Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered
into as of May 15, 2002 by BLOCK COMMUNICATIONS, INC., an Ohio corporation (the
"Borrower" and a "Grantor"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE
BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A
SECURITY JOINDER AGREEMENT (each a "Guarantor" and a "Grantor", and collectively
with the Borrower, the "Grantors"), and BANK OF AMERICA, N. A., a national
banking association, as Administrative Agent (in such capacity, the
"Administrative Agent") for each of the Lenders (as defined in the Credit
Agreement (as defined below) and collectively with the Administrative Agent, the
"Secured Parties") now or hereafter party to the Credit Agreement. All
capitalized terms used but not otherwise defined herein or pursuant to Section 1
hereof shall have the respective meanings assigned thereto in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the Borrower
certain term loan facilities and revolving credit facility with a letter of
credit sublimit and swing line facility pursuant to the Credit Agreement dated
as of May 15, 2002 by and among the Borrower, the Administrative Agent and the
Lenders (as from time to time amended, revised, modified, supplemented, amended
and restated or replaced, renewed, refunded or refinanced, the "Credit
Agreement"); and
WHEREAS, as collateral security for payment and performance of its
Obligations, the Borrower is willing to grant to the Administrative Agent for
the benefit of the Secured Parties a security interest in all of its personal
property and assets pursuant to the terms of this Security Agreement; and
WHEREAS, each Guarantor will materially benefit from the Loans to be made,
and the Letters of Credit to be issued, under the Credit Agreement and each
Guarantor is a party (as signatory or by joinder) to a Guaranty pursuant to
which each Guarantor guarantees the Obligations of the Borrower; and
WHEREAS, as collateral security for payment and performance by each
Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which
such Guarantor is a party), and the payment and performance of its obligations
and liabilities (whether now existing or hereafter arising) hereunder or under
any of the other Loan Documents to which it is now or hereafter becomes a party,
each Guarantor is willing to grant to the Administrative Agent for the benefit
of the Secured Parties a security interest in all of its personal property and
assets pursuant to the terms of this Security Agreement; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan
Documents unless the Borrower and the Guarantors enter into this Security
Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit, and in further
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. CERTAIN DEFINITIONS.
(a) Terms used in this Security Agreement, not otherwise expressly defined
herein or in the Credit Agreement, and for which meanings are provided in the
Uniform Commercial Code of the State of New York (the "UCC"), shall have such
meanings.
(b) "Qualifying Control Agreement" shall have the meaning set forth on
Schedule 1(a) hereto.
(c) "Excluded Collateral" means (i) any cable television franchise or
other license, permit or contract right awarded by a Governmental Authority as
to which the applicable Grantor is prohibited from granting a security interest
pursuant to the terms of such franchise, license, permit or contract or by
applicable Law or as to which such assignment or pledge requires the prior
approval or consent of any third party, including any Governmental Authority,
provided that (A) to the extent that any such prohibition is rendered
ineffective by the provisions of Article 9 of the applicable Uniform Commercial
Code, any such franchise, license, permit or contract shall not constitute
Excluded Collateral but shall be included hereunder as Collateral (as defined
below), (B) upon the applicable Grantor obtaining all consents and giving all
notices required under any such franchise, license, permit or contract, or any
Law applicable thereto, then the affected asset shall automatically, without any
further action on the part of any Person, cease to constitute Excluded
Collateral and shall then and thereafter be included hereunder as Collateral,
(C) upon a change in any applicable Law such that there is no longer a
prohibition on the grant of a security interest in any franchise, license,
permit or contract, then the affected asset shall automatically, without any
further action on the part of any Person, cease to constitute Excluded
Collateral and shall then and thereafter be included hereunder as Collateral,
and (D) the proceeds of any Disposition of any franchise, license, permit or
contract that constitutes Excluded Collateral shall at all times constitute
Collateral and shall not be a part of this definition of Excluded Collateral;
(ii) the ownership or equity interest of any Grantor in WAND (TV) Partnership,
an Illinois partnership ("WAND"), to the extent the applicable Grantor is
prohibited from granting a security interest pursuant to the terms of the
partnership agreement under which WAND is created (the "WAND Partnership
Agreement") without the prior approval or consent of the other partner in WAND,
provided that (A) to the extent that any such prohibition is rendered
ineffective by the provisions of Article 9 of the applicable Uniform Commercial
Code, any such interest in WAND shall not constitute Excluded Collateral but
shall be included hereunder as Collateral (as defined below), (B) if at any time
the applicable Grantor obtains the consent required under the WAND Partnership
Agreement with respect to any interest in WAND, then such interest in WAND shall
automatically, without any further action on the part of any Person, cease to
constitute Excluded Collateral and shall then and thereafter be included
hereunder as Collateral, (C) upon an amendment to or other change in the WAND
Partnership Agreement such that there is no longer a prohibition on the grant of
a security interest in any interest in WAND, then such interest in WAND shall
automatically, without any further action
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on the part of any Person, cease to constitute Excluded Collateral and shall
then and thereafter be included hereunder as Collateral, and (D) the proceeds of
any Disposition of any interest in WAND that constitutes Excluded Collateral
shall at all times constitute Collateral and shall not be a part of this
definition of Excluded Collateral; (iii) the securities set forth on Schedule
1(b) hereto, but only to the extent that, and so long as, such securities are
not Subsidiary Securities and the owner of such securities is subject to a
restriction specifically prohibiting the pledge or other grant of a security
interest in such securities, and at any time that any prohibition shall cease to
be in force or be unenforceable either by contract or operation of applicable
Law, the applicable Grantor's interest in such security shall automatically,
without any further action on the part of any Person, cease to constitute
Excluded Collateral and shall then and thereafter be included hereunder as
Collateral; and (iv) any other asset that is subject to a restriction on the
granting of a security interest therein, to the extent that such restriction is
permitted by Section 7.16 of the Credit Agreement, but only to the extent and so
long as such restriction is in force and enforceable, and at any time that any
such restriction shall cease to be in force or be unenforceable either by
contract or operation of applicable Law, the applicable Grantor's interest in
such asset shall automatically, without any further action on the part of any
Person, cease to constitute Excluded Collateral and shall then and thereafter be
included hereunder as Collateral.
2. GRANT OF SECURITY INTEREST. The Borrower hereby grants as collateral
security for the payment, performance and satisfaction of all of the Borrower's
Obligations, and each Guarantor hereby grants as collateral security for the
payment, performance and satisfaction of all of its Guarantor's Obligations (as
defined in its Guaranty) and the payment and performance of its obligations and
liabilities (whether now existing or hereafter arising) hereunder or under any
of the other Loan Documents to which it is now or hereafter becomes a party (all
such obligations and liabilities of the Borrower and the other Grantors referred
to collectively as the "Secured Obligations"), to the Administrative Agent for
the benefit of the Secured Parties a continuing first priority security interest
in and to, and collaterally assigns to the Administrative Agent for the benefit
of the Secured Parties, all of the personal property of such Grantor or in which
such Grantor has or may have or acquire an interest or the power to transfer
rights therein, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located, including the following:
(a) All accounts, and including accounts receivable, contracts,
bills, acceptances, choses in action, and other forms of monetary
obligations at any time owing to such Grantor arising out of property
sold, leased, licensed, assigned or otherwise disposed of or for services
rendered or to be rendered by such Grantor, and all of such Grantor's
rights with respect to any property represented thereby, whether or not
delivered, property returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation
(collectively referred to hereinafter as "Accounts");
(b) All inventory, including all goods manufactured or acquired for
sale or lease, and any piece goods, raw materials, work in process and
finished merchandise, component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items
used or consumed in the operation of the business of such Grantor or which
may contribute to the finished product or to the sale, promotion and
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shipment thereof, in which such Grantor now or at any time hereafter may
have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of such Grantor
or is held by such Grantor or by others for such Grantor's account
(collectively referred to hereinafter as "Inventory");
(c) All goods, including all machinery, equipment, motor vehicles,
parts, supplies, apparatus, appliances, tools, patterns, molds, dies,
blueprints, fittings, furniture, furnishings, fixtures and articles of
tangible personal property of every description, and all computer programs
embedded in any of the foregoing and all supporting information relating
to such computer programs (collectively referred to hereinafter as
"Equipment");
(d) All general intangibles, including all rights now or hereafter
accruing to such Grantor under contracts, leases, agreements or other
instruments, including all contracts or contract rights to perform or
receive services, to purchase or sell goods, or to hold or use land or
facilities, and to enforce all rights thereunder, all causes of action,
corporate or business records, inventions, patents and patent rights,
rights in mask works, designs, trade names and trademarks and all goodwill
associated therewith, trade secrets, trade processes, copyrights,
licenses, permits, franchises, customer lists, computer programs and
software, all internet domain names and registration rights thereto, all
internet websites and the content thereof, all payment intangibles, all
claims under guaranties, tax refund claims, all rights and claims against
carriers and shippers, leases, all claims under insurance policies, all
interests in general and limited partnerships, limited liability
companies, and other Persons not constituting Investment Property (as
defined below), all rights to indemnification and all other intangible
personal property and intellectual property of every kind and nature
(collectively referred to hereinafter as "General Intangibles");
(e) All deposit accounts, including demand, time, savings, passbook,
or other similar accounts maintained with any bank by or for the benefit
of such Grantor (collectively referred to hereinafter as "Deposit
Accounts");
(f) All chattel paper, including tangible chattel paper, electronic
chattel paper, or any hybrid thereof (collectively referred to hereinafter
as "Chattel Paper");
(g) All investment property, including all securities, security
entitlements, securities accounts, commodity contracts and commodity
accounts of or maintained for the benefit of such Grantor, but excluding
Pledged Interests subject to any Pledge Agreement (collectively referred
to hereinafter as "Investment Property");
(h) All instruments, including all promissory notes
(collectively referred to hereinafter as "Instruments");
(i) All documents, including warehouse receipts, bills of lading and
other documents of title (collectively referred to hereinafter as
"Documents");
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(j) All rights to payment or performance under letters of credit
including rights to proceeds of letters of credit ("Letter-of-Credit
Rights"), and all guaranties, endorsements, Liens, other Guaranty
Obligations or supporting obligations of any Person securing or supporting
the payment, performance, value or liquidation of any of the foregoing
(collectively, with Letter-of-Credit Rights, referred to hereinafter as
"Supporting Obligations");
(k) The commercial tort claims identified on Schedule 9(i) hereto,
as such Schedule may be supplemented from time to time in accordance with
the terms hereof (collectively referred to hereinafter as "Commercial Tort
Claims");
(l) All books and records relating to any of the forgoing (including
customer data, credit files, ledgers, computer programs, printouts, and
other computer materials and records (and all media on which such data,
files, programs, materials and records are or may be stored)); and
(m) All proceeds, products and replacements of, accessions to, and
substitutions for, any of the foregoing, including without limitation
proceeds of insurance policies insuring any of the foregoing;
provided, however, that the Excluded Collateral is expressly excluded from the
grant contained in this Section 2, and each definition in subsections (a)
through (k) above shall exclude any asset fitting such description that is
Excluded Collateral. All of the property and interests in property described in
subsections (a) through (m), other than property and interests in property
constituting Excluded Collateral, are herein collectively referred to as the
"Collateral."
3. PERFECTION. As of the date of execution of this Security Agreement or a
Security Joinder Agreement by each Grantor, as applicable (with respect to each
Grantor, its "Applicable Date"), other than with respect to motor vehicles (as
applicable), such Grantor shall have:
(a) furnished the Administrative Agent with properly executed
financing statements in form, number and substance suitable for filing,
sufficient under applicable law, and satisfactory to the Administrative
Agent in order that upon the filing of the same the Administrative Agent,
for the benefit of the Secured Parties, shall have a duly perfected
security interest in all Collateral in which a security interest can be
perfected by the filing of financing statements;
(b) to the extent expressly required by the terms hereof or of the
Credit Agreement, or otherwise as the Administrative Agent may request,
furnished the Administrative Agent with properly executed Qualifying
Control Agreements, issuer acknowledgments of the Administrative Agent's
interest in Letter-of-Credit Rights, and evidence of the placement of a
restrictive legend on tangible chattel paper (and the tangible components
of electronic Chattel Paper), and taken appropriate action acceptable to
the Administrative Agent sufficient to establish the Administrative
Agent's control of electronic Chattel Paper (and the electronic components
of hybrid Chattel Paper), as appropriate, with respect to Collateral in
which either (i) a security interest can be
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perfected only by control or such restrictive legending, or (ii) a
security interest perfected by control or accompanied by such restrictive
legending shall have priority as against a lien creditor, a purchaser of
such Collateral from the applicable Grantor, or a security interest
perfected by Persons not having control or not accompanied by such
restrictive legending, in each case in form and substance acceptable to
the Administrative Agent and sufficient under applicable law so that the
Administrative Agent, for the benefit of the Secured Parties, shall have a
security interest in all such Collateral perfected by control; and
(c) delivered to the Administrative Agent possession of all
Collateral with respect to which either a security interest can be
perfected only by possession or a security interest perfected by
possession shall have priority as against Persons not having possession,
and including in the case of Instruments, Documents, and Investment
Property in the form of certificated securities, duly executed
endorsements or stock powers in blank, as the case may be, affixed thereto
in form and substance acceptable to the Administrative Agent and
sufficient under applicable law so that the Administrative Agent, for the
benefit of the Secured Parties, shall have a security interest in all such
Collateral perfected by possession;
with the effect that the Liens conferred in favor of the Administrative Agent
shall be and remain duly perfected and of first priority subject only, to the
extent applicable, to Liens allowed to exist under Section 7.01 of the Credit
Agreement ("Permitted Liens"). All financing statements (including all
amendments thereto and continuations thereof), control agreements, certificates,
acknowledgments, stock powers and other documents, electronic identification,
restrictive legends, and instruments furnished in connection with the creation,
enforcement, protection, perfection or priority of the Administrative Agent's
security interest in Collateral, including such items as are described above in
this Section 3, are sometimes referred to herein as "Perfection Documents". The
delivery of possession of items of or evidencing Collateral, causing other
Persons to execute and deliver Perfection Documents as appropriate, the filing
or recordation of Perfection Documents, the establishment of control over items
of Collateral, and the taking of such other actions as may be necessary or
advisable in the determination of the Administrative Agent to create, enforce,
protect, perfect, or establish or maintain the priority of, the security
interest of the Administrative Agent for the benefit of the Secured Parties in
the Collateral is sometimes referred to herein as "Perfection Action".
4. MAINTENANCE OF SECURITY INTEREST; FURTHER ASSURANCES.
(a) Each Grantor will from time to time at its own expense, deliver
specific assignments of Collateral or such other Perfection Documents, and
take such other or additional Perfection Action, as may be required by the
terms of the Loan Documents or as the Administrative Agent may reasonably
request in connection with the administration or enforcement of this
Security Agreement or related to the Collateral or any part thereof in
order to carry out the terms of this Security Agreement, to perfect,
protect, maintain the priority of or enforce the Administrative Agent's
security interest in the Collateral, subject only to Permitted Liens, or
otherwise to better assure and confirm unto the Administrative Agent its
rights, powers and remedies for the benefit of the
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Secured Parties hereunder. Without limiting the foregoing, each Grantor
hereby irrevocably authorizes the Administrative Agent to file (with, or
to the extent permitted by applicable law, without the signature of the
Grantor appearing thereon) financing statements (including amendments
thereto and initial financing statements in lieu of continuation
statements) or other Perfection Documents (including copies thereof)
showing such Grantor as "debtor" at such time or times and in all filing
offices as the Administrative Agent may from time to time determine to be
necessary or advisable to perfect or protect the rights of the
Administrative Agent and the Secured Parties hereunder, or otherwise to
give effect to the transactions herein contemplated, any of which
Perfection Documents, at the Administrative Agent's election, may describe
the Collateral as or including all personal property of the Grantor. Each
Grantor hereby irrevocably ratifies and acknowledges the Administrative
Agent's authority to have effected filings of Perfection Documents made by
the Administrative Agent prior to its Applicable Date.
(b) With respect to any and all Collateral, each Grantor agrees to
do and cause to be done all things necessary to perfect, maintain the
priority of and keep in full force the security interest granted in favor
of the Administrative Agent for the benefit of the Secured Parties,
including, but not limited to, the prompt payment upon demand therefor by
the Administrative Agent of all fees and expenses (including documentary
stamp, excise or intangibles taxes) incurred in connection with the
preparation, delivery, or filing of any Perfection Document or the taking
of any Perfection Action to perfect, protect or enforce a security
interest in Collateral in favor of the Administrative Agent for the
benefit of the Secured Parties, subject only to Permitted Liens. All
amounts not so paid when due shall constitute additional Secured
Obligations and (in addition to other rights and remedies resulting from
such nonpayment) shall bear interest from the date of demand until paid in
full at the Default Rate.
(c) Each Grantor agrees to maintain among its books and records
appropriate notations or evidence of, and to make or cause to be made
appropriate disclosure upon its financial statements (in accordance with
the requirements of GAAP) of, the security interest granted hereunder to
the Administrative Agent for the benefit of the Secured Parties.
5. RECEIPT OF PAYMENT. In the event an Event of Default shall occur and be
continuing and a Grantor (or any of its Affiliates, subsidiaries, stockholders,
directors, officers, employees or agents on behalf of such Grantor) shall
receive any proceeds of Collateral, including without limitation monies, checks,
notes, drafts or any other items of payment, each Grantor shall hold all such
items of payment in trust for the Administrative Agent for the benefit of the
Secured Parties, and as the property of the Administrative Agent for the benefit
of the Secured Parties, separate from the funds and other property of such
Grantor, and no later than the first Business Day following the receipt thereof,
at the election of the Administrative Agent, such Grantor shall cause such
Collateral to be forwarded to the Administrative Agent for its custody,
possession and disposition on behalf of the Secured Parties in accordance with
the terms hereof and of the other Loan Documents.
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6. PRESERVATION AND PROTECTION OF COLLATERAL.
(a) Except for the exercise of reasonable care in the custody and
preservation of any Collateral in its possession and accounting for monies
received by it pursuant to this Security Agreement, the Administrative
Agent shall be under no duty or liability with respect to the collection,
protection or preservation of the Collateral. Each Grantor shall be
responsible for the safekeeping of its Collateral, and in no event shall
the Administrative Agent have any responsibility for (i) any loss or
damage thereto or destruction thereof occurring or arising in any manner
or fashion from any cause, (ii) any diminution in the value thereof, or
(iii) any act or default of any carrier, warehouseman, bailee or
forwarding agency thereof or other Person in any way dealing with or
handling such Collateral.
(b) Each Grantor shall keep and maintain its tangible personal
property Collateral in good operating condition and repair, ordinary wear
and tear excepted. No Grantor shall permit any such items to become a
fixture to real property (unless either such Grantor has granted the
Administrative Agent for the benefit of the Secured Parties a Lien on such
real property having a priority acceptable to the Administrative Agent or
the Administrative Agent has determined in its reasonable discretion that
such a Lien on such real property is not required) or accessions to other
personal property.
(c) Each Grantor agrees (i) to pay when due all taxes, charges and
assessments against the Collateral in which it has any interest, unless
being contested in good faith by appropriate proceedings diligently
conducted and against which adequate reserves have been established in
accordance with GAAP applied on a consistent basis and evidenced to the
satisfaction of the Administrative Agent and provided that all enforcement
proceedings in the nature of levy or foreclosure are effectively stayed,
and (ii) to cause to be terminated and released all Liens (other than
Permitted Liens) on the Collateral. Upon the failure of any Grantor to so
pay or contest such taxes, charges, or assessments, or cause such Liens to
be terminated, the Administrative Agent at its option may pay or contest
any of them or amounts relating thereto (the Administrative Agent having
the sole right to determine the legality or validity and the amount
necessary to discharge such taxes, charges, Liens or assessments) but
shall not have any obligation to make any such payment or contest. All
sums so disbursed by the Administrative Agent, including reasonable
Attorneys' Costs, court costs, expenses and other charges related thereto,
shall be payable on demand by the applicable Grantor to the Administrative
Agent and shall be additional Secured Obligations secured by the
Collateral, and any amounts not so paid on demand (in addition to other
rights and remedies resulting from such nonpayment) shall bear interest
from the date of demand until paid in full at the Default Rate.
7. STATUS OF GRANTORS AND COLLATERAL GENERALLY. Each Grantor represents
and warrants to, and covenants with, the Administrative Agent for the benefit of
the Secured Parties, with respect to itself and the Collateral as to which it
has or acquires any interest, that:
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(a) It is at its Applicable Date (or as to Collateral acquired after
its Applicable Date will be upon the acquisition of the same) and, except
as permitted by the Credit Agreement and subsection (b) of this Section 7,
will continue to be, the owner of the Collateral, free and clear of all
Liens, other than the security interest hereunder in favor of the
Administrative Agent for the benefit of the Secured Parties and Permitted
Liens, and that it will at its own cost and expense defend such Collateral
and any products and proceeds thereof against all claims and demands of
all Persons (other than holders of Permitted Liens) at any time claiming
the same or any interest therein adverse to the Secured Parties. Upon the
failure of any Grantor to so defend, the Administrative Agent may do so at
its option but shall not have any obligation to do so. All sums so
disbursed by the Administrative Agent, including reasonable Attorneys'
Costs, court costs, expenses and other charges related thereto, shall be
payable on demand by the applicable Grantor to the Administrative Agent
and shall be additional Secured Obligations secured by the Collateral, and
any amounts not so paid on demand (in addition to other rights and
remedies resulting from such nonpayment) shall bear interest from the date
of demand until paid in full at the Default Rate.
(b) It shall not (i) sell, assign, transfer, lease, license or
otherwise dispose of any of, or grant any option with respect to, the
Collateral, except for dispositions permitted under the Credit Agreement,
(ii) create or suffer to exist any Lien upon or with respect to any of the
Collateral except for the security interests created by this Security
Agreement and Permitted Liens, or (iii) take any other action in
connection with any of the Collateral that would materially impair the
interest or rights of such Grantor in the Collateral taken as a whole or
that would materially impair the interest or rights of the Administrative
Agent for the benefit of the Secured Parties.
(c) It has full power, legal right and lawful authority to enter
into this Security Agreement (and any Security Joinder Agreement
applicable to it) and to perform its terms, including the grant of the
security interests in the Collateral herein provided for.
(d) No authorization, consent, approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person
is required either (i) for the grant by such Grantor of the security
interests granted hereby or the collateral assignment hereunder, or for
the execution, delivery or performance of this Security Agreement (or any
Security Joinder Agreement applicable to it) by such Grantor, or (ii) for
the perfection of or the exercise by the Administrative Agent, on behalf
of the Secured Parties, of its rights and remedies hereunder, except for
action required by the Uniform Commercial Code to perfect the security
interest conferred hereunder.
(e) Upon the filing of those UCC termination statements referred to
in Section 4.01 of the Credit Agreement and related releases in connection
with the termination of the Existing Credit Facilities, no effective
financing statement or other Perfection Document similar in effect, nor
any other Perfection Action, covering all or any part of the Collateral
purported to be granted or taken by or on behalf of such Grantor (or by or
on behalf of any other Person and which remains effective as against all
or any part of the Collateral) will be on file in any recording office,
delivered to another Person for filing
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(whether upon the occurrence of a contingency or otherwise), or otherwise
taken, as the case may be, except such as pertain to Permitted Liens and
such as may have been filed for the benefit of, delivered to, or taken in
favor of, the Administrative Agent for the benefit of the Secured Parties
in connection with the security interests conferred hereunder.
(f) Schedule 7(f) attached hereto contains true and complete
information as to the information required to be contained in Schedule
2A.03 of the Credit Agreement by Section 2A.03 of the Credit Agreement. No
Grantor shall change its name, change its jurisdiction of formation
(whether by reincorporation, merger or otherwise), change the location of
its chief executive office, utilize any additional location where tangible
personal property Collateral (including Account Records and Account
Documents) may be located, change or use any additional or different trade
name or style, except in each case upon giving written notice to the
Administrative Agent not later than ten (10) days after taking such action
and taking or causing to be taken at such Grantor's expense all such
Perfection Action, including the delivery of such Perfection Documents, as
may be reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in Collateral
contemplated hereunder.
(g) No Grantor shall engage in any consignment transaction in
respect of any of the Collateral, whether as consignee or consignor,
without the prior written consent of the Administrative Agent in each
instance.
(h) No Grantor shall cause, suffer or permit any of the tangible
personal property Collateral (i) to be evidenced by any document of title
(except for shipping documents as necessary or customary to effect the
receipt of raw materials or components or the delivery of inventory to
customers, in each case in the ordinary course of business) or (ii) to be
in the possession, custody or control of any warehouseman or other bailee
unless such location and Person are set forth on Schedule 7(f) or the
Administrative Agent shall have received not less than 30 days' prior
written notice of each such transaction, the Administrative Agent shall
have received a duly executed Qualifying Control Agreement from such
bailee, and the Grantor shall have caused at its expense to be prepared
and executed such additional Perfection Documents and to be taken such
other Perfection Action as the Administrative Agent may deem necessary or
advisable to carry out the transactions contemplated by this Security
Agreement.
(i) No tangible personal property Collateral is or shall be located
at any location that is leased by such Grantor from any other Person,
unless (x) such location and lessor is set forth on Schedule 7(f) attached
hereto or such Grantor provides written notice of such location and lessor
to the Administrative Agent not later than ten (10) days after locating
such tangible personal property at such location, (y) unless otherwise
agreed to by the Administrative Agent, such lessor acknowledges the Lien
in favor of the Administrative Agent for the benefit of the Secured
Parties conferred hereunder and waives its statutory and consensual liens
and rights with respect to such Collateral in form and substance
acceptable to the Administrative Agent and delivered in writing to
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the Administrative Agent prior to any Collateral being located at any such
location, and (z) the Grantor shall have caused at its expense to be
prepared and executed such additional Perfection Documents and to be taken
such other Perfection Action as the Administrative Agent may deem
necessary or advisable to carry out the transactions contemplated by this
Security Agreement.
8. INSPECTION. The Administrative Agent (by any of its officers, employees
and agents), on behalf of the Secured Parties, shall have the right upon prior
notice to an executive officer of any Grantor, and at any reasonable times
during such Grantor's usual business hours, at the expense of the Borrower, to
inspect the Collateral, all records related thereto (and to make extracts or
copies from such records), and the premises upon which any of the Collateral is
located, to discuss such Grantor's affairs and finances with any Person (other
than Persons obligated on any Accounts ("Account Debtors") except as expressly
otherwise permitted in the Loan Documents) and to verify with any Person other
than (except as expressly otherwise permitted in the Loan Documents) Account
Debtors the amount, quality, quantity, value and condition of, or any other
matter relating to, the Collateral and, if an Event of Default has occurred and
is continuing, to discuss such Grantor's affairs and finances with such
Grantor's Account Debtors and to verify the amount, quality, value and condition
of, or any other matter relating to, the Collateral with such Account Debtors.
Upon or after the occurrence and during the continuation of an Event of Default,
the Administrative Agent may at any time and from time to time employ and
maintain on such Grantor's premises a custodian selected by the Administrative
Agent who shall have full authority, to the extent permitted to the
Administrative Agent under this Security Agreement or the other Loan Documents,
to do all acts necessary to protect the Administrative Agent's (for the benefit
of the Secured Parties) interest. All expenses incurred by the Administrative
Agent, on behalf of the Secured Parties, by reason of the employment of such
custodian shall be paid by such Grantor on demand from time to time and shall be
added to the Secured Obligations secured by the Collateral, and any amounts not
so paid on demand (in addition to other rights and remedies resulting from such
nonpayment) shall bear interest from the date of demand until paid in full at
the Default Rate.
9. SPECIFIC COLLATERAL.
(a) ACCOUNTS. With respect to its Accounts whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) Each Grantor shall keep accurate and complete records of
its Accounts ("Account Records") and from time to time at reasonable
intervals designated by the Administrative Agent such Grantor shall
provide the Administrative Agent with a schedule of Accounts in form
and substance acceptable to the Administrative Agent describing all
Accounts created or acquired by such Grantor ("Schedule of
Accounts"); provided, however, that such Grantor's failure to
execute and deliver any such Schedule of Accounts shall not affect
or limit the Administrative Agent's security interest or other
rights in and to any Accounts for the benefit of the Secured
Parties. If requested by the Administrative Agent, each Grantor
shall furnish the Administrative Agent with
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copies of proof of delivery and other documents relating to the
Accounts so scheduled, including without limitation repayment
histories and present status reports (collectively, "Account
Documents") and such other matter and information relating to the
status of then existing Accounts as the Administrative Agent shall
request.
(ii) All Account Records and Account Documents are and shall
at all times be located only at such Grantor's current chief
executive office as set forth on Schedule 7(f) attached hereto, such
other locations as are specifically identified on Schedule 7(f)
attached hereto as an "Account Documents location," or as to which
the Grantor has complied with Section 7(f) hereof.
(iii) The Accounts are genuine, are in all respects what they
purport to be, are not evidenced by an instrument or document or, if
evidenced by an instrument or document, are only evidenced by one
original instrument or document.
(iv) The Accounts cover bona fide sales, leases, licenses or
other dispositions of Inventory or other property or property rights
usually dealt in by such Grantor, or the rendition by such Grantor
of services, to an Account Debtor in the ordinary course of
business.
(v) The amounts of the face value of any Account shown or
reflected on any Schedule of Accounts, invoice statement, or
certificate delivered to the Administrative Agent, are actually
owing to such Grantor and are not contingent for any reason. Other
than as set forth on a supplemental schedule maintained and
delivered by the applicable Grantor to the Administrative Agent with
the applicable Schedule of Accounts (the "Supplemental Schedule"),
there are no setoffs, discounts, allowances, claims, counterclaims
or disputes of any kind or description in an aggregate amount
greater than 3% of the face value of all Accounts shown on the
Schedule of Accounts existing or asserted with respect thereto.
(vi) Except for conditions generally applicable to such
Grantor's industry and markets, there are no facts, events, or
occurrences known to such Grantor pertaining particularly to any
Accounts which are reasonably expected to materially impair in any
way the validity, collectibility or enforcement of Accounts that
would reasonably be likely, in the aggregate, to be of material
economic value, or in the aggregate materially reduce the amount
payable thereunder from the amount of the invoice face value shown
on any Schedule of Accounts, or on any certificate, contract,
invoice or statement delivered to the Administrative Agent with
respect thereto.
(vii) The property or services giving rise thereto are not,
and were not at the time of the sale or performance thereof, subject
to any Lien, claim,
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encumbrance or security interest, except those of the Administrative
Agent for the benefit of Secured Parties and Permitted Liens.
(viii) With respect to Accounts that are shown on any Schedule
of Accounts, in the event any amounts due and owing in excess of
$1,000,000 individually, or $2,000,000 in the aggregate amount, are
in dispute between any Account Debtor and the applicable Grantor
(which shall include without limitation any dispute in which an
offset claim or counterclaim may result), unless such disputed
amount is set forth and described on the applicable Supplemental
Schedule, such Grantor shall provide the Administrative Agent with
written notice thereof as soon as practicable, explaining in detail
the reason for the dispute, all claims related thereto and the
amount in controversy.
(b) INVENTORY. With respect to its Inventory whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) Each Grantor shall keep accurate and complete records of
Inventory in commercially reasonable detail in the ordinary course
of its business, and shall furnish to the Administrative Agent from
time to time at reasonable intervals designated by the
Administrative Agent, a current schedule of Inventory ("Schedule of
Inventory") based upon its most recent physical inventory and its
daily inventory records. Each Grantor shall conduct a physical
inventory no less frequently than annually, and shall furnish to the
Administrative Agent such other documents and reports thereof as the
Administrative Agent shall reasonably request with respect to the
Inventory.
(ii) All Inventory shall at all times be located only at such
Grantor's locations as set forth on Schedule 7(f) attached hereto or
at such other locations as to which such Grantor has complied with
Section 7(f) hereof.
(c) EQUIPMENT. With respect to its Equipment whether now existing or
hereafter created or acquired and wheresoever located, each Grantor
represents, warrants and covenants to the Administrative Agent for the
benefit of the Secured Parties that:
(i) The Grantors, as soon as practicable following a request
therefor by the Administrative Agent, shall deliver to the
Administrative Agent any and all evidence of ownership of any of the
Equipment (including without limitation certificates of title and
applications for title).
(ii) The Grantors shall maintain accurate, itemized records
describing the kind, type, quantity and value of its Equipment and
shall furnish the Administrative Agent upon request with a current
schedule containing the foregoing information, but, other than
during the continuance of an Event of Default, not more often than
once per fiscal quarter.
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(iii) All Equipment is and shall at all times be located only
at such Grantor's locations as set forth on Schedule 7(f) attached
hereto or at such other locations as to which such Grantor has
complied with Section 7(f) hereof. No Grantor shall, other than to
the extent not prohibited by the Credit Agreement or any of the
other Loan Documents, sell, lease, transfer, dispose of or remove
any Equipment (other than motor vehicles) from such locations.
(d) SUPPORTING OBLIGATIONS. With respect to its Supporting
Obligations whether now existing or hereafter created or acquired and
wheresoever located, each Grantor represents, warrants and covenants to
the Administrative Agent for the benefit of the Secured Parties that:
(i) Each Grantor shall (A) maintain at all times, and furnish
to the Administrative Agent from time to time at the Administrative
Agent's request, a current list identifying in reasonable detail
each Supporting Obligation relating to any Collateral from a single
obligor in excess of $1,000,000, and (B) upon the request of the
Administrative Agent from time to time following the occurrence and
during the continuance of any Event of Default, deliver to the
Administrative Agent the originals of all documents evidencing or
constituting Supporting Obligations, together with such other
documentation (executed as appropriate by the Grantor) and
information as may be necessary to enable the Administrative Agent
to realize upon the Supporting Obligations in accordance with their
respective terms or transfer the Supporting Obligations as may be
permitted under the Loan Documents or by applicable law.
(ii) With respect to each letter of credit giving rise to
Letter-of-Credit Rights that has an aggregate stated amount
available to be drawn in excess of $1,000,000, each Grantor shall,
within thirty (30) days of the issuance of each such letter of
credit, cause the issuer thereof to execute and deliver to the
Administrative Agent a Qualifying Control Agreement.
(iii) With respect to each transferable letter of credit
giving rise to Letter-of-Credit Rights that has an aggregate stated
amount available to be drawn in excess of $1,000,000, each Grantor
shall, within thirty (30) days of the issuance of each such letter
of credit, deliver to the Administrative Agent a duly executed,
undated transfer form in blank sufficient in form and substance
under the terms of the related letter of credit to effect, upon
completion and delivery to the letter of credit issuer together with
any required fee, the transfer of such letter of credit to the
transferee identified in such form. Each Grantor hereby expressly
authorizes the Administrative Agent following the occurrence and
during the continuance of any Event of Default to complete and
tender each such transfer form as transferor in its own name or in
the name, place and stead of the Grantor in order to effect any such
transfer, either to the Administrative Agent or to another
transferee, as the case may be, in connection with any sale or other
disposition of Collateral or for any other purpose permitted under
the Loan Documents or by applicable law.
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(e) INVESTMENT PROPERTY. With respect to its Investment Property
whether now existing or hereafter created or acquired and wheresoever
located, each Grantor represents, warrants and covenants to the
Administrative Agent for the benefit of the Secured Parties that:
(i) Schedule 9(e) attached hereto contains a true and complete
description of (x) the name and address of each securities
intermediary with which such Grantor maintains a securities account
in which Investment Property is or may at any time be credited or
maintained, and (y) all other Investment Property of such Grantor
other than interests in Subsidiaries in which such Grantor has
granted a Lien to the Administrative Agent for the benefit of the
Secured Parties pursuant to a Pledge Agreement.
(ii) Except with the express prior written consent of the
Administrative Agent in each instance as to the form of the
Investment Property or the required deliveries thereto set forth
below, all Investment Property other than interests in Subsidiaries
in which such Grantor has granted a Lien to the Administrative Agent
for the benefit of the Secured Parties pursuant to a Pledge
Agreement shall be maintained at all times in the form of (A)
certificated securities, which certificates shall have been
delivered to the Administrative Agent together with duly executed
undated stock powers endorsed in blank pertaining thereto, or (B)
security entitlements credited to one or more securities accounts as
to each of which the Administrative Agent has received (1) copies of
the account agreement between the applicable securities intermediary
and the Grantor and the most recent statement of account pertaining
to such securities account (each certified to be true and correct by
an officer of the Grantor) and (2) a Qualifying Control Agreement
from the applicable securities intermediary which remains in full
force and effect and as to which the Administrative Agent has not
received any notice of termination. Without limiting the generality
of the foregoing, no Grantor shall cause, suffer or permit any
Investment Property to be credited to or maintained in any
securities account not listed on Schedule 9(e) attached hereto
except in each case upon giving not less than thirty (30) days'
prior written notice to the Administrative Agent and taking or
causing to be taken at such Grantor's expense all such Perfection
Action, including the delivery of such Perfection Documents, as may
be reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in
Collateral contemplated hereunder.
(iii) All dividends and other distributions with respect to
any of the Investment Property shall be subject to the security
interest conferred hereunder, provided, however, that cash dividends
paid to a Grantor as record owner of the Investment Property may be
disbursed to and retained by such Grantor so long as no Event of
Default shall have occurred and be continuing, free from any Lien
hereunder.
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(iv) So long as no Event of Default shall have occurred and be
continuing, the registration of Investment Property in the name of a
Grantor as record and beneficial owner shall not be changed and such
Grantor shall be entitled to exercise all voting and other rights
and powers pertaining to Investment Property for all purposes not
inconsistent with the terms hereof or of any Qualifying Control
Agreement relating thereto.
(v) Upon the occurrence and during the continuance of any
Event of Default, at the option of the Administrative Agent, all
rights of the Grantors to exercise the voting or consensual rights
and powers which it is authorized to exercise pursuant to clause
(iv) immediately above shall cease and the Administrative Agent may
thereupon (but shall not be obligated to), at its request, cause
such Collateral to be registered in the name of the Administrative
Agent or its nominee or agent for the benefit of the Secured Parties
and/or exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end each
Grantor hereby appoints the Administrative Agent as its proxy, with
full power of substitution, to vote and exercise all other rights as
a shareholder with respect to such Investment Property upon the
occurrence and during the continuance of any Event of Default, which
proxy is coupled with an interest and is irrevocable until the
Facility Termination Date, and each Grantor hereby agrees to provide
such further proxies as the Administrative Agent may request;
provided, however, that the Administrative Agent in its discretion
may from time to time refrain from exercising, and shall not be
obligated to exercise, any such voting or consensual rights or such
proxy. For purposes of this Security Agreement, "Facility
Termination Date" means the date as of which all of the following
shall have occurred: (a) the Borrower shall have permanently
terminated the credit facilities under the Loan Documents by final
payment in full of all Outstanding Amounts, together with all
accrued and unpaid interest and fees thereon, other than (i) the
undrawn portion of Letters of Credit and (ii) all letter of credit
fees relating thereto accruing after such date (which fees shall be
payable solely for the account of the L/C Issuer and shall be
computed (based on interest rates then in effect) on such undrawn
amounts to the respective expiry dates of the Letters of Credit), in
each case as have been fully Cash Collateralized or as to which
other arrangements with respect thereto satisfactory to the
Administrative Agent and the L/C Issuer shall have been made; (b)
all Related Swap Contracts shall have been terminated, expired or
Cash Collateralized; (c) all Commitments shall have terminated or
expired; and (d) the Borrower and each other Loan Party shall have
fully, finally and irrevocably paid and satisfied in full all of
their respective obligations and liabilities arising under the Loan
Documents, including with respect to the Borrower and its
Obligations (except for future Obligations consisting of continuing
indemnities and other contingent Obligations of the Borrower or any
Loan Party that may be owing to any Agent-Related Person or any
Lender pursuant to the Loan Documents and expressly survive
termination of the Credit Agreement).
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(vi) Upon the occurrence and during the continuance of any
Event of Default, all rights of the Grantors to receive and retain
cash dividends and other distributions upon or in respect to
Investment Property pursuant to clause (iii) above shall cease and
shall thereupon be vested in the Administrative Agent for the
benefit of the Secured Parties, and each Grantor shall, or shall
cause, all such cash dividends and other distributions with respect
to the Investment Property to be promptly delivered to the
Administrative Agent (together, if the Administrative Agent shall
request, with any documents related thereto) to be held, released or
disposed of by it hereunder or, at the option of the Administrative
Agent, to be applied to the Secured Obligations.
(f) DEPOSIT ACCOUNTS. With respect to its Deposit Accounts whether
now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Administrative
Agent for the benefit of the Secured Parties that:
(i) Schedule 9(f) attached hereto contains a true and complete
description of (x) the name and address of each depositary
institution with which such Grantor maintains a Deposit Account.
(ii) Except with the express prior written consent of the
Administrative Agent in each instance, all Deposit Accounts shall be
maintained at all times with depositary institutions as to which the
Administrative Agent shall have received a Qualifying Control
Agreement. Without limiting the generality of the foregoing, no
Grantor shall cause, suffer or permit (x) any deposit in excess of
$500,000 to be evidenced by a certificate of deposit unless such
certificate of deposit is a negotiable instrument and immediately
upon receipt thereof such certificate shall have been delivered to
the Administrative Agent, together with a duly executed undated
assignment in blank affixed thereto, or (y) any Deposit Account not
listed on Schedule 9(f) attached hereto to be opened or maintained
except in each case upon giving not less than two business days'
prior written notice to the Administrative Agent and taking or
causing to be taken at such Grantor's expense all such Perfection
Action, including the delivery of such Perfection Documents, as may
be reasonably requested by the Administrative Agent to perfect or
protect, or maintain the perfection and priority of, the Lien of the
Administrative Agent for the benefit of the Secured Parties in
Collateral contemplated hereunder; provided that no Perfection
Action need be taken, or Perfection Documents delivered, with
respect to Deposit Accounts that are specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of any Grantor's employees, but such
exclusion shall apply only so long as the amount on deposit in such
Deposit Account does not at any time exceed the amount that is
reasonably required for such purposes.
(g) CHATTEL PAPER. With respect to its Chattel Paper whether now
existing or hereafter created or acquired and wheresoever located, each
Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
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(i) Each Grantor shall at all times retain sole physical
possession of the originals of all Chattel Paper (other than
electronic Chattel Paper and the electronic components of hybrid
Chattel Paper); provided, however, that (x) upon the request of the
Administrative Agent upon the occurrence and during the continuance
of any Event of Default, such Grantor shall immediately deliver
physical possession of such Chattel Paper to the Administrative
Agent or its designee, and (y) in the event that there shall be
created more than one original counterpart of any physical document
that alone or in conjunction with any other physical or electronic
document constitutes Chattel Paper, then such counterparts shall be
numbered consecutively starting with "1" and such Grantor shall
retain the counterpart numbered "1".
(ii) All counterparts of all tangible Chattel Paper (and the
tangible components of hybrid Chattel Paper) shall immediately upon
the creation or acquisition thereof by any Grantor be conspicuously
legended as follows: "A FIRST PRIORITY SECURITY INTEREST IN THIS
CHATTEL PAPER HAS BEEN GRANTED TO BANK OF AMERICA, N.A., FOR ITSELF
AND AS ADMINISTRATIVE AGENT FOR CERTAIN LENDERS PURSUANT TO A
SECURITY AGREEMENT DATED AS OF MAY 15, 2002 AS AMENDED FROM TIME TO
TIME. NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF ANY OTHER
PERSON MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS
CHATTEL PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE
CONSENT OF THE AFORESAID ADMINISTRATIVE AGENT AS PROVIDED IN SUCH
SECURITY AGREEMENT." In the case of electronic Chattel Paper
(including the electronic components of hybrid Chattel Paper), no
Grantor shall create or acquire any such Chattel Paper unless, prior
to such acquisition or creation, it shall have taken such Perfection
Action as the Administrative Agent may require to perfect by control
the security interest of the Administrative Agent for the benefit of
the Secured Parties in such Collateral.
(iii) Other than in the ordinary course of business and in
keeping with reasonable and customary practice, no Grantor shall
amend, modify, waive or terminate any provision of, or fail to
exercise promptly and diligently each material right or remedy
conferred under or in connection with, any Chattel Paper, in any
case in such a manner as could reasonably be expected to materially
adversely affect the value of affected Chattel Paper as collateral.
(h) INSTRUMENTS. With respect to its Instruments whether now
existing or hereafter created or acquired and wheresoever located, each
Grantor represents, warrants and covenants to the Administrative Agent for
the benefit of the Secured Parties that:
(i) Each Grantor shall (i) maintain at all times, and furnish
to the Administrative Agent from time to time at the Administrative
Agent's reasonable request, a current list identifying in reasonable
detail Instruments of which such
18
Grantor is the payee or holder and having a face amount payable in
excess of $250,000, and (ii) upon the request of the Administrative
Agent from time to time following the occurrence and during the
continuance of any Event of Default, deliver to the Administrative
Agent the originals of all such Instruments, together with duly
executed undated endorsements in blank affixed thereto and such
other documentation and information as may be necessary to enable
the Administrative Agent to realize upon the Instruments in
accordance with their respective terms or transfer the Instruments
as may be permitted under the Loan Documents or by applicable law.
(ii) Other than in the ordinary course of business and in
keeping with reasonable and customary practice, no Grantor shall
amend, modify, waive or terminate any provision of, or fail to
exercise promptly and diligently each material right or remedy
conferred under or in connection with, any Instrument, in any case
in such a manner as could reasonably be expected to materially
adversely affect the value of affected Instrument as collateral.
(i) COMMERCIAL TORT CLAIMS. With respect to its Commercial Tort
Claims whether now existing or hereafter created or acquired and
wheresoever located, each Grantor represents, warrants and covenants to
the Administrative Agent for the benefit of the Secured Parties that:
(i) Schedule 9(i) attached hereto contains a true and complete
list of all Commercial Tort Claims in which any Grantor has an
interest and which have been identified by a Grantor as of the
Closing Date, or as of any later date on which such Schedule 9(i) is
updated either by virtue of the delivery of a Security Joinder
Agreement or by virtue of subection (ii) below or any other
provision of this Security Agreement, and as to which the applicable
Grantor believes in good faith there exists the possibility of
recovery (including by way of settlement) of monetary relief in
excess of $1,000,000 ("Grantor Claims").
(ii) In the event that any Grantor at any time has an interest
in any Grantor Claims not listed on Schedule 9(i) at such time, (A)
such Grantor shall not later than ten (10) days after obtaining such
an interest in a Grantor Claim, give written notice to the
Administrative Agent of the making of such Grantor Claim, including
the name of the parties thereto and a description of the cause of
action and the claim for relief, and (B) to the extent required by
the Administrative Agent, take such Perfection Action (including
adding such Grantor Claim to Schedule 9(i)), and deliver such
Perfection Documents, and do all such other things as the
Administrative Agent may reasonably request, to perfect the security
interest of the Administrative Agent in the Grantor Claim and
Commercial Tort Claim as Collateral hereunder.
(j) INTERNET PROPERTY RIGHTS. With respect to its rights, titles and
interests in and to any internet domain names or registration rights
relating thereto, and any internet websites or the content thereof
(collectively, "Internet Property Rights") whether
19
now existing or hereafter created or acquired and wheresoever located,
each Grantor represents, warrants and covenants to the Administrative
Agent for the benefit of the Secured Parties that:
(i) Schedule 9(j) attached hereto contains a true and complete
description of (t) each internet domain name registered to such
Grantor or in which such Grantor has ownership, operating or
registration rights, (u) the name and address of the registrar for
such internet domain name, (v) the registration identification
information for such internet domain name, (w) the name of each
internet website operated (whether individually or jointly with
others) by such Grantor, (x) the name and address of each internet
service provider through whom each such website is operated, (y) the
name and address of each operator of each other internet site,
internet search engine, internet directory or Web browser with whom
such Grantor maintains any advertising or linking relationship which
is material to the operation of or flow of internet traffic to such
Grantor's website, and (z) each technology licensing and other
agreement that is material either to the operation of, or flow of
internet traffic to, such Grantor's website or to the advertising
and linking relationships described in clause (y), and the name and
address of each other party to such agreement.
(ii) Such Grantor shall cause to be delivered to the
Administrative Agent at or prior to the Closing Date with respect to
each internet domain name registered to such Grantor an undated
transfer document, duly executed in blank by such Grantor and in the
form required by the applicable internet domain name registrar,
sufficient to effect the transfer of each internet domain name to
the transferee thereof named in such transfer form upon delivery to
such registrar. Without limiting the generality of the foregoing, no
Grantor shall acquire any rights to any internet domain name not
listed on Schedule 9(j) attached hereto except in each case upon
giving written notice thereof to the Administrative Agent not later
than ten (10) days after such acquisition, which notice shall be
accompanied by an appropriate supplement to Schedule 9(j) reflecting
such additional name, the delivery of additional executed internet
domain name transfer documents executed in blank with respect
thereto, and taking or causing to be taken at such Grantor's expense
all such Perfection Action, including the delivery of such
Perfection Documents, as may be reasonably requested by the
Administrative Agent to perfect or protect, or maintain the
perfection and priority of, the Lien of the Administrative Agent for
the benefit of the Secured Parties in Collateral contemplated
hereunder. Without limiting the foregoing, each Grantor shall
furnish to the Administrative Agent and the Lenders such supplements
to Schedule 9(j) from time to time as shall be necessary to keep
such Schedule true and complete at all times.
(iii) So long as no Event of Default shall have occurred and
be continuing, the registration of Internet Property Rights in the
name of a Grantor shall not be changed and such Grantor shall be
entitled to exercise all rights and powers with respect thereto not
inconsistent with the terms hereof.
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(iv) Each Grantor hereby expressly authorizes the
Administrative Agent following the occurrence and during the
continuance of any Event of Default to (i) complete and tender each
internet domain name transfer document in its own name or in the
name, place and stead of the Grantor in order to effect the transfer
of any internet domain name registration, either to the
Administrative Agent or to another transferee, as the case may be,
and (ii) maintain, obtain access to, and continue to operate, in its
own name or in the name, place and stead of such Grantor, such
Grantor's internet website and the contents thereof, and all related
advertising, linking and technology licensing and other contractual
relationships, in each case in connection with the maintenance,
preservation, operation, sale or other disposition of Collateral or
for any other purpose permitted under the Loan Documents or by
applicable law.
(j) EXCLUDED COLLATERAL. With respect to any Grantor's right, title
and interest in and to any asset that constitutes Excluded Collateral,
each Grantor represents, warrants and covenants to the Administrative
Agent for the benefit of the Secured Parties that:
(i) to the extent any asset constitutes Excluded Collateral
solely by reason of consents and/or notices being required in order
for a security interest therein to be granted, upon the reasonable
request of the Administrative Agent with respect to any particular
asset (other than any interest in WAND unless expressly agreed to
with the Borrower), the applicable Grantor shall use its best
efforts, including taking all actions reasonably requested by the
Administrative Agent in connection therewith, at its sole cost and
expense, to obtain such consents and give such notices;
(ii) to the extent at any time any item of Excluded Collateral
becomes Collateral pursuant to the terms of this Security Agreement,
the applicable Grantor shall take all Perfection Action, and deliver
all Perfection Documents, and do all such other things as the
Administrative Agent may reasonably request to perfect the security
interest of the Administrative Agent in such interest as Collateral
hereunder;
(iii) no interest of any Grantor in WAND (A) constitutes a
"security" under Article 8 (including by election of WAND), or (B)
is held or maintained in the form of a security entitlement or
credited to a securities account; and
(iv) no Grantor shall at any time take any action, without the
consent of the Administrative Agent, to (A) elect to have, or
othewise cause, any interest in WAND constitute a "security" under
Article 8 of the applicable Uniform Commercial Code, (B) permit any
interest in WAND to be represented by a certificate or to be held or
maintained in the form of a security entitlement or credited to a
securities account.
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10. CASUALTY AND LIABILITY INSURANCE REQUIRED.
(a) Each Grantor will keep the Collateral continuously insured
against such risks as are customarily insured against by businesses of
like size and type engaged in the same or similar operations including:
(i) casualty insurance on the Inventory and the Equipment
(including self-insurance with respect to motor vehicles) in an
amount not less than the full insurable value thereof, against loss
or damage by theft, fire, lightning and other hazards ordinarily
included under uniform broad form standard extended coverage
policies, limited only as may be provided in the standard broad form
of extended coverage endorsement at the time in use in the states in
which the Collateral is located;
(ii) comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring with or about
such Collateral (such coverage to include provisions waiving
subrogation against the Secured Parties), with the Administrative
Agent and the Lenders as additional insureds thereunder, in amounts
as shall be reasonably satisfactory to Administrative Agent;
(iii) liability insurance with respect to the operation of its
facilities under the workers' compensation laws of the states in
which such Collateral is located, in amounts as shall be reasonably
satisfactory to Administrative Agent; and
(iv) business interruption insurance in amounts as shall be
reasonably satisfactory to Administrative Agent.
(b) Each insurance policy obtained in satisfaction of the
requirements of Section 10(a):
(i) may be provided by blanket policies now or hereafter
maintained by each or any Grantor or by the Borrower;
(ii) shall be issued by such insurer (or insurers) as shall be
financially responsible, of recognized standing and reasonably
acceptable to the Administrative Agent;
(iii) shall be in such form and have such provisions
(including without limitation the loss payable clause, the waiver of
subrogation clause, the deductible amount, if any, and the standard
mortgagee endorsement clause) as are generally considered standard
provisions for the type of insurance involved and are reasonably
acceptable in all respects to the Administrative Agent;
(iv) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30
days' prior written notice to
22
the Administrative Agent, except for non-payment of premium, as to
which such policies shall provide for at least ten (10) days' prior
written notice to the Administrative Agent; and
(v) without limiting the generality of the foregoing, all
insurance policies where applicable under Section 10(a)(i) carried
on the Collateral shall name the Administrative Agent, for the
benefit of the Secured Parties, as a loss payee and the
Administrative Agent and Lenders as parties insured thereunder in
respect of any claim for payment.
(c) Prior to expiration of any such policy, such Grantor shall
furnish the Administrative Agent with evidence satisfactory to the
Administrative Agent that the policy or certificate has been renewed or
replaced or is no longer required by this Security Agreement.
(d) Each Grantor hereby makes, constitutes and appoints the
Administrative Agent (and all officers, employees or agents designated by
the Administrative Agent), for the benefit of the Secured Parties, as such
Grantor's true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims under such policies of insurance,
endorsing the name of such Grantor on any check, draft, instrument or
other item or payment for the proceeds of such policies of insurance and
for making all determinations and decisions with respect to such policies
of insurance, which appointment is coupled with an interest and is
irrevocable; provided, however, that the powers pursuant to such
appointment shall be exercisable only upon the occurrence and during the
continuation of an Event of Default.
(e) In the event such Grantor shall fail to maintain, or fail to
cause to be maintained, the full insurance coverage required hereunder,
the Administrative Agent may (but shall be under no obligation to),
without waiving or releasing any Secured Obligation or Default or Event of
Default by such Grantor hereunder, contract for the required policies of
insurance and pay the premiums on the same; and all sums so disbursed by
Administrative Agent, including reasonable Attorneys' Costs, court costs,
expenses and other charges related thereto, shall be payable on demand by
such Grantor to the Administrative Agent, shall be additional Secured
Obligations secured by the Collateral, and (in addition to other rights
and remedies resulting from such nonpayment) shall bear interest from the
date of demand until paid in full at the Default Rate.
(f) Each Grantor agrees that to the extent that it shall fail to
maintain, or fail to cause to be maintained, the full insurance coverage
required by Section 10(a), it shall in the event of any loss or casualty
pay promptly to the Administrative Agent, for the benefit of the Secured
Parties, to be held in a separate account for application in accordance
with the provisions of Section 10(h), such amount as would have been
received as Net Proceeds (as hereinafter defined) by the Administrative
Agent, for the benefit of the Secured Parties, under the provisions of
Section 10(h) had such insurance been carried to the extent required.
23
(g) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 10(a)(ii) and 10(a)(iii) shall be applied by such
Grantor toward satisfaction of the claim or liability with respect to
which such insurance proceeds may be paid.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be
paid to such Grantor and held by such Grantor in a separate account and
applied, as long as no Event of Default shall have occurred and be
continuing, as follows: after any loss under any such insurance and
payment of the proceeds of such insurance, each Grantor shall have a
period of 120 days after payment of the insurance proceeds with respect to
such loss to elect to either (x) repair or replace the Collateral so
damaged, (y) deliver such Net Proceeds to the Administrative Agent, for
the benefit of the Secured Parties, as additional Collateral or (z) apply
such Net Proceeds to the acquisition of tangible assets constituting
Collateral used or useful in the conduct of the business of such Grantor,
subject to the provisions of this Security Agreement. If such Grantor
elects to repair or replace the Collateral so damaged, such Grantor agrees
the Collateral shall be repaired to a condition substantially similar to
or of better quality or higher value than its condition prior to damage or
replaced with Collateral in a condition substantially similar to or of
better quality or higher value than the condition of the Collateral so
replaced prior to damage. At all times during which an Event of Default
shall have occurred and be continuing, the Administrative Agent shall be
entitled to receive direct and immediate payment of the proceeds of such
insurance and such Grantor shall take all action as the Administrative
Agent may reasonably request to accomplish such payment. Notwithstanding
the foregoing, in the event such Grantor shall receive any such proceeds,
such Grantor shall immediately deliver such proceeds to such
Administrative Agent for the benefit of the Secured Parties as additional
Collateral, and pending such delivery shall hold such proceeds in trust
for the benefit of the Secured Parties and keep the same segregated from
its other funds.
(i) "Net Proceeds" when used with respect to any insurance proceeds
shall mean the gross proceeds from such proceeds, award or other amount,
less all taxes, fees and expenses (including Attorneys' Costs) incurred in
the realization thereof.
(j) In case of any material damage to, destruction or loss of, or
claim or proceeding against, all or any material part of the Collateral
pledged hereunder by a Grantor, such Grantor shall give prompt notice
thereof to the Administrative Agent. Each such notice shall describe
generally the nature and extent of such damage, destruction, loss, claim
or proceeding. Subject to Section 10(d), each Grantor is hereby authorized
and empowered to adjust or compromise any loss under any such insurance
other than losses relating to claims made directly against any Secured
Party as to which the insurance described in Section 10(a)(ii) or (iii) is
applicable.
(k) The provisions contained in this Security Agreement pertaining
to insurance shall be cumulative with any additional provisions imposing
additional insurance requirements with respect to the Collateral or any
other property on which a Lien is conferred under any Security Instrument.
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11. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT. Upon and after an Event of
Default, the Administrative Agent shall have the following rights and remedies
on behalf of the Secured Parties in addition to any rights and remedies set
forth elsewhere in this Security Agreement or the other Loan Documents, all of
which may be exercised with or, if allowed by law, without notice to a Grantor:
(a) All of the rights and remedies of a secured party under the UCC
or under other applicable law, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, to the extent permitted
by law, in addition to any other rights and remedies contained in this
Security Agreement or any other Loan Document;
(b) The right to foreclose the Liens and security interests created
under this Security Agreement by any available judicial procedure or
without judicial process;
(c) The right to (i) enter upon the premises of a Grantor through
self-help and without judicial process, without first obtaining a final
judgment or giving such Grantor notice or opportunity for a hearing on the
validity of the Administrative Agent's claim and without any obligation to
pay rent to such Grantor, or any other place or places where any
Collateral is located and kept, and remove the Collateral therefrom to the
premises of the Administrative Agent or any agent of the Administrative
Agent, for such time as the Administrative Agent may desire, in order
effectively to collect or liquidate the Collateral, (ii) require such
Grantor or any bailee or other agent of such Grantor to assemble the
Collateral and make it available to the Administrative Agent at a place to
be designated by the Administrative Agent that is reasonably convenient to
both parties, and (iii) notify any or all Persons party to a Qualifying
Control Agreement or who otherwise have possession of or control over any
Collateral of the occurrence of an Event of Default and other appropriate
circumstances, and exercise control over and take possession or custody of
any or all Collateral in the possession, custody or control of such other
Persons;
(d) The right to (i) exercise all of a Grantor's rights and remedies
with respect to the collection of Accounts, Chattel Paper, Instruments,
Supporting Obligations and General Intangibles (collectively, "Payment
Collateral"), including the right to demand payment thereof and enforce
payment, by legal proceedings or otherwise; (ii) settle, adjust,
compromise, extend or renew all or any Payment Collateral or any legal
proceedings pertaining thereto; (iii) discharge and release all or any
Payment Collateral; (iv) take control, in any manner, of any item of
payment or proceeds referred to in Section 5 above; (v) prepare, file and
sign a Grantor's name on any Proof of Claim in bankruptcy, notice of Lien,
assignment or satisfaction of Lien or similar document in any action or
proceeding adverse to any obligor under any Payment Collateral or
otherwise in connection with any Payment Collateral; (vi) endorse the name
of a Grantor upon any chattel paper, document, instrument, invoice,
freight bill, bill of lading or similar document or agreement relating to
any Collateral; (vii) use the information recorded on or contained on a
Grantor's internet website or otherwise in any data processing equipment
and computer hardware and software relating to any Collateral to which a
25
Grantor has access; (viii) open such Grantor's mail and collect any and
all amounts due to such Grantor from any Account Debtors or other obligor
in respect of Payment Collateral; (ix) take over such Grantor's post
office boxes or make other arrangements as the Administrative Agent, on
behalf of the Secured Parties, deems necessary to receive such Grantor's
mail, including notifying the post office authorities to change the
address for delivery of such Grantor's mail to such address as the
Administrative Agent, on behalf of the Secured Parties, may designate; (x)
notify any or all Account Debtors or other obligor on any Payment
Collateral that such Payment Collateral has been assigned to the
Administrative Agent for the benefit of the Secured Parties and that
Administrative Agent has a security interest therein for the benefit of
the Secured Parties (provided that the Administrative Agent may at any
time give such notice to an Account Debtor that is a department, agency or
authority of the United States government); each Grantor hereby agrees
that any such notice, in the Administrative Agent's sole discretion, may
(but need not) be sent on such Grantor's stationery, in which event such
Grantor shall co-sign such notice with the Administrative Agent if
requested to do so by the Administrative Agent; and (xi) do all acts and
things and execute all documents necessary, in Administrative Agent's sole
discretion, to collect the Payment Collateral; and
(e) The right to sell all or any Collateral in its then existing
condition, or after any further manufacturing or processing thereof, at
such time or times, at public or private sale or sales, with such notice
as may be required by law, in lots or in bulk, for cash or on credit, with
or without representations and warranties, all as the Administrative
Agent, in its sole discretion, may deem advisable. The Administrative
Agent shall have the right to conduct such sales on a Grantor's premises
or elsewhere and shall have the right to use a Grantor's premises without
charge for such sales for such time or times as the Administrative Agent
may see fit. The Administrative Agent may, if it deems it reasonable,
postpone or adjourn any sale of the Collateral from time to time by an
announcement at the time and place of such postponed or adjourned sale,
and such sale may, without further notice, be made at the time and place
to which it was so adjourned. Each Grantor agrees that the Administrative
Agent has no obligation to preserve rights to the Collateral against prior
parties or to marshal any Collateral for the benefit of any Person. To the
extent not violative of any applicable Law or agreement to which such
Grantor is a party or is bound or subject (provided any such agreement
does not violate the Credit Agreement or any other Loan Document, and
provided further that, other than contracts entered into in the ordinary
course of its business, no Grantor shall enter into any such agreement
after the Closing Date without the consent of the Administrative Agent),
the Administrative Agent for the benefit of the Secured Parties is hereby
granted an irrevocable fully paid license or other right (including each
Grantor's rights under any license or any franchise agreement), each of
which shall remain in full force and effect until the Facility Termination
Date, to use, without charge, each of the labels, patents, copyrights,
names, trade secrets, trade names, trademarks and advertising matter, or
any property of a similar nature owned or licensed by any Grantor, as it
pertains to the Collateral, in completing production of, advertising for
sale and selling any Collateral. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or other
unfinished state, the Administrative Agent shall have the right, but shall
not be obligated, to perform such repairs, maintenance, preparation,
26
processing or completion of manufacturing for the purpose of putting the
same in such saleable form as the Administrative Agent shall deem
appropriate, but the Administrative Agent shall have the right to sell or
dispose of the Collateral without such processing and no Grantor shall
have any claim against the Administrative Agent for the value that may
have been added to such Collateral with such processing. In addition, each
Grantor agrees that in the event notice is necessary under applicable law,
written notice mailed to such Grantor in the manner specified herein seven
(7) days prior to the date of public sale of any of the Collateral or
prior to the date after which any private sale or other disposition of any
of the Collateral will be made shall constitute commercially reasonable
notice to such Grantor. All notice is hereby waived with respect to any of
the Collateral which threatens to decline speedily in value or is of a
type customarily sold on a recognized market. The Administrative Agent may
purchase all or any part of the Collateral at public or, if permitted by
law, private sale, free from any right of redemption which is hereby
expressly waived by such Grantor and, in lieu of actual payment of such
purchase price, may set off the amount of such price against the Secured
Obligations. Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of certain of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state law, and may be otherwise
delayed or adversely affected in effecting any sale by reason of present
or future restrictions thereon imposed by governmental authorities
("Affected Collateral"), and that as a consequence of such prohibitions
and restrictions the Administrative Agent may be compelled (i) to resort
to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire Affected Collateral
for their own account, for investment and not with a view to the
distribution or resale thereof, or (ii) to seek regulatory approval of any
proposed sale or sales, or (iii) to limit the amount of Affected
Collateral sold to any Person or group. Each Grantor agrees and
acknowledges that private sales so made may be at prices and upon terms
less favorable to such Grantor than if such Affected Collateral was sold
either at public sales or at private sales not subject to other regulatory
restrictions, and that the Administrative Agent has no obligation to delay
the sale of any Affected Collateral for the period of time necessary to
permit the Grantor or any other Person to register or otherwise qualify
them under or exempt them from any applicable restriction, even if such
Grantor or other Person would agree to register or otherwise qualify or
exempt such Affected Collateral so as to permit a public sale under the
Securities Act or applicable state law. Each Grantor further agrees, to
the extent permitted by applicable law, that the use of private sales made
under the foregoing circumstances to dispose of Affected Collateral shall
be deemed to be dispositions in a commercially reasonable manner. Each
Grantor hereby acknowledges that a ready market may not exist for Affected
Collateral that is not traded on a national securities exchange or quoted
on an automated quotation system.
The net cash proceeds resulting from the collection, liquidation, sale, or
other disposition of the Collateral shall be applied first to the expenses
(including all Attorneys' Costs) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating and the like, and then to
the satisfaction of all Secured Obligations in accordance with the terms of
Section 2.14(c) of the Credit Agreement. Each Grantor shall be liable to the
Administrative
27
Agent, for the benefit of the Secured Parties, and shall pay to the
Administrative Agent, for the benefit of the Secured Parties, on demand any
deficiency which may remain after such sale, disposition, collection or
liquidation of the Collateral. The Administrative Agent shall provide prompt
notice to the Borrower of its exercise of remedies under this Section 11,
provided that such notice may be general in nature and neither the failure to
give, nor any delay in giving, such notice shall have any effect on the validity
or effectiveness of any action taken hereunder.
12. ATTORNEY-IN-FACT. Each Grantor hereby appoints the Administrative
Agent as the Grantor's attorney-in-fact for the purposes of carrying out the
provisions of this Security Agreement and taking any action and executing any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable and coupled
with an interest; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and during
the continuance of an Event of Default. Without limiting the generality of the
foregoing, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall have the right and power
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to endorse such Grantor's name on any checks, notes, drafts or
any other payment relating to or constituting proceeds of the Collateral
which comes into the Administrative Agent's possession or the
Administrative Agent's control, and deposit the same to the account of the
Administrative Agent, for the benefit of the Secured Parties, on account
and for payment of the Secured Obligations.
(d) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent, for the benefit of the Secured
Parties, with respect to any of the Collateral; and
(e) to execute, in connection with any sale or other disposition of
Collateral provided for herein, any endorsement, assignments, or other
instruments of conveyance or transfer with respect thereto.
13. REINSTATEMENT. The granting of a security interest in the Collateral
and the other provisions hereof shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Secured Obligations
is rescinded or must otherwise be returned by any Secured Party or is repaid by
any Secured Party in whole or in part in good faith settlement of a pending or
threatened avoidance claim, whether upon the insolvency, bankruptcy or
reorganization of any Grantor or any other Loan Party or otherwise, all as
though such payment had not been made. The provisions of this Section 13 shall
survive repayment of all of the
28
Secured Obligations and the termination or expiration of this Security Agreement
in any manner, including but not limited to termination upon occurrence of the
Facility Termination Date.
14. CERTAIN WAIVERS BY THE GRANTORS. Each Grantor waives to the extent
permitted by applicable law (a) any right to require any Secured Party or any
other obligee of the Secured Obligations to (x) proceed against any Person or
entity, including without limitation any Loan Party, (y) proceed against or
exhaust any Collateral or other collateral for the Secured Obligations, or (z)
pursue any other remedy in its power; (b) any defense arising by reason of any
disability or other defense of any other Person, or by reason of the cessation
from any cause whatsoever of the liability of any other Person or entity, (c)
any right of subrogation, (d) any right to enforce any remedy which any Secured
Party or any other obligee of the Secured Obligations now has or may hereafter
have against any other Person and any benefit of and any right to participate in
any collateral or security whatsoever now or hereafter held by the
Administrative Agent for the benefit of the Secured Parties. Each Grantor
authorizes each Secured Party and each other obligee of the Secured Obligations
without notice (except notice required by applicable law) or demand and without
affecting its liability hereunder or under the Loan Documents from time to time
to: (i) take and hold security, other than the Collateral herein described, for
the payment of such Secured Obligations or any part thereof, and exchange,
enforce, waive and release the Collateral herein described or any part thereof
or any such other security; and (ii) apply such Collateral or other security and
direct the order or manner of sale thereof as such Secured Party or obligee in
its discretion may determine.
The Administrative Agent may at any time deliver (without representation,
recourse or warranty) the Collateral or any part thereof to a Grantor and the
receipt thereof by such Grantor shall be a complete and full acquittance for the
Collateral so delivered, and the Administrative Agent shall thereafter be
discharged from any liability or responsibility therefor.
15. CONTINUED POWERS. Until the Facility Termination Date shall have
occurred, and to the extent permitted by applicable Law, the power of sale and
other rights, powers and remedies granted to the Administrative Agent for the
benefit of the Secured Parties hereunder shall continue to exist and may be
exercised by the Administrative Agent at any time and from time to time
irrespective of the fact that any of the Secured Obligations or any part thereof
may have become barred by any statute of limitations or that any part of the
liability of any Grantor may have ceased.
16. OTHER RIGHTS. The rights, powers and remedies given to the
Administrative Agent for the benefit of the Secured Parties by this Security
Agreement shall be in addition to all rights, powers and remedies given to the
Administrative Agent or any Secured Party under any other Loan Document or by
virtue of any statute or rule of law. Any forbearance or failure or delay by the
Administrative Agent in exercising any right, power or remedy hereunder shall
not be deemed to be a waiver of such right, power or remedy, and any single or
partial exercise of any right, power or remedy hereunder shall not preclude the
further exercise thereof; and every right, power and remedy of the Secured
Parties shall continue in full force and effect until such right, power or
remedy is specifically waived in accordance with the terms of the Credit
Agreement.
29
17. ANTI-MARSHALING PROVISIONS. The right is hereby given by each Grantor
to the Administrative Agent, for the benefit of the Secured Parties, to make
releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Administrative Agent without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
Liens and security interests in the remaining Collateral conferred hereunder,
nor release any Grantor from personal liability for the Secured Obligations.
Notwithstanding the existence of any other security interest in the Collateral
held by the Administrative Agent, for the benefit of the Secured Parties, the
Administrative Agent shall have the right to determine the order in which any or
all of the Collateral shall be subjected to the remedies provided in this
Security Agreement. To the extent permitted by applicable Law, each Grantor
hereby waives any and all right to require the marshaling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein or in any other Loan Document.
18. ENTIRE AGREEMENT. This Security Agreement and each Security Joinder
Agreement, together with the Credit Agreement and other Loan Documents,
constitutes and expresses the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes all prior
negotiations, agreements and understandings, inducements, commitments or
conditions, express or implied, oral or written, except as contained in the Loan
Documents. The express terms hereof and of the Security Joinder Agreements
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof or thereof. Neither this Security
Agreement nor any Security Joinder Agreement nor any portion or provision hereof
or thereof may be changed, altered, modified, supplemented, discharged,
canceled, terminated, or amended orally or in any manner other than as provided
in the Credit Agreement.
19. THIRD PARTY RELIANCE. Each Grantor hereby consents and agrees that all
issuers of or obligors in respect of any Collateral, and all securities
intermediaries, warehousemen, bailees, public officials and other Persons having
any interest in, possession of, control over or right, privilege, duty or
discretion in respect of, any Collateral shall be entitled to accept the
provisions hereof and of the Security Joinder Agreements as conclusive evidence
of the right of the Administrative Agent, on behalf of the Secured Parties, to
exercise its rights hereunder or thereunder with respect to the Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by any Grantor or any other Person to any of such Persons.
20. BINDING AGREEMENT; ASSIGNMENT. This Security Agreement and each
Security Joinder Agreement, and the terms, covenants and conditions hereof and
thereof, shall be binding upon and inure to the benefit of the parties hereto,
and to their respective successors and assigns, except that no Grantor shall be
permitted to assign this Security Agreement, any Security Joinder Agreement or
any interest herein or therein or, except as expressly permitted herein or in
the Credit Agreement, in the Collateral or any part thereof or interest therein.
Without limiting the generality of the foregoing sentence of this Section 20,
any Lender may assign to one or more Persons, or grant to one or more Persons
participations in or to, all or any part of its rights and obligations under the
Credit Agreement (to the extent permitted by the Credit Agreement); and to the
extent of any such assignment or participation such other Person shall, to the
fullest extent permitted by law, thereupon become vested with all the benefits
in respect thereof granted to
30
such Lender herein or otherwise, subject however, to the provisions of the
Credit Agreement, including Article IX thereof (concerning the Administrative
Agent) and Section 10.07 thereof (concerning assignments and participations).
All references herein to the Administrative Agent and to the Secured Parties
shall include any successor thereof or permitted assignee, and any other
obligees from time to time of the Secured Obligations.
21. RELATED SWAP CONTRACTS. All obligations of each Grantor under or in
respect of Related Swap Contracts (which are not prohibited under the terms of
the Credit Agreement) to which any Lender or any Affiliate of any Lender is a
party, shall be deemed to be Secured Obligations secured hereby, 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 Secured Obligations;
provided, however, that such obligations shall cease to be Secured Obligations
at such time 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 any Lien by virtue of the provisions
of this Section shall have any right to notice of any action or to consent to,
direct or object to any action hereunder or under any other Loan Document or
otherwise in respect of the Collateral (including the release or impairment of
any Collateral) other than in its capacity as a Lender and only to the extent
expressly provided in the Loan Documents.
22. SEVERABILITY. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. COUNTERPARTS. This Security Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and all of which together shall constitute one and the same
instrument, and it shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart executed by
the Grantor against whom enforcement is sought. Without limiting the foregoing
provisions of this Section 23, the provisions of Section 10.02(b) of the Credit
Agreement shall be applicable to this Security Agreement.
24. TERMINATION.
(a) Subject to the provisions of Section 13, this Security Agreement and
each Security Joinder Agreement, and all obligations of the Grantors hereunder
(excluding those obligations and liabilities that expressly survive such
termination) shall terminate without delivery of any instrument or performance
of any act by any party on the Facility Termination Date. Upon such termination
of this Security Agreement, the Administrative Agent shall, at the request and
sole expense of the Grantors, promptly deliver to the Grantors such termination
statements and take such further actions as the Grantors may reasonably request
to terminate of record, or otherwise to give appropriate notice of the
termination of, any Lien conferred hereunder.
31
(b) In the event that all of the Subsidiary Securities issued by any
Grantor are Disposed of by the Borrower and/or any Grantor, and such Disposition
is permitted by the Credit Agreement, then all obligations of such disposed
Grantor hereunder (excluding those obligations and liabilities that expressly
survive such termination) shall terminate without delivery of any instrument or
performance of any act by any party, and the Administrative Agent shall, at the
request and sole expense of the Grantors, promptly deliver such termination
statements and take such further actions as may reasonably be requested to
terminate of record, or otherwise to give appropriate notice of the termination
of, any Lien conferred hereunder with respect to such disposed Grantor.
25. NOTICES. Any notice required or permitted hereunder shall be given (a)
with respect to the Borrower, at the address for the giving of notice then in
effect under the Credit Agreement, (b) with respect to any Grantor, at the
address then in effect for the giving of notices to such Grantor under the
Guaranty to which it is a party, and (c) with respect to the Administrative
Agent or a Lender, at the Administrative Agent's address indicated in Schedule
10.02 of the Credit Agreement. All such addresses may be modified, and all such
notices shall be given and shall be effective, as provided in Section 10.02 of
the Credit Agreement for the giving and effectiveness of notices and
modifications of addresses thereunder.
26. JOINDER. Each Person who shall at any time execute and deliver to the
Administrative Agent a Security Joinder Agreement substantially in the form
attached as Exhibit A hereto shall thereupon irrevocably, absolutely and
unconditionally become a party hereto and obligated hereunder as a Grantor and
shall have thereupon pursuant to Section 2 hereof granted a security interest in
and collaterally assigned to the Administrative Agent for the benefit of the
Secured Parties all Collateral in which it has at its Applicable Date or
thereafter acquires any interest or the power to transfer, and all references
herein and in the other Loan Documents to the Grantors or to the parties to this
Security Agreement shall be deemed to include such Person as a Grantor
hereunder. Each Security Joinder Agreement shall be accompanied by the
Supplemental Schedules referred to therein, appropriately completed with
information relating to the Grantor executing such Security Joinder Agreement
and its property. Each of the applicable Schedules attached hereto shall be
deemed amended and supplemented without further action by such information
reflected on the Supplemental Schedules.
27. RULES OF INTERPRETATION. The rules of interpretation contained in
Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this
Security Agreement and each Security Joinder Agreement and are hereby
incorporated by reference. All representations and warranties contained herein
shall survive the delivery of documents and any Credit Extensions referred to
herein or secured hereby.
28. RELEASE. Upon the Disposition of any item of Collateral, so long as
such Disposition is permitted under Section 7.05 of the Credit Agreement and all
conditions to such Disposition contained therein have been satisfied:
(a) the Lien of the Administrative Agent for the benefit of the
Secured Parties in such disposed Collateral shall, subject to the
provision at the end of this subsection (a), be deemed to be released
without any further action on the part of the Administrative Agent or the
relevant Grantor, provided that in the event following any such
Disposition
32
any Grantor shall thereafter acquire any interest in (or the power to
transfer rights in) any asset that constituted Collateral hereunder prior
to its Disposition and release from the security interests hereunder, the
pledge, assignment and security interest granted hereunder shall be deemed
to automatically apply and attach to such asset and it shall from such
time forward continue to constitute Collateral hereunder notwithstanding
any prior release; and
(b) the Administrative Agent will (other than in connection with
sales of Inventory in the ordinary course of business), at the Grantors'
expense, execute and deliver to each Grantor such documents as such
Grantor shall reasonably request on reasonable advance notice to evidence
the release of such item of Collateral from the pledge, assignment and
security interest granted hereunder, provided that such Grantor shall have
delivered to the Collateral Agent a written request for release describing
the item of Collateral and the terms of the Disposition thereof in
reasonable detail, including the price thereof and any expenses in
connection therewith.
28. GOVERNING LAW; WAIVERS.
(a) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY
PERFORMED, IN SUCH STATE; PROVIDED THAT (i) WITH RESPECT TO THOSE
INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE,
INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF
A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF
PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OF SECURITY
INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE
LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, (ii) EACH
CONTROL AGREEMENT (INCLUDING EACH QUALIFYING CONTROL AGREEMENT) APPLICABLE
TO ANY SECURITIES ACCOUNT OR DEPOSIT ACCOUNT SHALL BE GOVERNED BY THE LAWS
OF THE JURISDICTION SPECIFIED IN SUCH CONTROL AGREEMENT, OR OTHERWISE BY
THE LAWS OF THE JURISDICTION THAT GOVERN THE SECURITIES ACCOUNT OR DEPOSIT
ACCOUNT TO WHICH SUCH CONTROL AGREEMENT RELATES, AND (iii) IN THOSE
INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS
LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING
ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH
MATTERS.
(b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY
33
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS
SECURITY AGREEMENT OR A SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY
OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR
TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND
IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN
SECTION 25 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY
SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF
ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS
MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF
ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR
COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE
DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY
JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE
FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY
SUCH ACTION, SUIT OR PROCEEDING.
34
(f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE
TERMS HEREOF IS AN INCONVENIENT FORUM.
[SIGNATURE PAGES FOLLOW.]
35
IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
on the day and year first written above.
GRANTORS:
BLOCK COMMUNICATIONS, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Managing Director
------------------------------------
BUCKEYE CABLEVISION, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
ERIE COUNTY CABLEVISION, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
BUCKEYE TELESYSTEMS, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
CORPORATE PROTECTION SERVICES, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
COMMUNITY COMMUNICATION SERVICES, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Vice President
------------------------------------
PG PUBLISHING COMPANY
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Vice President
------------------------------------
MONROE CABLEVISION, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
LIMA COMMUNICATIONS CORPORATION
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
WLFI-TV, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: President
------------------------------------
INDEPENDENCE TELEVISION COMPANY
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
Security Agreement
Signature Page 2
TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Vice President
------------------------------------
METRO FIBER & CABLE CONSTRUCTION COMPANY
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Vice President
------------------------------------
IDAHO INDEPENDENT TELEVISION, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: Chairman
------------------------------------
CARS HOLDING, INC.
By: /s/ Allan J. Block
------------------------------------
Name: Allan J. Block
------------------------------------
Title: President
------------------------------------
ACCESS TOLEDO, LTD.
By: BLOCK COMMUNICATIONS, INC.
By: /s/ Allan J. Block
------------------------------
Name: Allan J. Block
------------------------------
Title: Vice President
------------------------------
Security Agreement
Signature Page 3
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., as Administrative
Agent for the Lenders
By: /s/ Derrick C. Bell
------------------------------------
Name: Derrick C. Bell
------------------------------------
Title: Principal
------------------------------------
Security Agreement
Signature Page 4
SCHEDULE 1(a)
For purposes of this Security Agreement, a "Qualifying Control Agreement"
shall mean each of the following, as applicable to the respective items or types
of property in which the Grantor now has or may hereafter acquire an interest:
(a) With respect to Investment Property credited to any securities
account, an agreement executed by the applicable securities intermediary
substantially in the form of Schedule 1(a)-A hereto or in such other form
as may be consented to by the Administrative Agent in its discretion;
(b) With respect to Deposit Accounts or tangible personal property
Collateral in the possession, custody or control of any warehouseman or
other bailee, an acknowledgment and agreement executed by the depositary
institution or bailee (each, a "Custodian"), as the case may be, and (as
to Deposit Accounts) the applicable Grantor, in form and substance
acceptable to the Administrative Agent and in which the Custodian (i)
acknowledges the Lien created hereunder (and, in the case of any Custodian
of tangible personal property, that such Custodian holds such Collateral
for the Administrative Agent for the benefit of the Secured Parties), (ii)
agrees to discontinue accepting requests or demands from or on behalf of
the applicable Grantor for access to or possession of any Collateral of
which it is Custodian upon receipt of notice from the Administrative Agent
that a Default or Event of Default has occurred and is continuing (a
"Default Notice"), until such time as the Administrative Agent may furnish
it with a subsequent notice that such Default or Event of Default has been
cured or waived, (iii) agrees that it will comply with instructions from
the Administrative Agent directing the disposition of the Collateral of
which it is Custodian, without requiring further consent from the Grantor,
following receipt of any Default Notice from the Administrative Agent,
(iv) agrees that it will not consent to or acknowledge any Lien on
Collateral of which it is Custodian in favor of any other Person and, as
to Deposit Accounts only, agrees that it will not permit any withdrawals
from such deposit accounts, until it receives notice from the
Administrative Agent that all Liens on such Collateral in favor of the
Secured Parties have been released or terminated, (v) agrees to waive or
subordinate to the Lien conferred hereunder, on terms acceptable to the
Administrative Agent, any lien, claim, or right of setoff or recoupment
(whether statutory or consensual) in favor of the Custodian on any of the
Collateral; provided, however, Deposit Account Custodians may retain a
prior Lien solely for the payment of routine deposit account maintenance
and activity charges, and (vi) in the case of any warehouseman or other
bailee of tangible personal property collateral, agrees to deliver (and
accompanies such agreement with any then existing) warehouse receipts or
other Documents pertaining to such Collateral;
(c) With respect to Letter-of-Credit Rights, an acknowledgment and
agreement of the issuer or other applicable person nominated to accept
drafts and or effect payment thereunder (the "Issuer") of the related
letter of credit in form and substance acceptable to the Administrative
Agent and in which the Issuer (i) consents to and acknowledges the Lien in
favor of the Administrative Agent conferred hereunder in proceeds of
drawings under the related letter of credit, (ii) agrees that it will not
acknowledge any Lien in favor of any other Person on Letter-of-Credit
Rights until it
receives notice from the Administrative Agent that all Liens on such
Collateral in favor of the Secured Parties have been released or
terminated, and (iii) to the extent not inconsistent with the express
terms of the related letter of credit, agrees that upon receipt of notice
from the Administrative Agent that an Event of Default has occurred and is
continuing, it will make all payments of drawings honored by it under the
related letter of credit to the Administrative Agent, notwithstanding any
contrary instruction received from the Grantor; and
(d) With respect to any Investment Property in the form of
uncertificated securities, an agreement of the issuer of such Investment
Property in form and substance acceptable to the Administrative Agent
sufficient to confer control (within the meaning of Section 9-106 of the
UCC) over such property and containing such other terms and provisions as
the Administrative Agent may reasonably request.
S-2
SCHEDULE 1(a)-A
ACCOUNT CONTROL AGREEMENT
Bank of America, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent") for the Lenders (the "Lenders" and, together with the
Administrative Agent, the "Secured Parties") under that certain Credit Agreement
dated as of May 15, 2002 (as amended, supplemented or restated from time to
time, the "Credit Agreement") among the Administrative Agent, the Lenders, and
Block Communications, Inc., an Ohio corporation ("Debtor"), the undersigned
Broker-Dealer ("Broker"), and Debtor hereby agree as follows:
PREAMBLE:
1. Broker has established a securities account number __________ in the
name of Debtor (the "Account").
2. Debtor has granted the Administrative Agent a security interest in the
Account Administrative Agent for the benefit of the Secured Parties pursuant to
agreement.
3. Administrative Agent, Debtor and Broker are entering into this
Agreement to provide for the control of the Account and to perfect the security
interest of Administrative Agent in the Account.
TERMS:
SECTION 1. THE ACCOUNT. Broker hereby represents and warrants to
Administrative Agent and Debtor that (a) the Account has been established in the
name of Debtor as recited above, (b) Exhibit A hereto is a complete and accurate
statement of the Account and the financial assets carried therein and any free
credit balance thereunder as of the date thereof, (c) Exhibit A does not reflect
any financial assets which are registered in the name of Debtor, payable to its
order, or specially endorsed to it, which have not been endorsed to Broker or in
blank, (d) the security entitlements arising out of the financial assets carried
in the Account and such free credit balance are valid and legally binding
obligations of Broker, and (e) except for the claims and interest of
Administrative Agent and Debtor in the Account (subject to any claim in favor of
Broker permitted under Section 2), Broker does not know any of claim to or
interest in Account. Broker will treat all property held by it in the Account as
financial assets under Article 8 of the Uniform Commercial Code of the State of
New York (the "State").
SECTION 2. PRIORITY OF LIEN. Broker hereby acknowledges the security
interest granted to Administrative Agent for the benefit of the Secured Parties
by Debtor. Broker hereby confirms that the Account is a cash account and that it
will not advance any margin or other credit to Debtor therein, either directly
by executing purchase orders in excess of any credit balance or money market
mutual funds held in the Account, executing sell orders on securities
S-3
not held in the Account, or by allowing Debtor to trade in instruments such as
options and commodities contracts that create similar obligations, nor
hypothecate any securities carried in the Account. Broker hereby subordinates,
to Administrative Agent's security interest in the Account and to the payment
and performance of all obligations and liabilities of Debtor to any of the
Secured Parties secured by the Account, all liens, encumbrances, claims and
rights of setoff or recoupment it may have against the Account or any property
in the Account and agrees that, except for payment of its customary fees and
commissions pursuant to its agreement with Debtor pertaining to the Account (the
"Customer Agreement") and for payment of the purchase price of property
purchased for the Account in compliance with this Agreement, it will not assert
any such lien, encumbrance, claim or right against the Account or any property
in the Account. In the event that, notwithstanding the foregoing subordination,
Broker shall receive any cash or other property in respect of any subordinated
claim, lien, or right, Broker shall hold such cash or other property in trust
for Administrative Agent and, pending delivery thereof to Administrative Agent,
maintain such cash or other property in a segregated account. Broker will not
agree with any third party that Broker will comply with entitlement orders
concerning the Account originated by such third party without the prior written
consent of Administrative Agent and Debtor.
SECTION 3. CONTROL. Broker will comply with entitlement orders originated
by Administrative Agent concerning the Account without further consent by
Debtor. Except as otherwise provided in Section 2 above and 4 below, Broker may
make trades of financial assets held in the Account at the direction of Debtor,
or his authorized representatives, and comply with entitlement orders concerning
the Account from Debtor, or its authorized representatives, until such time as
Administrative Agent delivers a written notice to Broker that Administrative
Agent is thereby exercising exclusive control over the Account. Such notice may
be referred to herein as the "Notice of Exclusive Control".
After Broker receives the Notice of Exclusive Control, it will immediately cease
complying with entitlement orders or other directions concerning the Account
originated by Debtor or its representatives.
SECTION 4. NO WITHDRAWALS. Notwithstanding the provisions of Section 3
above, Broker shall neither accept nor comply with any entitlement order from
Debtor withdrawing any financial assets from the Account nor deliver any such
financial assets (or dividends or income received in respect of such property)
to Debtor nor pay any free credit balance or other amount owing from Broker to
Debtor with respect to the Account without the specific prior written consent of
Administrative Agent, except that until Broker receives a Notice of Exclusive
Control, Broker may distribute to Debtor all interest and regular cash dividends
received in respect of property in the Account.
SECTION 5. STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE Claims. Broker
will send copies of all statements, confirmations and other correspondence
concerning the Account simultaneously to each of Debtor and Administrative Agent
at the address set forth on the signature pages of this Agreement. If any person
asserts any lien, encumbrance or claim in or against the Account or in any
financial asset carried therein adverse to Debtor or Administrative Agent,
Broker will promptly notify Administrative Agent and Debtor thereof.
S-4
SECTION 6. RESPONSIBILITY OF BROKER. Except for permitting a withdrawal or
payment in violation of Section 4 above or advancing margin or other credit to
Debtor in violation of Section 2 above, Broker shall have no responsibility or
liability to Administrative Agent for making trades of financial assets held in
the Account at the direction of Debtor, or his authorized representatives, or
complying with entitlement orders concerning the Account from Debtor, or his
authorized representatives, which are received by Broker before Broker receives
a Notice of Exclusive Control. Broker shall have no responsibility or liability
to Debtor for complying with a Notice of Exclusive Control or complying with
entitlement orders concerning the Account originated by Administrative Agent.
Broker shall have no duty to investigate or make any determination as to whether
a default exists under the Credit Agreement or any other agreement between
Debtor and any Secured Party and shall comply with a Notice of Exclusive Control
even if it believes that no such default exists. This Agreement does not create
any obligation or duty of Broker other than those expressly set forth herein.
SECTION 7. TAX REPORTING. All items of income, gain, expense, and loss
recognized in the Account shall be reported to the Internal Revenue Service and
all state and local taxing authorities under the name of taxpayer identification
number of Debtor.
SECTION 8. CUSTOMER AGREEMENT. In the event of a conflict between this
Agreement and any other agreement between the Broker and the Debtor, the terms
of this Agreement will prevail. Regardless of any provision in such agreement,
the State shall be deemed to be Broker's location for the purposes of this
Agreement and the perfection and priority of Administrative Agent's security
interest in the Account.
SECTION 9. TERMINATION. The rights and powers granted herein to
Administrative Agent have been granted in order to perfect its security interest
for the benefit of the Secured Parties in the Account, are powers coupled with
an interest and will neither be affected by the death, dissolution or insolvency
of Debtor nor by the lapse of time. The obligations and agreements of Broker
under Section 2, 3, 4 and 5 above shall continue in effect until the security
interest of Administrative Agent in the Account has been terminated and
Administrative Agent has notified Broker of such termination in writing. Upon
receipt of such notice the obligations of Broker under Section 2, 3, 4 and 5
above with respect to the operation and maintenance of the Account after the
receipt of such notice shall terminate, Administrative Agent shall have no
further right to originate entitlement orders concerning the Account and Broker
may take such steps as Debtor may request to vest full ownership and control of
Account in Debtor including, but not limited to, transferring all of the
financial assets and credit balances in the Account to another securities
account in the name of Debtor or its designee. Broker may terminate this
Agreement only upon not less than thirty (30) days' prior written notice to
Administrative Agent.
SECTION 10. THIS AGREEMENT. This Agreement, the schedules and exhibits
hereto and the agreements and instruments required to be executed and delivered
hereunder set forth the entire agreement of the parties with respect to the
subject matter hereof and supersede and discharge all prior agreements (written
or oral) and negotiations and all contemporaneous oral agreements concerning
such subject matter and negotiations. There are no oral conditions precedent to
the effectiveness of this Agreement.
S-5
SECTION 11. AMENDMENTS. No amendment, modification or termination of this
Agreement or waiver of any right hereunder shall be binding on any party hereto
unless it is in writing and is signed by the party to be charged.
SECTION 12. SEVERABILITY. If any term or provision set forth in this
Agreement shall be invalid or unenforceable, the remainder of this Agreement, or
the application of such terms or provisions to persons or circumstances, other
than those to which it is held invalid or unenforceable, shall be construed in
all respects as if such invalid or unenforceable term or provision were omitted.
SECTION 13. SUCCESSORS. The terms of this Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
corporate successors or heirs and personal representatives, and the assignees of
any Secured Party.
SECTION 14. RULES OF CONSTRUCTION. In this Agreement, words in the
singular number include the plural, and in the plural include the singular;
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates words of the neuter gender may refer to any gender and the
word "or" is disjunctive, but not exclusive. The captions and section numbers
appearing in this Agreement are inserted only as a matter of convenience. They
do not define, limit or describe the scope or intent of the provisions of this
Agreement.
SECTION 15. NOTICES. Any notice, request or other communication required
or permitted to be given under this Agreement shall be in writing and deemed to
have been properly given when delivered in person, or when sent by telecopy or
other electronic means and electronic confirmation of error free receipt is
received or two days after being sent by certified or registered United States
mail, return receipt requested, postage prepaid, addressed to the party at the
address set forth immediately following the signature of its authorized
representative set forth below. Any party may change his address for notices in
the manner set forth above.
SECTION 16. FINANCIAL ASSETS. All property credited to the Account will be
treated as financial assets under Article 8 of the Uniform Commercial Code of
the State.
SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which when so executed and delivered shall be deemed an
original, and all of which together shall constitute one and the same
instrument, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart executed by the party
against whom enforcement is sought. Any party hereto may execute this Agreement
by signing and delivering one or more counterparts.
SECTION 18. CHOICE OF LAW. The parties hereto agree that certain material
events, occurrences and transactions relating to this Agreement bear a
reasonable relationship to the State. The validity, terms, performance and
enforcement of this Agreement shall be governed by those laws of the State which
are applicable to agreements which are negotiated, executed, delivered and
performed solely in the State.
S-6
SIGNATURES:
BANK OF AMERICA, N.A., as Administrative
Agent
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Address for Notices:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Fax: ( ) ---- - --------
DEBTOR:
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Address for Notices:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Fax: ( ) ---- - --------
[BROKER NAME]
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Address for Notices:
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
Fax: ( ) ---- - --------
S-7
EXHIBIT A
FORM OF SECURITY JOINDER AGREEMENT
SECURITY JOINDER AGREEMENT
THIS SECURITY JOINDER AGREEMENT (the "Security Joinder Agreement"), dated
as of _____________, 20__ is made by and between
_______________________________, a ________________ (the "Subsidiary"), and BANK
OF AMERICA, N.A., in its capacity as Administrative Agent (in such capacity, the
"Administrative Agent") under that certain Credit Agreement (as from time to
time amended, revised, modified, supplemented, amended and restated or replaced,
renewed, refunded or refinanced, the "Credit Agreement"), dated as of May 15,
2002, by and among Block Communications, Inc. (the "Borrower"), the Lenders
party thereto and the Administrative Agent. All capitalized terms not otherwise
defined herein shall have the meanings given to such terms in the Credit
Agreement.
WHEREAS, the Joining Grantor is a Subsidiary and required by the terms of
the Credit Agreement to become a "Guarantor" under the Credit Agreement and be
joined as a party to that certain Security Agreement dated as of May 15, 2002 by
and among the Administrative Agent, the Borrower and certain Subsidiaries of the
Borrower (as from time to time amended, revised, modified, supplemented, amended
and restated or replaced, renewed, refunded or refinanced, the "Security
Agreement") as a Grantor (as defined in the Security Agreement); and
WHEREAS, the Joining Grantor will materially benefit directly and
indirectly from the credit facilities made available and to be made available to
the Borrower by the Lenders under the Credit Agreement;
NOW, THEREFORE, the Joining Grantor hereby agrees as follows with the
Administrative Agent, for the benefit of the Secured Parties (as defined in the
Security Agreement):
1. JOINDER. The Joining Grantor hereby irrevocably, absolutely and
unconditionally becomes a party to the Security Agreement as a Grantor and bound
by all the terms, conditions, obligations, liabilities and undertakings of each
Grantor or to which each Grantor is subject thereunder, including without
limitation the grant pursuant to Section 2 of the Security Agreement of a
security interest to the Administrative Agent for the benefit of the Secured
Parties in the property and property rights constituting Collateral (as defined
in Section 2 of the Security Agreement) of such Grantor or in which such Grantor
has or may have or acquire an interest or the power to transfer rights therein,
whether now owned or existing or hereafter created, acquired or arising and
wheresoever located, as security for the payment and performance of the Secured
Obligations (as defined in the Security Agreement), all with the same force and
effect as if the Joining Grantor were a signatory to the Security Agreement.
2. AFFIRMATIONS. The Joining Grantor hereby acknowledges and reaffirms as
of the date hereof with respect to itself, its properties and its affairs each
of the waivers,
A-1
representations, warranties, acknowledgements and certifications applicable to
any Grantor contained in the Security Agreement.
3. SUPPLEMENTAL SCHEDULES. Attached to this Security Joinder Agreement are
duly completed schedules (the "Supplemental Schedules") supplementing as thereon
indicated the respective Schedules to the Security Agreement. The Joining
Grantor represents and warrants that the information contained on each of the
Supplemental Schedules with respect to such Joining Grantor and its properties
and affairs is true, complete and accurate as of the date hereof.
4. SEVERABILITY. The provisions of this Security Joinder Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Joinder Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
5. COUNTERPARTS. This Security Joinder Agreement may be executed in any
number of counterparts each of which when so executed and delivered shall be
deemed an original, and all of which together shall constitute one and the same
instrument, and it shall not be necessary in making proof of this Security
Joinder Agreement to produce or account for more than one such counterpart
executed by the Joining Grantor. Without limiting the foregoing provisions of
this Section 4, the provisions of Section 10.02(b) of the Credit Agreement shall
be applicable to this Security Joinder Agreement.
6. DELIVERY. Joining Grantor hereby irrevocably waives notice of
acceptance of this Security Joinder Agreement and acknowledges that the Secured
Obligations are and shall be deemed to be incurred, and credit extensions under
the Loan Documents made and maintained, in reliance on this Security Joinder
Agreement and the Grantor's joinder as a party to the Security Agreement as
herein provided.
6. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The provisions of Section
28 of the Security Agreement are hereby incorporated by reference as if fully
set forth herein.
IN WITNESS WHEREOF, the Joining Grantor has duly executed and delivered
this Security Joinder Agreement as of the day and year first written above.
JOINING GRANTOR:
------------------------------------------
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
A-2