EXHIBIT H
SECURITY AGREEMENT dated as of August 25, 1997, among Tel-Save
Holdings, Inc. (the "Borrower"), each subsidiary of the Borrower listed
on the signature page hereto (the Borrower and each such subsidiary
individually a "Grantor" and collectively, the "Grantors") and SALOMON
BROTHERS HOLDING COMPANY INC, a Delaware corporation ("SBHC"), as
collateral agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and SBHC, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent") and Collateral Agent and (b) the Guarantee
Agreement dated as of August 25, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement"), among
the Guarantors party thereto and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower, and an
Issuing Bank may agree to issue Letters of Credit for the account of
the Borrower, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Each of the Grantors
other than the Borrower has agreed to guarantee, among other things,
all the obligations of the Borrower under the Credit Agreement. The
obligations of the Lenders to make Loans and of any Issuing Bank to
issue Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Grantors of an agreement in the form
hereof to secure (a) the due and punctual payment by the Borrower of
(i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed
or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by the Borrower
under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in
such proceeding), of the Borrower to the Secured Parties under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other
Loan Documents and (c) the due and punctual payment and performance of
all the covenants, agreements, obligations and liabilities of each Loan
H-1
Party under or pursuant to this Agreement and the other Loan Documents
(all the monetary and other obligations described in the preceding
clauses (a) through (c) being collectively called the "Obligations").
Accordingly, the Grantor and the Collateral Agent, on behalf
of itself and each Secured Party (and each of their respective
successors or assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the
context otherwise requires, all capitalized terms used but not defined
herein shall have the meanings set forth in the Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any person who is or who may
become obligated to the Grantor under, with respect to or on account of
an Account.
"Accounts" shall mean any and all right, title and interest of
the Grantor to payment for goods and services sold or leased, including
any such right evidenced by chattel paper, whether due or to become
due, whether or not it has been earned by performance, and whether now
or hereafter acquired or arising in the future, including accounts
receivable from Affiliates of the Grantor.
"Accounts Receivable" shall mean all "accounts" as such term
is used in Section 9-106 of the UCC and, to the extent not included
within such definition, all accounts receivable, book debts and other
forms of obligations, whether arising out of goods sold or services
rendered by Grantor or from any other transaction, including, without
limitation, any such obligation which might be characterized as an
account or contract right under the UCC, and all of Grantor's rights
in, to and under all purchase orders or receipts for goods or services,
all of Grantor's rights to any goods represented by any of the
foregoing, all moneys due or to become due to Grantor under all
contracts for the sale of goods or the performance of services or both
by Grantor (whether or not yet earned by performance on the part of
Grantor or in any other transaction), now in existence or hereafter
occurring, and expressly including, without limitation, rights to
receive the proceeds of, from or in connection with purchase orders or
contracts for the provision of telephone and other communication
services, including, without limitation, all agreements with and sums
due from customers and other persons, and all books and records
recording, evidencing or relating to such rights or any part thereof,
and all collateral security and guarantees of any kind given by any
person with respect to any of the foregoing.
"Collateral" shall mean all (a) Accounts, (b) Contracts and
Leases, (c) Equipment and Licenses, (d) Furniture and Fixtures, (e)
General Intangibles, (f) Inventory, (g) cash and cash accounts, (h)
Miscellaneous Items and (i) Proceeds.
"Contracts and Leases" shall mean all contracts, undertakings,
leases or other agreements in or under which Grantor may now or
hereafter have any right, title or interest including, without
limitation, (a) construction contracts, subscriber contracts,
H-3
customer service agreements, management agreements, rights of way,
easements, tower agreements, cell site agreements, pole attachment
agreements, transmission capacity agreements, public utility contracts
and other agreements to which the Grantor is a party, whether now
existing or hereafter arising; (b) lease agreements for real or
personal property to which the Grantor is a party, whether now existing
or hereafter arising; and (c) other contracts and contractual rights,
remedies or provisions now existing or hereafter arising in favor of
the Grantor, including, with respect to an Account, any agreement
relating to the terms of performance thereof.
"Copyright License" shall mean any written agreement, now or
hereafter in effect, granting any right to any third party under any
Copyright now or hereafter owned by the Grantor or which the Grantor
otherwise has the right to license, or granting any right to the
Grantor under any Copyright now or hereafter owned by any third party,
and all rights of the Grantor under any such agreement.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all copyright rights in any work
subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, and (b)
all registrations and applications for registration of any such
copyright in the United States or any other country, including
registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office.
"Credit Agreement" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Equipment and Licenses " shall mean all "equipment" as such
term is defined in Section 9-109(2) of the UCC and, to the extent not
included within such definition, all machinery, equipment, furnishings,
vehicles, fixtures, and supplies (installed and uninstalled), and any
and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment and accessories installed or to be installed thereon
or affixed or to be affixed thereto, including, without limitation, all
equipment located at telephone switching office facilities; any
distribution systems and all components thereof, including but not
limited to hardware, cables, fiber optic cables, switches, computer
equipment, amplifiers, and associated devices; and any other equipment
used in connection with the Grantor's business; and all franchises,
licenses, permits and operating rights authorizing or relating to the
Grantor's rights to operate and maintain telecommunications or other
related business.
"Furniture and Fixtures" shall mean all of the Debtor's right,
title and interest in and to all furniture and fixtures in which the
Debtor has an ownership, leasehold or similar legal interest.
H-4
"General Intangibles" shall mean all "general intangibles" as
such term is defined in Section 9-106 of the UCC and, to the extent not
included within such definition, all personal property, all goodwill,
permits, customer lists, patents, copyrights, proprietary or
confidential information, inventions (whether patented or patentable or
not), technical information, procedures, trademarks, trademark
applications, trade names, trade secrets, designs, knowledge, know-how,
software, data, databases, skill, expertise, experience, processes,
models, drawings, materials and records, industrial or intellectual
property or rights therein, whether under license or otherwise, all
right, title and interest in any of the foregoing, including, without
limitation, all rights to receive payment or property upon or in
connection with any transfer of any license, claims for tax refunds,
tax refund amounts and rights of indemnification, in each case, whether
now owned or hereafter acquired by the Grantor.
"Intellectual Property" shall mean all intellectual and
similar property of the Grantor of every kind and nature now owned or
hereafter acquired by the Grantor, including inventions, designs,
Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential
or proprietary technical and business information, know-how, show-how
or other data or information, software and databases and all
embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and
accessions to, and books and records describing or used in connection
with, any of the foregoing.
"Inventory" shall mean all "inventory" as such term is defined
in Section 9-109(4) of the UCC and to the extent not included within
such definition, all inventory, supplies, merchandise, goods and other
personal property of whatsoever nature and kind, and wherever situated,
including, without limitation any inventory held for lease or sale or
which are furnished or are to be furnished under a contract of service,
or which constitute raw materials, components, work in process,
finished goods, goods in transit, materials used or consumed or to be
used or consumed in Grantor's business, packing and shipping materials,
and all accretions and accessions thereto, trust receipts and similar
documents covering the same products.
"Miscellaneous Items" shall mean all goods, chattel paper,
documents, instruments, supplies, choses in action, claims, money,
deposits, certificates of deposit, stock or share certificates
(including, without limitation, the stock of any subsidiaries of the
Grantor now existing or hereafter created or acquired) and licenses and
other rights in intellectual property not otherwise included as
"collateral" hereunder and including, without limitation, all other
investment property of Grantor to the extent not otherwise included
above, including all securities, security entitlements, securities
accounts and commodity contracts.
"Obligations" shall have the meaning assigned to such term in
the preliminary statement of this Agreement.
H-5
"Patent License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to make, use
or sell any invention on which a Patent, now or hereafter owned by the
Grantor or which the Grantor otherwise has the right to license, is in
existence, or granting to the Grantor any right to make, use or sell
any invention on which a Patent, now or hereafter owned by any third
party, is in existence, and all rights of the Grantor under any such
agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any
other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any
similar offices in any other country, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the
right to make, use and/or sell the inventions disclosed or claimed
therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 2 hereto, completed and supplemented
with the schedules and attachments contemplated thereby, and duly
executed by a Financial Officer and the chief legal officer of the
Borrower.
"Proceeds" shall mean to the extent not otherwise included as
"Collateral" hereunder, all "proceeds", as such term is defined in
Section 9-306(1) of the UCC, of each item of Collateral, and, to the
extent not included within such definition, any and all proceeds of any
loss of, damage to or destruction of the above, whether insured or not
insured, and all other proceeds of any sale, lease or other disposition
of any property or interest therein referred to herein, together with
all proceeds of any policies of insurance covering any item of
Collateral, any and all proceeds of any award with respect to the
requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the property or assets of the Grantor, any and all
proceeds of any insurance, indemnity, warranty or guarantee payable to
Grantor from time to time with respect to any property or assets of the
Grantor, any rebates or refunds, whether for taxes or otherwise, and
any and all other amounts from time to time paid or payable (in
whatever form) under, in connection with or with respect to any
property or assets of the Grantor, and all proceeds of any such
proceeds.
"Secured Parties" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Collateral Agent, (d) the Issuing Bank,
(e) the beneficiaries of each indemnification obligation undertaken by
any Grantor under any Loan Document and (f) the successors and assigns
of each of the foregoing.
"Security Interest" shall have the meaning assigned to such
term in Section 2.01.
"Trademark License" shall mean any written agreement, now or
hereafter in effect, granting to any third party any right to use any
Trademark now or hereafter owned
H-6
by the Grantor or which the Grantor otherwise has the right to license,
or granting to the Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of the Grantor under
any such agreement.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by the Grantor: (a) all trademarks, service marks,
trade names, corporate names, company names, business names, fictitious
business names, trade styles, trade dress, logos, other source or
business identifiers, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all registration and recording applications
filed in connection therewith, including registrations and registration
applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country
or any political subdivision thereof, and all extensions or renewals
thereof, (b) all goodwill associated therewith or symbolized thereby
and (c) all other assets, rights and interests that uniquely reflect or
embody such goodwill.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of New York; provided, however,
in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of any Secured Party's
interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, or by
the laws of a jurisdiction other than a state of the United States, the
term "UCC" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction or such other laws, as the case may be, for purposes
of the provisions hereof relating to such attachment, perfection or
priority.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement shall
be applicable to this Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment
or performance, as the case may be, in full of the Obligations, the
Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages,
pledges, hypothecates and transfers to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties,
and hereby grants to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, a security interest in,
all of the Grantor's right, title and interest in, to and under the
Collateral (the "Security Interest"). Without limiting the foregoing,
the Collateral Agent is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, or
other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interest granted by the Grantor,
without the signature of the Grantor, and naming the Grantor as the
debtor and
H-7
the Collateral Agent as secured party. Notwithstanding anything else
herein, the Grantor's grant of the Security Interest with respect to
Grantor's rights under any contract or agreement to which Grantor is a
party on the date hereof shall be effective hereunder only to the
extent such grant is permitted or not prohibited by the terms of such
contract or agreement.
SECTION 2.02. No Assumption of Liability. The Security
Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way alter or
modify, any obligation or liability of the Grantor with respect to or
arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantor represents and warrants to the Collateral Agent
and the Secured Parties that:
SECTION 3.01. Title and Authority. The Grantor has good and
valid rights in and title to the Collateral with respect to which it
has purported to grant a Security Interest hereunder and has full power
and authority to grant to the Collateral Agent the Security Interest in
such Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or
approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been
duly prepared, completed and executed and the information set forth
therein is correct and complete. Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable) or
other appropriate filings, recordings or registrations containing a
description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office
specified in Schedule 6 to the Perfection Certificate, which are all
the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a legal, valid
and perfected security interest in favor of the Collateral Agent (for
the ratable benefit of the Secured Parties) in respect of all
Collateral in which the Security Interest may be perfected by filing,
recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording,
registration or reregistration is necessary in any such jurisdiction,
except as provided under applicable law with respect to the filing of
continuation statements.
(b) [Reserved].
SECTION 3.03. Validity of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and
H-8
performance of the Obligations and (b) subject to the filings described
in Section 3.02 above, a perfected security interest in all Collateral
in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United
States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code or other applicable
law in such jurisdictions. The Security Interest is and shall be prior
to any other Lien on any of the Collateral, other than Liens expressly
permitted to be prior to the Security Interest pursuant to Section 6.02
of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned
by the Grantor free and clear of any Lien, except for Liens expressly
permitted pursuant to Section 6.02 of the Credit Agreement. None of the
Grantors has filed or consented to the filing of (a) any financing
statement or analogous document under the Uniform Commercial Code or
any other applicable laws covering any Collateral or (b) any assignment
in which the Grantor assigns any Collateral or any security agreement
or similar instrument covering any Collateral with any foreign
governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar
instrument is still in effect, except, in each case, for Liens
expressly permitted pursuant to Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records;
Place of Business. (a) The Grantor agrees promptly to notify the
Collateral Agent in writing of any change (i) in its corporate name or
in any trade name used to identify it in the conduct of its business or
in the ownership of its properties, (ii) in the location of its chief
executive office, its principal place of business, any office in which
it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located
(including the establishment of any such new office or facility), (iii)
in its identity or corporate structure or (iv) in its Federal Taxpayer
Identification Number. The Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have
been made under the Uniform Commercial Code or otherwise that are
required in order for the Collateral Agent to continue at all times
following such change to have a valid, legal and perfected first
priority security interest in all the Collateral. The Grantor agrees
promptly to notify the Collateral Agent if any material portion of the
Collateral owned or held by such Grantor is damaged or destroyed.
(b) The Grantor agrees to maintain, at its own cost and
expense, such complete and accurate records with respect to the
Collateral owned by it as is consistent with its current practices and
in accordance with such prudent and standard practices used in
H-9
industries that are the same as or similar to those in which the
Grantor is engaged, but in any event to include complete accounting
records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the
Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules
in form and detail satisfactory to the Collateral Agent showing the
identity, amount and location of any and all Collateral.
SECTION 4.02. Periodic Certification. Each year, at the time
of delivery of annual financial statements with respect to the
preceding fiscal year pursuant to Section 5.04 of the Credit Agreement,
the Borrower shall deliver to the Collateral Agent a certificate
executed by a Financial Officer and the chief legal officer of the
Borrower (a) setting forth the information required pursuant to Section
2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of such certificate or the
date of the most recent certificate delivered pursuant to Section 4.02
and (b) certifying that all Uniform Commercial Code financing
statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description
of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified
pursuant to clause (a) above to the extent necessary to protect and
perfect the Security Interest for a period of not less than 18 months
after the date of such certificate (except as noted therein with
respect to any continuation statements to be filed within such period).
SECTION 4.03. Protection of Security. The Grantor shall, at
its own cost and expense, take any and all actions necessary to defend
title to the Collateral against all persons and to defend the Security
Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien not expressly permitted pursuant to Section
6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. The Grantor agrees, at its
own expense, to execute, acknowledge, deliver and cause to be duly
filed all such further instruments and documents and take all such
actions as the Collateral Agent may from time to time request to better
assure, preserve, protect and perfect the Security Interest and the
rights and remedies created hereby, including the payment of any fees
and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of
any financing statements (including fixture filings) or other documents
in connection herewith or therewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note or other instrument, such note or instrument shall
be immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent.
SECTION 4.05. Inspection and Verification. The Collateral
Agent and such persons as the Collateral Agent may reasonably designate
shall have the right, at the Grantor's own cost and expense, to inspect
the Collateral, all records related thereto (and
H-10
to make extracts and copies from such records) and the premises upon
which any of the Collateral is located, to discuss the Grantor's
affairs with the officers of the Grantor and its independent
accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other
matter relating to, the Collateral, including, in the case of Accounts
or Collateral in the possession of any third person, by contacting
Account Debtors or the third person possessing such Collateral for the
purpose of making such a verification. The Collateral Agent shall have
the absolute right to share any information it gains from such
inspection or verification with any Secured Party (it being understood
that any such information shall be deemed to be "Information" subject
to the provisions of Section 9.16).
SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments, charges,
fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral and not permitted pursuant to
Section 6.02 of the Credit Agreement, and may pay for the maintenance
and preservation of the Collateral to the extent the Grantor fails to
do so as required by the Credit Agreement or this Agreement, and the
Grantor agrees to reimburse the Collateral Agent on demand for any
payment made or any expense incurred by the Collateral Agent pursuant
to the foregoing authorization; provided, however, that nothing in this
Section 4.06 shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises
of the Grantor with respect to taxes, assessments, charges, fees,
liens, security interests or other encumbrances and maintenance as set
forth herein or in the other Loan Documents.
SECTION 4.07. Assignment of Security Interest. If at any time
the Grantor shall take a security interest in any property of an
Account Debtor or any other person to secure payment and performance of
an Account, the Grantor shall promptly assign such security interest to
the Collateral Agent. Such assignment need not be filed of public
record unless necessary to continue the perfected status of the
security interest against creditors of and transferees from the Account
Debtor or other person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantor. The
Grantor shall remain liable to observe and perform all the conditions
and obligations to be observed and performed by it under each contract,
agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and the Grantor agrees to
indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such performance.
SECTION 4.09. Use and Disposition of Collateral. The Grantor
shall not make or permit to be made an assignment, pledge or
hypothecation of the Collateral nor shall it grant any other Lien in
respect of the Collateral, except as expressly permitted by Section
6.02 of the Credit Agreement. The Grantor shall not make or permit to
be made any transfer of the Collateral and the Grantor shall remain at
all times in possession of the
H-11
Collateral owned by it, except that (a) Inventory may be sold in the
ordinary course of business and (b) unless and until the Collateral
Agent shall notify the Grantor that an Event of Default shall have
occurred and be continuing and that during the continuance thereof the
Grantor shall not sell, convey, lease, assign, transfer or otherwise
dispose of any Collateral (which notice may be given by telephone if
promptly confirmed in writing), the Grantor may use and dispose of the
Collateral in any lawful manner not inconsistent with the provisions of
this Agreement, the Credit Agreement or any other Loan Document.
Without limiting the generality of the foregoing, the Grantor agrees
that it shall not permit any Inventory to be in the possession or
control of any warehouseman, bailee, agent or processor at any time
unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to
hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien
held by it with respect to such Inventory, whether arising by operation
of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts. The
Grantor will not, without the Collateral Agent's prior written consent,
grant any extension of the time of payment of any of the Accounts
Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for
the payment thereof or allow any credit or discount whatsoever thereon,
other than extensions, credits, discounts, compromises or settlements
granted or made in the ordinary course of business and consistent with
its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those
in which the Grantor is engaged.
SECTION 4.11. Insurance. The Grantor, at its own expense,
shall maintain or cause to be maintained insurance covering physical
loss or damage to the Inventory and Equipment in accordance with
Section 5.02 of the Credit Agreement. The Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as the
Grantor's true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and
adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of the Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance
and for making all determinations and decisions with respect thereto.
In the event that the Grantor at any time or times shall fail to obtain
or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Collateral Agent
may, without waiving or releasing any obligation or liability of the
Grantor hereunder or any Event of Default, in its sole discretion,
obtain and maintain such policies of insurance and pay such premium and
take any other actions with respect thereto as the Collateral Agent
deems advisable. All sums disbursed by the Collateral Agent in
connection with this Section 4.11, including reasonable attorneys'
fees, court costs, expenses and other charges relating thereto, shall
be payable, upon demand, by the Grantor to the Collateral Agent and
shall be additional Obligations secured hereby.
H-12
SECTION 4.12. Legend. The Grantor shall legend, in form and
manner satisfactory to the Collateral Agent, its Accounts Receivable
and its books, records and documents evidencing or pertaining thereto
with an appropriate reference to the fact that such Accounts Receivable
have been assigned to the Collateral Agent for the benefit of the
Secured Parties and that the Collateral Agent has a security interest
therein.
SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) The Grantor agrees that it will not, nor will
it permit any of its licensees to, do any act, or omit to do any act,
whereby any Patent which is material to the conduct of the Grantor's
business may become invalidated or dedicated to the public, and agrees
that it shall continue to xxxx any products covered by a Patent with
the relevant patent number as necessary and sufficient to establish and
preserve its maximum rights under applicable patent laws.
(b) The Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of the
Grantor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the
quality of products and services offered under such Trademark, (iii)
display such Trademark with notice of Federal or foreign registration
to the extent necessary and sufficient to establish and preserve its
maximum rights under applicable law and (iv) not knowingly use or
knowingly permit the use of such Trademark in violation of any third
party rights.
(c) The Grantor (either itself or through licensees) will, for
each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate
copyright notice as necessary and sufficient to establish and preserve
its maximum rights under applicable copyright laws.
(d) The Grantor shall notify the Collateral Agent immediately
if it knows or has reason to know that any Patent, Trademark or
Copyright material to the conduct of its business may become abandoned,
lost or dedicated to the public, or of any adverse determination or
development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding the Grantor's ownership of any
Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.
(e) In no event shall the Grantor, either itself or through
any agent, employee, licensee or designee, file an application for any
Patent, Trademark or Copyright (or for the registration of any
Trademark or Copyright) that is material to the conduct of the
Grantor's business with the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any
political subdivision thereof, unless it promptly informs the
Collateral Agent, and, upon request of the Collateral Agent, executes
and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may
H-13
request to evidence the Collateral Agent's security interest in such
Patent, Trademark or Copyright, and the Grantor hereby appoints the
Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.
(f) The Grantor will take all necessary steps that are
consistent with the practice in any proceeding before the United States
Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or
in any other country or any political subdivision thereof, to maintain
and pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each registration
of the Trademarks and Copyrights that is material to the conduct of the
Grantor's business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment
of maintenance fees, and, if consistent with good business judgment, to
initiate opposition, interference and cancellation proceedings against
third parties.
(g) In the event that the Grantor has reason to believe that
any Collateral consisting of a Patent, Trademark or Copyright material
to the conduct of the Grantor's business has been or is about to be
infringed, misappropriated or diluted by a third party, the Grantor
promptly shall notify the Collateral Agent and shall, if consistent
with good business judgment, promptly xxx for infringement,
misappropriation or dilution and to recover any and all damages for
such infringement, misappropriation or dilution, and take such other
actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default,
the Grantor shall use its best efforts to obtain all requisite consents
or approvals by the licensor of each Copyright License, Patent License
or Trademark License to effect the assignment of all of the Grantor's
right, title and interest thereunder to the Collateral Agent or its
designee.
ARTICLE V
Power of Attorney
The Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by
the Collateral Agent) as the Grantor's true and lawful agent and
attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for the Grantor and in the
Grantor's name or otherwise, for the use and benefit of the Collateral
Agent and the Secured Parties, upon the occurrence and during the
continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt
for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of the Grantor on any invoice or xxxx of lading
relating to
H-14
any of the Collateral; (d) to send verifications of Accounts Receivable
to any Account Debtor; (e) to commence and prosecute any and all suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (f)
to settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; (g) to notify, or
to require the Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Collateral, and to do all other acts and things
necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral
Agent or any Secured Party to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by the
Collateral Agent or any Secured Party, or to present or file any claim
or notice, or to take any action with respect to the Collateral or any
part thereof or the moneys due or to become due in respect thereof or
any property covered thereby, and no action taken or omitted to be
taken by the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Grantor or to any claim or
action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as
the agent and attorney-in-fact of the Grantor for the purposes set
forth above is coupled with an interest and is irrevocable. The
provisions of this Section shall in no event relieve the Grantor of any
of its obligations hereunder or under any other Loan Document with
respect to the Collateral or any part thereof or impose any obligation
on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof,
or in any way limit the exercise by the Collateral Agent or any Secured
Party of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other Loan
Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the occurrence and
during the continuance of an Event of Default, the Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and
it is agreed that the Collateral Agent shall have the right to take any
of or all the following actions at the same or different times: (a)
with respect to any Collateral consisting of Intellectual Property, on
demand, to cause the Security Interest to become an assignment,
transfer and conveyance of any of or all such Collateral by the Grantor
to the Collateral Agent, or to license or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any such Collateral throughout the world on such terms and
conditions and in such manner as the Collateral Agent shall determine
(other than in violation of any then-existing
H-15
licensing arrangements to the extent that waivers cannot be obtained),
and (b) with or without legal process and with or without prior notice
or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the
Collateral may be located for the purpose of taking possession of or
removing the Collateral and, generally, to exercise any and all rights
afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, the
Grantor agrees that the Collateral Agent shall have the right, subject
to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale
or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale
(if it deems it advisable to do so) to restrict the prospective bidders
or purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of
the Grantor, and the Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which the Grantor now
has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantor 10 days' written
notice (which the Grantor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code as in effect
in the State of New York or its equivalent in other jurisdictions) of
the Collateral Agent's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place
for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such
sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may
fix and state in the notice (if any) of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot
as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall
not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. The Collateral 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 sale, and such sale may, without further
notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail
to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon
H-16
like notice. At any public (or, to the extent permitted by law,
private) sale made pursuant to this Section, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right
of redemption, stay, valuation or appraisal on the part of the Grantor
(all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale
and may make payment on account thereof by using any claim then due and
payable to such Secured Party from the Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without
further accountability to the Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free
to carry out such sale pursuant to such agreement and the Grantor shall
not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it,
the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION 6.02. Application of Proceeds. The Collateral Agent
shall apply the proceeds of any collection or sale of the Collateral,
as well as any Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses
incurred by the Administrative Agent or the Collateral Agent
(in its capacity as such hereunder or under any other Loan
Document) in connection with such collection or sale or
otherwise in connection with this Agreement or any of the
Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of all
advances made by the Collateral Agent hereunder or under any
other Loan Document on behalf of the Grantor and any other
costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Loan
Document;
SECOND, to the payment in full of the Obligations
(the amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantor, its successors or assigns, or
as a court of competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement. Upon any sale of the Collateral by the Collateral Agent
(including pursuant to a power of sale granted by
H-17
statute or under a judicial proceeding), the receipt of the Collateral
Agent or of the officer making the sale shall be a sufficient discharge
to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual Property.
For the purpose of enabling the Collateral Agent to exercise rights and
remedies under this Article at such time as the Collateral Agent shall
be lawfully entitled to exercise such rights and remedies, the Grantor
hereby grants to the Collateral Agent an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation
to the Grantor) to use, license or sub-license any of the Collateral
consisting of Intellectual Property now owned or hereafter acquired by
the Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of
such license by the Collateral Agent shall be exercised, at the option
of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default; provided that any license,
sub-license or other transaction entered into by the Collateral Agent
in accordance herewith shall be binding upon the Grantor
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 9.01 of the Credit Agreement.
All communications and notices hereunder to any Grantor shall be given
to it at its address or telecopy number set forth on Schedule I.
SECTION 7.02. Security Interest Absolute. All rights of the
Collateral Agent hereunder, the Security Interest and all obligations
of the Grantor hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any agreement with respect
to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of or any consent to any departure from
the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on
other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Obligations or this Agreement.
H-18
SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Grantor herein
and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement shall be considered to
have been relied upon by the Secured Parties and shall survive the
making by the Lenders of the Loans, and the execution and delivery to
the Lenders of any notes evidencing such Loans, regardless of any
investigation made by the Lenders or on their behalf, and shall
continue in full force and effect until this Agreement shall terminate.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective when a counterpart hereof executed on
behalf of the Grantor shall have been delivered to the Collateral Agent
and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon the Grantor and
the Collateral Agent and their respective successors and assigns, and
shall inure to the benefit of the Grantor, the Collateral Agent and the
other Secured Parties and their respective successors and assigns,
except that the Grantor shall not have the right to assign or transfer
its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except
as expressly contemplated by this Agreement or the Credit Agreement.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the
Grantor or the Collateral Agent that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and
assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses;
Indemnification. (a) The Grantor agrees to pay upon demand to the
Collateral Agent the amount of any and all reasonable expenses,
including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may
incur in connection with (i) the administration of this Agreement, (ii)
the custody or preservation of, or the sale of, collection from or
other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of the Grantor to perform or observe any
of the provisions hereof.
(b) Without limitation of its indemnification obligations
under the other Loan Documents, the Grantor agrees to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of
them harmless from, any and all losses, claims, damages, liabilities
and related expenses, including reasonable fees, disbursements and
other charges of counsel, incurred by or asserted against any of them
arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any claim,
litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related
expenses are determined by a court of competent
H-19
jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby. The provisions of this Section
7.06 shall remain operative and in full force and effect regardless of
the termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the repayment of
any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Collateral Agent or any
Lender. All amounts due under this Section 7.06 shall be payable on
written demand therefor.
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or delay of
the Collateral Agent in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The
rights and remedies of the Collateral Agent hereunder and of the
Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No
waiver of any provisions of this Agreement or any other Loan Document
or consent to any departure by the Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on
the Grantor in any case shall entitle the Grantor or any other Grantor
to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Collateral Agent and the
Grantor, subject to any consent required in accordance with Section
9.08 of the Credit Agreement.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
H-20
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provision in any
other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute but one contract
(subject to Section 7.04), and shall become effective as provided in
Section 7.04. Delivery of an executed signature page to this Agreement
by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings used
herein are for the purpose of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of Process. (a)
The Grantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent, the
Administrative Agent, the Issuing Bank or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement or the
other Loan Documents against the Grantor or its properties in the
courts of any jurisdiction.
(b) The Grantor hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter
H-21
have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.01.
Nothing in this Agreement will affected the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 7.14. Termination. This Agreement and the Security
Interest shall terminate when all the Obligations have been
indefeasibly paid in full, the Lenders have no further commitment to
lend, the L/C Exposure has been reduced to zero and the Issuing Bank
has no further commitment to issue Letters of Credit under the Credit
Agreement, at which time the Collateral Agent shall execute and deliver
to the Grantor, at the Grantor's expense, all Uniform Commercial Code
termination statements and similar documents which the Grantor shall
reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this
Section 7.14 shall be without recourse to or warranty by the Collateral
Agent. A Grantor shall automatically be released from its obligations
hereunder and the Security Interest in the Collateral of such Grantor
shall be automatically released in the event that all the capital stock
of such Grantor shall be sold, transferred or otherwise disposed of to
a person that is not an Affiliate of the Borrower in accordance with
the terms of the Credit Agreement; provided that the Required Lenders
shall have consented to such sale, transfer or other disposition (to
the extent required by the Credit Agreement) and the terms of such
consent did not provide otherwise.
SECTION 7.15. Additional Grantors. Upon execution and delivery
by the Collateral Agent and a Subsidiary of an instrument in the form
of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder
with the same force and effect as if originally named as a Grantor
herein. The execution and delivery of any such instrument shall not
require the consent of the Grantor hereunder. The rights and
obligations of the Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor as a party to
this Agreement.
* * *
H-22
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
TEL-SAVE HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
TEL-SAVE, INC.
By:
-------------------------------------
Name:
Title:
EMERGENCY TRANSPORT CORP.
By:
-------------------------------------
Name:
Title:
TEL-SAVE HOLDINGS OF VIRGINIA, INC.
By:
-------------------------------------
Name:
Title:
SALOMON BROTHERS HOLDING
COMPANY INC, as Collateral Agent
By:
-------------------------------------
Name:
Title:
H-23
Annex 2 to the
Security Agreement
[Form of]
PERFECTION CERTIFICATE
Reference is made to (a) the Credit Agreement dated as of
August 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto (the "Lenders") and Salomon Brothers
Holding Company Inc, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent") and Collateral Agent and (b) the
Guarantee Agreement dated as of August 25, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee
Agreement"), among the Guarantors party thereto and the Collateral
Agent.
The undersigned, a Financial Officer and a Legal Officer,
respectively, of the Borrower, hereby certify to the Collateral Agent
and each other Secured Party as follows:
1. Names. (a) The exact corporate name of the Grantor, as such
name appears in its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name the Grantor
has had in the past five years, together with the date of the relevant
change:
(c) Except as set forth in Schedule 1 hereto, the Grantor has
not changed its identity or corporate structure in any way within the
past five years. Changes in identity or corporate structure would
include mergers, consolidations and acquisitions, as well as any change
in the form, nature or jurisdiction of corporate organization. If any
such change has occurred, include in Schedule 1 the information
required by Sections 1 and 2 of this certificate as to each acquiree or
constituent party to a merger or consolidation.
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Grantor or any of its
divisions or other business units in connection with the conduct of its
business or the ownership of its properties at any time during the past
five years:
H-30
(e) Set forth below is the Federal Taxpayer Identification
Number of the Grantor:
2. Current Locations. (a) The chief executive office of the
Grantor is located at the address set forth below:
Mailing Address County State
--------------- ------ -----
(b) Set forth below are all locations where the Grantor
maintains any books or records relating to any Accounts Receivable
(with each location at which chattel paper, if any, is kept being
indicated by an "*"):
Mailing Address County State
--------------- ------ -----
(c) Set forth below are all the places of business of the
Grantor not identified in paragraph (a) or (b) above:
Mailing Address County State
--------------- ------ -----
(d) Set forth below are all the locations where the Grantor
maintains any Collateral not identified above:
Mailing Address County State
--------------- ------ -----
H-31
(e) Set forth below are the names and addresses of all persons
other than the Grantor that have possession of any of the Collateral of
the Grantor:
Mailing Address County State
--------------- ------ -----
3. Unusual Transactions. All Accounts Receivable have been
originated by the Grantor and all Inventory has been acquired by the
Grantor in the ordinary course of business.
4. File Search Reports. Attached hereto as Schedule 4(A) are
true copies of file search reports from the Uniform Commercial Code
filing offices where filings described in Section 3.19 of the Credit
Agreement are to be made. Attached hereto as Schedule 4(B) is a true
copy of each financing statement or other filing identified in such
file search reports.
5. UCC Filings. Duly signed financing statements on Form UCC-1
in substantially the form of Schedule 5 hereto have been prepared for
filing in the Uniform Commercial Code filing office in each
jurisdiction where the Grantor has Collateral as identified in Section
2 hereof.
6. Schedule of Filings. Attached hereto as Schedule 6 is a
schedule setting forth, with respect to the filings described in
Section 5 above, each filing and the filing office in which such filing
is to be made.
7. Filing Fees. All filing fees and taxes payable in
connection with the filings described in Section 5 above have been
paid.
8. Stock Ownership. Attached hereto as Schedule 8 is a true
and correct list of all the duly authorized, issued and outstanding
stock of each Subsidiary and the record and beneficial owners of such
stock. Also set forth on Schedule 8 is each equity Investment of the
Borrower and each Subsidiary that represents 50% or less of the equity
of the entity in which such investment was made.
9. Notes. Attached hereto as Schedule 9 is a true and correct
list of all notes held by the Borrower and each Subsidiary and all
intercompany notes between the Borrower and each Subsidiary of the
Borrower and between each Subsidiary of the Borrower and each other
such Subsidiary.
10. Advances. Attached hereto as Schedule 10 is (a) a true and
correct list of all advances made by the Borrower to any Subsidiary of
the Borrower or made by any Subsidiary of the Borrower to the Borrower
or any other Subsidiary of the Borrower, which advances will be on and
after the date hereof evidenced by one or more intercompany notes
pledged to the Collateral Agent under the Pledge Agreement, and (b)
H-32
a true and correct list of all unpaid intercompany transfers of goods
sold and delivered by or to the Borrower or any Subsidiary of the
Borrower.
11. Mortgage Filings. Attached hereto as Schedule 11 is a
schedule setting forth, with respect to each Mortgaged Property, (i)
the exact corporate name of the corporation that owns such property as
such name appears in its certificate of incorporation, (ii) if
different from the name identified pursuant to clause (i), the exact
name of the current record owner of such property reflected in the
records of the filing office for such property identified pursuant to
the following clause and (iii) the filing office in which a Mortgage
with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.
H-33
IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this 25th day of August, 1997.
TEL-SAVE HOLDINGS, INC.
By:
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
By:
------------------------------------
Name: Xxxxxxxx X. Lawn, IV
Title: General Counsel and Secretary
H-34
