, other than Permitted Liens, or
(iv) require any approval of the holders of such Debtor's Capital Stock or any
approval or consent of any Person under any contractual obligation of such
Debtor, other than (x) consents or approvals that have been obtained and that
are still in force and effect and (y) those consents and approvals the failure
to obtain could not reasonably be expected to have a Material Adverse Effect.
(c) Other than the filing of financing statements and the recordation
of the Mortgages, the execution, delivery, and performance by such Debtor of
this Agreement and the other Loan Documents to which such Debtor is a party do
not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority, other than
(x) consents or approvals that have been obtained and that are still in force
and effect and (y) those consents and approvals the failure to obtain could not
reasonably be expected to have a Material Adverse Effect.
(d) This Agreement and the other Loan Documents to which such Debtor
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Debtor will be the legally valid and binding
obligations of such Debtor, enforceable against such Debtor in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
(e) The Agent's Liens on the Collateral of such Debtor are validly
created, perfected, and, subject to the Intercreditor Agreement, first priority
liens, subject only to Permitted Liens.
3.9. INTELLECTUAL PROPERTY.
(a) To such Debtor's knowledge, such Debtor owns, or holds licenses
in, all trademarks, trade names, copyrights, patents and licenses that are
necessary to the conduct of its business as currently conducted. The
Intellectual Property listed on EXHIBITS A, B, C, and D, respectively,
constitute all of the Registered Intellectual Property now owned by such Debtor,
and the Intellectual Property listed on EXHIBIT C constitute all of the material
Licenses now owned by such Debtor.
(b) None of the issued patents, patent applications, registered
trademarks, trademark applications, registered copyrights or copyright
applications (collectively, the "REGISTERED INTELLECTUAL PROPERTY") of such
Debtor has been adjudged invalid or unenforceable nor has any such Registered
Intellectual Property of such Debtor been cancelled, in whole or in part, and
each such Intellectual Property of such Debtor is presently subsisting.
(c) To the knowledge of such Debtor, none of the Intellectual Property
of such Debtor infringes upon the rights or property of any other Person or is
currently being challenged in any way.
-13-
(d) There are no pending or, to the knowledge of such Debtor,
threatened claims, litigation, proceedings or other investigations regarding any
of the Intellectual Property of such Debtor.
(e) Each of the Intellectual Property material to such Debtor's
business is valid and enforceable, and such Debtor has adopted adequate
precautions to protect its Trade Secrets from unauthorized or accidental
disclosure.
(f) Such Debtor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to the Registered Intellectual
Property of such Debtor, free and clear of any liens, security interests,
mortgages, charges and encumbrances, including, without limitation, licenses,
consent-to-use agreements, shop rights and covenants by such Debtor not to xxx
third Persons (except for Permitted Liens).
(g) Such Debtor has adopted, used and is currently using all of the
Trademarks, and, to the knowledge of such Debtor, such Debtor's use thereof does
not infringe the intellectual property rights of any person or entity.
(h) Such Debtor has no written notice or knowledge of any suits or
actions commenced or threatened with reference to or in connection with any of
the Intellectual Property of such Debtor.
(i) No trademark opposition or cancellation proceedings have been
filed in the prior three years with the United States Patent and Trademark
Office against any of the Trademarks of such Debtor.
(j) The Licenses of such Debtor, complete copies of which will be
provided to the Agent at its request, are valid and binding agreements,
enforceable in accordance with their terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and similar laws
from time to time in effect). Each of the material Licenses of such Debtor is in
full force and effect and has not been amended or abrogated and, to the
knowledge of such Debtor, there is no default under any of the Licenses of such
Debtor.
3.10. DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Set forth on SCHEDULE 3.10
(as such schedule may be amended from time to time by such Debtor and, to the
extent required by SECTION 2.7 consented to by the Agent as evidenced by the
execution and delivery by such Debtor, the applicable securities intermediary or
bank and the Agent of a Control Agreement) is a listing of all of such Debtor's
Deposit Accounts and Securities Accounts, including, with respect to each bank
or securities intermediary (a) the name and address of such Person, and (b) the
account numbers of the Deposit Accounts or Securities Accounts maintained with
such Person.
4. AFFIRMATIVE COVENANTS.
Each Debtor covenants and agrees that, until payment in full of the
Obligations (other than contingent indemnification obligations), such Debtor
shall do all of the following:
-14-
4.1. MAINTENANCE OF PROPERTIES. Maintain and preserve all of its properties
which are necessary or useful in the proper conduct to its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all material leases to which it is a party as
lessee, so as to prevent any loss or forfeiture thereof or thereunder.
4.2. INSURANCE.
(a) At such Debtor's expense, maintain insurance respecting its assets
wherever located, covering loss or damage by fire, theft, explosion, and all
other hazards and risks and in such amounts as ordinarily are insured against by
other Persons engaged in the same or similar businesses. Such Debtor also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation. Such Debtor shall deliver copies of all such policies or
certificates of insurance evidencing the same to the Agent with an endorsement
naming the Agent as loss payee (under a satisfactory lender's loss payable
endorsement) or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
30 days prior written notice to the Agent in the event of cancellation of any
such policy for any reason whatsoever.
(b) Such Debtor shall give the Agent prompt notice of any loss in an
amount in excess of $20,000 covered by such insurance. If an Event of Default
shall have occurred and is outstanding, the Agent shall have the exclusive right
(but not the obligation) to adjust any losses claimed under any such insurance
policies, without any liability to such Debtor whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be deposited into a Deposit Account of such Debtor with respect to which a
Control Agreement is in effect unless directed by the Agent to be paid over to
the Agent at any time an Event of Default is outstanding, in which case, such
payment shall be paid over to the Agent.
(c) Such Debtor will not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this SECTION 4.2, unless the Agent is included thereon as an additional
insured or loss payee under a lender's loss payable endorsement. Such Debtor
promptly shall notify the Agent whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and copies of such policies or certificates of insurance
evidencing the same shall be promptly provided to the Agent.
4.3. LOCATION OF INVENTORY AND EQUIPMENT. Keep such Debtor's Inventory and
Equipment only at the locations identified on SCHEDULE 3.4 and its chief
executive offices only at the locations identified on SCHEDULE 3.6(B); provided,
however, that such Debtor may amend SCHEDULE 3.4 and SCHEDULE 3.6(B) so long as
such amendment occurs by prompt written notice to the Agent, so long as such new
location is within the continental United States or Canada.
4.4. NEW INTELLECTUAL PROPERTY. If, before all Obligations (other than
contingent indemnification obligations) shall have been satisfied in full, such
Debtor shall (i) become aware of any existing Registered Intellectual Property
of such Debtor of which such Debtor has not previously informed the Agent, (ii)
-15-
obtain rights to any Registered Intellectual Property, or (iii) become entitled
to the benefit of any material Intellectual Property which benefit is not in
existence on the date hereof, the provisions of this Agreement above shall
automatically apply thereto and such Debtor shall give to the Agent prompt
written notice thereof. Such Debtor shall prepare an amendment (in form and
substance reasonably satisfactory to the Agent) to EXHIBITS A, B, C, and D, as
applicable, to include any such Intellectual Property, and such Debtor shall
file or refile this Agreement with the United States Patent and Trademark Office
and United States Copyright Office. Such Debtor shall promptly execute, deliver
and file with any necessary Governmental Authority any and all documents and
instruments necessary or advisable to record or preserve the Agent's interest in
all Intellectual Property added to EXHIBITS A, B, C, and D pursuant to this
Section.
4.5. DUTIES OF SUCH DEBTOR. Such Debtor shall have the duty to the extent
commercially reasonable and in such Debtor's good faith business judgment,
desirable: (i) to file and prosecute to diligently any patent, trademark or
service xxxx applications of such Debtor pending as of the date hereof or
hereafter until all Obligations (other than contingent indemnification
obligations) shall have been paid in full, (ii) except as otherwise provided in
the Loan Agreement or any other Loan Document, to preserve and maintain all
rights in the material Intellectual Property of such Debtor (including, but not
limited to, with respect to Trademarks, the filing of affidavits of use and,
incontestability, where applicable, under ss.ss.8 and 15 of the Xxxxxx Act (15
U.S.C. ss. 1058, 1065) and renewals and, to the extent commercially reasonable,
initiating opposition or cancellation proceedings or litigation against users of
the same or confusingly similar marks who seriously threaten the validity or
rights of such Debtor in its material Trademarks), and (iii) to ensure that the
Registered Intellectual Property of such Debtor is and remains enforceable. Such
Debtor shall not knowingly or unreasonably abandon any right to file a material
patent, trademark or service xxxx application, or abandon any pending patent
application, or any other material Intellectual Property, of such Debtor unless
such Debtor, in the exercise of its commercially reasonable business judgment
determines that such abandonment will not materially and adverse effect its
business.
4.6. FOREIGN PATENTS, COPYRIGHTS AND TRADEMARKS. Upon the occurrence and
during the continuance of an Event of Default, at the request of the Agent and
at the sole cost and expense (including, without limitation, reasonable
attorneys' fees) of such Debtor, such Debtor shall take all actions and execute
and deliver any and all instruments, agreements, assignments, certificates
and/or documents, reasonably required by the Agent to collaterally assign any
and all of such Debtor's foreign patent, copyright and trademark registrations
and applications now owned or hereafter acquired to and in favor of the Agent.
Upon the execution and delivery of any such collateral assignments or documents,
the terms "Patents", "Copyrights", and "Trademarks" as used herein with respect
to such Debtor shall automatically be deemed amended to include such foreign
patent, copyright and trademark registrations and applications without any
action required by any person or entity.
4.7. POST-CLOSING INTELLECTUAL PROPERTY SEARCHES. Each Debtor shall provide
to the Agent true and complete copies of intellectual property searches from the
United States Patent and Trademark Office relating to such Debtor within 30 days
of the date hereof.
-16-
5. NEGATIVE COVENANTS.
Each Debtor covenants and agrees that, until the Obligations are paid
and performed in full (other than contingent indemnification obligations), such
Debtor will not do any of the following:
5.1. DISPOSAL OF ASSETS. Other than Permitted Dispositions, Dispose of any
of such Debtor's assets.
5.2. CHANGE NAME. Change such Debtor's name, organizational identification
number, state of organization or organizational identity unless such Debtor
shall within ten Business Days of any such change provide written notice to the
Agent of such change and file any financing statements or amendments thereto
necessary to continue the perfection and priority of the Agent's Liens.
5.3. DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Maintain, on or after the
date that is 30 days following the Closing Date, any Deposit Account or
Securities Account having an average closing balance in excess of (i) $20,000,
individually, or (ii) $50,000, in the aggregate, in each case, for any five
consecutive Business Day period unless such Debtor and the applicable securities
intermediary or bank have entered into a Control Agreement governing such
Deposit Account o Securities Account, as the case may be, in order to perfect or
improve the priority of the Agent's Liens therein.
5.4. RESTRICTIONS ON FUTURE AGREEMENTS. Except as otherwise permitted
pursuant to the Loan Agreement, without the prior written consent of the Agent,
Dispose, xxxxx x Xxxx on, encumber or assign any or all of, or grant any license
or sublicense under (other than as commercially reasonable in such Debtor's good
faith business judgment), the Intellectual Property of such Debtor, or enter
into any other agreement with respect to the Intellectual Property of such
Debtor, and such Debtor further agrees that it shall not knowingly take any
action or knowingly permit any action to be taken by others subject to its
control, including, without limitation, licensees or sublicensees, or knowingly
fail to take any action, which would materially, diversely affect the validity
or enforcement of the Agent's rights subject to this Agreement, other than in
the ordinary course of business.
6. AGENT'S RIGHTS AND REMEDIES.
6.1. RIGHTS AND REMEDIES. Upon the occurrence, and during the continuation,
of an Event of Default, the Agent (at its election (or at the direction of the
Required Banks but without notice of its election (or such direction) and
without demand) may (but shall not be obligated to) do any one or more of the
following, all of which are authorized by each Debtor:
(a) Proceed directly and at once, without notice, against such Debtor
to collect and recover the full amount or any portion of the Obligations,
without first proceeding against any other Debtor, or against any security or
collateral for the Obligations;
(b) Settle or adjust disputes and claims directly with such Debtor's
Account for amounts and upon terms which the Agent considers advisable;
-17-
(c) Cause such Debtor to hold all of its returned Inventory in trust
for the Agent and segregate all such Inventory from all other assets of such
Debtor or in such Debtor's possession;
(d) Without notice to or demand upon such Debtor, make such payments
and do such acts as the Agent considers necessary or reasonable to protect its
security interests in the Collateral (including, without limitation, in
connection with the filing or recording any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
counsel fees, maintenance fees, encumbrances or otherwise in protecting,
maintaining or preserving the Intellectual Property of such Debtor, or in
defending or prosecuting any actions or proceedings arising out of or related to
the Intellectual Property of such Debtor, shall be borne by and paid by such
Debtor on demand by the Agent on behalf of the Secured Parties and until so paid
shall bear interest at the Past Due Rate set forth in the Loan Agreement). Such
Debtor agrees to assemble the Collateral if the Agent so requires , and to make
the Collateral available to the Agent at a place that the Agent may designate
which is reasonably convenient to both parties. Such Debtor authorizes the Agent
to enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien that conflicts with the priority of the Agent's Liens in
and to the Collateral and to pay all expenses incurred in connection therewith,
which expenses shall be for the account of such Debtor. With respect to any of
such Debtor's owned or leased premises, such Debtor hereby grants the Agent a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of the Agent's rights or remedies
provided herein, at law, in equity, or otherwise;
(e) Without notice to such Debtor (such notice being expressly
waived), and without constituting an acceptance of any collateral in full or
partial satisfaction of an obligation (within the meaning of the Code), set off
and apply to the Obligations any and all (i) balances and deposits of such
Debtor held by the Agent, or (ii) Indebtedness at any time owing to or for the
credit or the account of such Debtor held by the Agent;
(f) Hold, as cash collateral, any and all balances and deposits of
such Debtor held by the Agent to secure the full and final repayment of all of
the Obligations (other than contingent indemnification obligations);
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral of such Debtor. Such Debtor hereby grants to the Agent a license or
other right to use, without charge, such Debtor's labels, patents, copyrights,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral of such
Debtor, in completing production of, advertising for sale, and selling any
Collateral of such Debtor and such Debtor's rights under all licenses and all
franchise agreements shall inure to the Agent's benefit;
(h) Sell all or any part of the Collateral of such Debtor at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
such Debtor's premises) as is commercially reasonable. It is not necessary that
such Collateral of such Debtor be present at any such sale;
-18-
(i) Except in those circumstances where no notice is required under
the Code, the Agent shall give notice of the disposition of the Collateral of
such Debtor as follows:
(i) The Agent shall give such Debtor a notice in writing of the
time and place of public sale, or, if the sale is a private sale or
some other disposition other than a public sale is to be made of the
Collateral of such Debtor, the time on or after which the private sale
or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to such Debtor as provided in SECTION 9, at least 10 days
before the earliest time of disposition set forth in the notice; no
notice needs to be given prior to the disposition of any portion of
the Collateral of such Debtor that is perishable or threatens to
decline speedily in value or that is of a type customarily sold on a
recognized market;
(j) The Agent or any other Secured Party may credit bid and purchase
at any public sale;
(k) The Agent may seek the appointment of a receiver or keeper to take
possession of all or any portion of the Collateral of such Debtor or to operate
same and, to the maximum extent permitted by applicable law, may seek the
appointment of such a receiver without the requirement of prior notice or a
hearing;
(l) The use by the Agent for the benefit of the Secured Parties of all
Intellectual Property of such Debtor shall be worldwide and as extensive as the
rights of such Debtor to use such Intellectual Property of such Debtor, and
without any liability for royalties or other related charges from the Agent or
the other Secured Parties to such Debtor, solely for the purpose of completing
production of, advertising for sale and selling any Intellectual Property.
(m) The Agent for the benefit of the Secured Parties shall have the
right, but shall in no way be obligated, to bring suit in its own name to
enforce the Intellectual Property of such Debtor, only after the Agent has
tendered notice to such Debtor of the Agent's desire to initiate such suit and
such Debtor has declined in writing to itself pursue such suit, and, if the
Agent shall commence any such suit, such Debtor shall, at the request of the
Agent, do any and all lawful acts and execute any and all proper documents and
instruments reasonably required by the Agent for the benefit of the Secured
Parties in aid of such enforcement.
(n) The Agent shall have the right and be authorized (but not
obligated) to (i) endorse such Debtor's name on all applications, documents,
papers and instrument necessary or desirable for the Agent in the use of the
Intellectual Property of such Debtor, or (ii) take any other actions with
respect to the Intellectual Property of such Debtor as the Agent deems in its
commercially reasonable judgment to be in the best interest of the Secured
Parties, or (iii) grant or issue any exclusive or non-exclusive license under
the Intellectual Property of such Debtor to any person or entity, or (iv)
assign, pledge, sell, convey or otherwise transfer title in or dispose of any of
the Intellectual Property of such Debtor to any person or entity.
(o) The Agent shall have all other rights and remedies available at
law or in equity or pursuant to any other Loan Documents; and
-19-
(p) Be entitled to any deficiency that exists after disposition of the
Collateral as provided above by immediate payment from each Debtor. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Agent to the applicable Debtor.
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon or as to
preservation of rights against prior parties or any other rights pertaining
thereto and the Agent shall not be responsible for filing any financing or
continuation statements or recording any documents or instruments in any public
office at an time or times or otherwise perfecting or maintaining the perfection
of any security interest in a Collateral. The Agent shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property and shall not be liable or responsible for any loss or
diminution in the value of any of the Collateral, by reason of the act or
omission of any carrier, forwarding agency or other agent or bailee selected by
the Agent in good faith.
The Agent shall not be responsible for the existence, genuineness or value
of any of the Collateral or for the validity, perfection, priority or
enforceability of the Liens in any of the Collateral, whether impaired by
operation of law or by reason of any of any action or omission to act on its
part hereunder, except to the extent such action or omission constitutes gross
negligence or willful misconduct on the part of the Agent, for the validity or
sufficiency of the Collateral or any agreement or assignment contained therein,
for the validity of the title of the Debtor to the Collateral, for insuring the
Collateral or for the payment of taxes, charges, as assessments or Liens upon
the Collateral or otherwise as to the maintenance of the Collateral. The Agent
shall have no duty to ascertain or inquire as to the performance or observance
of any of the terms of this Agreement or the Loan Documents by the Debtors.
6.2. REMEDIES CUMULATIVE. The rights and remedies of the Agent under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Agent shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by the
Agent of one right or remedy shall be deemed an election, and no waiver by the
Agent of any Event of Default shall be deemed a continuing waiver. No delay by
the Agent shall constitute a waiver, election, or acquiescence by it.
7. TAXES AND EXPENSES.
If any Debtor fails to pay any monies (whether taxes, assessments,
rents, insurance premiums, or, in the case of leased properties or assets, rents
or other amounts payable under such leases) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, in each
case, to the extent required under the terms of this Agreement, then, the Agent,
in its sole discretion and without prior notice to such Debtor, may (but shall
not be obligated to) do any or all of the following: (a) make payment of the
same or any part thereof or (b) in the case of the failure to comply with
SECTION 4.2 hereof, if an Event of Default shall occur and be continuing, obtain
and maintain insurance policies of the type described in SECTION 4.2 and take
any action with respect to such policies as the Agent deems prudent. Any such
amounts paid by the Agent shall constitute Obligations owing to the Agent and
any such payments shall not constitute an agreement by the Agent to make similar
payments or deposits in the future or a waiver by the Agent of any Event of
-20-
Default under this Agreement. The Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
8. WAIVERS; INDEMNIFICATION.
8.1. DEMAND; PROTEST. Each Debtor waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Agent on which such Debtor may in any way be liable.
8.2. AGENT'S LIABILITY FOR COLLATERAL OF EACH DEBTOR. Each Debtor hereby
agrees that: (a) so long as the Agent complies with its obligations, if any,
under the Code, the Agent shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral of such Debtor, (ii) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause, (iii) any diminution in the value thereof, or (iv) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b)
all risk of loss, damage, or destruction of the Collateral of such Debtor shall
be borne by such Debtor.
8.3. INDEMNIFICATION. Each Debtor shall, jointly and severally, pay,
indemnify, defend, and hold the Agent-Related Persons (each, an "INDEMNIFIED
PERSON") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution, delivery, enforcement, performance, or administration
(including any restructuring or workout with respect hereto) of this Agreement,
any of the other Loan Documents, or the transactions contemplated hereby or
thereby, and (b) with respect to any investigation, litigation, or proceeding
related to this Agreement or any other Loan Document, or any act, omission,
event, or circumstance in any manner related thereto (all the foregoing,
collectively, the "INDEMNIFIED LIABILITIES"). The foregoing to the contrary
notwithstanding, such Debtor shall have no obligation to any Indemnified Person
under this SECTION 8.3 with respect to any Indemnified Liability that a court of
competent jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment in full of the
Obligations. If any Indemnified Person makes any payment to any other
Indemnified Person with respect to an Indemnified Liability as to which such
Debtor was required to indemnify the Indemnified Person receiving such payment,
the Indemnified Person making such payment is entitled to be indemnified and
reimbursed by such Debtor with respect thereto. WITHOUT LIMITATION, THE
FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF
ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
-21-
9. NOTICES.
All notices and other communications hereunder to Agent shall be in
writing and shall be mailed, sent or delivered in accordance with the Loan
Agreement and all notices and other communications hereunder to any Debtor shall
be in writing and shall be mailed, sent or delivered in care of Company in
accordance with the Loan Agreement.
10. CHOICE OF LAW; JURY TRIAL WAIVER.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
(b) EACH DEBTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
11. AMENDMENTS; WAIVERS.
11.1. AMENDMENTS AND WAIVERS. Except as set forth herein, no amendment or
waiver of any provision of this Agreement, and no consent with respect to any
departure by any Debtor herefrom, shall be effective unless the same shall be in
writing and signed by the Agent and such Debtor and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
11.2. NO WAIVERS; CUMULATIVE REMEDIES. No failure by the Agent to exercise
any right, remedy, or option under this Agreement or any other Loan Document, or
delay by the Agent in exercising the same, will operate as a waiver thereof. No
waiver by the Agent will be effective unless it is in writing, and then only to
the extent specifically stated. No waiver by the Agent on any occasion shall
affect or diminish the Agent's rights thereafter to require strict performance
by each Debtor of any provision of this Agreement. The Agent's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that the Agent may have.
12. GENERAL PROVISIONS.
12.1. EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by each Debtor and the Agent.
12.2. SUCCESSORS. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
-22-
that no party may assign this Agreement or any rights or duties hereunder other
than pursuant to the terms of the Loan Agreement.
12.3. SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.
12.4. INTERPRETATION; GOVERNMENT REGULATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed against the Agent, any other
Secured Party or any Debtor, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to accomplish fairly the purposes and intentions of all parties
hereto.
12.5. SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.6. COUNTERPARTS: ELECTRONIC EXECUTION. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
12.7. REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by any Debtor or the transfer by any Debtor to the
Agent of any property of such Debtor should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a "VOIDABLE TRANSFER"), and if
the Agent is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Agent is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Agent related thereto, the liability of such
Debtor automatically shall be revived, reinstated, and restored and shall exist
as though such Voidable Transfer had never been made.
12.8. INTEGRATION. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
-23-
12.9. DEBTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding:
(a) Debtors will remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and will perform all
of their duties and obligations under such contracts and agreements to the same
extent as if this Agreement had not been executed;
(b) the exercise by Agent of any of its rights hereunder will not
release any Debtor from any of its duties or obligations under any such
contracts or agreements included in the Collateral; and
(c) none of Agent or any Bank will have any obligation or liability
under any contracts or agreements included in the Collateral by reason of this
Agreement, nor will any such Person be obligated to perform any of the
obligations or duties of any Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
12.10. COLLATERAL COMPRISED OF EQUITY INTERESTS OF SUBSIDIARIES. The
provisions of the Pledge Agreement, as they relate to Collateral comprised of
Capital Stock of Subsidiaries of any Debtor are incorporated by reference
herein, MUTATIS MUTANDIS.
12.11. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall: (i) remain in full
force and effect until payment in full of all Obligations (other than contingent
indemnification obligations); (ii) be binding upon each Debtor and its
successors and assigns, except as otherwise provided in the Loan Agreement; and
(iii) inure to the benefit of Agent and its successors, transferees, and
assigns. Upon the payment in full of all Obligations (other than contingent
indemnification obligations), the security interests granted herein shall
automatically terminate and all rights to the Collateral shall revert to the
applicable Debtor. Upon any termination of any security interest referred to in
this SECTION 12.11, Agent will, at Debtors' expense, execute and deliver to each
Debtor such documents without recourse, representation or warranty as such
Debtor shall reasonably request to evidence such termination.
12.12. SECURITY INTEREST ABSOLUTE. To the maximum extent permitted by law,
all rights of Agent, all security interests hereunder, and all obligations of
each Debtor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any of the
Obligations or any other agreement or instrument relating thereto, including any
of the Loan Documents;
(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 any of the Loan Documents, or any
other agreement or instrument relating thereto;
(c) any exchange, release, or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Obligations; or
-24-
(d) any other circumstances that might otherwise constitute a
defense available to, or a discharge of, any Debtor.
To the maximum extent permitted by law, each Debtor hereby waives any right to
require Agent to: (A) proceed against or exhaust any security held from such
Debtor; or (B) pursue any other remedy in Agent's power whatsoever.
12.13. POSTPONEMENT OF SUBROGATION. Each Debtor hereby agrees that it will
not exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment in full of all Obligations (other than contingent indemnification
obligations). Subject to the terms of the Intercreditor Agreement, any amount
paid to any Debtor on account of any payment made hereunder prior to the payment
in full of all Obligations (other than contingent indemnification obligations)
shall be held in trust for the benefit of Agent, and shall immediately be paid
to Agent for application against the Obligations, whether matured or unmatured,
in accordance with the terms of the Loan Agreement. In furtherance of the
foregoing, for so long as any Obligations (other than contingent indemnification
obligations) remain outstanding, each Debtor shall refrain from taking any
action or commencing any proceeding against the Company or any other Debtor (or
any of their respective successors or assigns, whether in connection with an
Insolvency Proceeding or otherwise) to recover any amounts in respect of
payments made under this Agreement to Agent.
12.14. APPLICABLE GAMING LAWS. The Agent acknowledges, understands and
agrees on behalf of itself and the other Secured Parties that the Gaming/Racing
Laws may impose certain licensing or transaction approval requirements prior to
the exercise of the rights and remedies granted to it under this Agreement with
respect to the Collateral subject to the Gaming/Racing Laws. All rights,
remedies, and powers provided in this Agreement relative to the Collateral may
be exercised only to the extent that the exercise thereof does not violate any
applicable mandatory provision of the applicable Gaming/Racing Laws and all
provisions of this Agreement relative to the Collateral are intended to be
subject to all applicable mandatory provisions of the applicable Gaming/Racing
Laws and to be limited solely to the extent necessary to not render the
provisions of this Agreement invalid or unenforceable, in whole or in part.
Notwithstanding the immediately preceding sentence:
(a) if any consent under the Gaming/Racing Laws is required in
connection with the taking of any of the actions which may be taken by the Agent
in the exercise of its rights hereunder, then each Debtor agrees to use its best
efforts to secure such consent and to cooperate with the Agent in obtaining any
such consent, and upon the occurrence and during the continuation of any Event
of Default, each Debtor shall promptly execute and/or cause the execution of all
applications, certificates, instruments, and other documents and papers that the
Agent may be required to file in order to obtain any necessary approvals under
the Gaming/Racing Laws, and if such Debtor fails or refuses to execute such
documents, the Agent or the court with jurisdiction may execute such documents
on behalf of such Debtor; and
(b) any other provision of this Agreement to the contrary, nothing in
this Agreement, shall (i) effect any transfer of any ownership interest in a
Debtor or (ii) effect any transfer, sale, purchase, lease or hypothecation of,
-25-
or any borrowing or loaning of money against, or any establishment of any voting
trust agreement or other similar agreement with respect to any certificate of
suitability or any owner's license heretofore issued to any person, including
any Debtor, under any of the Gaming/Racing Laws.
12.15. FURTHER ASSURANCES. Each Debtor agrees to execute and deliver such
further agreement, instruments and documents, and to perform such further acts,
as the Agent shall reasonably request from time to time in order to carry out
the purpose of this Agreement and agreements set forth herein. Each Debtor
agrees, that to the extent it has any Intellectual Property described in EXHIBIT
A, B or C if it does not file a copy of this Agreement with the United States
Patent and Trademark Office and the United States Copyright Office, as
applicable, the Agent shall be entitled (but not obligated) to so file this
Agreement at the sole cost and expense of such Debtor.
12.16. INTERCREDITOR AGREEMENT. If the Intercreditor Agreement is in
effect,
(a) the Liens granted hereunder in favor of Agent for the benefit of
itself and the Banks in respect of the Collateral and the exercise of any right
related thereto thereby shall be subject, in each case, to the terms of the
Intercreditor Agreement; and
(b) in the event of any direct conflict between the express terms and
provisions of this Agreement and of the Intercreditor Agreement, the terms and
provisions of the Intercreditor Agreement shall control.
[Signature pages to follow.]
-26-
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed d delivered as of the date first above written.
COMPANY:
EMPIRE RESORTS, INC.
BY:/s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: CFO
GUARANTORS:
ALPHA MONTICELLO, INC.
BY: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President
ALPHA CASINO MANAGEMENT INC.
BY: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President
MOHAWK MANAGEMENT, LLC
BY: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Manager
-27-
MONTICELLO CASINO
MANAGEMENT, LLC
BY: /s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Manager
MONTICELLO RACEWAY
DEVELOPMENT COMPANY, LLC
BY: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Manager
MONTICELLO RACEWAY
MANAGEMENT, INC.
BY: /s/ Xxxxxx X. Xxx
---------------------------------------
Name: Xxxxxx X. Xxx
Title: President
AGENT:
BANK OF SCOTLAND
BY: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: Assitant Vice President
-28-