Exhibit 10.3
THIRD AMENDED AND RESTATED SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED SECURITY AGREEMENT (as further
amended, amended and restated, supplemented or otherwise modified from time to
time, this "SECURITY AGREEMENT"), dated as of September 13, 2002, is made by
CHOICE ONE COMMUNICATIONS INC., a Delaware corporation (the "COMPANY"), and
certain Subsidiaries thereof listed on the signature pages hereto (the
"SUBSIDIARY GRANTORS", and together with the Company and each additional Grantor
who executes a Joinder Agreement to the Credit Agreement referred to below, the
"GRANTORS," each individually, a "GRANTOR"), in favor of WACHOVIA INVESTORS,
INC. (formerly known as First Union Investors, Inc.) as administrative agent
(the "ADMINISTRATIVE AGENT") for the benefit of itself and the financial
institutions (the "LENDERS") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
STATEMENT OF PURPOSE
Pursuant to the Security Agreement, dated as of October 14,
1998 (as previously amended, restated or otherwise modified, the "INITIAL
SECURITY AGREEMENT"), the Company and the Grantors party thereto granted a
security interest in the collateral referred to therein in order to secure the
obligations under the Initial Credit Agreement.
Pursuant to the First Amended and Restated Credit Agreement,
the Grantors entered into an Amended and Restated Security Agreement dated as of
November 3, 1999 (the "FIRST AMENDED AND RESTATED SECURITY AGREEMENT"), whereby
the parties thereto agreed to modify the Initial Security Agreement in certain
respects as reflected therein.
Pursuant to the Second Amended and Restated Credit Agreement,
the Grantors entered into a Second Amended and Restated Security Agreement dated
as of August 1, 2000 (the "SECOND AMENDED AND RESTATED SECURITY AGREEMENT"),
whereby the parties thereto agreed to modify the First Amended and Restated
Security Agreement in certain respects as reflected therein.
Pursuant to the Third Amended and Restated Credit Agreement of
even date herewith (as further amended, restated, supplemented or otherwise
modified, the "CREDIT AGREEMENT"), by and among the Company, as Guarantor, its
Subsidiaries party thereto, as Borrowers, the Lenders, the Administrative Agent
and the other Agents party thereto, the Lenders agreed to modify the Second
Amended and Restated Credit Agreement as more specifically described in the
Credit Agreement. The Credit Facilities described in the Credit Agreement
represent a continuation of the existing credit facilities provided to the
Borrowers pursuant to the Initial Credit Agreement, the First Amended and
Restated Credit Agreement and the Second Amended and Restated Credit Agreement,
subject to the addition of two term loan facilities and certain other amendments
as provided in the Credit Agreement.
The Credit Facilities have been and continue to be secured by,
among other things, the Initial Security Agreement, as amended and restated by
the First Amended and Restated Security Agreement and as further amended and
restated by the Second Amended and Restated Security Agreement. The Grantors,
the Administrative Agent and the Lenders have determined to modify the Security
Agreement in certain respects, and for ease of reference have elected to
incorporate such modifications in this Security Agreement which is an amendment
and restatement of such Second Amended and Restated Security Agreement. This
Security Agreement continues the pledge and grant of security interests under
the Initial Security Agreement as reaffirmed by the First Amended and Restated
Security Agreement and the Second Amended and Restated Security Agreement,
pursuant to the terms amended and restated in certain respects as set forth
below.
The Extensions of Credit will be provided for certain purposes
as described in Section 9.17 of the Credit Agreement, including funding working
capital and general corporate requirements of the Borrowers. The Grantors, other
than the Company, constitute one integrated financial enterprise, and thus
Extensions of Credit to any Grantor shall benefit directly and indirectly each
Grantor.
NOW, THEREFORE, in consideration of these premises and the
mutual agreements set forth herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and to induce the
Administrative Agent and the Lenders to enter into and make available Extensions
of Credit pursuant to the Credit Agreement, the Grantors hereby agree with the
Administrative Agent, for the ratable benefit of itself and the Lenders, as
follows:
Section 1. DEFINITIONS. Unless otherwise defined herein, capitalized
terms used herein have the meanings assigned thereto in the Credit Agreement,
and the following terms shall have the following meanings:
"ACCOUNT DEBTOR" means "account debtor" (as defined in the UCC)
including any Person who is or may become obligated to any Grantor under, with
respect to, or on account of, an Account.
"ACCOUNTS" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by any Grantor or in which any Grantor now has or hereafter
acquires any right or interest, including, without limitation, (a) all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to any Grantor and arising from the sale, lease, consignment
or exchange of goods or other property, or from the performance of services by
such Grantor, (b) all of each Grantor's rights to any goods or other property
services or represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission, replevin,
reclamation and rights to stoppage in transit) and (c) all monies due or to
become due to any Grantor under all contracts for the sale, lease, consignment
or exchange of goods or other property or for the performance of services by
such Grantor (whether or not yet earned), in each case whether now in existence
or hereafter arising or acquired, including, without limitation, the right to
receive the proceeds of such contracts and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
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"ACCOUNTS AGING REPORT" means a detailed aged trial balance of all
Accounts existing as of a specified date, specifying the names, addresses, face
value and dates of invoices of each Account Debtor obligated on any Accounts so
listed, and otherwise in form and substance satisfactory to the Administrative
Agent and Required Lenders.
"COLLATERAL" shall have the meaning given thereto in Section 2(a)
hereof.
"COLLATERAL ACCOUNT" means a cash collateral account established by the
Grantors with the Administrative Agent, in the name and under the exclusive
dominion and control of the Administrative Agent, pursuant to Section 6 hereof.
"COPYRIGHT LICENSE" means any written agreement now or hereafter in
existence granting to any Grantor any right to use any Copyright.
"COPYRIGHTS" means, collectively, all of the following now owned or
hereafter created or acquired by any Grantor: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright registrations
and copyright applications, including, without limitation, any thereof referred
to on SCHEDULE I hereto; (b) all renewals of any of the foregoing; (c) all
income, royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future infringements of any
of the foregoing; (d) the right to xxx for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding to any
of the foregoing throughout the world.
"DOCUMENTS" means all "documents" (as defined in the UCC) or other
receipts of any Grantor covering, evidencing or representing goods or services,
now owned or hereafter acquired by any Grantor or in which any Grantor now has
or hereafter acquires any right or interest.
"EQUIPMENT" means all "equipment" (as defined in the UCC) of any
Grantor, wherever located, and all Telecommunications Equipment, machinery,
goods and other equipment of any Grantor used or bought for use primarily in the
business of such Grantor, including all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor, in all such
cases whether now owned or hereafter acquired by any Grantor or in which any
Grantor now has or hereafter acquires any right or interest.
"FINANCING STATEMENTS" shall mean the UCC Form UCC-1 Financing
Statements executed by the Grantors with respect to the Collateral and filed (or
to be filed) in the jurisdictions set forth in the Perfection Certificate.
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"FIXTURES" shall mean all "fixtures" (as defined in the UCC) of any
Grantor, whether now owned or hereafter acquired by any Grantor or in which any
Grantor now has or hereafter acquires any right or interest.
"GENERAL INTANGIBLES" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by any Grantor or in which any Grantor
now has or hereafter acquires any right or interest, including, without
limitation, all payment intangibles, all rights to indemnification, and all
rights, title and interest which any Grantor now has or hereafter acquires in or
under the Lucent Agreement, switch installation and testing contracts, lease
agreements for fiber capacity, rights of way, each Material Contract and all
other contracts (other than contracts described in the definition of Accounts),
permits, licenses, franchises, causes of action, tax refund claims, customer
lists, Intellectual Property, license royalties, goodwill, trade secrets, data
bases, business records, and all other intangible property of every kind and
nature; provided that for the purpose of Section 2 hereof, the grant,
assignment, transfer, mortgage, hypothecation and pledge of General Intangibles
(which includes, as noted herein, Intellectual Property) set forth therein shall
not include any intent to use application or registration of trademark until to
the filing of a verified statement of use in connection therewith.
"INSTRUMENTS" means all "instruments", "chattel paper" or
"letter-of-credit rights" (each as defined in the UCC) of any Grantor,
including, without limitation, instruments, chattel paper and letters of credit
evidencing, representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of any of the Accounts, including,
without limitation, promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by any Grantor or in which any
Grantor now has or hereafter acquires any right or interest.
"INTELLECTUAL PROPERTY" means, collectively, all of the following of
any Grantor: (a) all systems software and applications software, including,
without limitation, screen displays and formats, program structures, sequence
and organization, all documentation for such software, including, without
limitation, user manuals, flowcharts, programmer's notes, functional
specifications, operations manuals, formulas, processes, ideas and know-how
embodied in any of the foregoing, and all program materials, flowcharts, notes
and outlines created in connection with any of the foregoing, whether or not
patentable or copyrightable, (b) concepts, discoveries, improvements and ideas,
(c) any useful information relating to the items described in clause (a) or (b),
including know-how, technology, engineering drawings, reports, design
information, trade secrets, practices, laboratory notebooks, specifications,
test procedures, maintenance manuals, research, development, manufacturing,
marketing, merchandising, selling, purchasing and accounting, (d) Patents,
Patent rights, Patent applications, Copyrights, Copyright applications,
Trademarks, Trademark rights, trade names, trade name rights, service marks,
service xxxx rights, applications for registration of Trademarks, trade names
and service marks, and Trademark, trade name and service xxxx registrations and
Patent Licenses, Trademark Licenses, Copyright Licenses, (e) other licenses to
use any of the items described in the foregoing clauses (a), (b), (c) and (d) or
any other similar items of any Grantor necessary for the conduct of its business
and (f) all goodwill associated with the items described in the foregoing
clauses (a), (b), (c), (d) and (e); provided that for the purpose of Section
4(d)(iii) hereof, the assignment, transfer and conveyance of the Intellectual
Property set forth therein shall not include any intent to use application or
registration of trademark until to the filing of a verified statement of use in
connection therewith.
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"INVENTORY" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired by any Grantor or in which any Grantor now has or hereafter
acquires any right or interest, wherever located, including, without limitation,
all raw materials, inventory and other materials and supplies, work in process,
finished goods, all accessions thereto, documents therefor and any products made
or processed therefrom, all software related thereto (including, without
limitation, software that is embedded in and is part of the inventory), and all
substances commingled therewith or added thereto (including, without limitation,
any of the foregoing in which any Grantor has an interest as a consignor).
"INVESTMENT PROPERTY" means "investment property" (as defined in the
UCC) including all "securities" (whether certificated or uncertificated),
"security entitlements", "securities accounts", "commodity contracts" and
"commodity accounts" (in each case as defined in the UCC) of any Grantor,
whether now owned or hereafter acquired.
"PATENT LICENSE" means any written agreement now or hereafter in
existence granting to any Grantor any right to use any invention on which a
Patent is in existence.
"PATENTS" means, collectively, all of the following now owned or
hereafter created or acquired by any Grantor: (a) all patents and patent
applications including all patentable inventions, including, without limitation,
any thereof referred to on SCHEDULE II hereto; (b) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part of any of the
foregoing; (c) all income, royalties, damages or payments now or hereafter due
and/or payable under any of the foregoing or with respect to any of the
foregoing, including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to xxx for past, present
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"PERFECTION CERTIFICATE" means a certificate dated as of even date
herewith, setting forth the corporate or other names, chief executive office or
principal place of business in each state and other current locations of each
Grantor and such other information as the Administrative Agent deems pertinent
to the perfection of security interests, completed and supplemented with the
schedules and attachments contemplated thereby to the satisfaction of the
Administrative Agent, and duly certified by the chief executive, chief financial
officer or Treasurer of each Grantor so authorized to act.
"PERMITTED LIENS" means all Liens respecting the Collateral permitted
pursuant to Section 11.3 of the Credit Agreement.
"PROCEEDS" means all "proceeds" (as defined in the UCC) and all other
profits, rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, Collateral, including, without limitation, all claims of any
Grantor against third parties for loss of, damage to or destruction of, or for
proceeds payable under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or requisition
payments with respect to any Collateral and all Collateral acquired with the
cash proceeds of any other Collateral.
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"SECURED OBLIGATIONS" means, with respect to each Grantor that is a
Borrower, the Obligations as defined in the Credit Agreement and any renewals or
extensions of any of such Obligations and, with respect to the Company as
Grantor, the Guaranteed Obligations as defined in the Credit Agreement and any
renewals or extensions of any of such Guaranteed Obligations.
"SECURITY INTERESTS" means the security interests granted pursuant to
Section 2 hereof, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Security Agreement.
"TRADEMARK LICENSE" means any written agreement now or hereafter in
existence granting to a Grantor any right to use any Trademark.
"TRADEMARKS" means, collectively, all of the following now owned or
hereafter acquired by any Grantor: (a) all Trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on which any
of the foregoing have appeared or appear, all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state thereof or any
other country or any political subdivision thereof, all of such registrations,
recordings and applications in the United States Patent and Trademark office are
listed on SCHEDULE III hereto; (b) all reissues, extensions and renewals of any
of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under or with respect to any of the foregoing,
including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to xxx for past, present
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"UCC" means the Uniform Commercial Code as in effect, from time to
time, in the State of New York; PROVIDED that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
or priority of the Security Interests in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York "UCC"
means the Uniform Commercial Code as in effect, from time to time, in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection or priority.
To the extent any amendment, revision or other modification of the UCC
after the date hereof results in the renumbering of specific sections, revision
of the order of specific sections or other changes in the organization of the
UCC in effect as of the date hereof, all references herein to specific sections
of the UCC in effect as of the date hereof shall be deemed to refer to such new
section or sections which correspond to such original sections.
"VEHICLES" means all cars, trucks, trailers, construction and earth
moving equipment of any Grantor and other vehicles covered by a certificate of
title law of any state, and all tires and other appurtenances to any of the
foregoing.
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Section 2. THE SECURITY INTERESTS. (a) In order to secure the payment and
performance of the Secured Obligations, the Grantors hereby grant to the
Administrative Agent, for the ratable benefit of itself and the Lenders, a
continuing security interest in and to all of the Grantors' estate, right, title
and interest in and to all of the following property, whether now owned or
hereafter acquired by the Grantors or in which the Grantors now have or
hereafter acquire any estate, right, title or interest, and wherever located
(collectively, along with any other property of any Grantor which may from time
to time secure the Secured Obligations, the "COLLATERAL"):
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Equipment;
(v) Fixtures;
(vi) Instruments;
(vii) General Intangibles;
(viii) Investment Property;
(ix) Vehicles;
(x) The Collateral Account, all cash deposited therein from time to time,
the investments made pursuant to Section 6 and other monies and
property of any kind (including any deposit accounts) of any Grantor in
the possession or under the control of the Administrative Agent or any
Lender;
(xi) All Communications Licenses and all goodwill and going concern
value relating thereto; PROVIDED, however, that such security
interest does not include at any time any Communications License to
the extent, but only to the extent, that any Grantor is prohibited
at that time from granting a security interest therein pursuant to
Communications Law and all other Applicable Law, but includes, to
the maximum extent permitted by Applicable Law, all rights
incident or appurtenant to any such Communications License and
the rights to receive all proceeds derived from or in connection
with the sale, assignment or transfer of any Communications License;
and provided further, to the extent that any Grantor is so prohibited
from granting a security interest in any Communications License,
each Grantor agrees that a security interest shall automatically
attach to any such Communications License, all rights incident or
appurtenant thereto, and the rights to receive proceeds derived from
or in connection with the sale, assignment or transfer of any
Communications License, at such time that such a security interest
is permitted by Applicable Law;
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(xii) All books and records (including, without limitation, customer lists,
credit files, computer programs, printouts and other computer materials
and records) of any Grantor pertaining to any of the Collateral;
(xiii) All other goods and personal property of each Grantor, whether
tangible or intangible; and
(xiv) All products and Proceeds of all or any of the Collateral described in
clauses (i) through (xiii) hereof.
(b) The Security Interests are granted as security only and shall not subject
the Administrative Agent or any Lender to, or transfer to the Administrative
Agent or any Lender, or in any way affect or modify, any obligation or liability
of any Grantor with respect to any of the Collateral or any transaction in
connection therewith.
Section 3. REPRESENTATIONS AND WARRANTIES. To induce the Administrative Agent
and the Lenders to execute the Credit Agreement, provide the Extensions of
Credit thereunder and accept the security contemplated hereby, each Grantor
represents and warrants as follows:
(a) Such Grantor's exact legal name, as defined in Section 9-503(a) of the UCC,
is correctly set forth in SCHEDULE IV hereto. Such Grantor has only the trade
names, domain names and marks listed on SCHEDULE VI hereto. Such Grantor is
located (within the meaning of Section 9-307 of the UCC) and has its chief
executive office and the office in which it maintains all originals of all
chattel paper that evidence receivables of such Grantor in the state or
jurisdiction set forth in SCHEDULE IV hereto. The information set forth in
SCHEDULE IV hereto with respect to such Grantor is true and accurate in all
respects. Such Grantor has not previously changed its name, location, chief
executive office, place where it maintains its chattel paper, type of
organization, jurisdiction of organization or organizational identification
number from those set forth in SCHEDULE IV except as disclosed in SCHEDULE V
hereto.
(b) Each Grantor has the corporate power, authority and legal right to execute
and deliver, to perform its obligations under, and to grant the Security
Interests in the Collateral pursuant to this Security Agreement and has taken
all necessary corporate action to authorize the execution, delivery, performance
and grant of the Security Interests on the Collateral pursuant to this Security
Agreement.
(c) This Security Agreement constitutes a legal, valid and binding obligation of
each Grantor enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
(d) Each Grantor is the sole owner of, and has good and marketable title to, or
a valid leasehold interest in, all of its respective Collateral, free and clear
of any Liens other than the Permitted Liens.
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(e) No Grantor has performed or failed to perform any acts that would prevent or
hinder the Administrative Agent from enforcing any of the terms of this Security
Agreement. No financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the Collateral is
on file or of record in any jurisdiction, except with respect to Permitted
Liens. No Collateral of any Grantor is in the possession of any Person (other
than the Grantors) asserting any claim thereto or security interest therein,
except that the Administrative Agent or its designee may have possession of
Collateral as contemplated hereby and a bailee or consignee may have possession
of the Collateral as contemplated by, and so long as the Grantors have complied
with, Section 4(a)(iii) and Section 4(a)(iv) hereof.
(f) All of the information set forth in the Perfection Certificate is true and
correct as of the date hereof after giving effect to the transactions
contemplated by the Loan Documents and the Related Transaction Documents to be
consummated on such date.
(g) Each Grantor has, contemporaneously herewith, delivered to the
Administrative Agent possession of all originals of all Instruments and
Documents constituting Collateral currently owned or held by such Grantor, if
any (duly endorsed in blank, if requested by the Administrative Agent).
(h) With respect to any Inventory of the Grantors: (i) all Inventory is, and
shall be at all times, located at places of business listed in the Perfection
Certificate or as to which the applicable Grantor has complied with the
provisions of Section 4(a)(i) hereof, except Inventory in transit from one such
location to another such location; (ii) no inventory is, nor shall at any time
or times be, subject to any Lien whatsoever, except for Permitted Liens; (iii)
no Inventory in aggregate value exceeding $500,000 at any time is, nor shall at
any time or times be, kept, stored or maintained with a landlord, bailee,
warehouseman, carrier or similar party (other than a carrier delivering
Inventory to a purchaser in the ordinary course of the applicable Grantor's
business) unless the Administrative Agent shall have received prior written
notice of such storage and the applicable Grantor has complied with the
provisions of Section 4(a)(iii) hereof; and (iv) no Inventory in the aggregate
value exceeding $500,000 at any time is, nor shall at any time or times be,
kept, stored or maintained with a consignee unless the applicable Grantor has
complied with Section 4(a)(iv) hereof and has taken such other action as is
reasonably requested by the Administrative Agent in order to maintain the
perfection and priority of the Administrative Agent's Lien on such Inventory.
(i) With respect to any Intellectual Property the loss, impairment or
infringement of which could reasonably be expected to have a Material
Adverse Effect:
(i) such Intellectual Property is subsisting and has not been adjudged
invalid or unenforceable, in whole or in part;
(ii) such Intellectual Property is valid and enforceable;
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(iii) such Grantor has made all necessary filings and recordations to protect
its interest in such Intellectual Property, including, without
limitation, recordations of all of its interests in the Patents and
Trademarks in the United States Patent and Trademark Office and its
claims to the Copyrights in the United States Copyright Office;
(iv) such Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property and no
claim has been made that the use of such Intellectual Property does or
may violate the asserted rights of any third party;
(v) such Grantor has performed and will continue to perform all acts and
has paid and will continue to pay all required fees and taxes to
maintain such Intellectual Property in full force and effect; and
(vi) SCHEDULE III attached hereto sets forth a true and complete list of all
registered and applied for Intellectual Property owned by the Grantors.
(j) The Financing Statements are in appropriate form and, with respect to all
Grantors, the Administrative Agent for the ratable benefit of itself and the
Lenders, has a valid and perfected first priority security interest in the
Collateral, prior to all other Liens and rights of others therein except for the
Permitted Liens (to the extent that a security interest therein may be perfected
by filing pursuant to the UCC). All filings and other actions necessary
(including, without limitation, (i) actions necessary to obtain control of
Collateral as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC and
(ii) actions necessary to perfect the Administrative Agent's Security Interest
with respect to Collateral evidenced by a certificate of ownership) or desirable
to perfect and protect such Security Interests, except for the recordation of
this Security Agreement with the United States Patent and Trademark Office which
will be recorded by the Adminsitrative Agent, have been duly taken.
Section 4.FURTHER ASSURANCES; COVENANTS. (a)GENERAL.
(i) No Grantor will change its name, type of organization, jurisdiction of
organization, organizational identification number or location without first
giving at least thirty (30) days prior written notice to the Administrative
Agent and taking all action required by the Administrative Agent for the purpose
of perfecting or protecting the security interest granted by this Security
Agreement, including such Grantor agrees to execute or authenticate and deliver
to the Administrative Agent all financing statements and financing statement
amendments which the Administrative Agent may reasonably request in connection
therewith. Each Grantor agrees to promptly notify the Administrative Agent of
any change in the locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location described in the
Perfection Certificate and, within thirty (30) days after such change, such
Grantor agrees to execute and deliver to the Administrative Agent all financing
statements and financing statement amendments which the Administrative Agent may
reasonably request in connection therewith. No Grantor will in any event change
the location of any Collateral if such change would cause the Security Interests
in such Collateral to lapse or cease to be perfected.
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(ii) The Grantors will maintain the Administrative Agent's Lien on the
Collateral as a first priority perfected Lien thereon, subject only to Permitted
Liens. Upon the reasonable request of the Administrative Agent, each Grantor
will, from time to time, at its expense, execute, deliver, file and record any
statement, assignment, instrument, document, agreement or other paper and take
any other action (including, without limitation, any filings of financing or
continuation statements under the UCC and any filings with the United States
Patent and Trademark Office and United States Copyright Office) that from time
to time may be necessary in order to create, preserve, upgrade in rank (to the
extent required hereby), perfect, confirm or validate the Security Interests or
to enable the Administrative Agent and the Lenders to obtain the full benefits
of this Security Agreement, or to enable the Administrative Agent to exercise
and enforce any of its rights, powers and remedies hereunder with respect to any
of the Collateral. Each Grantor agrees that a carbon, photographic, photostatic
or other reproduction of this Security Agreement or of a financing statement is
sufficient as a financing statement. The Grantors shall pay the costs of, or
incidental to, any recording or filing of the Financing Statements and any other
financing statements, financing statement amendments or continuation statements
concerning the Collateral.
(iii) Collateral exceeding $500,000 in aggregate value shall not at any
time be in the possession or control of any landlord, warehouseman, bailee, or
any of any Grantor's agents or processors, unless such Grantor has notified in
writing such landlord, warehouseman, bailee, agent or processor of the Security
Interests created hereby, and has obtained such landlord's, warehouseman's,
bailee's, agent's or processor's agreement in writing to hold all such
Collateral for the Administrative Agent's account subject to the Administrative
Agent's instructions and has to caused such landlord, warehouseman, bailee,
agent or processor to issue and deliver to the Administrative Agent warehouse
receipts, bills of lading or any similar documents relating to such Collateral
in the Administrative Agent's name and in form and substance reasonably
acceptable to the Administrative Agent.
(iv) Collateral exceeding $500,000 in aggregate value shall not at any time
be in the possession or control of any consignee, unless the applicable
Grantor(s) has notified in writing each such consignee of the Security Interests
created hereby, and has obtained such consignee's agreement in writing to hold
all such Collateral for the Administrative Agent's account subject to the
Administrative Agent's instructions, and has caused such consignee to issue and
deliver to the Administrative Agent warehouse receipts, bills of lading or any
similar documents relating to such Collateral in the Administrative Agent's name
and in form and substance reasonably acceptable to the Administrative Agent.
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(v) Each Grantor will cause the Administrative Agent, for the ratable
benefit of itself and the Lenders, to be named as additional insured and loss
payee on each all-risk property and business interruption insurance policy, and
additional insured on each comprehensive general liability, workers'
compensation, employer's liability, automobile liability and umbrella liability
policy. Obligations under such policies shall be the sole obligation of the
applicable Borrowers and no action of the Borrowers shall invalidate the rights
and interests of the Administrative Agent and Lenders thereunder. In addition,
the Administrative Agent on behalf of itself and the Lenders may obtain (or
maintain) any insurance required hereunder, with all costs and reasonable
expenses therefor to be reimbursed by the Borrowers upon demand. Each such
insurance policy shall provide that (A) each additional insured shall be covered
as if a separate (and equivalent) policy covered such Person, (B) the insurers
thereunder shall waive all right of subrogation against the Administrative Agent
and Lenders and any right of setoff or counterclaim and any other right to
deduction, whether by attachment or otherwise, (C) such insurance shall be
primary without right of contribution of any other insurance carried by or on
behalf of the Administrative Agent and Lenders and (D) all insurance proceeds
shall be adjusted with and payable to the Administrative Agent and provide that
no cancellation or termination thereof shall be effective until at least thirty
(30) days have elapsed after receipt by the Administrative Agent of written
notice thereof. The Administrative Agent agrees that, as long as no Default or
Event of Default has occurred and is continuing, any such proceeds received by
it shall be applied (and to the extent required, paid over to the Grantors) in
the manner set forth in Section 4.5(c)(iv) of the Credit Agreement.
(vi) Each Grantor will, promptly upon request, provide to the
Administrative Agent all information and evidence the Administrative Agent may
reasonably request concerning the Collateral, and in particular the Accounts, to
enable the Administrative Agent to enforce the provisions of this Security
Agreement.
(vii) If an Event of Default has occurred and is continuing, upon request
by and to the satisfaction of the Administrative Agent, each Grantor shall, at
its cost and expense, cause to be delivered to the Administrative Agent and the
Lenders an opinion or opinions of counsel, as to the enforceability of the Loan
Documents and the Lien of the Administrative Agent and Lenders on the Collateral
and other property of the Grantors and such other matters relating to the
transactions contemplated hereby as the Administrative Agent or the Required
Lenders may reasonably request.
(viii) Each Grantor will comply in all material respects with all
Applicable Laws applicable to the Collateral or any part thereof or to the
operation of such Grantor's business.
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(ix) Each Grantor will pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies) against or with
respect to the Collateral, except that no such charge need be paid if (A) the
validity thereof is being contested in good faith by appropriate proceedings,
(B) such proceedings do not involve any reasonable danger of the prompt sale,
forfeiture or loss of or creation of a Lien on any of the Collateral or any
interest therein and (C) such charge is adequately reserved against on such
Grantor's books in accordance with GAAP.
(x) The Grantors shall not
(1) sell, assign (by operation of law or otherwise), abandon or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(2) create or suffer to exist any Lien or other charge or encumbrance upon
or with respect to any of the Collateral to secure indebtedness of any
Person or entity, except as permitted by the Credit Agreement.
(b) ACCOUNTS, ETC.
(i) Each Grantor shall use all reasonable efforts to cause to be collected
from its Account Debtors, as and when due, any and all amounts owing
under or on account of each Account (including, without limitation,
delinquent Accounts which shall be collected in accordance with lawful
collection procedures) and to apply forthwith amounts so collected to
the outstanding balance of such Account. The costs and expenses
(including, without limitation, attorney's fees) of collection of
Accounts incurred by such Grantor or the Administrative Agent shall be
borne by such Grantor.
(ii) Upon the occurrence and during the continuance of any Event of Default,
upon request of the Administrative Agent or the Required Lenders, each
Grantor will promptly notify (and each Grantor hereby authorizes the
Administrative Agent so to notify) each Account Debtor in respect of
any Account that such Account has been assigned to the Administrative
Agent hereunder and that any payments due or to become due in respect
of such Account are to be made directly to the Administrative Agent or
its designee.
(iii) Each Grantor will perform and comply with all of its material
obligations in respect of Accounts and General Intangibles and the
exercise by the Administrative Agent of any of its rights hereunder
shall not release such Grantor from any of its duties or obligations.
13
(iv) No Grantor will (A) amend, modify, terminate or waive any material
provision of any agreement giving rise to an Account in any manner
which could reasonably be expected to materially adversely affect the
value of such Account as Collateral, (B) fail to exercise promptly and
diligently each and every material right which it may have under each
agreement giving rise to an Account (other than any right of
termination) or (C) fail to deliver to the Administrative Agent a copy
of each material demand, notice or document received by it relating in
any way to any agreement giving rise to an Account.
(v) Other than in the ordinary course of business as conducted by each
Grantor over a period of time, no Grantor will (A) grant any extension
of the time of payment of any Account with a face amount in excess of
$250,000, (B) compromise, compound or settle the same for less than the
full amount thereof, (C) release, wholly or partially, any Person
liable for the payment thereof, or (D) allow any credit or discount
whatsoever thereon.
(vi) At the reasonable request of the Administrative Agent or Required
Lenders, the Grantors shall deliver to the Administrative Agent with a
copy for each Lender an Accounts Aging Report.
(c) EQUIPMENT, ETC. Each Grantor will (i) maintain each item of Equipment in the
same condition, repair and working order as when acquired, ordinary wear and
tear, immaterial impairments of value and damage by the elements excepted, and
in accordance with any manufacturer's manual, (ii) provide as quickly as
practicable all maintenance, service and repairs necessary for such purpose and
(iii) furnish to the Administrative Agent promptly a statement respecting any
material loss or damage to any of the Equipment with a value exceeding $500,000.
(d) INTELLECTUAL PROPERTY.
(i) Each Grantor shall notify the Administrative Agent promptly (A) of its
acquisition after the Closing Date of any Patent, Patent License, Copyright,
Copyright License, Trademark or Trademark License and (B) if it knows, or has
reason to know of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any court)
regarding such Grantor's ownership of any Patent or Trademark, its right to
register the same, or to keep and maintain the same.
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In the event that any Patent, Patent License, Copyright, Copyright License,
Trademark or Trademark License is infringed, misappropriated or diluted by a
third party, the affected Grantor shall notify the Administrative Agent promptly
after it learns thereof and shall, unless such Grantor and the Administrative
Agent shall jointly determine that any such action would be of immaterial
economic value, promptly xxx for infringement, misappropriation or dilution and
to recover any and all resulting damages and take such other actions as may be
appropriate under the circumstances to protect such Patent, Patent License,
Copyright, Copyright License, Trademark or Trademark License. Each Grantor
agrees, either itself or through any agent, employee or licensee, to inform the
Administrative Agent upon the filing of an application for the registration of
any Patent, Copyright or Trademark with the United States Patent and Trademark
Office, United States Copyright Office or any similar office or agency in any
other country or any political subdivision thereof, and, upon issuance of such
patent or Trademark, to execute and deliver thereto any and all agreements,
instrument, documents and papers the Administrative Agent may reasonably request
to evidence the Security Interests in such Patent, Copyright or Trademark and
the goodwill and general intangibles of such Grantor relating thereto or
represented thereby. Each Grantor hereby constitutes the Administrative Agent
its attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed, and
such power, being coupled with an interest, shall be irrevocable until the
Revolving Credit Commitment has terminated and the Secured Obligations are paid
in full.
(ii) Each Grantor shall preserve and maintain in all material respects
rights in the Intellectual Property which is material to the conduct of its
business and, upon and after the occurrence and during the continuance of an
Event of Default, if requested by the Administrative Agent, use its best efforts
to obtain any consents, waivers or agreements necessary to enable the
Administrative Agent to exercise its remedies with respect to the Intellectual
Property. No Grantor shall abandon any right to file a Copyright, Patent or
Trademark application that is material to the business of such Grantor nor shall
such Grantor abandon any such pending Copyright, Patent or Trademark
application, or Copyright, Copyright License, Patent, Patent License, Trademark
or Trademark License without the prior written consent of the Administrative
Agent.
(iii) The Grantors hereby assign, transfer and convey to the Administrative
Agent, effective upon the occurrence and during the continuance of any Event of
Default, the nonexclusive right and license to use all Intellectual Property
owned or used by the Grantors, together with any goodwill associated therewith,
all to the extent necessary to enable the Administrative Agent to realize on the
Collateral (including, without limitation, completing production of, advertising
for sale and selling the Collateral) and any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit of
all successors, assigns and transferees of the Administrative Agent and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without requirement
that any monetary payment whatsoever be made to Grantor by the Administrative
Agent.
15
(e) VEHICLES. The Company will maintain each Vehicle in good operating
condition, ordinary wear and tear and immaterial impairments of value and damage
by the elements excepted, and will provide all maintenance, service and repairs
necessary for such purpose. Upon the request of the Administrative Agent, all
applications for certificates of title or ownership indicating the
Administrative Agent's first priority Lien on the Vehicle covered by such
certificate, and any other necessary documentation, shall be filed in each
office in each jurisdiction which the Administrative Agent shall deem advisable
to perfect its Liens on the Vehicles. Prior thereto, each certificate of title
or ownership relating to each Vehicle shall be maintained by the applicable
Grantor in accordance with Applicable Law to reflect the ownership interest of
such Grantor.
(f) INDEMNIFICATION. Each Grantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, costs and expenses
(including, without limitation, reasonable legal fees and expenses) (i) with
respect to, or resulting from, any and all excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, complying with any
Applicable Law applicable to any of the Collateral or (iii) in connection with
any of the transactions contemplated by this Security Agreement (except to the
extent any such liabilities, costs and expenses result from the gross negligence
or willful misconduct of the Administrative Agent or Lenders). In any suit,
proceeding or action brought by the Administrative Agent under any Account for
any sum owing thereunder, or to enforce any provisions of any Account, each
Grantor will save, indemnify and keep the Administrative Agent and the Lenders
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability whatsoever
of the Account Debtor or any other obligor thereunder, arising out of a breach
by any Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
Account Debtor or obligor or its successors from any Grantor (except to the
extent any such expense, loss or damage results from the gross negligence or
willful misconduct of the Administrative Agent or Lenders). The obligations of
the Grantors under this Section 4(f) shall survive the termination of the other
provisions of this Security Agreement.
Section 5. REPORTING AND RECORDKEEPING. Each Grantor respectively covenants and
agrees with the Administrative Agent and the Lenders that from and after the
date of this Security Agreement and until the Commitments have terminated and
all Secured Obligations have been fully satisfied:
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(a) MAINTENANCE OF RECORDS GENERALLY. Each Grantor will keep and maintain at its
own cost and expense complete and accurate records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. All
chattel paper given to such Grantor with respect to any Accounts will be marked
with the following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of Wachovia Investors, Inc.,
as Administrative Agent". For the Administrative Agent's and the Lenders'
further security, each Grantor agrees that upon the occurrence and during the
continuation of any Default or Event of Default, such Grantor shall deliver and
turn over any such books and records directly to the Administrative Agent or its
designee. Each Grantor shall permit any representative of the Administrative
Agent to inspect such books and records in accordance with Section 9.11 of the
Credit Agreement and will provide photocopies thereof to the Administrative
Agent upon its reasonable request.
(b) CERTAIN PROVISIONS REGARDING MAINTENANCE OF RECORDS AND REPORTING
RE: ACCOUNTS.
(i) In the event any amounts due and owing in excess of $250,000
individually or $500,000 in the aggregate are in dispute between any Account
Debtor and any Grantor, such Grantor shall provide the Administrative Agent with
written notice thereof promptly after such Grantor's learning thereof,
explaining in detail the reason for the dispute, all claims related thereto and
the amount in controversy.
(ii) Each Grantor will promptly notify the Administrative Agent in writing
if any Account or Accounts, the face value of which exceeds $250,000
individually or $500,000 in the aggregate, arises or arise out of a contract
with the United States of America, or any department, agency, subdivision or
instrumentality thereof, or of any state (or department, agency, subdivision or
instrumentality thereof) where such state has a state assignment of claims act
or other law comparable to the Federal Assignment of Claims Act. Each Grantor
will take all reasonable action required or reasonably requested by the
Administrative Agent or give notice of the Administrative Agent's Security
Interest in such Accounts under the provisions of the Federal Assignment of
Claims Act or any comparable law or act enacted by any state or local
Governmental Authority. Any notifications or other documents executed and
delivered to the Administrative Agent in connection with the Federal Assignment
of Claims Act or any comparable state law may be promptly filed with the
appropriate Governmental Authority by the Administrative Agent or held by the
Administrative Agent until the Administrative Agent or the Required Lenders
decide in its or their sole discretion to make any such filing.
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(iii) The Grantors will promptly upon, but in no event later than ten (10)
Business Days after: (A) the Grantor's learning thereof, inform the
Administrative Agent, in writing, of any material delay in such Grantor's
performance of any of its obligations to any Account Debtor and of any assertion
of any claims, offsets or counterclaims by any Account Debtor and of any
allowances, credits and/or other monies granted by such Grantor to any Account
Debtor, in each case involving amounts in excess of $250,000 for any single
Account or Account Debtor or in excess of $500,000 in the aggregate for all
Accounts and Account Debtors; and (B) the Grantor's receipt or learning thereof,
furnish to and inform the Administrative Agent of all adverse information
relating to the financial condition of any Account Debtor with respect to
Accounts exceeding $250,000 individually or $500,000 in the aggregate.
(c) FURTHER IDENTIFICATION OF COLLATERAL. Each Grantor will, if so requested by
the Administrative Agent, furnish to the Administrative Agent statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
(d) NOTICES. In addition to the notices required by Section 5(b) hereof, each
Grantor will advise the Administrative Agent promptly, in reasonable detail, (i)
of any material Lien or claim made or asserted against any of the Collateral,
(ii) of any material adverse change in the composition of the Collateral, and
(iii) of the occurrence of any other event which could reasonably be expected to
have a material adverse effect on the Collateral or on the validity, perfection
or priority of the Security Interests.
Section 6. COLLATERAL ACCOUNT. (a) Pursuant to the Initial Security Agreement, a
Collateral Account has been established with the Administrative Agent in the
name and under the exclusive dominion and control of the Administrative Agent.
There shall be deposited from time to time into such account the cash proceeds
of the Collateral required to be delivered to the Administrative Agent pursuant
to Section 6(b) hereof or any other provision of this Security Agreement. Any
income received by the Administrative Agent with respect to the balance from
time to time standing to the credit of the Collateral Account, including any
interest or capital gains on investments of amounts on deposit in the Collateral
Account, shall remain, or be deposited, in the Collateral Account together with
any investments from time to time made pursuant to Section 6(c), shall vest in
the Administrative Agent, shall constitute part of the Collateral hereunder and
shall not constitute payment of the Secured Obligations until applied thereto as
hereinafter provided.
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(b) Upon the occurrence and during the continuance of an Event of Default, if
requested by the Administrative Agent, each Grantor shall instruct all Account
Debtors and other Persons obligated in respect of all Accounts to make all
payments in respect of the Accounts either (i) directly to the Administrative
Agent (by instructing that such payments be remitted to a post office box which
shall be in the name and under the exclusive dominion and control of the
Administrative Agent) or (ii) to one or more other banks in any state in the
United States (by instructing that such payments be remitted to a post office
box which shall be in the name and under the exclusive dominion and control of
such bank) under a Lockbox Letter substantially in the form of ANNEX I hereto
duly executed by each Grantor and such bank or under other arrangements, in form
and substance satisfactory to the Administrative Agent, pursuant to which such
Grantor shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to the
Administrative Agent for deposit into the Collateral Account or as the
Administrative Agent may otherwise instruct such bank, and thereafter if the
proceeds of any Collateral shall be received by any of the Grantors, such
Grantor will promptly deposit such proceeds into the Collateral Account and
until so deposited, all such proceeds shall be held in trust by such Grantor for
and as the property of the Administrative Agent, for the benefit of itself and
the Lenders and shall not be commingled with any other funds or property of such
Grantor. At any time after the occurrence and during the continuance of an Event
of Default, the Administrative Agent may itself so instruct each Grantor's
Account Debtors. All such payments made to the Administrative Agent shall be
deposited in the Collateral Account.
(c) Amounts on deposit in the Collateral Account shall be promptly liquidated
and applied to the payment of the Secured Obligations in the manner specified in
Section 10 hereof.
Section 7. GENERAL AUTHORITY. (a) The Grantors hereby irrevocably appoint the
Administrative Agent their true and lawful attorney, with full power of
substitution, in the name of each Grantor, the Administrative Agent, the Lenders
or otherwise, for the sole use and benefit of the Administrative Agent and the
Lenders, but at the Grantors' expense, to exercise, at any time from time to
time all or any of the following powers:
(i) to file the Financing Statements and any financing statements,
financing statement amendments and continuation statements referred to
in Sections 4(a)(i), 4(a)(ii) and Section 7(c) hereof;
(ii) to demand, xxx for, collect, receive and give acquittance for any
and all monies due or to become due with respect to any Collateral or
by virtue thereof;
(iii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect to any Collateral;
(iv) to sell, transfer, license, assign or otherwise deal in or with the
Collateral and the Proceeds thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof; and
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(v) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference to the Collateral;
PROVIDED that the Administrative Agent shall not take any of the actions
described in this Section 7 except those described in clause (i) above unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall give the Grantors not less than ten (10) days' prior written notice
of the time and place of any sale or other intended disposition of any of the
Collateral, except any Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. The
Grantors agree that any such notice constitutes "reasonable notification" within
the meaning of Section 9-610(b) of the UCC (to the extent such Section is
applicable).
(b) RATIFICATION. The Grantors hereby ratify all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and shall be irrevocable.
(c) EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-509 of the UCC and
any other applicable law, each Grantor authorizes the Administrative Agent to
file or record financing statements, financing statement amendments,
continuation statements and other filings or recording documents or instruments
with respect to the Collateral without the signature of such Grantor in such
form and in such offices as the Administrative Agent determines appropriate to
perfect the Security Interests of the Administrative Agent under this Security
Agreement. A photographic or other reproduction of this Security Agreement shall
be sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
(d) OTHER POWERS. The Grantors also authorize the Administrative Agent at any
time and from time to time, to execute, in connection with the sale provided for
in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
Section 8. REMEDIES UPON EVENT OF DEFAULT. (a) If any Event of Default has
occurred and is continuing, the Administrative Agent may, upon the request of
the Required Lenders (and only upon such request), exercise on behalf of itself
and the Lenders all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, upon the request of the Required Lenders (and only
upon such request), (i) withdraw all cash, if any, in the Collateral Account and
investments made with amounts on deposit in the Collateral Account, and apply
such monies, investments and other cash, if any, then held by it as Collateral
as specified in Section 10 hereof and (ii) if there shall be no such monies,
investments or cash or if such monies, investments or cash shall be insufficient
to pay all the Secured Obligations in full, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future delivery,
and at such price or prices as the Administrative Agent may deem satisfactory.
20
The Administrative Agent or any Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations or if otherwise permitted under
applicable law, at any private sale) and thereafter hold the same, absolutely,
free from any right or claim of whatsoever kind. Each Grantor will execute and
deliver such documents and take such other reasonable actions as the
Administrative Agent deems reasonably necessary or reasonably advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Administrative Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold (without warranty). Each purchaser at
any such sale shall hold the Collateral so sold to it absolutely, free from any
claim or right of whatsoever kind, including any equity or right of redemption
of any Grantor. To the extent permitted by law, each Grantor hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. The notice of such sale shall
be given to the Grantors ten (10) days prior to such sale and (A) in case of a
public sale, state the time and place fixed for such sale, and (B) in the case
of a private sale, state the day after which sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Administrative Agent may fix in the notice of
such sale. At any such sale the Collateral may be sold in one lot as an entirety
or in separate parcels, as the Administrative Agent may determine. The
Administrative Agent shall not be obligated to make any such sale pursuant to
any such notice. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In case
of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Administrative Agent
until the selling price is paid by the purchaser thereof, but the Administrative
Agent shall not incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may again be sold upon like notice. The Administrative Agent,
instead of exercising the power of sale herein conferred upon it, may proceed by
a suit or suits at law or in equity to foreclose the Security Interests and sell
the Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction. The Grantors shall remain liable for any
deficiency.
21
(b) For the purpose of enforcing any and all rights and remedies under this
Security Agreement, the Administrative Agent may (i) require each Grantor to,
and each Grantor agrees that it will, at its expense and upon the reasonable
request of the Administrative Agent, forthwith assemble all or any part of the
Collateral as directed by the Administrative Agent and make it available at the
premises of such Grantor or other place reasonably deemed by the Administrative
Agent to be reasonably convenient thereto and such Grantor, (ii) to the extent
permitted by applicable law, enter, and without breach of the peace, any premise
where any of the Collateral is or may be located and, without charge or
liability to the Administrative Agent (except for any liability resulting from
the gross negligence or willful misconduct thereof), seize and remove such
Collateral from such premises, (iii) have access to and use such Grantor's books
and records relating to the Collateral and (iv) prior to the disposition of the
Collateral, store or transfer such Collateral without charge in or by means of
any storage or transportation facility owned or leased by such Grantor, process,
repair or recondition such Collateral or otherwise prepare it for disposition in
any manner and to the extent the Administrative Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
Trademark, trade name, Copyright, Patent or technical process used by such
Grantor.
(c) Without limiting the generality of the foregoing, if any Event of Default
has occurred and is continuing,
(i) the Administrative Agent may license, or sublicense, whether general,
special or otherwise, and whether
on an exclusive or non-exclusive basis, any Patents or Trademarks
included in the Collateral throughout the world for such term or terms,
on such conditions and in such manner as the Administrative Agent shall
in its sole discretion determine;
(ii) the Administrative Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of any Grantor in,
to and under any Patent Licenses, Copyright Licenses or Trademark
Licenses and take or refrain from taking any action under any
thereof; PROVIDED, HOWEVER, that no such actions could reasonably
be expected to esult in the failure of such Patent Licenses,
Copyright Licenses or Trademark Licenses to remain in compliance with
all Applicable Law, and the Grantors hereby release the
Administrative Agent and each of the Lenders free and harmless from
and against any claims arising out of, any lawful action so taken
or omitted to be taken with respect thereto except with respect to
the gross negligence or willful misconduct of the Administrative
Agent or the Lenders; and
23
(iii) upon request by the Administrative Agent, the Grantors will
execute and deliver to the Administrative Agent a power of attorney,
in form and substance satisfactory to the Administrative Agent,
for the implementation of any lease, assignment, license, sublicense,
grant or option, sale or other disposition of a Patent or Trademark.
In the event of any such disposition pursuant to this Section 8, the
Grantors shall supply their know-how and expertise relating to the
manufacture and sale of the products bearing Trademarks or the
products or services made or rendered in connection with Patents,
and its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to the
Administrative Agent.
Section 9. LIMITATION ON DUTY OF ADMINISTRATIVE AGENT IN RESPECT OF COLLATERAL.
Beyond reasonable care in the custody thereof, the Administrative Agent shall
have no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Administrative Agent shall be deemed to have exercised reasonable
care in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and the Administrative Agent shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the
Administrative Agent in good faith.
Section 10. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Administrative Agent in accordance with Section 5.5 of the Credit Agreement, and
then to payment to the Grantors or their successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds. The Administrative Agent may make distribution hereunder in cash or in
kind or, on a ratable basis, in any combination thereof.
Section 11. CONCERNING THE ADMINISTRATIVE AGENT. The provisions of Article XIII
of the Credit Agreement shall inure to the benefit of the Administrative Agent
in respect of this Security Agreement and shall be binding upon the parties to
the Credit Agreement in such respect. In furtherance and not in derogation of
the rights, privileges and immunities of the Administrative Agent therein set
forth:
(a) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action incidental thereto. As to any matters not expressly provided for herein,
the Administrative Agent may request instructions from the Lenders and shall act
or refrain from acting in accordance with written instructions from the Required
Lenders (or, when expressly required by this Security Agreement or the Credit
Agreement, all the Lenders) or, in the absence of such instructions, in
accordance with its discretion.
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(b) The Administrative Agent shall not be responsible for the existence,
genuineness or value of any of the Collateral or for the validity, perfection,
priority or enforceability of the Security Interests, whether impaired by
operation of law or by reason of any action or omission to act on its part
(other than any such action or inaction constituting gross negligence or willful
misconduct). The Administrative Agent shall have no duty to ascertain or inquire
as to the performance or observance of any of the terms of this Security
Agreement by any Grantor.
Section 12. APPOINTMENT OF COLLATERAL AGENTS. At any time or times, in order to
comply with any legal requirement in any jurisdiction or in order to effectuate
any provision of the Loan Documents, the Administrative Agent may appoint
another bank or trust company or one or more other Persons, either to act as
collateral agent or agents, jointly with the Administrative Agent or separately,
on behalf of the Administrative Agent and the Lenders with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and specified in the instrument of appointment (which may, in the
discretion of the Administrative Agent, include provisions for the protection of
such collateral agent similar to the provisions of Section 11 hereof).
Section 13. EXPENSES. In the event that the Grantors fail to comply with the
provisions of the Credit Agreement, this Security Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of the Security Interests are thereby diminished or potentially
diminished or put at material risk, the Administrative Agent if requested by the
Required Lenders may, but shall not be required to, effect such compliance on
behalf of the Grantors, and the Grantors shall reimburse the Administrative
Agent for the costs thereof on demand. All insurance expenses and all expenses
of protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, any and all excise, stamp, intangibles, transfer,
property, sales, and use taxes imposed by any state, federal, or local authority
or any other Governmental Authority on any of the Collateral, or in respect of
the sale or other disposition thereof, shall be borne and paid by the Grantors;
and if the Grantors fail promptly to pay any portion thereof when due, the
Administrative Agent or any Lender may, at its option, but shall not be required
to, pay the same and charge the Grantors' account therefor, and the Grantors
agree to reimburse the Administrative Agent or such Lender therefor on demand.
All sums so paid or incurred by the Administrative Agent or any Lender for any
of the foregoing and any and all other sums for which the Grantors may become
liable hereunder and all costs and expenses (including reasonable attorneys'
fees, legal expenses and court costs) incurred by the Administrative Agent or
any Lender in enforcing or protecting the Security Interests or any of their
rights or remedies thereon shall be payable by the Grantors on demand and shall
bear interest (after as well as before judgment) until paid at the rate then
applicable to Base Rate Loans under the Credit Agreement and shall be additional
Secured Obligations hereunder.
Section 14. NOTICES. All notices, communications and distributions
hereunder shall be given or made in accordance with Section 15.1 of the Credit
Agreement.
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Section 15. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration of
the rights and remedies of the Administrative Agent and the Lenders set forth in
this Security Agreement is not intended to be exhaustive and the exercise by the
Administrative Agent and the Lenders of any right or remedy shall not preclude
the exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder or under
the Loan Documents or that may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of the
Administrative Agent or any Lender in exercising any right, power or privilege
under this Security Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver of any
Event of Default. No course of dealing between the Borrowers, the Administrative
Agent and the Lenders or their respective agents or employees shall be effective
to change, modify or discharge any provision of this Security Agreement or any
of the other Loan Documents or to constitute a waiver of any Event of Default.
This Security Agreement is a Loan Document executed pursuant to the Credit
Agreement.
Section 16. REGULATORY APPROVALS. If an Event of Default shall have occurred and
be continuing, upon the request of the Administrative Agent, each Grantor will,
at its expense, promptly execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments, registration
statements and all other documents and papers the Administrative Agent may
reasonably request or as may be required by law in connection with the obtaining
of any consent, approval, registration, qualification or authorization of the
FCC and any applicable PUC (collectively, the "REGULATORY AUTHORITIES") or of
any other Person necessary or reasonably appropriate for the effective exercise
of any rights under this Security Agreement. Without limiting the generality of
the foregoing, if an Event of Default shall have occurred and be continuing, the
Grantors shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or to such
one or more third parties as the Administrative Agent may designate, or to a
combination of the foregoing, each Communications License. To enforce the
provisions of this Section, upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction. Such
receiver shall be instructed to seek from the Regulatory Authorities an
involuntary transfer of control of each such Communications License for the
purpose of seeking a bona fide purchaser to whom control will ultimately be
transferred. The Grantors hereby agree to authorize such an involuntary transfer
of control upon the request of the receiver so appointed and, if the Grantors
shall refuse to authorize the transfer, their approval may be required by the
court. Upon the occurrence and during the continuance of an Event of Default,
the Grantors shall further use their best efforts to assist in obtaining
approval of the Regulatory Authorities, if required, for any action or
transactions contemplated by this Security Agreement including, without
limitation, the preparation, execution and filing with the Regulatory
Authorities of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any Communications License or
transfer of control necessary or reasonably appropriate under the rules and
regulations of the Regulatory Authorities for the approval of the transfer or
assignment of any portion of the Collateral, together with any Communications
License. The Grantors acknowledge that the assignment or transfer of each
Communications License is integral to the Administrative Agent's and the
Lenders' realization of the value of the Collateral, that there is no adequate
remedy at law for failure by the Grantors to comply with the provisions of this
Section and that such failure would cause irreparable injury not adequately
compensable in damages, and therefore agree that each and every covenant
contained in this Section may be specifically enforced, and the Grantors hereby
waive and agree not to assert any defenses against an action for specific
performance of such covenants.
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Section 17. SUCCESSORS AND ASSIGNS. This Security Agreement is for the benefit
of the Administrative Agent and the Lenders and their successors and assigns (as
permitted by the Credit Agreement), and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness. This
Security Agreement shall be binding on the Grantors and their successors and
assigns; provided, that the Grantors may not assign any of their rights or
obligations hereunder without the prior written consent of the Administrative
Agent and the Lenders.
Section 18. AMENDMENTS, WAIVERS AND CONSENTS. No term, covenant, agreement or
condition of this Security Agreement may be amended or waived, nor may any
consent be given, except pursuant to a Joinder Agreement and otherwise in the
manner set forth in Section 15.11 of the Credit Agreement.
Section 19. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest and are irrevocable.
Section 20. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 21. CONSENT TO JURISDICTION. Each Grantor irrevocably consents to the
personal jurisdiction of the state and federal courts located in New York
County, New York, in any action, claim or other proceeding arising out of or any
dispute in connection with this Security Agreement, any rights or obligations
hereunder, or the performance of such rights and obligations. Each Grantor
irrevocably consents to the service of a summons and complaint and other process
in any action, claim or proceeding brought by the Administrative Agent or any
Lender in connection with this Security Agreement, any rights or obligations
hereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner provided in Section 15.1 of the Credit
Agreement. Nothing in this Section 21 shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Administrative Agent or
any Lender to bring any action or proceeding against any Grantor or its
properties in the courts of any other jurisdictions. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by Applicable Law,
any objection that it may now or hereafter have to the laying of te venue of any
such proceeding brought in any court specified above and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
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Section 22. WAIVER OF JURY TRIAL; INJUNCTIVE RELIEF; PUNITIVE DAMAGES. JURY
TRIAL. THE PARTIES HERETO AND TO THE OTHER LOAN DOCUMENTS HEREBY ACKNOWLEDGE
THAT THEY IRREVOCABLE WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE (AS
HEREINAFTER DEFINED) IN CONNECTION WITH THIS SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. FOR THE PURPOSE OF THIS SECURITY AGREEMENT, "DISPUTE"
MEANS ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF, CONNECTED WITH OR
RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT. "DISPUTES" MAY
INCLUDE, WITHOUT LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS
ACTIONS, CLAIMS ARISING FROM LOAN DOCUMENTS EXECUTED IN THE FUTURE, DISPUTES AS
TO WHETHER A MATTER IS SUBJECT TO ARBITRATION, OR CLAIMS CONCERNING ANY ASPECT
OF THE PAST, PRESENT OR FUTURE RELATIONSHIPS ARISING OUT OF OR CONNECTED WITH
THE LOAN DOCUMENTS.
(a) INJUCTIVE RELIEF. Each party hereto recognizes that, in the event any such
Person fails to perform, observe or discharge any of its obligations or
liabilities under this Security Agreement, any remedy of law may prove to be
inadequate relief to the Administrative Agent and the Lenders. Therefore, each
Grantor agrees that the Administrative Agent and the Lenders, at their option,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) PUNITIVE DAMAGES. Each party hereto and to the other Loan Documents agrees
that it shall not have a remedy of punitive or exemplary damages against any
other party hereto or any other Loan Document in any Dispute and hereby waives
any right or claim to punitive or exemplary damages such party has now or which
may arise in the future in connection with any Dispute, whether such Dispute is
resolved by arbitration or judicially.
Section 23. SEVERABILITY. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent and the
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible; and (b) the invalidity or unenforceability of any provisions
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
Section 24. HEADINGS. The various headings of this Security Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or any provisions hereof.
Section 25. COUNTERPARTS. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement.
[Signatures To Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be executed under seal by their duly authorized officers,
all as of the day and year first written above.
GRANTORS:
CHOICE ONE COMMUNICATIONS INC.
CHOICE ONE COMMUNICATIONS OF NEW YORK INC.
CHOICE ONE COMMUNICATIONS OF PENNSYLVANIA INC.
CHOICE ONE COMMUNICATIONS OF MASSACHUSETTS INC.
CHOICE ONE COMMUNICATIONS INTERNATIONAL INC.
CHOICE ONE COMMUNICATIONS OF RHODE ISLAND INC.
CHOICE ONE COMMUNICATIONS OF CONNECTICUT INC.
CHOICE ONE COMMUNICATIONS OF MAINE INC.
CHOICE ONE OF NEW HAMPSHIRE INC.
CHOICE ONE COMMUNICATIONS OF OHIO INC.
CHOICE ONE COMMUNICATIONS OF VERMONT INC.
CHOICE ONE ONLINE INC.
CHOICE ONE COMMUNICATIONS OF VIRGINIA INC.
CHOICE ONE COMMUNICATIONS SERVICES INC.
US XCHANGE INC. (formerly known as BARTER ACQUISITION
CORPORATION)
US XCHANGE OF INDIANA, L.L.C.
US XCHANGE OF ILLINOIS, L.L.C.
US XCHANGE OF WISCONSIN, L.L.C.
US XCHANGE OF MICHIGAN, L.L.C.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Executive Vice President
& Chief Financial Officer
