Document:

Exhibit 10.3

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT is dated as of April 19, 2012, among REALD INC., a Delaware corporation (“Borrower”), STEREOGRAPHICS CORPORATION, a California corporation (“Stereographics”), COLORLINK INC., a Delaware corporation (“ColorLink”), and those additional entities that hereafter become parties hereto (together with Borrower, Stereographics, and ColorLink, each, a “Debtor” and collectively, the “Debtors”) and CITY NATIONAL BANK, as administrative agent for the Secured Parties (as defined below) (in such capacity, and together with any successor administrative agent hereunder, “Administrative Agent”).

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a certain Credit Agreement dated of even date herewith among Borrower, Administrative Agent, City National Bank, as letter of credit issuer (in its capacity as such, and together with any successor letter of credit issuer hereunder, the “L/C Issuer”), and the lenders party thereto from time to time (the “Lenders”) (the Lenders, Administrative Agent, the L/C Issuer and certain other Persons parties to Related Swap Contracts as more particularly described in Section 16 hereof, collectively referred to as the “Secured Parties”) (as the same may be amended, restated, modified or supplemented and in effect from time to time, the “Credit Agreement”), Lenders and the L/C Issuer have agreed, subject to the satisfaction of certain conditions precedent, to make Loans and other financial accommodations available to Borrower;

 

WHEREAS, to induce Lenders and the L/C Issuer to execute and deliver the Credit Agreement and to perform the transactions contemplated thereby, each of Stereographics and ColorLink has guaranteed the obligations of Borrower arising under the Credit Agreement; and

 

WHEREAS, it is a condition precedent to the availability of Loans and other financial accommodations under the Credit Agreement that the Debtors shall have granted the security interests contemplated by this Agreement to Administrative Agent in order to secure the payment and performance of all obligations of the Debtors to the Secured Parties, or any of them, under this Agreement, the Credit Agreement, and every other Loan Document and any extensions, renewals or amendments thereto, however created, acquired, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, including any Related Swap Contracts, as such term is defined in the Credit Agreement together with all other now existing or hereafter arising Obligations, as such term is defined in the Credit Agreement (all of the foregoing obligations being hereinafter collectively referred to as the “Obligations”).

 

NOW, THEREFORE, in consideration of the foregoing, and in order to induce Lenders and the L/C Issuer to make the Loans and other financial accommodations available to Borrower under the Credit Agreement, each of the Debtors hereby agrees with Administrative Agent, for the benefit of the Secured Parties, respectively, as follows:

 

 

SECTION 1.           Definitions.

 

1.1       The following terms, as used herein, have the meanings set forth below:

 

“Agreement” means this Security Agreement, as the same may be amended, restated, modified or supplemented and in effect from time to time in accordance with the terms hereof.

 

“Collateral” has the meaning assigned to that term in Section 2

 

“Copyright Security Agreement” means, if any, each Copyright Security Agreement executed and delivered by a Debtor to Administrative Agent, as the same may be amended and in effect from time to time.

 

“Copyrights” means any copyrights, copyright registrations and copyright applications, and all renewals, extensions and continuations of any of the foregoing.

 

“Deposit Account Control Agreement” has the meaning assigned to that term in Section 4.11.

 

“Discharge of All Obligations” means (i) the termination or expiration of all commitments to extend credit that would constitute Obligations, (ii) the payment in full in cash and performance of all Obligations (other than (a) contingent indemnification obligations to the extent no claim giving rise thereto has been asserted and (b) obligations under Bank Products Agreements and Related Swap Contracts as to which arrangements satisfactory to the applicable Lender or Affiliate of a Lender have been made), and (iii) the expiration or termination of all Letters of Credit (other than L/C Obligations that have been Cash Collateralized pursuant to the Credit Agreement).

 

“Encumbered Equipment” has the meaning assigned to that term in Section 2.

 

“Excluded Account” means any Deposit Account (i) maintained solely for payroll, tax, zero balance disbursement, pension, employee benefits or other trust purposes, and (ii) accounts with an ending daily balance, in the aggregate for all such accounts at any time, of less than $100,000.

 

“Federal Registration Collateral” means Collateral with respect to which Liens may be registered, recorded or filed under, or notice thereof given under, any federal statute or regulation.

 

“Intellectual Property” means, collectively, all Copyrights, Patents and Trademarks.

 

“Patent Security Agreement” means, if any, each Patent Security Agreement executed and delivered by a Debtor to Administrative Agent, as the same may be amended and in effect from time to time.

 

“Patents” means any patents and patent applications and all renewals, extensions and continuations of any of the foregoing.

 

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“Security Interests” means the security interests granted or provided for pursuant to Section 2 hereof and pursuant to any Copyright Security Agreements, Patent Security Agreements and Trademark Security Agreements, as well as all other security interests in the assets of the Debtors created, assigned or provided as additional security for the Obligations pursuant to the provisions of this Agreement or any of the other Loan Documents.

 

“Trademark Security Agreement” means, if any, each Trademark Security Agreement executed and delivered by a Debtor to Administrative Agent, as the same may be amended and in effect from time to time.

 

“Trademarks” means any trademarks, trademark registrations, and trademark applications, all renewals, extensions and continuations of any of the foregoing and all goodwill attributable to any of the foregoing.

 

“UCC” means the Uniform Commercial Code of the State of California or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

 

1.2           Other Definition Provisions.  Except as provided by the immediately following sentence, capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided for in the Credit Agreement.  All capitalized terms defined in the UCC and not otherwise defined herein shall have the respective meanings provided for by the UCC.  The rules of construction set forth in Article I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Agreement, apply to this Agreement and are hereby incorporated by reference.

 

SECTION 2.           Grant of Security Interests.

 

To secure the payment and performance of the Obligations, each Debtor hereby grants to Administrative Agent, for its benefit and the benefit of the Secured Parties, a lien on, security interest in and right of set-off against any and all right, title and interest in and to any of such Debtor’s Collateral.  As used herein, the term “Collateral” shall mean all of the below listed property and interests in property of each Debtor, whether now owned or existing or hereafter created, acquired or arising, including all of the following properties and interests in properties of each Debtor, whether now owned or hereafter created, acquired or arising:

 

(a)           Accounts;

 

(b)           Chattel Paper;

 

(c)           Commercial Tort Claims, including without limitation those Commercial Tort Claims in which the Debtor has any interest specified on Schedule 3.9;

 

(d)           Deposit Accounts, all cash, and other property deposited therein or otherwise credited thereto from time to time and other monies and property in the possession or under the control of Administrative Agent or any other Secured Party or any affiliate, representative, agent or correspondent of Administrative Agent or any other Secured Party;

 

(e)           Documents;

 

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(f)            General Intangibles, including without limitation any and all Intellectual Property;

 

(g)           Goods, including without limitation any and all Inventory, any and all Equipment and any and all Fixtures;

 

(h)           Instruments;

 

(i)            Investment Property;

 

(j)            Letter-of-Credit Rights;

 

(k)           Supporting Obligations;

 

(l)            Any and all other personal property and interests in property whether or not subject to the UCC;

 

(m)          Any and all books and records, in whatever form or medium, that at any time evidence or contain information relating to any of the foregoing properties or interests in properties or are otherwise necessary or helpful in the collection thereof or realization thereon;

 

(n)           All Accessions and additions to, and substitutions and replacements of, any and all of the foregoing; and

 

(o)           All Proceeds and products of the foregoing, and all insurance pertaining to the foregoing and proceeds thereof.

 

Notwithstanding the foregoing provisions of this Section 2, the pledge and grant of a lien and security interest as provided herein and in the definition of “Collateral” shall not extend to: (i) voting equity interests of any CFC, solely to the extent that such equity interests represent more than 65% of the outstanding voting equity interests of such CFC; (ii) any asset now owned or hereafter acquired by any Debtor that is subject to a purchase money Lien or a capital lease permitted under the Credit Agreement (“Encumbered Property”), Contract, General Intangibles, Instrument, License or Chattel Paper in which any Debtor has any right, title or interest if and to the extent such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper is subject to a contractual provision or other restriction (including under applicable law) such that the creation of a lien and security interest in the right, title or interest of such Debtor therein would (A) be prohibited and would cause or result in a breach, termination or default thereunder enabling another Person party to such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper to enforce any remedy with respect thereto, or (B) result in the abandonment, invalidation or unenforceability of any rights, title or interest of such Debtor in such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper; provided that the foregoing exclusions shall not apply if (x) such restriction has been waived or such other Person has otherwise consented to the creation hereunder of a lien or security interest in such Encumbered Property, Contract, General Intangibles, Instrument, License, Chattel Paper or (y) such restriction would be rendered ineffective pursuant to Section 9-406, 9-407 or 9-408 of Article 9 of the UCC, as applicable and as then in effect in any relevant jurisdiction, or any other applicable law (including the Bankruptcy Code) or principles of equity; provided further that immediately upon the

 

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ineffectiveness, lapse or termination of any such restriction, such Debtor shall be deemed to have granted a security interest in, all its rights, title and interests in and to such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper, as if such provision had never been in effect; and provided further that the foregoing exclusions shall in no way be construed so as to limit, impair or otherwise affect Administrative Agent’s unconditional continuing security interest in and to all rights, title and interests of such Debtor in or to any payment obligations or other rights to receive monies due or to become due under any such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper and in any such monies and other proceeds of such Encumbered Property, Contract, General Intangibles, Instrument, License or Chattel Paper; or (iii) any “intent-to-use” application for registration of a Trademark prior to the filing of a “Statement of Use” pursuant to applicable law or an “Amendment to Allege Use” pursuant to applicable law with respect thereto, solely to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of any registration that issues from such “intent-to-use” application or would result in the loss by a Debtor of any rights in any such Trademark under applicable law.

 

Each Debtor represents and warrants that, as of the Closing Date, it has no properties material to its business (other than the voting equity interests described in clause (i) of the immediately preceding paragraph, to the extent such interests are material to its business) that are excluded from the term “Collateral” as a result of the operation of this paragraph.  Each of the Debtors covenants and agrees that it will use commercially reasonable efforts to not subject any properties material to its business to any contractual provision or other restriction on assignment which would result in the exclusion of assets from the defined term “Collateral”.

 

SECTION 3.           Representations and Warranties.

 

Each Debtor represents and warrants to Administrative Agent and to each other Secured Party as follows:

 

3.1           Binding Obligation; Perfection.  This Agreement constitutes a valid and binding obligation of such Debtor, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.  In the case of the certificated Pledged Securities (as defined in the Pledge Agreement), when stock certificates representing such Pledged Securities are delivered to the Administrative Agent and in the case of the other Collateral, when financing statements and other filings specified on Schedule 3.1 in appropriate form are filed in the appropriate filing offices specified on Schedule 3.1 and other actions described on Schedule 3.1 are taken, Administrative Agent will have a valid and perfected first priority Lien on the Collateral (except for Permitted Liens), securing the payment of the Obligations, and such Security Interests are entitled to all of the rights, priorities and benefits afforded by the UCC or other applicable law as enacted in any relevant jurisdiction which relates to perfected security interests.

 

3.2           Organizational Information.  Schedule 5.22 to the Credit Agreement sets forth (i) the full, correct and current name of such Debtor, as its appears in such Debtor’s organizational documents, (ii) such Debtor’s type of organization, (iii) such Debtor’s jurisdiction

 

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of organization and (iv) such Debtor’s organizational identification number (except where such Debtor’s jurisdiction of organization does not assign organizational numbers).

 

3.3           Collateral Locations.  Schedule 3.3 (i) sets forth as of the Closing Date all addresses at which any Collateral with an aggregate value in excess of $2,000,000 (except for Collateral which is (x) in transit in the ordinary course of business or (y) is in the possession of customers in the ordinary course of such Debtor’s business) is located, indicating for each whether such location is owned or leased by such Debtor, or owned or operated by a third-party such as a warehouseman, consignee or processor, and (ii) indicates which of the foregoing addresses serves as such Debtor’s chief executive office.

 

3.4           Existing Liens.  Except for Permitted Liens, such Debtor owns the Collateral, and will own all after-acquired Collateral, free and clear of any Lien.  No effective financing statement or other form of lien notice covering all or any part of the Collateral is on file in any recording office, except for those (i) in favor of Administrative Agent or (ii) filed in connection with Permitted Liens.

 

3.5           Governmental Authorizations; Consents; Federal Registration Collateral.  No authorization, approval or other action by, and no notice to or filing with, any domestic or foreign governmental authority or regulatory body or consent of any other Person is required for (i) the grant by such Debtor of the Security Interests granted hereby or for the execution, delivery or performance of this Agreement by such Debtor; or (ii) the exercise by Administrative Agent of its rights and remedies hereunder (except as may have been accomplished by or at the direction of such Debtor or Administrative Agent and except as may be required in connection with the disposition of Investment Property by laws affecting the offering and sales of securities generally).  Except as set forth on Schedule 3.5, as of the Closing Date, none of the Collateral is Federal Registration Collateral.  Except for (a) the filing of UCC financing statements with the Secretary of State of such Debtor’s jurisdiction of organization, (b) the filing of any necessary registrations, recordations or notices, as applicable, in respect of any Federal Registration Collateral and Intellectual Property registered outside of the United States, (c) execution and delivery of Deposit Account Control Agreements in respect of Deposit Accounts, (d) the registration of Administrative Agent’s Lien upon any certificate of title pertaining to motor vehicles, (e) the execution and delivery of an amendment and/or supplement hereto with respect to any hereafter arising Commercial Tort Claim, and (f) the delivery of any letter of credit to Administrative Agent with respect to any Letter-of-Credit Rights of the Debtors, no authorization, approval or other action by (other than any authorizations, approvals or actions which have already been received or taken, as applicable, as of the date hereof), and no notice to or filing with, any domestic or foreign governmental authority or regulatory body or consent of any other Person is required for the perfection of the Security Interests granted hereby and pursuant to any other Loan Documents.

 

3.6           Accounts.  Each existing Account of such Debtor constitutes, and each hereafter arising Account of such Debtor will constitute, the legally valid and binding obligation of the applicable Account Debtor, subject to limitations imposed by bankruptcy, insolvency or similar laws relating to the enforcement of creditors’ rights generally and by equitable principles. None of the Accounts of such Debtor is evidenced by a promissory note or other Instrument in an amount greater than $500,000 other than a check, which has not been delivered to Administrative Agent.

 

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3.7           Inventory.  All Inventory of such Debtor offered for sale is, and will be, of good and merchantable quality, free from any material defects which could pose bodily harm to any person.  Such Inventory is not subject to any licensing, patent, trademark, trade name or copyright agreement with any Person that materially restricts such Debtor’s or Administrative Agent’s ability to manufacture and/or sell the Inventory.  Such Debtor does not sell any Inventory to any customer on approval or on any other basis that entitles the customer to return, or which may obligate such Debtor to repurchase, such Inventory, except for customer returns in the ordinary course of business.  None of such Debtor’s Inventory has been or will be produced in violation of any provision of the Fair Labor Standards Act of 1938, or in violation of any other applicable law, except in each case for violations which could not reasonably be expected to have a Material Adverse Effect.

 

3.8           Intellectual Property.  As of the Closing Date, the Trademarks, Copyrights and Patents, if any, listed on the schedules to the Trademark Security Agreement, Copyright Security Agreement and Patent Security Agreement, as applicable, include all of the material federally registered Intellectual Property owned by such Debtor.  All material Intellectual Property owned by such Debtor is valid, subsisting and enforceable in all material respects and all filings necessary to maintain the effectiveness of such registrations have been made.  Except as set forth in Schedule 5.18 of the Credit Agreement, on the Closing Date, such Debtor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to all material Intellectual Property purported to be owned by such Debtor, free and clear of any Liens (except Permitted Liens).  As of the Closing Date, such Debtor has no notice of any suits or actions commenced or threatened with reference to any material Intellectual Property.  The execution, delivery and performance of this Agreement by such Debtor will not violate or cause a material default under any material Intellectual Property or any agreement in connection therewith.

 

3.9           Certain Collateral Disclosures.  Except in each case as set forth on Schedule 3.9, as of the Closing Date, such Debtor has no ownership interest in any Chattel Paper, Letter-of-Credit Rights, Commercial Tort Claims, Documents, or Equipment covered by any certificate of title, in each case with a value in excess of $500,000.

 

3.10         Control Arrangements.  Except for Control arising by operation of law in favor of banks and securities intermediaries having custody over Deposit Accounts and Securities Accounts set forth on Schedule 3.10, no Person has Control of any Deposit Accounts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights owned by such Debtor.

 

3.11         Survival of Representations and Warranties.  All representations and warranties of such Debtor contained in this Agreement shall survive the execution and delivery of this Agreement.

 

SECTION 4.           Covenants and Further Assurances.

 

4.1           Name or Entity Changes.  No Debtor shall change its type of organization or jurisdiction of organization or, unless such Debtor has given Administrative Agent not less than thirty (30) days prior written notice thereof, its name.

 

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4.2           Accounts.  Except as otherwise provided in this Section 4.2, each Debtor shall continue to collect, at its own expense, all amounts due or to become due to such Debtor with respect to Accounts of such Debtor and apply such amounts as are so collected to the outstanding balances thereof.  In connection with such collections, each Debtor may take (and, at Administrative Agent’s direction during the continuance of any Event of Default, shall take) such commercially reasonable action as such Debtor or Administrative Agent may deem necessary or reasonably advisable to enforce collection of the Accounts of such Debtor.  Administrative Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default under the Credit Agreement, to:  (i) notify the Account Debtor under any Accounts of such Debtor (or any other Person obligated thereon) of the Lien granted upon such Accounts in favor of Administrative Agent and to direct such Account Debtors and other Persons to make payment of all amounts due or to become due or otherwise render performance directly to Administrative Agent; (ii) exercise the rights of any Debtor with respect to the obligation of the Account Debtor to make payment or otherwise render performance to such Debtor and with respect to any property that secures the obligations of such Account Debtor or any other Person obligated on the Collateral; and (iii) adjust, settle or compromise the amount or payment of such Accounts.  After the occurrence and during the continuance of an Event of Default and upon notice to the Debtors all amounts and Proceeds received by a Debtor with respect to the Accounts shall be received in trust for the benefit of Administrative Agent (on behalf of the Secured Parties), shall be segregated from other funds of such Debtor and shall be forthwith paid over to Administrative Agent in the same form as so received (with any necessary endorsement) to be applied pursuant to the terms of the Credit Agreement.  No Debtor shall adjust, settle or compromise the amount or payment of any of its Accounts, or release wholly or partly any Account Debtor, or allow any credit or discount thereon (other than credits and discounts in the ordinary course of business and the adjustment, settlement or compromise of Accounts in the ordinary course of business).

 

4.3           Intellectual Property.

 

(a)           Borrower shall concurrently herewith deliver to Administrative Agent a Trademark Security Agreement and a Patent Security Agreement entered into in its favor and all other documents, instruments and other items as may be necessary for Administrative Agent to file such agreements with the U.S. Patent and Trademark Office.

 

(b)           Each Debtor shall, no less frequently than quarterly (but without duplication of any notice required by Section 4.13(a)), notify Administrative Agent in writing in the event such Debtor acquires or becomes entitled to any new or additional registered Intellectual Property and, after the request of Administrative Agent, shall amend (and hereby so authorizes Administrative Agent to amend) the schedules to the respective security agreements or enter into new or additional Copyright Security Agreements, Patent Security Agreements and/or Trademark Security Agreements (as applicable) to include any such new or additional Intellectual Property.

 

(c)           Each Debtor shall use commercially reasonable efforts to:  (i) prosecute any material Intellectual Property application at any time pending; (ii) make application for registration or issuance of all new or additional material Intellectual Property; (iii) preserve and maintain all material rights in the material Intellectual Property; and (iv) obtain any consents,

 

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waivers or agreements necessary to enable Administrative Agent to exercise its remedies with respect any and all material Intellectual Property.

 

(d)           Except in accordance with such Debtor’s reasonable business judgment, no Debtor shall abandon any (i) material right to file an Intellectual Property application, (ii) material pending Intellectual Property application, or (iii) material registered Intellectual Property.

 

(e)           Except as permitted by the Credit Agreement, no Debtor shall sell or assign its interest in, or grant any license under, any Intellectual Property, and each Debtor further agrees that it shall not take any action or permit any action to be taken by others subject to its control, including licensees, or fail to take any action which would affect the validity or enforcement of the rights granted to Administrative Agent under this Agreement.

 

(f)            Each Debtor agrees to maintain the quality of any and all products in connection with which any Trademarks, Copyrights and Patents are used, consistent with commercially reasonable business practices.  Upon the occurrence and during the continuance of an Event of Default, each Debtor agrees that Administrative Agent, or a conservator appointed by Administrative Agent, shall have the right to establish such additional product quality controls as Administrative Agent, or said conservator, in its reasonable judgment, may deem necessary to assure maintenance of the quality of products sold by such Debtor under any Trademarks, Copyrights and Patents.

 

(g)           Effective upon the occurrence and during the continuance of an Event of Default, each Debtor assigns, transfers and conveys to Administrative Agent all Intellectual Property owned or used by such Debtor to the extent necessary to enable Administrative Agent to realize on the Collateral and any successor or assign to enjoy the benefits of the Collateral.  This right and assignment shall inure to the benefit of Administrative Agent and its successors, assigns and transferees, whether by voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.  Such right and assignment is granted free of charge, without requirement that any monetary payment whatsoever including, without limitation, any royalty or license fee, be made to the applicable Debtor or any other Person by Administrative Agent or any other Secured Party or any other Person.

 

4.4           Landlord’s Access Agreements/Bailee Letters.  Each Debtor shall use its commercially reasonable efforts to obtain a bailee letter, landlord access agreement and/or landlord’s lien waiver, as applicable, each in form and substance reasonably satisfactory to Administrative Agent, from all bailees and landlords, as applicable, who from time to time have possession of Collateral in the ordinary course of such Debtor’s business and if requested by the Administrative Agent; provided, however, that a bailee’s letter shall not be required if the value of the Collateral held by such bailee at the relevant location is less than $2,000,000.

 

4.5           Chattel Paper and Instruments.

 

(a)           During the existence of an Event of Default, after the request of Administrative Agent, each Debtor shall (i) deliver to Administrative Agent all Tangible Chattel Paper in excess of $500,000, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to

 

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Administrative Agent, (ii) deliver to Administrative Agent all security agreements securing any Chattel Paper, in each case in excess of $500,000, and (iii) mark conspicuously all Chattel Paper with a legend, in form and substance reasonably satisfactory to Administrative Agent, indicating that such Chattel Paper is subject to the Security Interests.  Each Debtor shall provide Administrative Agent with Control of all Electronic Chattel Paper by having Administrative Agent identified as the assignee of the Records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of Control set forth in the UCC.

 

(b)           Each Debtor shall (i) deliver to Administrative Agent (x) all intercompany notes and (y) all other Instruments in excess of $500,000, in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to Administrative Agent, (ii) deliver to Administrative Agent all security agreements securing any Instruments, in each case in excess of $500,000, and (iii) mark conspicuously all Instruments with a legend, in form and substance reasonably satisfactory to Administrative Agent, indicating that such Instruments are subject to the Security Interests.

 

4.6           Letters of Credit.  Each Debtor shall deliver to Administrative Agent all letters of credit valued in excess of $500,000 under which any such Debtor is the beneficiary duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance reasonably satisfactory to Administrative Agent.  Each Debtor also shall deliver to Administrative Agent all security agreements securing any such letters of credit.  Each Debtor shall take any and all actions as may be reasonably necessary, or that Administrative Agent may reasonably request, from time to time, to cause Administrative Agent to obtain exclusive Control of any Letter-of-Credit Right owned by such Debtor in a manner reasonably acceptable to Administrative Agent.

 

4.7           Equipment.  Following a request of Administrative Agent, each Debtor shall promptly deliver to Administrative Agent any and all certificates of title, applications for title or similar evidence of ownership of all Equipment valued in excess of $500,000 and shall cause Administrative Agent to be named as lienholder on any such certificate of title or other evidence of ownership.

 

4.8           Investment Property.  Each Debtor shall take any and all reasonable actions as may be necessary, or that Administrative Agent may reasonably request from time to time, to (i) cause Administrative Agent to obtain exclusive Control of any Investment Property (other than any Excluded Account) owned by such Debtor in a manner reasonably acceptable to Administrative Agent and (ii) use commercially reasonable efforts to obtain from any issuers of Investment Property (other than any Excluded Account) and such other Persons, for the benefit of Administrative Agent, written confirmation of Administrative Agent’s Control over such Investment Property upon terms and conditions reasonably acceptable to Administrative Agent.

 

4.9           General Intangibles.  During the continuation of an Event of Default, each Debtor shall use commercially reasonable efforts to obtain any consents, waivers or agreements necessary to enable Administrative Agent to exercise remedies hereunder and under the other

 

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Loan Documents with respect to any of such Debtor’s rights under any General Intangibles, including such Debtor’s rights as a licensee of software.

 

4.10                           Commercial Tort Claims.  Debtor shall promptly advise Administrative Agent upon becoming aware that it has an interest in a Commercial Tort Claim with a value in excess of $500,000.  With respect to any such Commercial Tort Claim in which a Debtor has any interest, such Debtor shall execute and deliver such documents as may be necessary, or that Administrative Agent may reasonably request, to create, perfect and protect Administrative Agent’s security interest in such Commercial Tort Claim.

 

4.11                           Bank Accounts; Collection of Accounts and Payments.  Upon request by Administrative Agent, each Debtor agrees to enter into a deposit account control agreement (“Deposit Account Control Agreement”), in a form reasonably acceptable to Administrative Agent, with each financial institution with which such Debtor maintains from time to time any Deposit Account (other than Excluded Accounts).  No Debtor shall establish any Deposit Account (other than Excluded Accounts) with any financial institution unless prior thereto Administrative Agent and such Debtor shall have entered into a Deposit Account Control Agreement with such financial institution, or unless Administrative Agent shall have waived such requirement.  Each Deposit Account Control Agreement shall provide, among other things, that the financial institution maintaining the Deposit Account will waive certain rights of setoff and will, from and after receipt by such financial institution of written notice from Administrative Agent that an Event of Default has occurred and is continuing, transfer all amounts held by such financial institution on behalf of the applicable Debtor, as Administrative Agent may direct.

 

4.12                           Collateral Generally.

 

(a)                                  Each Debtor hereby authorizes Administrative Agent to file one or more financing or continuation statements, and amendments thereto (or similar documents required by any laws of any applicable jurisdiction), relating to all or any part of the Collateral without the signature of such Debtor (to the extent such signature is required under the laws of any applicable jurisdiction), which financing statements may describe the Collateral as “all assets” or “all personal property” or words of like import.

 

(b)                                 Each Debtor will furnish to Administrative Agent, from time to time upon reasonable request, statements and schedules further identifying, updating, and describing the Collateral and such other information, reports and evidence concerning the Collateral as Administrative Agent may reasonably request, all in reasonable detail.

 

(c)                                  Subject to the next sentence and the provisions of the Credit Agreement, each Debtor shall keep the Collateral (other than Collateral in the possession of Administrative Agent, cash on deposit in Excluded Accounts and investments in permitted Securities Accounts),  at the locations maintained by such Debtor and set forth on Schedule 3.3.  Each Debtor shall, not less than ten (10) Business Days prior to any change in (a) the location of any Debtor’s chief executive office, or (b) the location of any material Collateral (except Collateral in the possession of customers in the ordinary course of such Debtor’s business), notify the Administrative Agent of such change and shall take or cause to be taken at such Debtor’s expense all such actions, including the delivery of such documents, as may be reasonably

 

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requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent in the Collateral affected by such change.

 

(d)                                 Beyond the safe custody thereof and accounting for amounts actually received hereunder, each Debtor agrees that Administrative Agent shall not have any duties concerning the custody and preservation of any Collateral in its possession (or in the possession of any agent or bailee) or with respect to any income thereon or the preservation of rights against prior parties or any other rights pertaining thereto absent gross negligence or willful misconduct.  Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property.  Administrative Agent shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by Administrative Agent in good faith absent gross negligence or willful misconduct.

 

(e)                                  No Debtor shall do anything to impair the rights of Administrative Agent in the Collateral.  Each Debtor shall at all times maintain insurance with respect to the Collateral in compliance with the requirements of the Credit Agreement.  Each Debtor assumes all liability and responsibility in connection with the Collateral acquired by it, and the liability of such Debtor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, stolen, damaged, or for any reason whatsoever unavailable to such Debtor.

 

(f)                                    Administrative Agent agrees that upon the Discharge of All Obligations, the Security Interests with respect to the Obligations shall terminate and all rights to the Collateral shall revert to the applicable Debtor.  Administrative Agent further agrees that upon the Discharge of All Obligations, Administrative Agent shall, at the expense of the Debtors, execute and deliver to the Debtors such documents as the Debtors shall reasonably request to evidence such termination and payment.

 

4.13                           Federal Compliance.

 

(a)                                  Each Debtor shall, no less frequently than quarterly, notify Administrative Agent in writing upon filing or recording with the U.S. Patent and Trademark Office or the U.S. Copyright Office with respect to any interest in Federal Registration Collateral.  Each Debtor shall take such steps as may be necessary, or that Administrative Agent may reasonably request, in order to perfect any Security Interests in material Federal Registration Collateral.

 

(b)                                 No Debtor shall produce any Inventory in violation of any provision of the Fair Labor Standards Act of 1938, or in violation of any other law except, in each case, for such violations that could not reasonably be expected to have a Material Adverse Effect.

 

4.14                           Each Debtor Remains Liable.  Anything herein to the contrary notwithstanding: (i) each Debtor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein and shall perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; (ii) the exercise by Administrative Agent of any of the rights hereunder shall not release any Debtor from any of its

 

12

 

duties or obligations under the contracts and agreements included in the Collateral; (iii) neither Administrative Agent nor any other Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall Administrative Agent or any other Secured Party 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; and (iv) neither Administrative Agent nor any other Secured Party shall have any liability in contract or tort for any Debtor’s acts or omissions.

 

4.15                           Other Documents and Actions.  Each Debtor shall, from time to time, at its expense, promptly execute and deliver all further instruments, documents and notices and take all further action that may be reasonably necessary, or that Administrative Agent may reasonably request, in order to create, perfect and protect any Security Interests, or to enable Administrative Agent to exercise and enforce its rights and remedies hereunder or under any other Loan Document with respect to any Collateral.  Without limiting the generality of the foregoing, each Debtor shall:  (i) at any reasonable time and with reasonable frequency, upon demand by Administrative Agent, allow Administrative Agent or Persons designated by Administrative Agent (a) to inspect the Collateral, (b) to examine and make copies of the records of such Debtor related thereto, and (c) to discuss the Collateral and the records of such Debtor with respect thereto with, and to be advised as to the same by, such Debtor’s officers and employees and, after the occurrence and during the continuance of an Event of Default, with any other Person which is or may be obligated with respect to any Collateral; and (ii) upon Administrative Agent’s request, appear in and defend any action or proceeding that may affect such Debtor’s title to or Administrative Agent’s security interest in a material portion of the Collateral.

 

SECTION 5.                            Remedial Provisions.

 

(a)                                  Upon the occurrence and during the continuance of an Event of Default, Administrative Agent or its attorneys shall have the right without notice or demand or legal process (unless the same shall be required by applicable law), personally, or by an agent, (i) to enter upon, occupy and use any premises owned or leased by each and any Debtor or where the Collateral is located (or is believed to be located) until the Discharge of All Obligations without any obligation to pay rent to the applicable Debtor, to render the Collateral useable or saleable and to remove the Collateral or any part thereof to the premises of Administrative Agent for such time as Administrative Agent may desire in order to effectively collect or liquidate the Collateral and use in connection with such removal any and all services, supplies and other facilities of each and any Debtor; (ii) to take possession of each and any Debtor’s original books and records, to obtain access to each and any Debtor’s data processing equipment, computer hardware and Software relating to the Collateral and to use all of the foregoing and the information contained therein; and (iii) to notify postal authorities to change the address for delivery of each Debtor’s mail to an address designated by Administrative Agent and to receive, open and dispose of all mail addressed to such Debtor.  If any Debtor’s books and records are prepared or maintained by an accounting service, contractor or other third party agent, such Debtor hereby irrevocably authorizes (until the Discharge of All Obligations) such service, contractor or other agent, upon  notice by Administrative Agent to such Person and such Debtor that an Event of Default has occurred and is continuing, to deliver to Administrative Agent or its designees such books and records.

 

13

 

(b)                                 If any Event of Default shall have occurred and be continuing, Administrative Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of Administrative Agent on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may: (i) require any Debtor to, and such Debtor hereby agrees that it will, at its expense and upon request of Administrative Agent forthwith, assemble all or part of the Collateral as directed by Administrative Agent and make it available to Administrative Agent at any place or places designated by Administrative Agent which is reasonably convenient to Administrative Agent in which event such Debtor shall at its own expense (A) forthwith cause the same to be moved to the place or places so designated by Administrative Agent, (B) store and keep any Collateral so delivered to Administrative Agent at such place or places pending further action by Administrative Agent, and (C) while Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the Collateral in good condition; (ii) withdraw all cash in any Deposit Account and apply such monies in payment of the Obligations; and (iii) without notice except as specified below, sell, lease, license or otherwise dispose of the Collateral or any part thereof by one or more contracts, in one or more parcels at public or private sale, and without the necessity of gathering at the place of sale of the property to be sold, at any of Administrative Agent’s offices or elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Administrative Agent may deem commercially reasonable.

 

(c)                                  Each Debtor agrees that, to the extent notice of sale shall be required by law, a reasonable authenticated notification of disposition shall be a notification given at least ten (10) days prior to any such sale and such notice shall (i) describe Administrative Agent and such Debtor, (ii) describe the Collateral that is the subject of the intended disposition, (iii) state the method of intended disposition, (iv) state that such Debtor is entitled to an accounting of the Obligations, and state the charge, if any, for an accounting, and (v) state the time and place of any public disposition or the time after which any private sale is to be made.  At any sale of the Collateral, if permitted by law, Administrative Agent may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for the purchase, lease, license or other disposition of the Collateral or any portion thereof for the account of Administrative Agent (on behalf of the Secured Parties).  Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  Administrative Agent may disclaim any warranties that might arise in connection with the sale, lease, license or other disposition of the Collateral and have no obligation to provide any warranties at such time.  Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  To the extent permitted by law, each Debtor hereby specifically waives all rights of redemption, stay or appraisal, which it has or may have under any law now existing or hereafter enacted.

 

(d)                                 If an Event of Default has occurred and is continuing, each Debtor hereby irrevocably authorizes and empowers Administrative Agent, without limiting any other authorizations or empowerments contained in any of the other Loan Documents, to assert, either  directly or on behalf of such Debtor, any claims such Debtor may have, from time to time, against any other party to any of the agreements to which such Debtor is a party or to otherwise exercise any right or remedy of such Debtor under any such agreements (including, without limitation, the right to enforce directly against any party to any such agreement all of such

 

14

 

Debtor’s rights thereunder, to make all demands and give all notices and to make all requests required or permitted to be made by such Debtor thereunder).

 

(e)                                  Any and all proceeds received on account of or in connection with any of the Collateral shall be applied in the manner provided in Section 8.03  of the Credit Agreement or, if Section 8.03 is not applicable, as otherwise provided by in the Loan Documents.  Any excess balance remaining shall be delivered to the applicable Debtor, and each Debtor shall remain liable for any deficiency remaining unpaid after the foregoing application.

 

(f)                                    Each Debtor acknowledges and agrees that a breach of any of the covenants contained in Sections 4, 5 and 6 hereof will cause irreparable injury to Administrative Agent and that Administrative Agent has no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of Administrative Agent to seek and obtain specific performance of other obligations of such Debtor contained in this Agreement, that the covenants of such Debtor contained in the Sections referred to in this Section shall be specifically enforceable against such Debtor.

 

(g)                                 No failure or delay on the part of Administrative Agent or any other Secured Party in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or any other right, power or privilege.  All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

SECTION 6.                            Attorney-in-Fact.

 

Each Debtor hereby irrevocably appoints, effective upon the occurrence and during the continuation of an Event of Default, Administrative Agent, its nominee, and any other Person whom Administrative Agent may designate, as such Debtor’s attorney-in-fact, with full power during the existence of any Event of Default to sign such Debtor’s name on verifications of Accounts and other Collateral; to send requests for verification of Collateral to such Debtor’s customers, Account Debtors and other obligors; to endorse such Debtor’s name on any checks, notes, acceptances, money orders, drafts, and any other forms of payment or security that may come into Administrative Agent’s possession or on any assignments, stock powers, or other instruments of transfer relating to the Collateral or any part thereof; to sign such Debtor’s name on any invoice or bill of lading relating to any Collateral, on claims to enforce collection of any Collateral, on notices to and drafts against such Debtor’s customers and Account Debtors and other obligors, on schedules and assignments of Collateral, on notices of assignment and on public records; to notify the post office authorities to change the address for delivery of such Debtor’s mail to an address designated by Administrative Agent; to receive, open and dispose of all mail addressed to such Debtor; and to do all things necessary to carry out the terms and provisions of this Agreement.  Each Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither Administrative Agent nor any such attorney will be liable for any  acts or omissions nor for any error of judgment or mistake of fact or law other than, and to the extent of, such Person’s gross negligence, bad faith or willful misconduct.  The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Discharge of All Obligations.

 

15

 

SECTION 7.                            Expenses.

 

Without limiting any Debtor’s obligations under the Credit Agreement or the other Loan Documents, each Debtor hereby agrees to promptly pay to Administrative Agent all reasonable invoiced out-of-pocket fees, costs and expenses (including reasonable and documented out-of-pocket attorneys’ fees and expenses) of Administrative Agent incurred in connection with (i) protecting, storing, warehousing, insuring, handling, maintaining and shipping the Collateral, (ii) creating, perfecting, maintaining and enforcing Administrative Agent’s Liens and (iii) collecting, enforcing, retaking, holding, preparing for disposition, processing and disposing of the Collateral.

 

If any Debtor fails to promptly pay any portion of the above costs, fees and expenses when due or to perform any other obligation of such Debtor under this Agreement, either Administrative Agent or any other Secured Party may, at its option, but shall not be required to, pay or perform the same and charge such Debtor’s account for all such fees, costs and expenses incurred therefor, and such Debtor agrees to reimburse Administrative Agent or such Secured Party therefor on demand.  All sums so paid or incurred by Administrative Agent or any other Secured Party for any of the foregoing, any and all other sums for which any Debtor may become liable hereunder and all invoiced out-of-pocket fees, costs and expenses (including attorneys’ fees, legal expenses and court costs) incurred by Administrative Agent or any other Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement shall be payable on demand, shall constitute Obligations and shall be secured by the Collateral.

 

SECTION 8.                            Notices.

 

All notices, approvals, requests, demands and other communications hereunder shall be given in accordance with Section 10.02 of the Credit Agreement, and in the case of any such notices, approvals, requests, demands and other communications to any Debtor other than Borrower, sent in care of Borrower in accordance with Section 10.02 of the Credit Agreement.

 

SECTION 9.                            Successors and Assigns.

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted respective successors and assigns except that no Debtor may assign its rights or obligations hereunder without the written consent of Administrative Agent.  No sales of participations, other sales, assignments, transfers or other dispositions of any agreement governing or instrument evidencing the Obligations or any portion thereof or interest therein shall in any manner impair the Liens granted to Administrative Agent hereunder.

 

SECTION 10.                          Changes in Writing.

 

No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be in writing signed by the Debtors and Administrative Agent.

 

16

 

SECTION 11.                          Counterparts; Integration.

 

This Agreement may be signed in any number of counterparts (each of which may be transmitted via facsimile), each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

SECTION 12.                          Headings.

 

Headings and captions used in this Agreement are included for convenience of reference and shall not be given any substantive effect.

 

SECTION 13.                          Joint and Several.

 

The obligations, covenants and agreements of Debtors hereunder shall be the joint and several obligations, covenants and agreements of each Debtor, whether or not specifically stated herein.

 

SECTION 14.                          General Terms and Conditions.

 

In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Loan Document and shall otherwise be subject to all of general terms and conditions contained in Section 10 of the Credit Agreement, mutatis mutandis.  With respect to the Pledged Collateral (as such term is defined in that certain Pledge Agreement dated as of the date hereof by and between Borrower and Administrative Agent (the “Pledge Agreement”)), in the event of any conflict between this Agreement and the Pledge Agreement, the provisions of the Pledge Agreement shall govern.

 

SECTION 15.                          Administrative Agent.

 

Each reference herein to any right granted to, benefit conferred upon or power exercisable by the “Administrative Agent” shall be a reference to the Administrative Agent for the Secured Parties, and each action taken or right exercised hereunder shall be deemed to have been so taken or exercised by the Administrative Agent for the benefit of and on behalf of the Secured Parties.

 

SECTION 16.                          Related Swap Contracts.

 

All obligations of any Debtor under Related Swap Contracts to which any Lender or its Affiliates are a party shall be deemed to be liabilities of such Debtor (“Liabilities”), and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Liabilities; provided, however, that such  obligations shall cease to be Liabilities at such time, prior to the Discharge of All Obligations, as such Person (or Affiliate of such Person) shall cease to be a “Lender” under the Credit Agreement.

 

No Person who obtains the benefit of this Agreement by virtue of the provisions of this Section shall have, prior to the Discharge of All Obligations, any right to notice of any

 

17

 

action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Obligations (including the release or modification of any Obligations or security therefor) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents.  Each Secured Party not a party to the Credit Agreement who obtains the benefit of this Agreement by virtue of the provisions of this Section shall be deemed to have acknowledged and accepted the appointment of Administrative Agent pursuant to the terms of the Credit Agreement, and that with respect to the actions and omissions of Administrative Agent hereunder or otherwise relating hereto that do or may affect such Secured Party, Administrative Agent and each of its Related Parties shall be entitled to all the rights, benefits and immunities conferred under Article IX of the Credit Agreement.

 

[Signature Page Follows]

 

18

 

Witness the due execution hereof by the respective duly authorized officers of the undersigned as of the date first written above.

 

	
 
    	
DEBTORS:
    
	
 
    	
 
    
	
 
    	
REALD INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/   Michael   V. Lewis
    
	
 
    	
Name: 
    	
Michael   V. Lewis
    
	
 
    	
Title: 
    	
Chairman   and CEO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STEREOGRAPHICS   CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/   Michael   V. Lewis
    
	
 
    	
Name: 
    	
Michael   V. Lewis
    
	
 
    	
Title: 
    	
CEO and   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
COLORLINK   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/   Michael   V. Lewis
    
	
 
    	
Name: 
    	
Michael   V. Lewis
    
	
 
    	
Title: 
    	
CEO and   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ADMINISTRATIVE   AGENT:
    
	
 
    	
 
    
	
 
    	
CITY NATIONAL BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/   Garen   Papazyan
    
	
 
    	
Name: 
    	
Garen   Papazyan
    
	
 
    	
Title: 
    	
Senior   Vice President
    

 

 

SCHEDULE 3.1

 

ACTIONS TO PERFECT

 

Filing of UCC financing statements with the Secretary of State of each Debtor’s jurisdiction of organization.

 

Filing of any necessary registrations, recordations or notices, as applicable, in respect of any Federal Registration Collateral and Intellectual Property registered outside of the United States.

 

 

SCHEDULE 3.3

 

COLLATERAL LOCATIONS, CHIEF EXECUTIVE OFFICE

 

(a) Collateral Locations (with Collateral in aggregate value in excess of $2,000,000)

 

	
Address
    	
 
    	
Owned, Leased or Operated by Third Party
    
	
5195 Southbridge   Parkway, Suite 120, College Park, Atlanta, GA 30349
    	
 
    	
Operated by Third   Party
    
	
101 Frontier Way,   Bensenville, IL 60106
    	
 
    	
Operated by Third   Party
    
	
Mallory — DC   Logistics, Inc., 1709 Interstate 45 South, Hutchins, TX 75141
    	
 
    	
Operated by Third   Party
    
	
6 Greek Lane,   Edison, NJ 08817
    	
 
    	
Operated by Third   Party
    
	
1560 Jessie   Street, Jacksonville, FL 32209
    	
 
    	
Operated by Third   Party
    
	
28355 Witherspoon   Parkway, Valencia, CA 91355
    	
 
    	
Operated by Third   Party
    
	
4193 Industrial   Parkway Drive, Warehouse C, Lebec, CA 93243
    	
 
    	
Operated by Third   Party
    
	
5335 Sterling   Drive, Boulder, CO 80301
    	
 
    	
Leased
    
	
3122 Sterling   Drive, Boulder, CO 80301
    	
 
    	
Leased
    
	
Acme Distribution   Services, 18101 Colfax Avenue, Aurora, CO 80011
    	
 
    	
Operated by Third   Party
    
	
Park (North),   Yantian District, Shenzhen, China 518081
    	
 
    	
Operated by Third   Party
    

 

(b) Collateral Locations (with Collateral in aggregate value in excess of $2,000,000) which serve as any Debtor’s chief executive office

 

5335 Sterling Drive, Boulder, CO 80301

 

 

SCHEDULE 3.5

 

FEDERAL REGISTRATION COLLATERAL

 

See attached.

 

 

Schedule 3.5

to Security Agreement

 

Trademark Applications & Registered Trademarks

 

***

 

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

Pending Patent Applications

 

***

 

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

SCHEDULE 3.9

 

CHATTEL PAPER, LETTER-OF-CREDIT RIGHTS, COMMERCIAL TORT CLAIMS, DOCUMENTS, TITLED EQUIPMENT

 

Chattel Paper

 

NONE

 

Letter-of-Credit Rights

 

NONE

 

Commercial Tort Claims

 

NONE

 

Documents

 

NONE

 

Titled Equipment

 

NONE

 

 

SCHEDULE 3.10

 

DEPOSIT AND SECURITIES ACCOUNTS

 

***

 

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.NOC-3.31.2012-Ex 10.3

Form of 
[AMENDED AND RESTATED] INDEMNIFICATION AGREEMENT
This Agreement, dated as of the ____ day of _____________, 20__ between Northrop Grumman Corporation, a Delaware corporation (the “Corporation”), and ______________ (“Indemnitee”).
WHEREAS, it has come to the attention of the Board of Directors of the Corporation (the “Board”) that in certain circumstances highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with adequate protection from the risk of liability due to claims and actions against them arising out of their service to and activities on behalf of such corporations; and
WHEREAS, it has also come to the attention of the Board that, in this regard, the difficulty of maintaining adequate liability insurance and the uncertainties related to indemnification for directors and officers have increased the difficulty of attracting and retaining such highly competent persons; and
WHEREAS, the Board has determined that an increased difficulty in attracting and retaining such highly competent persons is detrimental to the best interests of the Corporation and its stockholders and that persons serving the Corporation should be assured they will have adequate protection from certain liabilities; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation to obligate itself contractually to indemnify such persons to the fullest extent permitted by applicable law, so that such persons will serve or continue to serve the Corporation, free from undue concern that they will not be adequately indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of any rights granted under the Restated Certificate of Incorporation of the Corporation, or Article V of the Restated Bylaws of the Corporation, and any resolutions adopted pursuant thereto, and shall not be deemed to be a substitute therefor nor to diminish or abrogate any rights of Indemnitee thereunder; and 
[WHEREAS, Indemnitee and the Corporation are parties to that certain Indemnification Agreement dated ____________ (the “Existing Indemnification Agreement”) and Indemnitee and the Corporation wish to amend and restate the Existing Indemnification Agreement to clarify the Corporation’s obligations under the Existing Indemnification Agreement and to provide for certain additional rights granted or to be granted to new directors and officers of the Corporation; and]
WHEREAS, Indemnitee is willing to serve the Corporation in the capacity or capacities in which he or she serves, continue so to serve and, if appropriate, to take on additional service for or on behalf of the Corporation on the condition that Indemnitee be indemnified according to 

the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Corporation and Indemnitee do hereby covenant and agree as follows:

Section 1.Definitions.  For purposes of this Agreement:
(a)    The term “Change in Control” means a change in control of the Corporation, occurring after the Effective Date, which would be required to be reported in response to Item 6(e) of Schedule 14A under Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), whether or not the Corporation is then subject to such reporting requirement.  Without limiting the generality of the foregoing, a Change in Control shall be deemed to have occurred if, after the Effective Date: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board in office immediately prior to such person attaining such percentage interest; (ii) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which (A) members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter or (B) the voting securities of the Corporation outstanding immediately prior to such transaction do not continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such transaction with the power to elect at least a majority of the board of directors or other governing body of such surviving entity; (iii) an involuntary case or other proceeding shall be commenced against the Corporation seeking liquidation, reorganization or other relief with respect to its debts under any federal, state or foreign bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and, such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days, or an order for relief shall be entered against the Corporation under any such bankruptcy laws as now or hereafter in effect or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then still office who were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board.
(b)    The term “Corporate Status” means the status of a person as a current or former director, officer, employee, agent or fiduciary of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation, including as a deemed fiduciary.

(c)    The term “Disinterested Director” means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.
(d)    The term “Effective Date” means as of_________________, 20__.
(e)    The term “Expenses” shall be broadly construed and shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, communication charges, postage, delivery service fees, and all other customary direct or indirect disbursements or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding or a proceeding to enforce Indemnitee’s rights under this Agreement.  The term “Expenses” shall also include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation, the premium, security for, and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.  The parties agree that, to the fullest extent permitted by law, for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Corporation in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being prudent and appropriate in the good faith judgment of such counsel shall be presumed conclusively to be reasonable Expenses.  To the fullest extent permitted by law, the Corporation agrees that, in any proceeding for an advancement of Expenses, it will not assert or make any claim that any Expenses (including without limitation attorneys’ fees and expert witness or consultant fees) incurred by or on behalf of Indemnitee are not reasonable if counsel for Indemnitee certifies by affidavit his or her belief that such Expenses were prudent and appropriate in the good faith judgment of such counsel; provided that, following the final disposition of the Proceeding for which Expenses are advanced, the Corporation may seek to recover any Expenses that it establishes are not reasonable in an action brought to enforce the undertaking granted by Indemnitee pursuant to Section 9.  The term “Expenses” shall not include the amount of judgments, fines or penalties against Indemnitee or amounts paid in settlement in connection with such matters.
(f)    The term “Independent Counsel” means an attorney, a law firm, or a member of a law firm, who (or which) is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Corporation, any entity or enterprise controlled by the Corporation, or Indemnitee or any entity controlled by Indemnitee, in any other matter material to either such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
(g)    The term “Proceeding” means any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, except one initiated by an Indemnitee pursuant to Section 12 of this Agreement to 

enforce Indemnitee’s rights under this Agreement.  Without limiting the foregoing, the term “Proceeding” shall include any arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, subpoena or other response to process served, request for information from government agencies or other third parties, internal investigation, any other proceeding or other process that Indemnitee in good faith believes might lead to the institution of a Proceeding.
(h)    The term “Rating Event” means the Corporation’s [“issuer credit rating” from Standard & Poor’s Financial Services LLC] is or is lowered to [BBB] or lower on any day within the five-year period after the occurrence of a Change in Control; provided, that if [Standard & Poor’s Financial Services LLC] ceases to provide an [issuer credit rating] for the Corporation, the Corporation shall select a comparable statistical rating organization and rating level as a replacement for purposes of this definition. 
(i)    References to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include services by such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Agreement.
Section 2.    Services by Indemnitee.  Indemnitee agrees to serve as an Officer of the Corporation.  Indemnitee may at any time and for any reason resign from any such position (subject to any other contractual obligation or any obligation imposed by operation of law) in which event the Corporation shall have no obligations under this Agreement to continue Indemnitee in such position.  This Agreement shall not be deemed an employment contract between the Corporation (or any of its subsidiaries or any other entity or enterprise) and Indemnitee.  The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve in the aforementioned capacity with the Corporation in accordance with the terms of this Agreement.
Section 3.    Indemnification.  The Corporation shall indemnify, and advance Expenses to, Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to, or is threatened to be made a party to, any Proceeding (including a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of Indemnitee’s Corporate Status against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with such Proceeding.  For purposes of this Section 3, the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to the fullest extent authorized or permitted by any amendments to or replacements of the Delaware General Corporation Law (the “DGCL”) that increase the extent to which a corporation may indemnify its officers and directors (including amendments to or replacements of any provisions that authorize or contemplate additional indemnification by agreement).  For the avoidance of doubt, if Indemnitee becomes a party to, or is otherwise involved in, any Proceeding initiated by the Corporation or any governmental or regulatory body to require 

Indemnitee to repay an advancement of expenses from the Corporation or to obtain a determination from a judicial or regulatory body that indemnification is prohibited by applicable law, the Corporation shall, to the fullest extent permitted by law, indemnify Indemnitee for the Expenses Indemnitee incurs in such suit and advance Expenses to Indemnitee prior to the final disposition of such suit.
Section 4.    Proceedings Other Than Proceedings by or in the Right of the Corporation.  Without limiting the scope of Section 3, Indemnitee shall be entitled to the rights of indemnification provided in this Section if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be made, a party to any Proceeding, other than a Proceeding by or in the right of the Corporation.  Pursuant to this Section, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines, other monetary remedies and amounts paid in settlement incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.  
Section 5.    Proceedings by or in the Right of the Corporation.  Without limiting the scope of Section 3, Indemnitee shall be entitled to the rights of indemnification provided in this Section if, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be made, a party to any Proceeding brought by or in the right of the Corporation to procure a judgment in its favor.  Pursuant to this Section, Indemnitee shall be indemnified against Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation.  Notwithstanding the foregoing, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in any such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Corporation if applicable law prohibits such indemnification; provided, however, that if applicable law so permits, indemnification against Expenses shall nevertheless be made by the Corporation in such event if, and only to the extent that, the Court of Chancery of the State of Delaware (the “Delaware Court”), or the court in which such Proceeding shall have been brought or is pending, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such Expenses as the Delaware Court or such other court shall deem proper.
Section 6.    Contribution.  To the fullest extent permitted by applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Corporation, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for Expenses, judgments, fines, penalties, other monetary remedies, amounts paid or to be paid in settlement in connection with any claim relating to a Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Corporation and Indemnitee as a result of the events or transactions giving rise to such 

Proceeding; and/or (ii) the relative fault of the Corporation (and its directors, officers, employees and agents) and Indemnitee in connection with such events or transactions.
Section 7.    Indemnification for Expenses of a Party Who is Wholly or Partly Successful.  Notwithstanding any other provision of this Agreement (other than Section 17), to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to or a participant in, and is successful, on the merits or otherwise, in any Proceeding, or in defense of any Claim, issue or matter therein, Indemnitee shall be indemnified by the Corporation against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Corporation shall indemnify Indemnitee against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter.  For the purposes of this Section and without limiting the foregoing, to the fullest extent permitted by law, the termination of any claim, issue or matter in any such Proceeding by dismissal, with or without prejudice, or, in the case of a government or other third-party inquiry, conclusion of such inquiry without formal action, shall be deemed to be a successful result as to such claim, issue or matter.
Section 8.    Indemnification for Expenses of a Witness.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in any Proceeding (and is not a party or threatened to be made a party to such Proceeding), Indemnitee shall be indemnified against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
Section 9.    Advancement of Expenses.  The Corporation shall advance, to the extent not prohibited by applicable law, all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within ten days after the receipt by the Corporation of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee.  Execution of this Agreement shall constitute an undertaking by Indemnitee that Indemnitee undertakes to repay any Expenses advanced if it shall ultimately be determined (by a court of competent jurisdiction in a final judgment not subject to appeal) that Indemnitee is not entitled to be indemnified by the Corporation against such Expenses. Advances shall be unsecured and interest free.  Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.  The right to advancement under this Agreement shall include (a) advancement for any and all Expenses incurred pursuing an action to enforce the rights of advancement, indemnification or other rights set forth in this Agreement, and (b) Expenses incurred in preparing and forwarding statements to the Corporation to support any claims for advancement under this Agreement.  Indemnitee may, in Indemnitee’s written request for advancement described below in Section 10, specify whether the Corporation shall (i) pay such Expenses on behalf of Indemnitee, (ii) advance to Indemnitee funds in an amount sufficient to pay such 

Expenses, or (iii) reimburse Indemnitee for such Expenses, and any advancement of Expenses by the Corporation shall be in accordance with such specification by Indemnitee.
Section 10.    Procedure for Determination of Entitlement to Indemnification or Contribution.
(a)    To obtain indemnification or contribution under this Agreement in connection with any Proceeding, and for the duration thereof, Indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification or contribution.  Without limiting the foregoing sentence, Indemnitee must provide the Corporation with a copy of any summons, citation, subpoena, complaint, indictment, information or other similar document relating to such Proceeding with which Indemnitee is served or otherwise received and which is reasonably requested by the Corporation.  The Corporation will be entitled to participate in any Proceeding at its own expense.  Indemnitee shall have the right to engage Indemnitee’s own counsel in connection with any Proceeding.  Indemnitee’s counsel shall cooperate reasonably with the Corporation’s counsel to minimize the cost of defending claims against the Corporation and Indemnitee.  The Secretary of the Corporation shall, promptly upon receipt of any such request for indemnification or contribution, advise the Board in writing that Indemnitee has requested indemnification or contribution.
(b)    Upon written request by Indemnitee for indemnification or contribution pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in such case: (i) if a Change in Control shall have occurred, by Independent Counsel (unless Indemnitee shall request that such determination be made by the Corporation, in which case in the manner provided for in clause (ii) or (iii) of this Section 10(b)) in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum, or (B) by a committee of Disinterested Directors designated by majority vote of the Disinterested Directors even though less than a quorum, or (C) if there are no Disinterested Directors or the Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, as determined by the Board, or (iii) if necessary, as provided in Section 11(b).  If it is so determined that Indemnitee is entitled to indemnification or contribution, payment to Indemnitee shall be made within ten days after such determination.  Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification or contribution, including without limitation providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Corporation (irrespective of the determination as to Indemnitee’s entitlement to indemnification or contribution) and the Corporation hereby 

agrees to indemnify and hold Indemnitee harmless therefrom.
(c)    If required, Independent Counsel shall be selected as follows: (i) if a Change in Control shall not have occurred, Independent Counsel shall be selected by the Corporation, and the Corporation shall give written notice to Indemnitee advising Indemnitee of the identity of Independent Counsel so selected; or (ii) if a Change in Control shall have occurred, Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Corporation, in which event (i) shall apply), and Indemnitee shall give written notice to the Corporation advising it of the identity of Independent Counsel so selected. In either event, Indemnitee or the Corporation, as the case may be, may, within ten days after such written notice of selection shall have been given, deliver to the Corporation or to Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the ground that Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1, and the objection shall set forth with particularity the factual basis of such assertion.  If such written objection is made, Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit.  If, within ten days after submission by Indemnitee of a written request for indemnification or contribution pursuant to Section 10(a), no Independent Counsel shall have been selected without objection, either the Corporation or Indemnitee may petition the Delaware Court, for resolution of any objection which shall have been made by Indemnitee to the Corporation to the selection of Independent Counsel and/or for appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 10(b).  The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with its actions pursuant to this Agreement, and the Corporation shall pay all reasonable fees and expenses incident to the procedures of this Section 10(c), regardless of the manner in which such Independent Counsel was selected or appointed.  The Corporation shall indemnify Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.  Upon the due commencement date of any judicial proceeding pursuant to Section 12(a), Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
Section 11.    Presumptions and Effects of Certain Proceedings.
(a)    To the fullest extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a), and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to the presumption.  Neither (i) the failure of the Corporation, any one or more Disinterested Directors (or committees thereof) or of Independent Counsel to have made a determination prior to the commencement of 

any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Corporation, any one or more Disinterested Directors (or committees thereof) or by Independent Counsel that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
(b)    If the person, persons or entity empowered or selected under Section 10 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith require(s) such additional time for the obtaining or evaluating of documentation and/or information relating thereto if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b).
(c)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
(d)    The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Corporation or any entity or enterprise that Indemnitee is serving at the request of the Corporation shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Section 12.    Remedies of Indemnitee.
(a)    Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 9, (iii) the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b) and such determination shall not have been made and delivered in a written opinion within 90 days after receipt by the Corporation of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7, Section 8 or the last sentence of Section 10(b) within ten days after receipt by the Corporation of a written request therefor, (v) payment of 

indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 10 or 11, or (vi) payment to Indemnitee pursuant to any contribution rights under this Agreement is not made within the later of ten days after receipt by the Corporation of a written request therefor and the date that Indemnitee is entitled to seek an adjudication by the Delaware Court in accordance with this paragraph for a claim for indemnification with respect to any Proceeding giving rise to a right to contribution, Indemnitee shall be entitled to an adjudication in the Delaware Court of Indemnitee’s entitlement to such contribution, indemnification or advancement of Expenses.  The Corporation shall not oppose Indemnitee’s right to seek any such adjudication.
(b)    In the event that a determination shall have been made pursuant to Section 10 that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section shall be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination and the Corporation may not refer to or introduce into evidence any determination pursuant to Section 10 of this Agreement adverse to Indemnitee.  In any judicial proceeding commenced pursuant to this Section, the Corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c)    If a determination shall have been made or deemed to have been made pursuant to Section 10 or 11 that Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to this Section, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) prohibition of such indemnification under applicable law.
(d)    The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Corporation is bound by all the provisions of this Agreement.
(e)    In the event that Indemnitee, pursuant to this Section, seeks a judicial adjudication of Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall, to the fullest extent permitted by law, be entitled to recover from the Corporation, and be indemnified by the Corporation against, any and all Expenses incurred by Indemnitee in such judicial adjudication regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(f)    Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein.
Section 13.    Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a)    The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Restated Certificate of Incorporation or Restated Bylaws of the Corporation, any agreement, a vote of stockholders or a resolution of directors, or otherwise.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to Indemnitee with respect to any action taken or omitted by such Indemnitee in such Indemnitee’s Corporate Status prior to such amendment, alteration or repeal.
(b)    The Corporation hereby acknowledges that Indemnitee has, or may from time to time have, certain rights to indemnification, advancement of Expenses and/or insurance that is either (1) provided by a fund or other entity with which Indemnitee is associated or its affiliates (“Fund Indemnitors”) or (2) pursuant to insurance obtained on Indemnitee’s own behalf (“Individual Insurance,” and together with the obligations of Fund Indemnitors, the “Other Arrangements”).  The Corporation hereby agrees (i) that the Corporation will not assert in any litigation between the Corporation and Indemnitee that the Corporation’s obligations under this Agreement are not primary relative to the Other Arrangements, or that any obligation of the providers of the Other Arrangements to advance Expenses or to provide indemnification for the same Expenses, judgments, penalties, fines, other monetary remedies, amounts paid in settlement, incurred by Indemnitee or on Indemnitee’s behalf are not secondary, (ii) that the Corporation shall be required to advance the full amount of Expenses (subject to the provisions concerning advancement of Expenses set forth in this Agreement) incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines, other monetary remedies, amounts paid in settlement, relative to the Other Arrangements, or as may be required by the terms of this Agreement, the Restated Certificate of Incorporation or Restated Bylaws of the Corporation (or any other agreement between the Corporation and Indemnitee), without regard to any rights Indemnitee may have under the Other Arrangements, and (iii) that with respect to the Corporation’s obligations to advance Expenses and indemnify Indemnitee by reason of Indemnitee’s service as an officer or director of the Corporation, the Corporation irrevocably waives, relinquishes and releases the providers of the Other Arrangements from any and all claims for contribution, subrogation or any other recovery of any kind in respect thereof.  The Corporation further agrees that no advancement or payment by the providers of the Other Arrangements on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Corporation shall affect the foregoing and to the extent consistent with the terms of the Other Arrangements the providers of the Other Arrangements shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Corporation.  Nothing in this Agreement shall be deemed to prevent the Corporation from taking any action necessary to require its own insurer(s) to provide coverage to the Corporation or its officers or directors (including Indemnitee), including causing any person (including a provider of Other Arrangements to be named as a party to a declaratory judgment action brought to obtain such relief).
(c)    Indemnitee’s rights under this Agreement to receive payment of amounts as indemnification or advancement of Expenses shall not be subject to offset, set-off or reduction on 

account of, and shall be separate from, any obligation or liability that Indemnitee may have to the Corporation or any subsidiary and shall be paid without regard thereto.
(d)    Except as provided in Section 13(b), the Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
(e)    Except as provided in Section 13(b), in the event of any payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights.
Section 14.    Insurance.  Nothing in this Agreement shall be deemed to prohibit the Corporation from purchasing and maintaining insurance, at its expense, to protect itself or Indemnitee against any Expenses, judgments, penalties, fines, other monetary remedies and amounts paid in settlement incurred by Indemnitee in any such capacity, or arising out of Indemnitee’s status as such, whether or not Indemnitee would be indemnified against such expense, liability or loss under this Agreement.  To the extent that the Corporation maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents of fiduciaries of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee serves or served at the request of the Corporation, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available under such policy or policies for any person then serving as a director, officer, employee, agent or fiduciary.  Until the termination of this Agreement in accordance with Section 15, the Corporation shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to cause to be maintained in effect a policy or policies of directors’ and officers’ liability insurance providing coverage for directors, officers, employees, agents and fiduciaries of the Corporation that is reasonable in scope and amount, as determined by the Corporation in its reasonable discretion considering applicable facts and circumstances, including, but not limited to, industry standards.  In the event of a Change in Control occurring prior to the termination of this Agreement pursuant to Section 15, the Corporation shall maintain (or cause to be maintained) for the benefit of Indemnitee, the same policy or policies of liability insurance for directors, officers, employees, agents or fiduciaries of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Corporation that is reasonable in scope and amount, as determined by the Corporation in its reasonable discretion considering applicable facts and circumstances, including, but not limited to, industry standards for a period of ten years thereafter or the termination of this Agreement in accordance with Section 15, whichever is later.  The minimum AM Best rating for the insurance carrier of such insurance shall not be less than A-VI.  If, at the time of the receipt of a notice of a claim pursuant to the terms of this Agreement, the Corporation has directors’ and officers’ liability insurance in effect, the Corporation shall 

give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. 
Section 15.    Duration of Agreement.  This Agreement shall continue until and terminate upon the later of: (a) ten years after the date that Indemnitee shall have ceased to serve as a director, officer, employee, agent or fiduciary of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Corporation; or (b) the final termination of all pending Proceedings in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12.  This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators.  The Corporation shall use its reasonable best efforts to require and cause any successor, and any direct or indirect parent of any successor, whether direct or indirect by purchase, merger, consolidation or otherwise, to all, substantially all or a substantial part, of the business and/or assets of the Corporation, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession has taken place.
Section 16.    Severability.  If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:  (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself held invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself held invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
Section 17.    Exception to Right of Indemnification or Advancement of Expenses.  
(a)    Notwithstanding anything in this Agreement to the contrary, but subject to the penultimate sentence of Section 9 and subject to Section 12(e), Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding, or any claim therein, brought or made by Indemnitee voluntarily and not by way of defense against the Corporation or any other person or entity unless the initiation thereof was expressly approved by the Board.  For the avoidance of doubt, (1) Indemnitee shall not be deemed, for purposes of this paragraph, to have initiated or brought any claim by reason of (a) having asserted any affirmative defenses in connection with a claim not initiated by Indemnitee 

or (b) having made any counterclaim (whether permissive or mandatory) in connection with any claim not initiated by Indemnitee and (2) Indemnitee shall be entitled to indemnification and advancement for any suit initiated by Indemnitee to enforce the rights provided for in this Agreement, as contemplated by the penultimate sentence of Section 9 and Section 12(e).  
(b)    Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Corporation within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law.
Section 18.    Settlement.  The Corporation shall have no obligation to indemnify Indemnitee hereunder for any amounts paid in settlement of any Proceeding effected without the Corporation’s prior written consent, which shall not be unreasonably withheld.
Section 19.    Trust Fund.  Upon the occurrence of a Rating Event, the Corporation shall create a trust fund (the “Trust”) for the benefit of the Indemnitee under this Agreement and from time to time shall fund additional amounts to the Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated to be incurred following such Rating Event in connection with investigating, preparing for, participating in, and/or defending any Proceeding and any judgments, fines or other amounts reasonably anticipated to be paid related thereto for which Indemnitee is entitled to indemnification and/or advancement of Expenses pursuant to this Agreement.  The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the trustee of the Trust (the “Trustee”) taking into account directors’ and officers’ liability insurance maintained by the Corporation.  The terms of the Trust shall provide that (i) the Trust shall not be revoked or the principal thereof invaded without the written consent of Indemnitee, (ii) the Trustee shall advance, within 30 days of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the same circumstances for which Indemnitee would be required to reimburse the Corporation under Section 9 of this Agreement), (iii) the Trust shall continue to be funded by the Corporation in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise no later than 30 days after notice to the Corporation in accordance with Section 25 and (v) all unexpended funds in the Trust shall revert to the Corporation upon a final determination by the Trustee or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement.  The Trustee shall be chosen by the Corporation in good faith and must be acceptable to the Indemnitee (provided that the Indemnitee’s consent to the selection of a Trustee shall not be unreasonably withheld).  All income earned on the assets held in the Trust shall be reported as income by the Corporation for federal, state, local and foreign tax purposes.  The Corporation shall pay all costs of establishing and maintaining the Trust and shall indemnify the Trustee against any and all expenses (including attorney’s fees), claims, liabilities, loss and damages arising out of or relating to this Agreement or the establishment and maintenance of the Trust.  The establishment of the Trust shall not, in any way, diminish the Corporation’s obligation to 

indemnify an Indemnitee to the full extent required by this Agreement.
Section 20.    Access to Information.  The Corporation shall provide Indemnitee with such information as the Corporation determines is reasonable under the circumstances to enable Indemnitee to enforce Indemnitee’s rights under this Agreement; provided that the Corporation shall not be required to deliver any information pursuant to this Section 20 if the provision of such information would, in the Corporation’s judgment, prejudice the Corporation’s rights or obligations in any Proceeding.  The foregoing shall not prejudice the rights of Indemnitee to discovery or otherwise in a Proceeding commenced in the Delaware Court to enforce this Agreement.  Indemnitee agrees that any information provided to Indemnitee pursuant to this section is material non-public information that Indemnitee is obligated to hold in confidence and may not disclose publicly or trade on the basis of; provided, however, that Indemnitee is permitted to use such information and to disclose such information to Indemnitee’s legal counsel solely in connection with defending Indemnitee from legal liability.
Section 21.    Identical Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  Only one such counterpart, signed by the party against whom enforceability is sought, may constitute evidence of the existence of this Agreement.
Section 22.    Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 23.    Modification and Waiver.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 24.    Notice by Indemnitee.  Indemnitee agrees to notify the Corporation promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.
Section 25.    Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom such notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:
(a)    If to Indemnitee, to:

[Insert Address]
(b)    If to the Corporation, to:
Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church, Virginia 22042
Attention:  Corporate Secretary
or to such other address as may have been furnished to Indemnitee by the Corporation or to the Corporation by Indemnitee, as the case may be.
Section 26.    Governing Law and Consent to Jurisdiction.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws in effect in the State of Delaware, without regard to its conflict of laws rules.  The Corporation and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address set forth in Section 25 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 27.    Enforcement; Specific Performance.  The Corporation expressly confirms and agrees that it has entered into this Agreement in order to induce Indemnitee to serve or to continue to serve as a director or officer of the Corporation, and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity.  The parties hereto agree that a delayed monetary remedy for breach of this Agreement shall cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce the Corporation’s obligations to advance Expenses provided under this Agreement by seeking injunctive relief and/or specific performance hereof, without further showing actual damage or irreparable harm.  The parties hereto further agree that Indemnitee shall be entitled to any such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith.  The Corporation acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the court, and the Corporation hereby waives any such requirement of a bond or undertaking.  Nothing herein shall prevent Indemnitee from seeking or obtaining any other relief to which Indemnitee may be entitled.  
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the 

day and year first above written.
NORTHROP GRUMMAN CORPORATION        INDEMNITEE
_____________________________                __________________________
Wesley G. Bush                        [Name]
Chairman, 
Chief Executive Officer and President

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