EXECUTION COPY
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BORROWER PLEDGE AND SECURITY AGREEMENT
dated as of
January 15, 1999
FLASHNET COMMUNICATIONS, INC.,
as Grantor
and
XXXXXXX XXXXX CREDIT PARTNERS L.P.
as Agent,
as Secured Party
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TABLE OF CONTENTS
PAGE
SECTION I. DEFINITIONS...........................................................1
1.1. Certain Terms...................................................1
1.2. Terms Defined in Term Loan Agreement............................3
1.3. Terms Defined in the Uniform Commercial Code....................4
1.4. Terms Generally.................................................5
SECTION II. THE SECURITY INTERESTS...............................................5
2.1. Grant of Security Interests....................................5
2.2. Delivery of Instruments And Securities.........................7
2.3. Investment Property............................................7
2.4. Registration of Pledge.........................................8
2.5. Financing Statements...........................................8
2.6. Secured Party Filing...........................................8
2.7. Further Assurances.............................................8
2.8. Power of Attorney..............................................9
2.9. Survival of Security INTERESTS................................10
2.10. Reinstatement of Security Interests...........................10
2.11. Grantor Remains Liable........................................11
SECTION III. REPRESENTATIONS, WARRANTIES AND COVENANTS..........................11
3.1. The Collateral................................................11
3.2. Maintenance of Perfection.....................................12
3.3. Defense of Collateral.........................................13
3.4. Transfer or Encumbrance.......................................13
3.5. Payments, Dividends and Distributions.........................13
3.6. Voting Rights.................................................13
3.7. Maintenance of Collateral.....................................14
3.8. Concerning Equipment and Inventory............................14
3.9. Concerning Accounts, Instruments and other Claims.............15
3.10. Substituted Performance.......................................16
SECTION IV. DEFAULT; REMEDIES...................................................16
4.1. Default.......................................................16
4.2. Remedies upon Default.........................................16
4.3. Waivers by Grantor............................................17
4.4. Standard of Care..............................................18
4.5. Application of Proceeds.......................................18
4.6. Indemnity and Expenses........................................18
4.7. Surplus, Deficiency...........................................19
4.8. Information Related to the Collateral.........................19
4.9. Sale Exempt from Registration.................................19
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4.10. Rights and Remedies Cumulative................................20
4.11. No Direct Enforcement by Beneficiaries........................20
SECTION V. CONCERNING THE SECURED PARTY.........................................20
5.1. Agent for Holders.............................................20
5.2. Agent shall be the Secured Party..............................20
5.3. No Assurances or Liability....................................21
5.4. Holders Bound.................................................21
SECTION VI. MISCELLANEOUS PROVISIONS............................................21
6.1. Continuing Security Interests; Release........................21
6.2. Amendments; Etc...............................................21
6.3. Failure or Indulgence not Waiver; Remedies Cumulative.........22
6.4. Notices.......................................................22
6.5. Severability..................................................22
6.6. Headings......................................................22
6.7. Governing Law; Terms..........................................22
6.8. Consent to Jurisdiction and Service of Process................22
6.9. Waiver of Jury Trial..........................................23
6.10. Counterparts..................................................23
6.11. Ascend Note...................................................23
SCHEDULES
Schedule 3.1(b): Capital Stock and Intercompany NOTES
Schedule 3.1(c): Intellectual Property
Schedule 3.1(d): Other Investment Property
Schedule 3.1(e): Location of Equipment and Inventory
Schedule 3.1(g): Location of Grantor
Schedule 3.1(h): Names
Schedule 3.1(i): Taxpayer ID Number
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BORROWER PLEDGE AND SECURITY AGREEMENT
This BORROWER PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT") is
dated as of January 15, 1999, and entered into by and between FLASHNET
COMMUNICATIONS, INC., a Texas corporation (the "GRANTOR"), and XXXXXXX XXXXX
CREDIT PARTNERS, L.P., in its capacity as Administrative Agent (in such capacity
the "AGENT") under the Term Loan Agreement described herein (in such capacity,
the "SECURED PARTY"), FOR THE BENEFIT OF the Persons that now are or at any time
hereafter become party as Lender to the Term Loan Agreement (the "LENDERS" and
the Agent and the Lenders, collectively, the "BENEFICIARIES").
RECITALS
The Grantor has requested that Term Loans be made to the Grantor on
terms and conditions set forth in that certain Term Loan Agreement dated as of
the day and year first above written, by and among Grantor, Secured Party and
the Lenders.
To induce the Beneficiaries to enter into the Term Loan Agreement, and
in consideration thereof and of any and all Term Loans at any time made
thereunder, the Grantor has agreed to grant to the Secured Party, for the
benefit of the Beneficiaries, the collateral security described herein as
security for the payment of the Secured Obligations on the terms herein set
forth.
ACCORDINGLY, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Xxxxxxx hereby agrees with Secured Party for the benefit of the
Beneficiaries as follows:
SECTION I.
DEFINITIONS
1.1. CERTAIN TERMS. As used in this Agreement, the following terms
have the meanings specified below:
"BANKRUPTCY CODE" means Title 11 of the United States Code, as from
time to time amended, or any successor statute.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
regardless of type, class, preference or designation, any and all equivalent
ownership interests in a Person other than a corporation, including membership
interests, partnership interests or other equity interests, and any and all
warrants, options, purchase rights, conversion or exchange rights, voting
rights, calls or claims of any character with respect thereto.
"CLAIM" has the meaning set forth in the Bankruptcy Code.
"COLLATERAL" has the meaning set forth in subsection 2.1.
"DISCHARGE OF THE OBLIGATIONS" means that all obligations of the
Lenders to make Term Loans under the Term Loan Agreement have expired or been
terminated and have been absolutely, unconditionally and irrevocably discharged
and all Obligations at any time created, incurred or outstanding (except
Obligations for indemnification which are then contingent and in respect of
which no claim or demand has then been made) have been fully and finally paid or
satisfied in cash or in accordance with the Loan Documents.
"EXCLUDED ASSETS" means (i) rights, licenses and franchises granted by
any Governmental Entity, licensor, lessor or other third party upon which it is
unlawful to create a Lien and (ii) that certain Master Lease Agreement, dated
June 7, 1998, between the Grantor, as lessee, and Ascend Credit Corporation, as
lessor.
"HOLDER" means, in respect of any Secured Obligation, the Person
entitled to enforce payment thereof and specifically includes each Lender and
the Secured Party.
"INTERCOMPANY NOTES" means any promissory note executed by a
Subsidiary of the Grantor in favor of the Grantor.
"LOAN PARTIES" means the Borrower and the Guarantors.
"OBLIGATIONS" means all direct or indirect debts, liabilities and
obligations of the Borrower of any and every type and description at any time
arising under or in connection with the Term Loan Agreement or any other Loan
Document, to the Secured Party, the Agent, any Lender or any Person entitled to
indemnification pursuant to the Term Loan Agreement or any other Loan Document,
in each case whether now outstanding or hereafter created or incurred, whether
or not the right of such Person to payment in respect of any such debts,
liabilities or obligations is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured and whether or not such claim is discharged, stayed or
otherwise affected by any bankruptcy case or insolvency, reorganization,
receivership, dissolution or liquidation proceeding, and shall include (a) all
liabilities of the Borrower for principal of, Applicable Repayment Fees, and
interest on any and all Term Loans at any time outstanding under the Term Loan
Agreement, (b) all liabilities of the Borrower under the Loan Documents for any
fees, costs, taxes, expenses, indemnification and other amounts payable
thereunder, and (c) all other liabilities of the Borrower under or in respect of
any of the Loan Documents or any of the transactions contemplated thereby and
specifically includes any and all present and future "Obligations" as such term
is defined in the Term Loan Agreement.
"PERFECTED" means, as to the security interests granted to Secured
Party in subsection 2.1, that (a) except with respect to the Ascend Note to the
extent the security interest granted under the Ascend Note is perfected and not
avoided, a creditor on a simple contract cannot acquire a judicial lien that is
superior to such security interests and (b) if a case were
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pending under the Bankruptcy Code in which Grantor is the debtor, such security
interests would be a Lien that is perfected in such bankruptcy case.
"POST-PETITION INTEREST AND EXPENSE CLAIMS" means any and all claims
of any Holder of Secured Obligations (a) for interest on any Obligations
determined for any period of time occurring after the commencement of any case
under the Bankruptcy Code or any other insolvency, reorganization, receivership,
dissolution or liquidation proceeding at the contract rate (including any
applicable post-default increase therein) set forth in the Term Loan Agreement
or any other Loan Document or (b) for cost and expense reimbursements or
indemnification on the terms set forth in the Term Loan Agreement or any other
Loan Document relating to costs and expenses incurred and indemnification rights
accrued at any time after the commencement of any such case or proceeding, in
each case to the extent such claim accrues or becomes payable in accordance with
the provisions of the Term Loan Agreement or other Loan Documents (or would have
accrued or become payable if enforceable or allowable in such case or
proceeding), whether or not such claim is enforceable, allowable or allowed in
such case or proceeding and even if such claim is disallowed therein.
"REQUIREMENT OF LAW" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Entity, in each case applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SECURED OBLIGATIONS" is defined in subsection 2.1.
"SECURITY DOCUMENTS" means the Security Agreements and all other
security documents hereafter delivered to the Agent granting or purporting to
xxxxx x Xxxx on any asset or assets of any Person to secure Obligations of the
Borrower and/or any other Loan Party hereunder and/or under any of the Loan
Documents or to secure any guarantee of any such obligations and liabilities.
"TERM LOAN AGREEMENT" means the Term Loan Agreement described in the
Recitals as such agreement from time to time may be modified, amended, restated,
extended, refinanced or replaced in any manner or in any respect (including so
as to reduce or increase the amount or cost of Term Loans made thereunder or to
shorten or extend the time of payment thereunder or in any other manner change
the amount or terms of Term Loans made to the Borrower or the identity, rights
or obligations of any party thereto).
"TRANSFER" means sell, transfer, exchange, lease, or otherwise dispose
of.
1.2. TERMS DEFINED IN TERM LOAN AGREEMENT. Unless the context
otherwise requires, the following terms used in this Agreement are used as
defined in the Term Loan Agreement:
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Applicable Repayment Fee
Ascend Note
Borrower
Business Day
Commitment
Default
Event of Default
Governmental Entity
Guarantee
Guarantor
Indebtedness
Investments
Lien
Loan Documents
Majority Lenders
Material Adverse Effect
Permitted Investments
Permitted Liens
Person
Security Agreements
Subsidiary
Term Loan
1.3. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. When capitalized,
the following terms used in this Agreement or the other Security Documents have
the meanings given to them in the Uniform Commercial Code, as in effect in the
State of New York on the date of this Agreement:
Accounts
Certificated Security
Chattel Paper
Commodity Account
Commodity Contract
Commodity Intermediary
Control
Documents
Equipment
Financial Asset
Fixtures
General Intangibles
Goods
Instruments
Inventory
Investment Property
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Securities Account
Securities Intermediary
Security
Security Certificate
Security Entitlement
Uncertificated Security
1.4. TERMS GENERALL. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." The word "will"
shall be construed to have the same meaning and effect as the word "shall."
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors,
transferees and assigns, (c) the words "herein," "hereof" and "hereunder," and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Sections, subsections, Exhibits and Schedules shall be construed to refer to
Sections and subsections of, and Exhibits and Schedules to, this Agreement, and
(e) the words "asset" and "property" shall be construed to have the same meaning
and effect and to refer to any and all tangible and intangible assets and
properties, whether real, personal or mixed and of every type and description.
SECTION II.
THE SECURITY INTERESTS
2.1. GRANT OF SECURITY INTERESTS. As security for the payment of the
Obligations and all Post-Petition Interest and Expense Claims (collectively, the
"SECURED OBLIGATIONS"), Grantor hereby assigns to Secured Party for the benefit
of the Beneficiaries, and grants Secured Party for the benefit of the
Beneficiaries security interests in, all of Grantor's right, title and interest
in and to the following types or items of property wherever located, in each
case whether now or hereafter existing, owned or acquired by Grantor, or in
which Grantor now owns or hereafter acquires an interest (collectively, the
"COLLATERAL"):
(a) all Inventory, including specifically all raw materials,
work-in-process, finished goods, supplies, materials, spare parts, Goods held
for sale or on lease or for lease or furnished or to be furnished under
contracts of service, merchandise inventory, rental inventory, and returned or
repossessed Goods and all rights to enforce return or repossession by
reclamation, stoppage in transit or otherwise,
(b) all Equipment, including specifically all manufacturing,
printing, distribution, delivery, retailing, vending, data processing,
communications, office and other
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equipment in all of its forms, all vehicles, all tools, dies, and molds, all
Fixtures, all other Goods used or bought for use primarily in a business and all
other Goods except Inventory,
(c) all Accounts,
(d) all Chattel Paper,
(e) all Documents,
(f) all Instruments and all other Claims that are in any respect
evidenced or represented by any writing, including specifically the Intercompany
Notes described on SCHEDULE 3.1(B) and all other Intercompany Notes and all
other writings evidencing or representing a Claim against any Subsidiary of the
Borrower or any other Person,
(g) (i) 100% of the issued and outstanding Capital Stock of any
Subsidiary, and (ii) all other Securities not described in the preceding clause
(i), whether constituting Certificated Securities or Uncertificated Securities,
all Financial Assets, all Security Entitlements, all Securities Accounts, all
Commodity Contracts, all Commodity Accounts, and all other Investment Property,
including specifically the Security Certificates described on SCHEDULE 3.1(B)
and all other Capital Stock and all Investments permitted under subsection 4.9
of the Term Loan Agreement,
(h) all money, cash and cash equivalents, including specifically
all deposit accounts and all certificates of deposit,
(i) all General Intangibles, including specifically (a) the
property described on SCHEDULE 3.1(C), (b) all registered, unregistered and
common law trademarks and service marks, trademark and service mark
applications, and all trademark, service mark and tradename license agreements
to which Grantor is a party (whether as licensor or licensee) and all Claims
(including infringement claims) relating thereto, (c) all patents and patent
applications and all patent license agreements to which Grantor is a party
(whether as licensor or licensee) and all Claims (including infringement claims)
relating thereto, (d) all registered and unregistered copyrights, copyright
applications and all copyright license agreements to which Grantor is a party
(whether as licensor or licensee) and Claims (including infringement claims)
relating thereto, (e) all other intellectual property in which Grantor has an
interest, including proprietary research and development, technical knowledge
and processes, inventions (whether or not patentable and whether or not reduced
to practice) know-how, trade secrets, trade names, trade styles, logos, license
agreements and user rights and Claims (including infringement claims) relating
thereto, (f) all customer lists and agreements, (g) all supplier lists and
agreements, (h) all employee and consultant lists, rights, and agreements, (i)
all computing, data and information processing and communications programs,
discs, designs, and information and the data and other entries thereon, (j) all
books, records, catalogs, back issues, library rights and all manifestations and
embodiments thereof, (k) all tax refunds, (l) all policies of insurance and
condemnation awards of every type and description and the proceeds thereof, (m)
all loans receivable, letters of credit, bonds and undertakings, deferred
purchase price or deferred purchase
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consideration, consulting or non-competition payments and other Indebtedness,
liabilities and obligations receivable not constituting an Account and not
evidenced or represented by any Instrument, Chattel Paper or Security, (n) all
rights of recoupment, recourse, reimbursement, subrogation, indemnity or
contribution arising on account of any agreement, transaction or event, (o) all
other causes of action and Claims of every type and description, whether fixed
or contingent, liquidated or not liquidated, accrued or not accrued, and all
judgments, orders and recoveries thereon, (p) all other agreements and contract
rights of every type and description and Claims thereon or relating in any
manner thereto, (q) all other rights, privileges, benefits, entitlements,
franchises, licenses and expectancies of every type and description, (r) all
other intangible property of every type and description, and (s) all goodwill
associated with any of the foregoing,
(j) all property that is at any time delivered to, or that is at
any time in the Control of, Secured Party, and
(k) any and all Fixtures located on any and all owned or leased
real property held by the Grantor,
TOGETHER, IN EACH CASE, WITH (w) all accessions thereto and products and
replacements thereof, (x) all guaranties, Liens and other forms of collateral
security therefor, and (y) all dividends, distributions, and payments received
thereon or in exchange or substitution therefor or upon Transfer thereof, and
(z) all other proceeds thereof,
EXCEPT AND EXCLUDING, HOWEVER, each item of property that is an Excluded Asset,
for as long as it remains an Excluded Asset.
2.2. DELIVERY OF INSTRUMENTS AND SECURITIES. On the date that the
security interest under the Ascend Note is extinguished or if acquired after
such date, immediately upon acquisition thereof by Grantor, without any notice
from or demand by Secured Party, (a) Grantor shall deliver to Secured Party the
Intercompany Notes and Security Certificates described on SCHEDULE 3.1(B) and
all other Instruments (except checks received and collected in the ordinary
course of business) and Security Certificates at any time constituting
Collateral, in each case in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer, assignments in blank or
with appropriate endorsements, in form and substance satisfactory to Secured
Party, and (b) Grantor shall cause the issuer of each Uncertificated Security
constituting Collateral to register Secured Party as the registered owner
thereof, either upon original issuance or by registration of transfer and shall
execute and deliver all writings necessary to cause such issuer to do so.
2.3. INVESTMENT PROPERTY. Grantor will cause Secured Party's security
interests in Investment Property to be and remain continuously Perfected by
Control and, in addition, will cause such security interests to be Perfected by
filing. Grantor will not grant or permit any other security interest or Lien
upon any Investment Property constituting Collateral. If so requested at any
time by Secured Party or the Majority Lenders as to any Security Entitlement or
Securities Account or any Commodity Contract or Commodity Account that
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constitutes Collateral, Grantor will promptly cause each Person who is a
Securities Intermediary as to any such Security Entitlement or Securities
Account and each Person who is a Commodity Intermediary as to any such Commodity
Contract or Commodity Account to deliver a written agreement enforceable by
Secured Party for the benefit of the Beneficiaries waiving and releasing, and
agreeing not to create, grant, accept or hold, any priority, PARI PASSU or
junior security interest or Lien therein. Grantor will not cause or permit any
Capital Stock in any Subsidiary which constitutes Collateral to be outstanding
as an Uncertificated Security (except as required by Requirements of Law) or to
constitute a Security Entitlement or be held in a Securities Account.
2.4. REGISTRATION OF PLEDGE. On and after the date that the security
interest granted under the Ascend Note, to the extent such security interest is
perfected and not avoided, is extinguished, Secured Party may at any time when
any Event of Default is continuing and without any notice to any Loan Party or
any other Person, transfer to and register in Secured Party's name, as pledgee,
any and all Instruments and Investment Property constituting Collateral. Such
transfer and registration shall not foreclose or otherwise affect any rights or
interests of any Loan Party and shall not increase, restrict or reduce any of
Secured Party's rights and remedies. If after any such transfer and registration
Grantor remains entitled under subsection 3.6 to exercise voting rights with
respect to Capital Stock included in such Investment Property, Secured Party
shall, at the written request of Grantor, deliver to Grantor a revocable proxy
or other instrument sufficient to permit Grantor to exercise such voting rights
to the extent permitted under subsection 3.6.
2.5. FINANCING STATEMENTS. Grantor will duly execute, deliver and
(subject to execution by Secured Party, where required by law) file duly
completed financing statements naming Grantor as debtor, naming Secured Party as
secured party, and covering the Collateral, in the proper filing office in each
jurisdiction in which a financing statement is required from time to time to be
filed in order to ensure that the security interests granted to Secured Party in
subsection 2.1 are at all times continuously Perfected, to the extent that,
under applicable law, such security interests can be Perfected by the filing of
a financing statement.
2.6. SECURED PARTY FILING. Secured Party is hereby authorized to file
one or more financing statements and continuations thereof and amendments
thereto, relative to all or any part of the Collateral, without the signature of
Grantor where permitted by law.
2.7. FURTHER ASSURANCES. Grantor will promptly (and in any event
within five Business Days after request by Secured Party or the Majority
Lenders) execute and deliver, and use its reasonable and diligent best efforts
to obtain from other Persons, all instruments and documents (including security
agreements, security assignments, Lien releases, Lien waivers, transfer
documents and transfer notices, financing statements and other Lien notices), in
form and substance satisfactory to Secured Party or the Majority Lenders, and
take all other actions which are necessary or, in the good faith judgment of
Secured Party or the Majority Lenders, desirable or appropriate in order to
create, maintain, Perfect, ensure the agreed priority of, protect or enforce
Secured Party's security interests in the Collateral, to enable Secured Party to
exercise
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and enforce its rights and remedies hereunder with respect to any Collateral, to
protect the Collateral against the rights, claims or interests of third persons,
or to effect or to assure further the purposes and provisions of this Agreement,
and Grantor agrees to pay all costs related thereto and all reasonable expenses
incurred by Secured Party in connection therewith.
2.8. POWER OF ATTORNEY. Grantor hereby irrevocably constitutes and
appoints Secured Party and any officer, agent or nominee of Secured Party, with
full power of substitution, as its true and lawful attorney-in-fact with full
power and authority, in the name of Grantor or in its own name, to take any and
all actions and to execute and deliver any and all agreements, documents,
notices, instruments and writings that Secured Party or the Majority Lenders may
determine to be necessary or desirable to create, Perfect or ensure the agreed
priority of the security interests granted in subsection 2.1 or, upon the
occurrence and during the continuance of an Event of Default, to enforce such
security interests in any lawful and commercially reasonable manner or otherwise
to protect Secured Party's interest in the Collateral in any lawful and
commercially reasonable manner, including the power and right on behalf of
Grantor, without notice to or assent by Grantor, to do any or all of the
following if and whenever Grantor is in default under this Agreement as set
forth in subsection 4.1:
(a) to ask for, demand, sue for, collect, settle and give
acquittance for any and all moneys due or to become due with respect to any or
all of the Collateral and otherwise to demand and enforce payment and collection
of any and all Claims constituting Collateral,
(b) to sign and file in any office in any jurisdiction financing
statements, Xxxx notices, collateral assignments and any other instruments or
writings that may be required or, in the opinion of Secured Party or the
Majority Lenders, appropriate to create or Perfect a security interest in or
Lien upon any of the Collateral as security for the Secured Obligations,
(c) to accept, hold, collect, endorse, transfer and deliver any
and all checks, notes, drafts, acceptances, documents and other negotiable and
nonnegotiable Instruments, Securities, Documents and Chattel Paper constituting
Collateral that may be delivered to Secured Party in accordance with the
provisions of this Agreement, whether made payable to Grantor or otherwise,
(d) to commence, file, prosecute, defend, settle, compromise or
adjust any Claim, suit, action or proceeding with respect to any or all of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral,
(e) to obtain, contest, enforce, adjust and settle Claims for
insurance proceeds or condemnation awards constituting proceeds of Collateral or
required to be paid to Secured Party pursuant to this Agreement or the Term Loan
Agreement,
(f) to do, at its option and at the expense and for the account
of Grantor, at any time and from time to time, all lawful and commercially
reasonable acts and
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things that Secured Party or the Majority Lenders may deem necessary or
desirable to protect or preserve the Collateral or to realize upon the
Collateral,
(g) to contest, settle, pay or discharge taxes or Liens (other
than Liens permitted under this Agreement or the Term Loan Agreement) levied or
placed upon or threatened against any of the Collateral, and for such purposes
(A) the legality or validity thereof and amounts necessary to settle or
discharge the same may be determined by Secured Party or the Majority Lenders in
its or their commercially reasonable discretion and (B) Grantor agrees
immediately upon demand to reimburse Secured Party for any payments made by
Secured Party on account of any such taxes or Liens, as part of the Secured
Obligations,
(h) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with the Accounts and other
documents relating to the Collateral, and
(i) generally to sell, Transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and at Grantor's expense, at any time or from time
to time, all acts and things that Secured Party or the Majority Lenders deem
necessary to protect, preserve or realize upon the Collateral and Secured
Party's security interests therein in order to effect the intent of this
Agreement, all as fully and effectively as Grantor might do.
The power granted in this subsection 2.8 is a power coupled with an
interest, is irrevocable and shall be discharged upon Discharge of the
Obligations.
2.9. SURVIVAL OF SECURITY INTERESTS. The security interests granted
hereby shall, unless released in writing by Secured Party, (a) remain
enforceable as security for all Secured Obligations now outstanding or created
or incurred at any future time (whether or not created or incurred pursuant to
any agreement presently in effect or hereafter made and notwithstanding any
subsequent repayment of any of the Secured Obligations or any other act,
occurrence or event), until Discharge of the Obligations, and (b) survive any or
other Transfer of any Collateral and remain enforceable against each transferee
and subsequent owner thereof, except for any sale or other Transfer that is
permitted at the time under the Term Loan Agreement, Inventory sold in the
ordinary course of business, and any other Collateral that is expressly and
specifically released from the security interests created hereby pursuant to a
written release signed by Secured Party.
2.10. REINSTATEMENT OF SECURITY INTERESTS. If at any time any payment
on any Secured Obligation is set aside, avoided or rescinded or must otherwise
be restored or returned, this Agreement and the security interests granted to
Secured Party herein and all other Obligations of Grantor hereunder shall remain
in full force and effect and, if previously released or terminated, shall be
automatically and fully reinstated, without any necessity for any act, consent
or agreement of Grantor, as fully as if such payment had never been made and as
fully as if any such release or termination had never become effective.
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2.11. GRANTOR REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under all contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under any contract or agreement included in the Collateral, (c)
Secured Party shall not have any obligation or liability under any contract or
agreement included in the Collateral by reason of this Agreement or the grant to
Secured Party of any security interest in such contract or agreement, and (d)
Secured Party shall not be obligated to perform any of the obligations or duties
of Grantor under any contract or agreement included in the Collateral or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Grantor represents and warrants to Secured Party and agrees with
Secured Party that:
3.1. THE COLLATERAL.
(a) OWNERSHIP. Except as otherwise expressly permitted under the
Term Loan Agreement, including, without limitation, Permitted Liens, (i) Grantor
owns or has an interest in the Collateral free and clear of any and all Liens
and (ii) no effective financing statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or recording
office, except those in favor of Secured Party.
(b) INTERESTS IN AND CLAIMS AGAINST SUBSIDIARIES. SCHEDULE 3.1(B)
sets forth accurately and completely all Capital Stock owned by Grantor in any
direct Subsidiary of Grantor, and all other Capital Stock owned by Grantor and
all Intercompany Notes issued to Grantor. All such Capital Stock has been duly
authorized and validly issued and was not issued in breach or derogation of
preemptive rights of any Person or in violation of any applicable securities
laws.
(c) INTELLECTUAL PROPERTY. SCHEDULE 3.1(C) sets forth accurately
and completely (a) all registered and unregistered trademarks and servicemarks
and all trademark and servicemark applications owned by Grantor, all trademark
and service mark license agreements to which Grantor is a party (whether as
licensor or licensee), and all pending or overtly threatened infringement Claims
by or against Grantor and other litigation relating to any such trademarks,
servicemarks, trademark or servicemark applications or trademark or servicemark
license agreements, (b) all patents and patent applications owned by Grantor,
all patent license agreements to which Grantor is a party (whether as licensor
or licensee), and all pending or overtly threatened infringement Claims by or
against Grantor and other litigation relating to any such patents, patent
applications or patent license agreements, and (c) all registered and
unregistered copyrights and copyright applications owned by Grantor, all
copyright license
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agreements to which Grantor is a party (whether as licensor or licensee) and all
pending or overtly threatened infringement claims by or against Grantor or other
litigation relating to any such copyrights, copyright application or copyright
license agreements.
(d) OTHER INVESTMENT PROPERTY. SCHEDULE 3.1(D) sets forth
accurately and completely all other Investment Property of Grantor except
Permitted Investments.
(e) LOCATION OF EQUIPMENT AND INVENTORY. All Equipment and
Inventory are located and intended to be kept at one of the collateral locations
specified on SCHEDULE 3.1(E).
(f) NO CONSUMER GOODS OR FARM PRODUCTS. Grantor does not own any
assets that are, as to it, consumer goods or farm products.
(g) LOCATION OF GRANTOR. The Grantor's chief place of business,
chief executive office and office or offices where the Grantor keeps its records
regarding its Accounts and all originals of its Chattel Paper are located, and
during the preceding four months were located, at the Grantor locations
specified on SCHEDULE 3.1(G).
(h) NAMES. The correct legal name of Grantor is set forth in the
preamble to this Agreement. Grantor does not conduct business or hold itself out
under, and in the past five years has not conducted business or held itself out
under, any other name (including any trade-name or fictitious business name)
except any name listed on SCHEDULE 3.1(H).
(i) TAXPAYER ID NUMBER. The proper taxpayer identification number
for Grantor is accurately set forth on SCHEDULE 3.1(I).
(j) PERFECTION. The security interests granted to Secured Party
in subsection 2.1 are lawful, valid and, subject to the security interest
granted under the Ascend Note to the extent such security interest is perfected
and not avoided, enforceable security interests that at all times have been, and
remain, duly and continuously Perfected.
(k) AMENDMENT OF SCHEDULE 3.1. Grantor may at any time
unilaterally amend SCHEDULE 3.1 in any respect required by the occurrence of any
event that does not constitute or give rise to a Default, by giving written
notice thereof to Secured Party. To be effective, such notice must state
conspicuously that it constitutes an amendment to certain factual matters
relating to the Collateral set forth in subsection 3.1 of this Agreement.
3.2. MAINTENANCE OF PERFECTION. Grantor will not (a) cause, permit or
suffer any voluntary or involuntary change in its name, identity or corporate
structure, or in the location of its chief executive office, or (b) keep any
records relating to its Accounts or any tangible Collateral (other than mobile
goods) at any location other than a location set forth in SCHEDULE 3.1, unless
(in each case) (i) SCHEDULE 3.1 has first been appropriately supplemented with
respect thereto, and (ii) an appropriate financing statement has been filed in
the proper office and in the proper form, and all other requisite actions have
been taken, to Perfect and
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continue the Perfection (without loss of priority) of Secured Party's security
interests in the Collateral.
3.3. DEFENSE OF COLLATERAL. Grantor will defend the Collateral against
all claims and demands of all Persons at any time claiming any interest therein.
3.4. TRANSFER OR ENCUMBRANCE. Grantor will not encumber or otherwise
Transfer any item of Collateral or any interest therein, or permit or suffer any
item of Collateral to be encumbered, sold, assigned or otherwise transferred,
unless (a) such action is permitted at the time under the Term Loan Agreement
and (ii) each Loan Party makes all payments on account of the Secured
Obligations required to be made therefrom and takes all other actions required
to be taken in connection therewith under the Term Loan Agreement or any other
Loan Document.
3.5. PAYMENTS, DIVIDENDS AND DISTRIBUTIONS. Grantor shall be entitled
to receive all payments in respect of Collateral and all dividends and
distributions on Capital Stock and other Investment Property constituting
Collateral, so long as (a) no Event of Default has occurred and is continuing or
would result, and (b) each Loan Party makes all payments on account of the
Secured Obligations or the Obligations of such Loan Party required to be made
therefrom and takes all other actions required to be taken in connection
therewith under the Term Loan Agreement or any other Loan Document.
3.6. VOTING RIGHTS. So long as no Event of Default has occurred or
would result, Grantor shall have and may exercise all voting rights with respect
to any and all Capital Stock constituting Collateral, except that:
(a) NO BREACH. Grantor shall not act or vote in favor of any
action that would constitute or cause a breach of any obligations of any Loan
Party under the Term Loan Agreement or under any other Loan Document;
(b) NO CAPITAL STRUCTURE CHANGES. Grantor shall not act or vote
in favor of (i) the authorization or issuance of any Capital Stock restricted
pursuant to subsection 4.9 of the Term Loan Agreement, or (ii) any
reclassification, readjustment, reorganization, merger, amalgamation,
liquidation, winding up, consolidation, sale, lease, assignment or other
disposition of assets, or dissolution, without giving Secured Party at least 15
days' prior written notice of the actions described in this clause (ii);
(c) MATERIAL ADVERSE CHANGES. Grantor shall not act or vote in
favor of any action that has or is reasonably likely to have a material adverse
effect on the value of any of the Collateral or Secured Party's rights therein
or that has, or would reasonably be expected to result in, a Material Adverse
Effect; and
(d) TERMINATION OF VOTING RIGHTS. At any time when Grantor is in
default under this Agreement as set forth in subsection 4.1, and subject to the
security interest granted under the Ascend Note to the extent such security
interest is perfected and not avoided,
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Secured Party may terminate any or all of Grantor's voting rights with respect
to any or all Capital Stock constituting Collateral, either by giving written
notice of such termination to Grantor or by transferring such Capital Stock into
Secured Party's name, and Secured Party shall thereupon have the sole right and
power to exercise such voting rights.
3.7. MAINTENANCE OF COLLATERAL. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any other Loan Document or any
applicable Requirement of Law or any policy of insurance covering any such
Collateral if such unlawful use or violation could reasonably result in a
Material Adverse Effect;
(b) notify Secured Party of any change in Grantor's name,
identity or corporate structure within 30 days after such change;
(c) give Secured Party 30 days' prior written notice of any
change in Grantor's chief place of business, chief executive office, places of
business, Collateral locations or federal taxpayer ID number or the office where
Grantor keeps its Chattel Paper and its records regarding any Accounts;
(d) if the Lenders give value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all material property and other taxes,
assessments and governmental charges or levies imposed upon any Collateral and
all Claims that are or might become secured by any Lien upon any Collateral,
except to the extent the same is being contested as permitted under the Term
Loan Agreement; PROVIDED, that, notwithstanding any other provision in the Loan
Documents, Grantor shall in any event pay such taxes, assessments, charges,
levies and Claims not later than five days prior to the date of any proposed
sale under any judgment, writ or warrant of attachment or other legal process
entered or filed against Grantor or any Collateral as a result of the failure to
make such payment.
3.8. CONCERNING EQUIPMENT AND INVENTORY. Grantor will:
(a) cause the Equipment to be maintained and preserved in the
same condition, repair and working order as when new (ordinary wear and tear and
worn-out and surplus equipment excepted) and in accordance with Grantor's past
practices and make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end;
(b) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, Grantor's cost therefor
and (where applicable) the current list prices for the Inventory, in the
ordinary course of Grantor's business;
(c) if any Inventory is in possession or control of any agent,
carrier, warehouseman, bailee, consignee or processor, upon the occurrence of an
Event of Default
14
instruct such Person to hold all such Inventory for the account of Secured Party
and subject to the instructions of Secured Party; and
(d) subject to the security interest granted under the Ascend
Note to the extent such security interest is perfected and not avoided, if so
requested at any time by Secured Party or the Majority Lenders, promptly endorse
and deliver to Secured Party each and all negotiable Documents constituting
Collateral.
3.9. CONCERNING ACCOUNTS, INSTRUMENTS AND OTHER CLAIMS. Grantor will:
(a) maintain accurate and complete records concerning the
Accounts, Instruments and all other Claims and the identity, name and address of
each account debtor or obligor thereon, hold and preserve such records in
safekeeping, permit representatives of Secured Party at any time during normal
business hours upon reasonable prior notice to inspect, copy and make abstracts
from such records, and render to Secured Party, at Grantor's cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto,
(b) if so requested at any time by Secured Party or the Majority
Lenders, Grantor will certify and deliver to Secured Party complete and correct
copies of each contract or agreement constituting Collateral,
(c) continue to collect, at Grantor's expense, all amounts due or
to become due to Grantor under Accounts, Instruments and other Claims and, in
connection therewith take such action as Grantor (or, whenever Grantor is in
default under this Agreement as set forth in subsection 4.1, as Secured Party or
the Majority Lenders) may reasonably deem necessary or advisable to enforce
collection of amounts due or to become due thereunder; PROVIDED, that Secured
Party shall have the right at any time when Grantor is in default under this
Agreement as set forth in subsection 4.1 (i) to notify the account debtors or
obligors under any or all Accounts, Instruments or other Claims of the
assignment of such Accounts, Instruments or Claims to Secured Party and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to Grantor thereunder directly to Secured Party, (ii) to notify each
Person maintaining a lockbox or similar arrangement to which account debtors or
obligors under any Accounts, Instruments or other Claims have been directed to
make payment to remit all amounts representing collections on checks and other
payment items from time to time sent to or deposited in such lockbox or other
arrangement directly to Secured Party and (iii) at the expense of Grantor, to
demand payment of any Accounts, Instruments and Claims and enforce collection
thereof by legal proceedings in any lawful manner and to extend, renew adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done, and
(d) if Secured Party at any time exercises any of the rights
described in the PROVISO in subsection 3.9(c), (i) segregate from all other
funds and hold in trust for Secured Party and immediately deliver to Secured
Party (in the identical form received) all amounts and proceeds (including
checks and other instruments) received by Grantor in respect of any and all
Accounts, Instruments and other Claims, and (ii) not adjust, settle or
compromise the amount or
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payment of any Account or Claim, or release wholly or partly any account debtor
or obligor thereon, or allow any credit or discount thereon.
3.10. SUBSTITUTED PERFORMANCE. Secured Party may at any time (but
shall not be obligated to) (a) perform any of the obligations of Grantor under
this Agreement if Grantor fails to perform such obligation within five Business
Days (or, in the case of insurance, within one Business Day) after written
demand by Secured Party and (b) make any payments and do any other acts which
Secured Party or the Majority Lenders may deem necessary or desirable to protect
Secured Party's security interests in the Collateral, including the right to
pay, purchase, contest or compromise any Lien that attaches or is asserted
against any Collateral, to procure insurance, and to appear in and defend any
action or proceeding relating to any Collateral, and Xxxxxxx agrees promptly to
reimburse Secured Party for all payments made by Secured Party in doing so,
together with interest thereon at the rate then applicable to the Term Loans,
all attorneys' fees and disbursements incurred by Secured Party in connection
therewith, whether or not suit is brought, and all other costs and expenses
related thereto.
SECTION IV.
DEFAULT; REMEDIES
4.1. DEFAULT. Grantor shall be in default under this Agreement (a)
whenever any Event of Default has occurred and is continuing and (b) at all
times after the Term Loans have become due and payable, whether at maturity,
upon acceleration pursuant to Article VII of the Term Loan Agreement or
otherwise.
4.2. REMEDIES UPON DEFAULT. At any time when Grantor is in default
under this Agreement as set forth in subsection 4.1, Secured Party may exercise
and enforce, in any order, (a) each and all of the rights and remedies available
to a secured party upon default under the Uniform Commercial Code or other
applicable law, (b) each and all of the rights and remedies available to it
under the Term Loan Agreement or any other Loan Document and (c) each and all of
the following rights and remedies:
(a) COLLECTION RIGHTS. Without notice to Grantor or any other
Loan Party, Secured Party may notify any or all account debtors and obligors on
any Accounts, Instruments or other Claims constituting Collateral of Secured
Party's security interests therein and may direct, demand and enforce payment
thereof directly to Secured Party.
(b) TAKING POSSESSION. Secured Party may (i) enter upon any and
all premises owned or leased by Grantor where Collateral is located (or believed
by Secured Party to be located), with or (to the fullest extent permitted by
law) without judicial process and without any obligation to pay rent, (ii) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iii) take possession of Grantor's
premises or place custodians or a receiver in exclusive control thereof, remain
on such premises and use the same and any of Grantor's Equipment for the purpose
of completing any work in process or otherwise
16
preparing the Collateral for sale or selling or otherwise Transferring the
Collateral, (iv) take possession of all items of Collateral that are not then in
its possession, either upon such premises or by removal from such premises, and
(v) require Grantor or the Person in possession thereof to deliver such
Collateral to Secured Party at one or more locations designated by Secured Party
and reasonably convenient to it and Grantor.
(c) FORECLOSURE. Secured Party may sell, lease, license or
otherwise dispose of or Transfer any or all of the Collateral or any part
thereof in one or more parcels at public sale or in private sale or transaction,
on any exchange or market or at Secured Party's offices or on Grantor's premises
or at any other location, for cash, on credit or for future delivery, and may
enter into all contracts necessary or appropriate in connection therewith,
without any notice whatsoever unless required by law. Where permitted by law,
one or more of the Beneficiaries may be the purchasers at any such sale and in
such event, if such bid is made by all of the Lenders or by all of the Holders
of Secured Obligations or otherwise whenever a credit bid is expressly permitted
under the Term Loan Agreement or approved in writing by the Agent and the
Majority Lenders, the Beneficiaries bidding at such sale may bid part or all of
the Obligations owing to them without necessity of any cash payment on account
of the purchase price, even though any other purchaser at such sale is required
to bid a purchase price payable in cash. Grantor agrees that at least 10
calendar days' written notice to Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall be
commercially reasonable. The giving of notice of any such sale or other
disposition shall not obligate Secured Party to proceed with the sale or
disposition, and any such sale or disposition may be postponed or adjourned from
time to time, without further notice.
(d) USE OF INTELLECTUAL PROPERTY. Secured Party may, on a
royalty-free basis, use and license use of any trademark, trade name, service
mark, trade style, copyright, patent or technical knowledge or process owned,
held or used by Grantor in respect of any Collateral as to which any right or
remedy of Secured Party is exercised or enforced.
In addition, each Holder of any Secured Obligation may exercise and
enforce such rights and remedies for the collection of such Secured Obligation
as may be available to it by law or agreement.
4.3. WAIVERS BY GRANTOR. Grantor hereby irrevocably waives (a) all
rights of redemption from any foreclosure sale, (b) to the extent permitted by
law, the benefit of all valuation, appraisal, exemption and moratorium laws, (c)
to the fullest extent permitted by law, all rights to notice or a hearing prior
to the exercise by Secured Party of its right to take possession of any
Collateral, whether by self-help or by legal process and any right to object to
the Secured Party taking possession of any Collateral by self-help, and (d) if
Secured Party seeks to obtain possession of any Collateral by replevin, claim
and delivery, attachment, levy or other legal process, (i) any notice or demand
for possession prior to the commencement of legal proceedings, (ii) the posting
of any bond or security in any such proceedings, and (iii) any requirement that
Secured Party retain possession and not dispose of any Collateral until after a
trial or final judgment in such proceedings.
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4.4. STANDARD OF CARE. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or to protect, preserve, vote or exercise any rights
pertaining to any Collateral. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property or if it selects, with reasonable care, a
custodian to hold such Collateral on its behalf.
4.5. APPLICATION OF PROCEEDS. Except as expressly provided elsewhere
in this Agreement or the Term Loan Agreement, all proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied by Secured Party against the
Secured Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including compensation to Secured Party
and its agents and counsel, and all other expenses, liabilities and
advances made or incurred by Secured Party in connection therewith, and all
amounts for which Secured Party is entitled to indemnification hereunder
and all advances made by Secured Party hereunder for the account of
Grantor, and to the payment of all costs and expenses paid or incurred by
Secured Party in connection with the exercise of any right or remedy
hereunder, all in accordance with subsection 4.6;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the Holders thereof) then due and payable; and
THIRD: To the payment to or upon the order of the Grantor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
4.6. INDEMNITY AND EXPENSES.
(a) INDEMNITY. Grantor will defend, indemnify and hold harmless
Secured Party and each Beneficiary from and against any and all claims, losses
and liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including enforcement of any
interest, right or remedy created hereby), provided that Grantor shall have no
obligation to indemnify a person with respect to claims, losses or liabilities
which are attributable to such person's gross negligence or willful misconduct
(as determined in a final non-appealable court of competent jurisdiction).
(b) EXPENSES. Grantor will pay to Secured Party upon demand the
amount of any and all costs and expenses, including the fees and expenses of its
counsel and of any advisors, consultants, experts and agents, that Secured Party
may incur in connection with
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(i) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (ii) the exercise or
enforcement of any of the interests, rights or remedies of Secured Party
hereunder, (iii) the failure by Grantor to perform or observe any of the
provisions hereof, or (iv) the proof, allowance, protection, administration,
treatment, discharge, collection or enforcement of any of the Secured
Obligations or any of the Collateral in any bankruptcy case or insolvency,
reorganization, receivership, dissolution or liquidation proceeding of or
affecting any Loan Party.
4.7. SURPLUS, DEFICIENCY. Any surplus proceeds of any sale or other
disposition by Secured Party of any Collateral remaining after Discharge of the
Obligations and after all Secured Obligations are paid in full and in cash shall
be paid over to Grantor or to whomever may be lawfully entitled to receive such
surplus or as a court of competent jurisdiction may direct, but prior to
Discharge of the Obligations, such surplus proceeds may be retained by Secured
Party and held as Collateral until Discharge of the Obligations. The Borrower
and each Guarantor shall be and remain liable for any deficiency.
4.8. INFORMATION RELATED TO THE COLLATERAL. Upon the occurrence and
continuation of an Event of Default, if Secured Party determines to sell or
otherwise Transfer any Collateral, Grantor shall, and shall cause any Person
controlled by it to, furnish to Secured Party all information Secured Party may
request that pertains or could pertain to the value or condition of the
Collateral or that would or might facilitate such sale or Transfer. Secured
Party shall have the right, notwithstanding any confidentiality obligation or
agreement otherwise binding upon it, freely to disclose such information, and
any and all other information (including confidential information) pertaining in
any manner to the Collateral or the assets, liabilities, results of operations,
business or prospects of any Loan Party, freely to any Person that Secured Party
in good faith believes to be a potential or prospective purchaser in such sale
or Transfer, without liability for any disclosure, dissemination or use that may
be made as to such information by any such Person.
4.9. SALE EXEMPT FROM REGISTRATION. Secured Party shall be entitled at
any such sale or other Transfer, if it deems it advisable to do so, to restrict
the prospective bidders or purchasers to Persons who will provide assurances
satisfactory to Secured Party that the Collateral may be offered and sold to
them without registration under the Securities Act of 1933, as amended, and
without registration or qualification under any other applicable state, federal
or foreign law. Upon the consummation of any such sale, Secured Party shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Secured Party may solicit offers to buy the Collateral,
or any part of it, from a limited number of investors deemed by Secured Party,
in its good faith judgment or in good faith reliance upon advice of its counsel,
to meet the requirements to purchase securities under Regulation D promulgated
under the Securities Act of 1933, as amended, as then in effect (or any other
Requirement of Law of similar import). If Secured Party solicits such offers
from such investors, then the acceptance by Secured Party of the highest offer
obtained from any of them shall be deemed to be a commercially reasonable method
of disposition of the Collateral
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4.10. RIGHTS AND REMEDIES CUMULATIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers or privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement. Secured Party may exercise
and enforce each right and remedy available to it either before or concurrently
with or after, and independently of, any exercise or enforcement of any other
right or remedy of Secured Party or any Holder of any Secured Obligation against
any Person or property. All such rights and remedies shall be cumulative, and no
one of them shall exclude or preclude any other.
4.11. NO DIRECT ENFORCEMENT BY BENEFICIARIES. Secured Party may freely
exercise and enforce any and all of its rights and remedies hereunder, for the
benefit of the Beneficiaries. No Beneficiary, other than Secured Party, shall
have any independent right to collect, take possession of, foreclose against or
otherwise enforce the security interests granted hereby.
SECTION V.
CONCERNING THE SECURED PARTY
5.1. AGENT FOR HOLDERS. Secured Party is executing and delivering this
Agreement, and accepting the security interests, rights, remedies, powers and
benefits conferred upon Secured Party hereby, both for its own benefit and as
agent for all present and future Holders of Secured Obligations. The provisions
of the Term Loan Agreement and all rights, powers, immunities and indemnities
granted to secured party under the Term Loan Agreement or any other Loan
Document, or under any separate agreement made by or otherwise binding upon any
Holder of Secured Obligations, shall apply in respect of such execution,
delivery and acceptance and in respect of any and all actions taken or omitted
by Secured Party under, in connection with or in respect of this Agreement.
5.2. AGENT SHALL BE THE SECURED PARTY. Secured Party shall at all
times be the same Person that is the Agent under the Term Loan Agreement.
Written notice of resignation by the Agent pursuant to subsection 10.9 of the
Term Loan Agreement shall also constitute notice of resignation as Secured Party
under this Agreement; and appointment of a successor Agent pursuant to
subsection 10.9 of the Term Loan Agreement shall also constitute appointment of
a successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Agent under subsection 10.9 of the Term Loan Agreement by a
successor Agent, the successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Secured Party under this Agreement, and the retiring Secured Party under this
Agreement shall promptly (a) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (b) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring Secured Party
shall be discharged from its
20
duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder as Secured Party, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Secured Party hereunder.
5.3. NO ASSURANCES OR LIABILITY. Secured Party makes no statement,
promise, representation or warranty whatsoever, and shall have no liability
whatsoever, to any Holder of any Secured Obligations as to the authorization,
execution, delivery, legality, enforceability or sufficiency of this Agreement
or as to the creation, Perfection, priority, or enforceability of any security
interests granted hereunder or as to existence, ownership, quality, condition,
value or sufficiency of any Collateral or as to any other matter whatsoever.
5.4. HOLDERS BOUND. Except where the consent of others may be required
pursuant to the express provisions of subsection 11.3 of the Term Loan
Agreement, any modification, amendment, waiver, release, termination or
discharge of any security interest, right, remedy, power or benefit conferred
upon Secured Party that is effectuated in a writing signed by Secured Party
shall be binding upon all Holders of Secured Obligations if it is (i) authorized
pursuant to any provision of the Term Loan Agreement or any other Loan Document,
(ii) required by law or (iii) authorized or ratified either (A) by the Majority
Lenders or (B) by the Holders of at least a majority in outstanding principal
amount of the Secured Obligations (other than contingent or unliquidated Secured
Obligations).
SECTION VI.
MISCELLANEOUS PROVISIONS
6.1. CONTINUING SECURITY INTERESTS; RELEASE. This Agreement creates
continuing security interests in the Collateral and shall (a) remain in full
force and effect until the Discharge of the Obligations, (b) be binding upon
Grantor and its successors and assigns, and (c) inure, together with the rights
and remedies of Secured Party hereunder, to the benefit of and be enforceable by
Secured Party and its successors, transferees and assigns acting in the capacity
of Agent under the Term Loan Agreement. Subject to and upon Discharge of the
Obligations or in connection with a sale or other disposition of any Collateral
permitted under the Term Loan Agreement, Secured Party shall (as soon as
reasonably practicable after it receives from Grantor a written request for
release of the Collateral) execute and deliver to Grantor an instrument in form
and substance satisfactory to Secured Party releasing (on a quitclaim basis,
without recourse, without warranty, and without any liability whatsoever) any
security interest Secured Party may then hold in the Collateral and thereupon
Secured Party shall, at Grantor's expense, execute and deliver to Grantor such
Uniform Commercial Code termination statements and other like documents as
Grantor may reasonably request to evidence such release.
6.2. AMENDMENTS; ETC. No amendment or waiver of any provision of this
Agreement, or consent to any departure by Grantor herefrom, shall in any event
be effective unless the same shall be in writing and signed by Secured Party,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given.
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6.3. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of Secured Party in the exercise of any power, right or
privilege hereunder shall impair such power, right or privilege or be construed
to be a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude any other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
6.4. NOTICES. Any and all notices and communications to be given to
Grantor or Secured Party shall be given in accordance with subsection 11.2 of
the Term Loan Agreement, and shall be effective as provided therein.
6.5. SEVERABILITY. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
6.6. HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
6.7. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF EXCEPT TO THE EXTENT THAT THE NEW YORK UNIFORM COMMERCIAL CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Notwithstanding the foregoing, the creation, Perfection, priority and
enforcement of a security interest in any deposit account shall be governed by
the laws of the state in which the depositary bank, or branch bank, maintaining
such deposit account is located.
6.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Grantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
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(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to it at its
address set forth in subsection 10.2 of the Term Loan Agreement or at such other
address of which the Secured Party shall have been notified pursuant thereto,
such service being hereby acknowledged by Grantor to be sufficient for personal
jurisdiction in any action against Grantor in any such court and to be otherwise
effective and binding service in every respect;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may -have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or consequential
damages.
6.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope
of this waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims, and all other common law and statutory claims. Grantor and
Secured Party each acknowledge that this waiver is a material inducement for
Grantor and Secured Party to enter into a business relationship, that Grantor
and Secured Party have already relied on this waiver in entering into this
Agreement and that each will continue to rely on this waiver in their related
future dealings. Each party hereto further warrants and represents that it has
reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
6.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
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6.11. ASCEND NOTE. Notwithstanding any other provisions in this
Agreement to the contrary, the security interest granted in subsection 2.1 is
subject to the security interest granted in the Ascend Note to the extent that
the security interest relating to the Ascend Note is perfected and not avoided.
The Obligations, however, are not subordinate to the Ascend Note and such
obligations are senior Indebtedness of the Borrower ranking PARI PASSU with the
Ascend Note.
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IN WITNESS WHEREOF, Xxxxxxx and Secured Party have executed this
Borrower Pledge and Security Agreement as of the day and year first above
written.
GRANTOR
FLASHNET COMMUNICATIONS, INC.,
a Texas corporation
By: /s/ X. Xxxxx Xxxxxx
-----------------------------
Name: X. Xxxxx Xxxxxx
Title: President & Secretary
SECURED PARTY
Accepted and agreed as of
the day and year first above written:
XXXXXXX XXXXX CREDIT PARTNERS L.P.,
as Agent
By: /s/ Xxxxxxx Xxxx
---------------------------
Name: Xxxxxxx Xxxx
Title: Authorized Signatory
