EXECUTION COPY
EXHIBIT 10.2
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement") is dated as of October 5, 2004 and
entered into among by and among CHOICE ONE COMMUNICATIONS INC., a Delaware
corporation ("COC"), CHOICE ONE COMMUNICATIONS OF NEW YORK INC., a Delaware
corporation ("COCNY"), CHOICE ONE COMMUNICATIONS OF CONNECTICUT INC., a Delaware
corporation ("COCCT"), CHOICE ONE COMMUNICATIONS OF MAINE INC., a Delaware
corporation ("COCME"), CHOICE ONE COMMUNICATIONS OF MASSACHUSETTS INC., a
Delaware corporation ("COCMA"), CHOICE ONE OF NEW HAMPSHIRE INC., a Delaware
corporation ("COCNH"), CHOICE ONE COMMUNICATIONS OF OHIO INC., a Delaware
corporation ("COCOH"), CHOICE ONE COMMUNICATIONS OF PENNSYLVANIA INC., a
Delaware corporation ("COCPA"), CHOICE XXX XXXXXXXXXXXXXX XX XXXXX XXXXXX INC.,
a Delaware corporation ("COCRI"), CHOICE ONE COMMUNICATIONS OF VERMONT INC., a
Delaware corporation ("COCVT"), CHOICE ONE COMMUNICATIONS INTERNATIONAL INC., a
Delaware corporation ("COCIN"), CHOICE ONE ONLINE INC., a New York corporation
("COCON"), CHOICE ONE COMMUNICATIONS OF VIRGINIA INC., a Virginia corporation
("COCVA"), CHOICE ONE COMMUNICATIONS SERVICES INC., a Delaware corporation
("COCSE"), US XCHANGE INC., a Delaware corporation ("USEX"), US XCHANGE OF
INDIANA, L.L.C., a Delaware limited liability company ("USIN"), US XCHANGE OF
ILLINOIS, L.L.C., a Delaware limited liability company ("USIL"), US XCHANGE OF
MICHIGAN, L.L.C., a Delaware limited liability company ("USMI"), and US XCHANGE
OF WISCONSIN, L.L.C., a Delaware limited liability company ("USWI"), each as a
debtor-in-possession (COC, COCNY, COCCT, COCME, COCMA, COCNH, COCOH, COCPA,
COCRI, COCVT, COCIN, COCON, COCVA, COCSE, USEX, USIN, USIL, USMI, and USWI,
together with any Subsidiary thereof added to this Agreement by means of a
supplement in the form of Exhibit B hereto, are sometimes collectively referred
to herein as the "Debtors" and individually as a "Debtor"); and GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation as Agent (the "Agent") for the
Lenders and Swap Issuer (collectively, the "Benefitted Parties") under the
Credit Agreement (as defined below). Capitalized terms used herein but not
otherwise defined herein shall have the meanings set forth in the Credit
Agreement.
W I T N E S S E T H:
WHEREAS, Debtors, Agent, Lenders and Swap Issuer are parties to a Senior
Secured, Super-Priority Debtor-in-Possession Credit Agreement dated as of
October 5, 2004 (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the "Credit Agreement"), pursuant to which Lenders
have agreed to make loans and other financial accommodations available to
Debtors;
WHEREAS, Debtors and Swap Issuer are parties to the Hedging Agreement
pursuant to which Swap Issuer has agreed to extend certain financial
accommodations available to Debtors;
WHEREAS, it is a condition precedent to the availability of the loans and
other financial accommodations under the Credit Agreement and to Swap Issuer's
agreement to enter into the Hedging Agreement that the Debtors shall have
granted a security interest, pledge and lien as contemplated by this Agreement
in order to secure the payment and performance of Debtors' indebtedness and
obligations under the Credit Agreement and the Loan Documents; and
WHEREAS, the grant of such security interest, pledge and lien has
been authorized pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the
Bankruptcy Code by the Financing Orders;
WHEREAS, to supplement the Financing Orders without in any way
diminishing or limiting the effect of the Financing Orders or the security
interest, pledge and lien granted thereunder, the parties hereto desire to more
fully set forth their respective rights in connection with such security
interest, pledge and lien;
WHEREAS, this Agreement has been approved by the Interim Order, and,
after the entry thereof, will have been so approved by the Final Order; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and in order to induce the Lenders to make the loans and other
financial accommodations available to the Debtors under the Credit Agreement and
to induce Swap Issuer to make the financial accommodations to Debtors under the
Hedging Agreement, the Debtors hereby agree with Agent, on behalf of the
Benefitted Parties, as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. The capitalized terms and the accounting terms
used in this Agreement shall have the meanings set forth in Section 35 of this
Agreement. Capitalized terms not otherwise defined herein shall have the
respective meanings provided for in the Credit Agreement. All other terms
contained in this Security Agreement, unless the context indicates otherwise,
have the meanings provided for by the UCC as in effect in the State of New York
to the extent the same are used or defined therein.
1.2 Other Definition Provisions. References to "Sections," "subsections,"
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of or to this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 35 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. All references to statutes and related regulations shall include
(unless otherwise specifically provided herein) any amendments of same and any
successor statutes and regulations.
SECTION 2. Grant of Security Interests
To secure the payment and performance of the Secured Obligations (as
defined below), including all renewals, extensions, restructurings and
refinancings of any or all of the Secured Obligations, each of the Debtors
hereby grants, conveys, assigns and pledges to the Agent, on behalf of the
Benefitted Parties, a continuing security interest, lien and mortgage in and to
all right, title and interest in all of such Debtor's personal property, whether
tangible or intangible,
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and whether now owned or existing or hereafter acquired or arising and
regardless of where located including, without limitation and to the extent
permitted by applicable law, all of the following (being collectively referred
to as the "Collateral"):
(A) Accounts, and all guaranties and security therefor, and all goods and
rights represented thereby or arising therefrom including the rights of stoppage
in transit, replevin and reclamation;
(B) Inventory;
(C) General Intangibles (including payment intangibles and Software);
(D) Documents or other receipts covering, evidencing or representing
goods;
(E) Instruments;
(F) Chattel Paper (as defined in the UCC), including Electronic Chattel
Paper;
(G) Equipment;
(H) Fixtures;
(I) Letter of Credit Rights;
(J) Letters of Credit;
(K) The commercial tort claims identified on Schedule VII hereto (as such
may be supplemented by the Debtors pursuant to the terms of this Agreement);
(L) Investment Property including, without limitation, all securities
(certificated and uncertificated), security accounts, security entitlements,
commodity contracts and commodity accounts;
(M) Intellectual Property;
(N) all deposit accounts of such Debtor maintained with any bank or
financial institution, including lock boxes;
(O) all cash, money and cash equivalents;
(P) all capital stock of any direct Subsidiary of COC or any other Debtor
and all intercompany notes held by any of them;
(Q) all contracts;
(R) all FCC Licenses or other PUC Authorizations;
(S) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any time
evidence or contain information
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relating to any of the property described above or are otherwise necessary or
helpful in the collection thereof or realization thereon; and
(T) Proceeds, products and accessions of all or any of the property
described above, including, without limitation, the Proceeds of any insurance
policies covering any of the above described property.
In addition, notwithstanding anything herein to the contrary, but without
limiting the grant of a security interest pursuant to clause (L) above, in no
event shall the Collateral include, and no Debtor shall be deemed to have
granted, a security interest in any of such Debtor's rights or interests in any
contract to which such Debtor is a party (other than any such contract between
or among the Debtors and/or their Affiliates only) to the extent, but only to
the extent, that such a grant would, under the terms of such contract, result in
a breach of the terms of, or constitute a default under such contract (other
than to the extent that any such term would be rendered ineffective pursuant to
Section 9-406 of the UCC or any other applicable law (including the Bankruptcy
Code) or principles of equity); provided, that immediately upon the
ineffectiveness, lapse or termination of any such term, the Collateral shall
include, and such Debtor shall be deemed to have granted a security interest in,
all such rights and interests as if such term had never been in effect.
Furthermore, notwithstanding anything to the contrary in clause (R) above,
the security interest does not include at any time the FCC Licenses or the PUC
Authorizations to the extent (but only the extent) that at such time any Debtor
is prohibited from granting a security interest therein pursuant to the
Communications Act of 1934, as amended, and the regulations promulgated
thereunder or pursuant to the applicable regulations of any PUC, as in effect at
such time, but such security interest does include, to the maximum extent
permitted by law, all rights incident or appurtenant to the FCC Licenses and the
PUC Authorizations and the right to receive all proceeds derived from or in
connection with the sale, assignment or transfer of the FCC Licenses and the PUC
Authorizations.
In addition, to secure the prompt and complete payment, performance and
observance of the Secured Obligations and in order to induce Agent and
Benefitted Parties as aforesaid, each Debtor hereby grants to Agent, for itself
and the benefit of the Benefitted Parties, a right of setoff against the
property of such Debtor held by Agent or any Benefitted Party, consisting of
property described above now or hereafter in the possession or custody of or in
transit to Agent or any Benefitted Party, for any purpose, including
safekeeping, collection or pledge, for the account of any Debtor, or as to which
any Debtor may have any right or power.
SECTION 3. Security for Obligations
This Agreement secures the payment and performance of the Obligations
under the Credit Agreement and any other Loan Document and all indebtedness,
liabilities and obligations of Debtors now existing or hereafter created or
arising under this Agreement, and all renewals, extensions, restructurings and
refinancings of any of the above (all such indebtedness, liabilities and
obligations of Debtors being collectively referred to herein as the "Secured
Obligations").
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SECTION 4. Debtors Remain Liable
Anything herein to the contrary notwithstanding: (a) Debtors shall remain
liable under the contracts and agreements included in the Collateral to the
extent set forth therein to perform all of their duties and obligations
thereunder to the same extent as if this Agreement had not been executed; (b)
the exercise by Agent of any of the rights hereunder shall not release Debtors
from any of their duties or obligations under the contracts and agreements
included in the Collateral; and (c) neither Agent nor any Benefitted Party shall
have any obligation or liability under the contracts and agreements included in
the Collateral by reason of this Agreement (including receipt of payment or
granting of a Lien), nor shall Agent or any Benefitted Party be obligated to
perform any of the obligations or duties of Debtors thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties
In order to induce Agent to enter into this Agreement, Debtors represent
and warrant to Agent and to each Benefitted Party as follows:
5.1 Authorization; No Conflict. Each Debtor has the power and authority to
incur the Secured Obligations and to grant security interests in the Collateral
to the extent provided herein free and clear of any and all liens and
encumbrances other than Permitted Encumbrances. No effective security agreement,
financing statement, equivalent security or lien instrument covering all of any
part of the Collateral is on file or of record in any public office, except such
as may have been filed (i) by any Debtor in favor of Agent, on behalf of the
Benefitted Parties, pursuant to this Agreement, or (ii) as may otherwise be
permitted under the Credit Agreement in connection with any other Permitted
Encumbrance. This Agreement, the Loan Documents and the Financing Orders are
effective to create a valid and continuing lien on the Collateral, the priority
of which liens are set forth in the Credit Agreement and the Financing Orders.
Debtors represent and warrant to Agent that the execution, delivery and
performance of this Agreement by Debtors will not violate or cause a default
under any of the Intellectual Property or any agreement in connection therewith.
5.2 Binding Obligation. This Agreement is the legally valid and binding
obligation of Debtors, enforceable against them in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditor's rights generally.
5.3 Account Warranties and Covenants. Except as otherwise disclosed to
Agent in writing, each Account is a valid, bona fide account, representing an
undisputed indebtedness incurred by the named account debtor for goods actually
sold and delivered or for services completely rendered and such Account is not
evidenced by a judgment, Instrument or chattel paper; there are no setoffs,
offsets or counterclaims, genuine or otherwise, against the Account other than
any credit balances in the ordinary course of business; the Account does not
represent a sale to an Affiliate (other than for sales in the ordinary course of
business to employees or directors in accordance with Section 6.4 of the Credit
Agreement) or a consignment, sale or return or a xxxx and hold transaction; no
agreement exists permitting any deduction or discount or extension of payment of
time; Debtors lawfully own the Account and have the right to assign the
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same to Agent, for the benefit of the Benefitted Parties; the Account is free of
all security interests, liens and encumbrances other than (i) Permitted
Encumbrances and (ii) those in favor of Agent, on behalf of the Benefitted
Parties, and the Account is due and payable in accordance with its terms and the
amount of all Accounts set forth on any Collateral report or invoice delivered
to the Agent are actually owing to the Debtor and not contingent.
5.4 Names and Locations. Schedule I sets forth the correct legal names of
the Debtors, the state organizational number (if any), state of organization and
federal tax identification numbers of each of the Debtors, the location of
Debtors' principal places of business and chief executive offices, the location
of Debtors' books and records, the location of all other offices of Debtors and
all Collateral locations except for Inventory that is in transit, and such
locations are Debtors' sole locations for their business and the Collateral.
None of said locations are leased by Debtors as lessee except those designated
as such on Schedule I. Schedule III sets forth, as of the date hereof, all
names, trade names, fictitious names and business names under which each Debtor
currently conducts business or has at any time during the past five years
conducted business and the name of any entity which any Debtor has acquired in
whole or in part or from whom any Debtor has acquired a significant amount of
assets within the past five years.
5.5 Intellectual Property. Each of the Debtors owns or has the valid right
to use all material Intellectual Property used or necessary for the conduct of
the business, free and clear of any and all Liens except for Liens permitted
under the definition of Permitted Encumbrances. To the best of each Debtor's
knowledge, all registrations for such material Intellectual Property are in full
force and effect and are valid and enforceable, unless the failure to be in full
force and effect or valid and enforceable could not reasonably be expected to
have a Material Adverse Effect. To the Debtors' knowledge, the conduct of the
business of each Debtor as currently conducted, including, but not limited to,
all products, processes, or services, made offered or sold by each such Debtor,
does not infringe upon, violate, misappropriate or dilute any Intellectual
Property rights of any third party, which infringement could reasonably be
expected to have a Material Adverse Effect. To the best of the Debtors'
knowledge, no third party is infringing upon the Intellectual Property owned or
used by any Debtor in any material respect. Except as set forth in Schedule IV,
there is no pending or, to the best of each Debtors' knowledge, threatened claim
or litigation contesting any Debtor's right to own or use any material
Intellectual Property or the validity or enforceability thereof. Schedule IV
sets forth a true and accurate list of (i) all Patents, Trademarks, and
Copyrights owned by each Debtor and (ii) all Patent Licenses, Trademark Licenses
and Copyright Licenses to which each Debtor is a party or is otherwise bound.
5.6 Bank Accounts. Schedule V sets forth the correct account numbers and
locations of all bank accounts of each Debtor and its Subsidiaries and any
associated lockboxes.
5.7 Location of Equipment, Inventory and Fixtures. All of the existing or
hereafter acquired Equipment, Inventory and Fixtures are located and shall be
located at the locations specified on Schedule I.
5.8 Ownership of Collateral; Bailees. Except for matters disclosed on
Schedule II, other Permitted Encumbrances and the Security Interests, Debtors
own the Collateral, and will
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own all Collateral (including all after-acquired Collateral), free and clear of
any Lien. Except as disclosed on Schedule II, none of the Collateral is in the
possession of any consignee, bailee, warehouseman, agent or processor. Debtors
do not sell any Inventory to any customer on approval or on any other basis
which entitles the customer to return, or which may obligate any Debtor to
repurchase, such Inventory (provided, however, that the Debtors are permitted to
have stock balancing programs and consigned inventory programs).
5.9 Perfection. Agent, on behalf of the Benefitted Parties, has a valid,
perfected and, except for the Permitted Encumbrances, first priority security
interest in the Collateral, securing the payment of the Secured Obligations, and
such Security Interests are entitled to all of the rights, priorities and
benefits afforded by the UCC or other applicable law as enacted in any relevant
jurisdiction which relates to perfected security interests.
5.10 Inventory. All Inventory (other than Inventory which has been
returned or quality controlled as defective) is of good and merchantable
quality, free from any defects, such Inventory is not subject to any licensing,
patent, trademark, trade name or copyright agreement with any Person that
restricts any Debtor's ability to manufacture and/or sell the Inventory (other
than those which give any other party to such licensing, patent, trademark,
trade name or copyright agreement the right to terminate its obligations
thereunder). The sale, completion and manufacturing process of such Inventory by
a Person other than any Debtor is permitted under any contract to which any
Debtor is a party or to which the Inventory is subject.
5.11 Accurate Information. All information heretofore, herein or hereafter
supplied to Agent and Benefitted Parties by or on behalf of any Debtor with
respect to the Collateral is and will be accurate and, taken in conjunction with
other information supplied, complete in all material respects.
5.12 Ownership of Collateral. Except as set forth in Schedule IV hereto,
such Debtor is the sole owner of each item of the Collateral upon which it
purports to xxxxx x Xxxx hereunder, and has good and marketable title thereto
free and clear of any and all Liens other than Permitted Encumbrances.
5.13 Instruments. Schedule VIII hereto lists all Instruments (other than
checks received in the ordinary course of business), letters of credit and
Chattel Paper of such Debtor. All action by such Debtor necessary or desirable
to protect and perfect the Lien in favor of Agent on each item set forth in
Schedule VIII (including the delivery of all originals thereof to Agent and the
legending of all such Chattel Paper as required by herein) has been duly taken.
SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Debtors will, from time to time, at their
expense, promptly execute and deliver all further Instruments and Documents and
take all further action that may be necessary or desirable, or that Agent, on
behalf of the Benefitted Parties, may request, in order to create, perfect and
protect any security interests granted or purported to be granted by the
Financing Orders, this Agreement or any other Loan Document, or to enable Agent,
on behalf of the Benefitted Parties, to exercise and enforce its rights and
remedies hereunder, or under any other Loan Document with respect to any
Collateral. Without limiting
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the generality of the foregoing, Debtors will: (a) execute (if necessary) and
file such financing or continuation statements, or amendments thereto, and such
other Instruments, Documents or notices, as may be necessary or desirable, or as
Agent, on behalf of the Benefitted Parties, may request, in order to create,
perfect and preserve the security interests granted or purported to be granted
by the Financing Orders, this Agreement or any other Loan Document or to
maintain Agent's priority with respect to the Collateral; (b) at any reasonable
time, upon demand by Agent, on behalf of the Benefitted Parties, exhibit the
Collateral to allow inspection of the Collateral by Agent, on behalf of the
Benefitted Parties, or Persons designated by Agent and to examine and make
copies of the records of Debtors related thereto, and to discuss the Collateral
and the records of Debtors with respect thereto with, and to be advised as to
the same by, an executive officer of COC and, after the occurrence and during
the continuance of an Event of Default and subject to the terms of the Financing
Orders, in the case of the Accounts, Documents, General Intangibles, Instruments
and Investment Property with any Person which is or may be obligated thereon;
(c) upon request of Agent, appear in and defend any action or proceeding that
may affect any Debtor's title to or security interest of Agent, on behalf of the
Benefitted Parties, in the Collateral; (d) transfer Collateral to Agent's
possession (for the benefit of the Benefitted Parties) if such Collateral
consists of chattel paper or Instruments or if a Lien on such Collateral can be
perfected only by possession, or if requested by Agent in writing; (e) upon
request of the Agent, use its best efforts to obtain control agreements with (i)
any depositary banks at which it maintains depositary accounts and (ii) any
issuer or securities intermediary with respect to its Investment Property; (f)
upon request of the Agent, use its best efforts to obtain landlord waivers or
leasehold mortgages from any landlord from whom it leases real property and (g)
upon acquisition of any new commercial tort claim, notify the Agent within two
(2) business days and provide a supplement to Schedule VII to this Agreement
sufficient to grant Agent an interest in such commercial tort claim. It is
understood and agreed that in making such request, Agent shall take into account
the effect the laws, rules and regulations of the United States and foreign
countries may have on the granting of security, pledging of assets and entering
into guaranties and that Agent shall not knowingly request any of the foregoing
which would cause a Material Adverse Effect on the Debtors and their
Subsidiaries.
6.2 Agent Authorized. Debtors hereby authorize Agent, on behalf of the
Benefitted Parties, to file one or more financing or continuation statements,
and amendments thereto (or similar documents required by any laws of any
applicable jurisdiction), relating to all or any part of the Collateral without
the signature of Debtors where permitted by law.
6.3 Corporate or Name or Location Changes. Each Debtor and each of its
Subsidiaries will give Agent at least ten (10) days (or such shorter notice
period as is acceptable to the Agent) advance written notice of: (a) any change
of name or of any new trade name or fictitious business name, (b) change of
principal place of business, (c) any change in the chief executive office or in
the location or new location of such party's books and records (if other than to
an already existing location), (d) any new location for such Debtor's
Collateral, (e) any change in the jurisdiction of organization of such Debtor or
such Debtor's Subsidiary or (f) any merger to which such Debtor or such Debtor's
Subsidiary is a party. With respect to any such change, Debtors will promptly
execute and deliver such documents and take such actions as Agent deems
necessary or desirable to create, perfect and preserve the security interests of
Agent, on behalf of the Benefitted Parties, in the Collateral. If and whenever
requested by the
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Agent, each Debtor shall deliver to Agent a recent certificate of good standing
issued by the appropriate official of such Debtor's jurisdiction of
organization.
6.4 Bailees. No Collateral or negotiable bills of lading shall at any time
be in the possession or control of any warehouseman, bailee, freight forwarder,
packager, customs agent or any of any Debtor's agents or processors without
prior written consent of Agent and unless Agent, if Agent has so requested, has
received warehouse receipts or bailee lien waivers satisfactory to Agent, prior
to the commencement of such storage. Debtors shall, upon the request of Agent,
on behalf of the Benefitted Parties, notify any such warehouseman, bailee,
freight forwarder, packager, agent or processor of the Security Interests
created hereby and shall instruct such Person to hold all such Collateral for
account of Agent, on behalf of the Benefitted Parties, subject to instructions
of Agent.
6.5 Instruments and Chattel Paper. Upon request of the Agent, Debtors will
deliver and pledge, to Agent, on behalf of the Benefitted Parties, all
Instruments duly endorsed and accompanied by duly executed Instruments of
transfer or assignment, all in form and substance satisfactory to Agent. Upon
request of the Agent, Debtors will also deliver to Agent, on behalf of the
Benefitted Parties, all security agreements securing any Instruments and execute
UCC-3 financing statements assigning to Agent, on behalf of the Benefitted
Parties, any UCC financing statements filed by any Debtor in connection with
such security agreements. Upon request of the Agent, Debtors will xxxx
conspicuously all chattel paper with a legend, in form and substance
satisfactory to Agent, indicating that such chattel paper is subject to the
Security Interests. Unless otherwise agreed to by the Agent, each Debtor shall
take all steps necessary to grant the Agent control of all electronic chattel
paper in accordance with the UCC.
6.6 Filing Requirements. None of the Equipment (other than motor vehicles
not having a book value in excess of $50,000.00 in the aggregate) is covered by
any certificate of title. Upon request of Agent, Debtors shall promptly deliver
to Agent, on behalf of the Benefitted Parties, any and all certificates of
title, applications for title or similar evidence of ownership of all Equipment
and shall cause Agent, on behalf of the Benefitted Parties, to be named as
lienholder on any such certificate of title or other evidence of ownership. None
of the Collateral is of a type in which security interests or Liens may be
registered, recorded or filed under, or notice thereof given under, any federal
statute or regulation except for Collateral described on the schedules hereto.
Debtors shall promptly notify Agent, on behalf of the Benefitted Parties, in
writing upon acquiring any material interest hereafter in Collateral that is of
a type where a security interest or lien may be registered, recorded of filed
under, or notice thereof given under, any federal statute or regulation. Debtors
shall promptly inform Agent, on behalf of the Benefitted Parties, of any
additions to or deletions (other than asset dispositions permitted by Section
6.8 of the Credit Agreement) from the Equipment and shall not permit any such
items to become Fixtures to real estate other than real estate subject to
mortgages or deeds of trust in favor of Agent, on behalf of the Benefitted
Parties. The legal description and street address of the property on which any
Fixtures are located is set forth on Schedule I, together with the name and
common address of the record owner of each such property.
6.7 Investment Property Covenants. Subject to the provisions of Sections 2
and 6.1, Debtors will take any and all actions required or requested by Agent,
from time to time, to (a) cause Agent to obtain exclusive Control of any
Investment Property owned by any Debtor in a
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manner satisfactory to Agent, and (b) obtain from any issuers of Investment
Property and such other Persons, for the benefit of Agent, on behalf of the
Benefitted Parties, written confirmation of Agent's Control on behalf of the
Benefitted Parties, over such Investment Property. For purposes of this
subsection 6.7, Agent, on behalf of the Benefitted Parties, to the extent
required by the Agent, shall have exclusive Control of Investment Property if in
accordance with the requirements of the UCC (i) such Investment Property
consists of certificated securities and any Debtor delivers such certificated
securities to Agent, on behalf of the Benefitted Parties (with appropriate
endorsements if such certificated securities are in registered form); (ii) such
Investment Property consists of uncertificated securities and either (x) any
Debtor delivers such uncertificated securities to Agent, on behalf of the
Benefitted Parties, or (y) the issuer thereof agrees, pursuant to documentation
in form and substance satisfactory to Agent, that it will comply with
instructions originated by Agent, without further consent by Debtors; and (iii)
such Investment Property consists of security entitlements and either (x) Agent,
on behalf of the Benefitted Parties, becomes the entitlement holder thereof or
(y) the appropriate securities intermediary agrees, pursuant to documentation in
form and substance satisfactory to Agent, that it will comply with entitlement
orders originated by Agent without further consent by Debtors.
6.8 Account Covenants. (a) Each Debtor shall maintain its existing
lockboxes and blocked accounts as of the Petition Date (collectively, "Blocked
Accounts"), which are subject to irrevocable instructions acceptable to the
Agent as hereinafter set forth, in each such Debtor's name with such banks
("Collecting Banks") as were previously approved by the Prepetition Agent
pursuant to the Prepetition Loan Agreement or are acceptable to the Agent, to
which all account debtors shall directly remit all payments on Accounts, in
which each Debtor will immediately deposit all payments it otherwise directly
receives for Inventory or other payments constituting proceeds of Collateral, in
each case in the identical form in which such payment was made, whether by cash
or check. With respect to any Blocked Accounts established on or after the date
hereof, the Collecting Banks shall acknowledge and agree, in a manner
satisfactory to the Agent, that all payments made to the Blocked Accounts are
the sole and exclusive property of the Agent, for the benefit of the Benefitted
Parties, and that the Collecting Banks have no right to setoff against the
Blocked Accounts and that all such payments received will be promptly
transferred to the Agent's account upon the request of Agent. The Debtors hereby
agree, and the Financing Orders shall confirm, that all payments made to any
Blocked Accounts or otherwise received by the Agent and whether on the Accounts
or as proceeds of other Collateral or otherwise will be the sole and exclusive
property of the Agent, for the benefit of the Benefitted Parties. If the
Debtors, or any of their Affiliates, employees, agents or other Person acting
for or in concert with Debtors, shall receive any monies, checks, notes, drafts
or any other payments relating to and/or proceeds of Accounts or other
Collateral, Debtors or such Person shall hold such instrument or funds in trust
for the Agent, for the benefit of the Benefitted Parties, and, immediately upon
receipt thereof, shall remit the same or cause the same to be remitted, in kind,
to the Blocked Accounts or to the Agent at its address set forth in Annex I of
the Credit Agreement. For the purpose of calculating interest on the Secured
Obligations, all proceeds received in the Agent's account shall be credited to
the Secured Obligations on the Business Day of the Agent's receipt of
immediately available federal funds.
(b) Other than in the ordinary course of business and consistent with past
practice, no discounts, credits or allowances will be issued, granted or allowed
by any Debtor to customers and no returns will be accepted without Agent's prior
written consent; provided, that until Agent
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notifies such Debtor to the contrary, such Debtor may presume consent. Other
than in the ordinary course of business and consistent with past practice, each
Debtor will promptly notify Agent in the event that a customer alleges any
dispute or claim with respect to an Account or of any other circumstances known
to such Debtor that may impair the validity or collectibility of an Account (it
is understood and agreed that notification by delivery of the Borrowing Base
Certificate shall be considered delivery of "prompt" notice). Each Debtor shall
use its best efforts to assure prompt payment of all amounts due or to become
due under the Accounts. Each Debtor, at its own expense, shall deliver to Agent
the results of each physical verification, if any, that such Debtor may in its
discretion have made, or caused any other Person to have made on its behalf, of
all or any portion of its Inventory. Agent shall have the right, at any time or
times hereafter, to verify the validity, amount or any other matter relating to
an Account, by mail, telephone or in person.
(c) Agent may at any time after an Event of Default shall have occurred
and be continuing, without prior notice to any Debtor, notify account debtors,
parties to all contracts (as defined in the UCC) and obligors in respect of
instruments and chattel paper, that the Accounts and the right, title and
interest of any Debtor in and under such contracts, instruments and chattel
paper have been assigned to Agent, for the benefit of the Benefitted Parties,
and that payments shall be made directly to Agent, for the benefit of the
Benefitted Parties. Upon the request of Agent, during the occurrence and
continuation of an Event of Default, each Debtor shall so notify account
debtors, parties to such contracts and obligors in respect of instruments and
chattel paper. Except as otherwise provided in this subsection 6.8, Debtors
shall continue to collect, at their own expense, all amounts due or to become
due any Debtor under the Accounts and apply such amounts as are so collected to
the outstanding balances thereof. In connection with such collections, any
Debtor may take (and, subject to the provisions of the Financing Orders, at the
direction of Agent shall take during the occurrence and continuance of an Event
of Default) such action such Debtor or Agent may deem necessary or advisable to
enforce collection of the Accounts; provided that Agent shall have the right at
any time after the occurrence and during the continuance of an Event of Default
to: (i) enforce collection, in each case in accordance with the terms of this
Agreement and those provisions of Part 6 of the UCC which cannot be waived or
varied except as and to the extent permitted by Sections 9-602 and 9-603 of the
UCC, of any such Accounts; and (ii) adjust, settle or compromise the amount or
payment of such Accounts. After the occurrence and during the continuance of an
Event of Default, subject to the provisions of the Financing Orders, all amounts
and Proceeds received by Debtors with respect to the Accounts shall be received
in trust for the benefit of Agent, on behalf of the Benefitted Parties, shall be
segregated from other funds of any Debtor and shall be forthwith paid over to
Agent, on behalf of the Benefitted Parties, in the same form as so received
(with any necessary endorsement) to such depositary account as Agent shall
specify. If an Event of Default shall have occurred and be continuing, each
Debtor, at its own expense, shall cause the independent certified public
accountants then engaged by such Debtor to prepare and deliver to Agent and each
Benefitted Party at any time and from time to time promptly upon Agent's request
the following reports with respect to such Debtor: (A) a reconciliation of all
Accounts of such Debtor; (B) an aging of all such Accounts; (C) trial balances
of such Accounts; and (D) test verifications of such Accounts as Agent may
request.
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6.9 Intellectual Property Covenants.
(i) Affirmative Covenants
(a) Upon the Agent's request, Debtors shall promptly deliver to
Agent, on behalf of the Benefitted Parties, a Copyright Security Agreement, a
Patent Security Agreement and a Trademark Security Agreement, if any, and all
other documents, instruments and other items as may be necessary for Agent, on
behalf of the Benefitted Parties, to file such agreements with the U.S.
Copyright Office and the U.S. Patent and Trademark Office.
(b) Each Debtor shall promptly notify the Agent if it knows or has
reason to know that any item of the Intellectual Property owned by such Debtor
that is material to the business of such Debtor may become (i) abandoned or
dedicated to the public or placed in the public domain other than through normal
expiration of rights with respect to Patents, (ii) invalid or unenforceable, or
(iii) subject to any adverse determination or development (including the
institution of proceedings) in any action or proceeding in the United States
Patent and Trademark Office, the United States Copyright Office, and state
registry, any foreign counterpart of the foregoing, or any court, that, in the
case of any of the events referred to in clauses (i) through (iii) hereof, would
reasonably be expected to have a Material Adverse Effect.
(c) Each Debtor shall take all commercially reasonable steps in the
United States Patent and Trademark Office, the United States Copyright Office,
any state registry or any foreign counterpart of the foregoing, to pursue each
application and maintain each registration of each Trademark, Patent, and
Copyright owned by such Debtor and material to its business which is now or
shall become included in the Intellectual Property pledged to the Agent
hereunder including, but not limited to, those items on Schedule IV.
(d) In the event that any Intellectual Property owned by or
exclusively licensed to any Debtor which is material to its business is
infringed, misappropriated, or diluted by a third party, such Debtor shall
promptly take all reasonable actions to prevent such infringement,
misappropriation, or dilution and protect its exclusive rights in such
Intellectual Property including, but not limited to, the initiation of a suit
for injunctive relief and to recover damages.
(e) Each Debtor shall upon request by the Agent, report to the Agent
(i) the filing of any application to register any Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office,
or any state registry or foreign counterpart of the foregoing (whether such
application is filed by such Debtor or through any agent, employee, licensee, or
designee thereof) and (ii) the registration of any Intellectual Property by any
such office. Each Debtor, upon request by the Agent, shall amend Schedule IV to
this Agreement to include any such new Patents, Trademarks or federally
registered Copyrights and indicate therein if any have expired. Each Debtor
hereby authorizes the Agent to modify this Agreement by amending Schedule IV and
will otherwise cooperate with the Agent in effecting any such amendment to
include any item Intellectual Property which shall become part of the
Intellectual Property pledged to the Agent hereunder after the date hereof.
(f) Each Debtor shall, promptly upon the reasonable request of the
Agent, execute and deliver to the Agent any document required to acknowledge,
confirm, register, record, or perfect the Agent's interest in any part of the
Intellectual Property, whether now
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owned or hereafter acquired, including, but not limited to, one or more
Copyright Security Agreements, Patent Security Agreements, or Trademark Security
Agreements in forms satisfactory to the Agent, respectively.
(ii) Negative Covenants
(a) Debtors shall not do or omit to do any act whereby any of the
Intellectual Property which is material to the business of such Debtor may lapse
prior to its scheduled termination (to the extent that the Intellectual Property
has a scheduled termination date), or become abandoned, dedicated to the public,
or unenforceable, or which would adversely affect the validity, grant, or
enforceability of the security interest granted in any Intellectual Property.
(b) Debtors shall not, with respect to any Trademarks which are
material to the business of such Debtor, cease the use of any of such Trademarks
or fail to maintain the level of the quality of products sold and services
rendered under any of such Trademark at a level at least substantially
consistent with the quality of such products and services as of the date hereof,
and each Debtor shall take all steps necessary to insure that licensees of such
Trademarks use such consistent standards of quality.
(c) Except with the prior consent of the Agent or as permitted under
this Agreement or the Credit Agreement, Debtors will not permit, and there will
not be on file in any public office, any financing statement or other document
or instruments with respect to Intellectual Property pledged to the Agent
hereunder, except financing statements or other documents or instruments filed
or to be filed in favor of the Agent, on behalf of the Benefitted Parties, and
each Debtor will not sell, assign, transfer, license, grant any option, or
create or suffer to exist any Lien upon or with respect to such Intellectual
Property, except for the Lien created by and under this Agreement and Permitted
Encumbrances.
6.10 Equipment Covenants. Debtors shall cause the equipment to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall promptly make or cause to be made all repairs, replacements,
and other improvements in connection therewith that are commercially reasonable
and necessary or desirable to such end.
6.11 Protection of Collateral; Insurance. Debtors will do nothing to
impair the rights of Agent, on behalf of the Benefitted Parties, in the
Collateral. Debtors shall at all times maintain insurance with respect to the
Collateral in compliance with the requirements of the Credit Agreement. Debtors
assume all liability and responsibility in connection with the Collateral
acquired by it, and the liability of any Debtor to pay the Secured Obligations
shall in no way be affected or diminished by reason of the fact that such
Collateral may be lost, stolen, damaged, or for any reason whatsoever
unavailable to any Debtor.
6.12 Taxes and Claims. Debtors will pay when due all property and other
taxes, assessments and governmental charges imposed upon, and all claims
against, the Collateral (including claims for labor, materials and supplies);
provided that no such tax, assessment or charge need be paid if any Debtor is
contesting the same in good faith by appropriate proceedings promptly instituted
and diligently conducted and if any Debtor has established such
13
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP; and provided further that the same can be contested
without risk of loss or forfeiture or material impairment of the Collateral or
the use thereof.
6.13 Collateral Description. Debtors will furnish to Agent from time to
time upon request, statements and schedules further identifying and describing
the Collateral and such other information, reports and evidence concerning the
Collateral (and in particular the Accounts) as Agent may reasonably request, all
in reasonable detail.
6.14 Use of Collateral. Debtors will not use or permit any Collateral to
be used in violation of any policy of insurance covering the Collateral or any
provision of applicable laws, rules, regulations and orders of any Governmental
Authority as now in effect and which may be imposed in the future in all
jurisdictions in which such Debtor or any of its Subsidiaries is now doing
business or may hereafter be doing business, other than those laws the
noncompliance with which could not reasonably be expected to have a Material
Adverse Effect.
6.15 Records of Collateral. Each Debtor shall keep full and accurate books
and records relating to the Collateral. Upon the reasonable request of Agent,
Debtors shall xxxx such negotiable instruments, invoices and other instruments
or documents relating to the Collateral, to indicate Agent's security interests
in the Collateral, for the benefit of the Benefitted Parties.
6.16 Federal Claims. Debtors shall notify Agent of any Collateral which
constitutes a claim against the United States government or any instrumentality
or agency thereof, the assignment of which claim is restricted by federal law.
Upon the request of Agent, on behalf of the Benefitted Parties, Debtors shall
take such steps as may be necessary to comply with any applicable federal
assignment of claims laws and other comparable laws.
6.17 Hot Goods. None of the Inventory of any Debtor has been or will be
produced in violation of any provision of the Fair Labor Standards Act of 1938,
as amended, or in violation of any other law.
6.18 Bank Accounts. The Debtors shall maintain cash management systems in
accordance with Annex C to the Credit Agreement.
6.19 Indemnification. In any suit, proceeding or action brought by Agent
or any Benefitted Party relating to any Account, Chattel Paper, Contract,
Document, General Intangible, Investment Property or Instrument of any Debtor
for any sum owing thereunder or to enforce any provision of any such Account,
Chattel Paper, Contract, Document, General Intangible, Investment Property or
Instrument, such Debtor shall save, indemnify and keep Agent and Benefitted
Parties harmless from and against all expense (including reasonable attorneys'
fees and expenses), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by such Debtor of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from such Debtor,
except to the extent such expense, loss, or damage is attributable solely to the
gross negligence or willful misconduct of Agent or any Benefitted Party as
finally determined by a court of
14
competent jurisdiction. All such obligations of such Debtor shall be and remain
enforceable against and only against such Debtor and shall not be enforceable
against Agent or any Benefitted Party.
SECTION 7. Agent, on behalf of the Benefitted Parties, Appointed
Attorney-in-Fact
On the Closing Date, each Debtor shall execute and deliver to Agent a
power of attorney in substantially the form attached hereto as Exhibit A. In
addition, subject to Section 9(f) below, Debtors hereby irrevocably appoint
Agent, on behalf of the Benefitted Parties, as Debtors' attorney-in-fact, with
full authority in the place and stead of Debtors and in the name of Debtors,
Agent, on behalf of the Benefitted Parties, or otherwise, from time to time
while an Event of Default is continuing (except that the Agent shall at all
times be able to file under the Uniform Commercial Code financing statements in
the name of each Debtor, and record in any intellectual property registry,
appropriate evidence of the lien and security interest granted herein in the
Intellectual Property in the name of each Debtor as assignor), in the sole
discretion of Agent to take any action and to execute any instrument that Agent
may deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to obtain and adjust insurance required to be paid to Agent, on
behalf of the Benefitted Parties;
(b) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse, and collect any drafts or other
Instruments, Documents and chattel paper, in connection with clauses (a) and (b)
above;
(d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Agent, on behalf of the
Benefitted Parties, with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Agent in its sole
discretion, and such payments made by Agent, on behalf of the Benefitted
Parties, to become obligations of Debtors to Agent, on behalf of the Benefitted
Parties, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other Documents relating to the
Collateral;
(g) to make, endorse, sign, declare or swear to any entry,
withdrawal, declaration, certificate, xxxx of lading, carnet or other document
required by law or regulation in connection with the importation, transportation
or exportation of any merchandise shipped or consigned by or to Debtors; to
perform any act or condition which may be required by law or
15
regulation in connection with such merchandise; to receive any merchandise
deliverable to Debtors;
(h) to make endorsements on bills of lading conferring authority to
transfer title, make entry or collect drawback and to make, sign, declare or
swear to any statement, supplemental statement, schedule, supplemental schedule,
certificate of delivery certificate of manufacture, certificate of manufacture
and delivery, abstract of manufacturing records, declaration of proprietor on
drawback entry, declaration of exporter on drawback entry or any other affidavit
or document which may be required by law or regulation for drawback purposes,
regardless of whether such xxxx of lading, sworn statement, schedule,
certificate, abstract, declaration, or other affidavit or document is intended
for filing in any customs district;
(i) to sign, seal and deliver for and as the act of Debtors any bond
required by law or regulation in connection with the entry or withdrawal of
imported merchandise or merchandise exported with or without benefit of drawback
or in connection with the entry, clearance, lading, unlading or navigation of
any vessel or other means of conveyance owned or operated by Debtors and any and
all bonds which may be voluntarily given and accepted under applicable laws and
regulations, consignee's and owner's declarations provided for in Xxxxxxx 000,
Xxxxxx Xxx of 1930, as amended, or affidavits in connection with the entry of
merchandise;
(j) to authorize customs brokers to act as Debtors' agent; to
receive, endorse and collect checks issued for Customs duty refunds in Debtors'
name drawn on the Treasurer of the United States; if the Debtor is a nonresident
of the United States, to accept service of process on behalf of the Debtor;
(k) generally to transact at the customhouses in any district any
and all customs business, including making, signing and filing of protests under
Section 514 of the Tariff Act of 1930, in which Agent is or may be concerned or
interested and which may properly be transacted or performed by an agent and
attorney, giving to said agent and attorney full power and authority to do
anything whatever requisite and necessary to be done in the premises as fully as
Agent could do if present and acting, hereby ratifying and confirming all that
the said agent and attorney shall lawfully do by virtue of these presents;
(l) 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 Agent, on behalf of the Benefitted Parties, were the absolute owner
thereof for all purposes, and to do, at option of Agent, and at Debtors'
expense, at any time or from time to time, all acts and things that Agent deems
necessary to protect, preserve or realize upon the Collateral.
This power, being coupled with an interest, is irrevocable so long as this
Agreement shall remain in force. Debtors hereby ratify and approve all acts of
Agent, made or taken pursuant to this Section 7. None of Agent, any Benefitted
Party, or any Person designated by Agent or any of their respective Affiliates,
officers, directors, employees, agents or representatives, shall be liable for
any acts or omissions or for any error of judgment or mistake of fact or law
under any power of attorney or otherwise, except for its gross negligence and
willful misconduct.
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SECTION 8. Transfers and Other Liens
Except as otherwise permitted herein or by the Credit Agreement, Debtors
shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral; or
(b) create or suffer to exist any Lien, security interest or other
charge or encumbrance, other than the Permitted Encumbrances, upon or with
respect to any of the Collateral to secure indebtedness of any Person except for
the security interest created by this Agreement.
SECTION 9. Remedies
(a) Subject to Section 9(f) below, if any Event of Default shall
have occurred and be continuing, Agent, on behalf of the Benefitted Parties, may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral) and also may: (i) require each Debtor to,
and each Debtor hereby agrees that it will, at its expense and upon request of
Agent, forthwith, assemble all or part of the Collateral as directed by Agent,
and make it available to Agent at any reasonable place or places designated by
Agent in which event each Debtor shall at its own expense (A) forthwith cause
the same to be moved to the place or places so designated by Agent and thereby
delivered to Agent, on behalf of the Benefitted Parties, (B) store and keep any
Collateral so delivered to Agent, on behalf of the Benefitted Parties, at such
place or places pending further action by Agent, and (C) while Collateral shall
be so stored and kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain the Collateral in
good condition; (ii) withdraw all cash in the Depository Accounts and apply such
monies in payment of the Secured Obligations; and (iii) without notice except as
specified below, sell, lease or otherwise dispose of the Collateral or any part
thereof in one or more parcels at public or private sale, and without the
necessity of gathering at the place of sale of the property to be sold, at any
of the offices of Agent, or elsewhere, at such time or times, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as Agent may deem commercially reasonable. Subject to Section 9(f) below,
Debtors agree that, to the extent notice of sale shall be required by law, at
least ten (10) days' notice to Debtors of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Agent, on behalf of the Benefitted Parties, may bid (which bid may be, in whole
or in part, in the form of cancellation of indebtedness) for the purchase of the
Collateral or any portion thereof for the account of Agent, on behalf of the
Benefitted Parties. Agent, on behalf of the Benefitted Parties, shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Agent, may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the extent permitted by law, each Debtor hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Agent may also, if it so elects, seek the
appointment of a receiver or keeper to take possession of Collateral and to
enforce any of Agent's remedies (for
17
the benefit of Agent and Benefitted Parties) with respect to such appointment
without prior notice or hearing.
(b) Subject to Section 9(f) below, upon the occurrence and during
the continuance of an Event of Default, Agent, or its agents or attorneys shall
have the right without notice or demand or legal process (unless the same shall
be required by applicable law), personally, or by agents or attorneys, (i) to
enter upon, occupy and use any premises owned or leased by any Debtor or where
the Collateral is located (or is believed to be located) until the Secured
Obligations are paid in full without any obligation to pay rent to Debtors, to
render the Collateral useable or saleable and to remove the Collateral or any
part thereof therefrom to the premises of Agent, or any agent of Agent, for such
time as Agent, may desire in order to effectively collect or liquidate the
Collateral and use in connection with such removal any and all services,
supplies and other facilities of any Debtor; (ii) to take possession of any
Debtor's original books and records, to obtain access to any Debtor's data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Agent, deems appropriate; and (iii) to notify postal authorities to
change the address for delivery of any Debtor's mail to an address designated by
Agent, and to receive, open and dispose of all mail addressed to any Debtor.
(c) Debtors acknowledge and agree that a breach of any of the
covenants contained in Sections 5, 6, 7 and 8 hereof will cause irreparable
injury to Agent, and that Agent, has no adequate remedy at law in respect of
such breaches and therefore agrees, without limiting the right of Agent to seek
and obtain specific performance of other obligations of Debtors contained in
this Agreement, that the covenants of Debtors contained in the Sections referred
to in this Section shall be specifically enforceable against any Debtor.
(d) Subject to Section 9(f) below, except as specifically provided
herein and in the Financing Orders and the Credit Agreement, each Debtor hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
(e) Governmental Approvals. In connection with the enforcement by
the Agent of any remedies available to it as a result of any Event of Default,
each Debtor agrees that it shall join and cooperate fully with, at the request
of the Agent, the successful bidder or bidders at any foreclosure sale in a
filing of an application (and furnishing any additional information that may be
required in connection with such application or which the Agent may believe
relevant to such application) with the FCC, the PUC and all other applicable
Governmental Authorities, requesting their prior approval of (i) the operation
or abandonment of all or any portion of any System and/or (ii) the transfer of
control from such Debtor or assignment of all licenses, certificates, approvals
and permits issued to such Debtor by the FCC, any PUC or any such Governmental
Authorities with respect to any System and the operation thereof to the Agent,
or to such successful bidder or bidders. In connection with the foregoing, each
Debtor shall take such further actions, and execute all such instruments, as the
Agent reasonably deems necessary or desirable. Each Debtor agrees that the Agent
may enforce any obligation of such Debtor as set forth in this section by an
action for specific performance. In addition, each Debtor hereby irrevocably
constitutes and appoints the Agent and any agent or officer thereof (which
appointment is coupled with an interest) as its true and lawful attorney-in-fact
with full
18
irrevocable power and authority and in the place and stead of such Debtor and in
the name of such Debtor or in its own name, from time to time in its discretion
after the occurrence and during the continuance of an Event of Default and in
connection with the foregoing, for the purpose of executing on behalf and in the
name of such Debtor any and all of the above-referenced instruments and to take
any and all appropriate action in furtherance of the foregoing. THE EXERCISE OF
ANY RIGHTS OR REMEDIES HEREUNDER OR UNDER ANY LOAN DOCUMENT BY ANY BENEFITTED
PARTY OR THE AGENT THAT MAY REQUIRE THE FCC, ANY PUC OR ANY OTHER GOVERNMENTAL
AUTHORITY APPROVAL SHALL BE SUBJECT TO OBTAINING SUCH APPROVAL. PENDING THE
RECEIPT OF ANY FCC, ANY PUC OR ANY OTHER GOVERNMENTAL AUTHORITY APPROVAL, NO
DEBTOR SHALL DO ANYTHING TO DELAY, HINDER, INTERFERE OR OBSTRUCT THE EXERCISE OF
THE AGENT'S RIGHTS OR REMEDIES HEREUNDER IN OBTAINING SUCH APPROVALS.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the Agent shall be permitted to exercise any remedy, whether provided
for herein, otherwise available to it, or provided to secured parties under the
UCC (whether or not the UCC applies to the affected Collateral), in the nature
of a sale, liquidation or other disposition (including the disposition by
merger) of, or foreclosure on, any interest of any Debtor in the Collateral only
upon five business days' prior written notice to such Debtor, counsel approved
by the Bankruptcy Court for the Committee, if any, the United States Trustee,
counsel to the Prepetition Agent and counsel to the Bridge Lender Steering
Committee.
SECTION 10. Assignment of Intellectual Property
To the extent such Intellectual Property is assignable, Debtors hereby
assign, transfer and convey to Agent, on behalf of the Benefitted Parties, all
Intellectual Property owned or used by any Debtor to the extent necessary to
enable Agent, effective upon the occurrence of any Event of Default, to realize
on the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and assignment shall inure to the benefit of Agent and
its successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure
or otherwise. Such right and assignment is granted free of charge, without
requirement that any monetary payment whatsoever including, without limitation,
any royalty or license fee, be made to Debtors or any other Person by Agent, on
behalf of the Benefitted Parties, or by any Benefitted Party and shall include
access to such electronic media as is necessary to use the Intellectual
Property.
SECTION 11. License of Intellectual Property.
To the extent that Intellectual Property of such Debtor may be licensed or
sublicensed, each Debtor hereby grants and conveys to Agent, on behalf of the
Benefitted Parties, effective upon the occurrence of any Event of Default, an
irrevocable non-exclusive royalty-free, worldwide right and license to use all
Intellectual Property owned or used by such Debtor to the extent necessary to
enable Agent to exercise its rights and remedies under this Section 11 and to
realize on the Collateral and for any successor or assign to enjoy the benefits
of the Collateral subject, in the case of Trademarks, to sufficient rights of
the quality control and inspection in favor of the owner of such Trademark as is
reasonably necessary to avoid the risk of invalidation of such Trademarks). This
right and license shall inure to the benefit of all successors, assigns and
transferees of Agent and its successors, assigns and transferees, whether by
voluntary
19
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise, and shall include access to such electronic media as
is necessary to use the Intellectual Property.
SECTION 12. Assigned Agreements
If an Event of Default has occurred and is continuing, Debtors hereby
irrevocably authorize and empower Agent, without limiting any other
authorizations or empowerments contained in any of the other Loan Documents, to
assert, either directly or on behalf of any Debtor, any claims any Debtor may
have, from time to time, against any other party to any of the agreements to
which any Debtor is a party or to otherwise exercise any right or remedy of any
Debtor under any such agreements (including, without limitation, the right to
enforce directly against any party to any such agreement all of any Debtor's
rights thereunder, to make all demands and give all notices and to make all
requests required or permitted to be made by any Debtor thereunder).
SECTION 13. Limitation on Duty of Agent with Respect to Collateral.
Beyond reasonable care thereof, Agent shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property. To the
extent that applicable law imposes duties on Agent to exercise remedies in a
commercially reasonable manner, each Debtor acknowledges and agrees that it is
not commercially unreasonable for Agent (i) to fail to incur expenses reasonably
deemed significant by Agent to prepare Collateral for disposition or otherwise
to complete raw material or work in process into finished goods or other
finished products for disposition, (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required by
other law, to fail to obtain governmental or third party consents for the
collection or disposition of Collateral to be collected or disposed of, (iii) to
fail to exercise collection remedies against account debtors or other Persons
obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (iv) to exercise collection remedies against account debtors and
other Persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) to contact other Persons,
whether or not in the same business as any Debtor, for expressions of interest
in acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in Collateral or that have the reasonable capacity of doing so, or that
match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure Agent against risks of loss, collection or disposition of
Collateral or to provide to Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Agent,
to obtain the services of other brokers, investment bankers, consultants
20
and other professionals to assist Agent in the collection or disposition of any
of the Collateral. Each Debtor acknowledges that the purpose of this Section 13
is to provide non-exhaustive indications of what actions or omissions by Agent
would not be commercially unreasonable in the Agent's exercise of remedies
against the Collateral and that other actions or omissions by Agent shall not be
deemed commercially unreasonable solely on account of not being indicated in
this Section 13. Without limitation upon the foregoing, nothing contained in
this Section 13 shall be construed to grant any rights to any Debtor or to
impose any duties on Agent that would not have been granted or imposed by this
Security Agreement or by applicable law in the absence of this Section 13.
Neither Agent nor any Benefitted Party shall be required to make any demand
upon, or pursue or exhaust any of their rights or remedies against, any Debtor,
any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Secured Obligations or to pursue or exhaust any of their rights
or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. Neither Agent nor any Benefitted Party shall be required to
marshal the Collateral or any guarantee of the Secured Obligations or to resort
to the Collateral or any such guarantee in any particular order, and all of its
and their rights hereunder or under any other Loan Document shall be cumulative.
To the extent it may lawfully do so, each Debtor absolutely and irrevocably
waives and relinquishes the benefit and advantage of, and covenants not to
assert against Agent or any Benefitted Party, any valuation, stay, appraisement,
extension, redemption or similar laws and any and all rights or defenses it may
have as a surety now or hereafter existing which, but for this provision, might
be applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Security Agreement, or otherwise.
SECTION 14. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default and
in the event of any sale, transfer or other disposition (including a casualty
loss or taking through eminent domain) of all or any part of the Collateral, the
Proceeds resulting therefrom (including insurance proceeds) and any cash held in
the Blocked Accounts shall, upon Agent's request, be promptly applied in
accordance with the terms of the Credit Agreement.
SECTION 15. Expenses
Debtors shall pay all costs, fees and expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, all costs, fees and expenses of creating, perfecting, maintaining
and enforcing the Security Interests, and any and all excise, property, sales
and use taxes imposed by any federal, state, local or foreign authority on any
of the Collateral, or with respect to periodic appraisals and inspections of the
Collateral, or with respect to the sale or other disposition thereof. If any
Debtor fails to promptly pay any portion of the above costs, fees and expenses
when due or to perform any other obligation of any Debtor under this Agreement,
Agent, at its option may, but shall not be required to, pay or perform the same
and charge any Debtor's account for all fees, costs and expenses incurred
therefor, and any Debtor agree to reimburse Agent or such Benefitted Party
therefor on demand. All sums so paid or incurred by Agent or any Benefitted
Party for any of the foregoing, any and all other sums for which any Debtor may
become liable hereunder and all fees, costs and expenses (including reasonable
attorneys' fees, legal expenses and court costs) incurred by Agent, on behalf of
the Benefitted Parties or by any other Benefitted Party in enforcing or
21
protecting the Security Interests or any of their rights or remedies under this
Agreement shall be payable on demand, shall constitute Secured Obligations,
shall bear interest until paid at the highest rate provided in the Credit
Agreement and shall be secured by the Collateral.
SECTION 16. Termination of Security Interests; Release of Collateral
Upon the indefeasible payment in full in cash of all Secured Obligations
(other than unasserted indemnity claims) and the termination of all Commitments
under and as defined in the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral granted under this Agreement shall
revert to Debtors. Upon such termination of the Security Interests or release of
any Collateral, Agent will, at the expense of Debtors, execute and deliver to
Debtors such documents as Debtors shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be. Until the termination of the Security Interests, Debtors shall not
have the right to file amendments or terminations to Agent's financing
statements without Agent's prior written consent, subject to the rights of
Debtors under Section 9-509(d)(2) of the UCC.
SECTION 17. Notices
Except as otherwise provided herein, whenever it is provided herein that
any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered: (a) upon the earlier of actual receipt and three (3) Business Days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid; (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 17); (c) one (1)
Business Day after deposit with a reputable overnight courier with all charges
prepaid or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower Representative or Agent) designated herein to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
Notices shall be delivered to the following addresses:
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxx, Account Manager
22
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
with copies to:
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxx Docu
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
General Electric Capital Corporation
000 Xxxxxxx 0
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
and
(B) If to any Debtor, to Borrower Representative, at
Choice One
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
with copies to:
Choice One
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxx XxXxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Weil, Gotshal & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
23
and
(C) If to the Bridge Lender Steering Committee, at
Choice One Bridge Lender Steering Committee
c/o Xxx Xxxxxxxxx, Esq.
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
SECTION 18. Successors and Assigns
This Agreement is for the benefit of Agent, and for the benefit of the
Benefitted Parties and their respective successors and permitted assigns, and in
the event of an assignment of all or any of the Secured Obligations in
accordance with the terms of the Credit Agreement, the rights hereunder, to the
extent applicable to the Secured Obligations so assigned, may be transferred
with such Secured Obligations. This Agreement shall be binding on any Debtor and
its successors and assigns; provided that any Debtor may not delegate its
obligations under this Agreement without prior written consent of Agent, on
behalf of the Benefitted Parties.
SECTION 19. Changes in Writing
No amendment, modification, termination or waiver of any provision of this
Agreement shall be effective unless the same shall be in writing signed by
Agent, on behalf of the Benefitted Parties or as otherwise permitted by the
Credit Agreement.
SECTION 20. Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND
5-1402 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES) AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.
SECTION 21. CONSENT TO JURISDICTION.
EACH DEBTOR HEREBY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
AMONG THE DEBTORS, AGENT AND BENEFITTED PARTIES PERTAINING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT AND
DEBTORS ACKNOWLEDGE THAT ANY APPEALS FROM THE BANKRUPTCY COURT MAY HAVE TO BE
HEARD BY A COURT OTHER THAN THE BANKRUPTCY COURT; PROVIDED FURTHER, THAT NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING
SUIT OR
24
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH DEBTOR EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND EACH DEBTOR HEREBY WAIVES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH DEBTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH DEBTOR AT THE ADDRESS SET FORTH
IN SECTION 17 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH DEBTOR'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
SECTION 22. WAIVER OF JURY TRIAL.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, BENEFITTED PARTIES AND ANY CREDIT PARTY ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR
THE TRANSACTIONS RELATED THERETO.
SECTION 23. Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Agent or any Benefitted Party in the
exercise of any power, right or privilege hereunder shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or any other right, power
or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
25
SECTION 24. 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.
SECTION 25. Counterparts
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 26. Survival
All representations and warranties of Debtors contained in this Agreement
shall survive the execution and delivery of this Agreement.
SECTION 27. Amendment of Schedules
Debtors may amend any one or more of the Schedules referred to in this
Agreement (subject to prior notice to Agent, as applicable) and any
representation, warranty, or covenant contained herein which refers to any such
Schedule shall from and after the date of any such amendment refer to such
Schedule as so amended; provided however, that in no event shall the amendment
of any such Schedule constitute a waiver by Agent and Benefitted Parties of any
existing Default or Event of Default that exists notwithstanding the amendment
of such Schedule.
26
SECTION 28. Reinstatement. This Security Agreement shall remain in full force
and effect and continue to be effective should any Debtor become a debtor in a
case under Chapter 7 or should a Chapter 11 or Chapter 7 trustee be appointed
for any Debtor, and shall continue to be effective if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
SECTION 29. Severability. Whenever possible, each provision of this Security
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement. This Security Agreement is to be read, construed and applied
together with the Credit Agreement, the other Loan Documents and the Financing
Orders, which, taken together, set forth the complete understanding and
agreement of Agent, Benefitted Parties and Debtors with respect to the matters
referred to herein and therein.
SECTION 30. No Waiver; Cumulative Remedies. Neither Agent nor any Benefited
Party shall by any act, delay, omission or otherwise be deemed to have waived
any of its rights or remedies hereunder, and no waiver shall be valid unless in
writing and signed by Agent, and then only to the extent therein set forth. A
waiver by Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy that Agent would otherwise have on
any future occasion. No failure by Agent or any Benefitted Party to exercise,
nor any delay in exercising, any right, power or privilege hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided hereunder are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by law.
None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and Debtors.
SECTION 31. Limitation by Law. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Security Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent
necessary so that they do not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
SECTION 32. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Security Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
27
SECTION 33. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement (and, specifically,
the provisions of Sections 21 and 22) with its counsel.
SECTION 34. ADDITIONAL DEBTORS. Each Person that becomes a Subsidiary of a
Debtor after the date hereof is required to become, and such Debtor will
promptly cause such Subsidiary to become, a Debtor and be made a party to this
Security Agreement pursuant to this Section 34 by execution and delivery to
Agent by such Subsidiary of an instrument in the form of Exhibit B hereto, with
the same force and effect as if originally named as a Debtor hereunder;
provided, however, that, in the event such Person is a foreign Subsidiary, that
is not a Canadian Subsidiary, such Subsidiary shall not be required to execute
and deliver an instrument in the form of Exhibit B hereto; provided, further,
however, that, in the event of any change in, or the introduction, adoption,
effectiveness, interpretation, reinterpretation or phase-in of, any law or
regulation, directive or guideline of any Governmental Authority that eliminates
the amount of United States federal income tax that would otherwise result from
the operation of Section 956 (or any successor provision thereto) of the Code by
the Debtors and the other members of the affiliated group of corporations filing
a consolidated federal income tax return with the Debtors, Agent may require the
execution and delivery by such Person of an instrument in the form of Exhibit B
hereto. The execution and delivery of any such instrument shall not require the
consent of any Debtor hereunder. The rights and obligations of each Debtor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Debtor as a party to this Security Agreement.
SECTION 35. Defined Terms
The following terms used in this Agreement shall have the following
meanings:
"Agent" means General Electric Capital Corporation, a Delaware Corporation
and its successors and assigns pursuant to Section 10.1 of the Credit Agreement.
"Blocked Accounts" shall mean lock-box or blocked accounts in any Debtor's
name with Collecting Banks.
"Collateral" has the meaning assigned to that term in Section 2.
"Collecting Banks" has the meaning assigned to that term in Section 6.8.
"Control" means "control" as defined in the UCC.
"Copyright Licenses" means all of Debtors' right, title and interest in
and to any and all agreements providing for the granting of any right in or to
Copyrights (whether the Debtor is the licensor or the licensee thereunder)
including, without limitation, each agreement referred to in Schedule IV hereof.
"Copyright Security Agreement" means, if any, a copyright security
agreement, in such form as is reasonably acceptable to, or requested by, the
Agent executed and delivered by Debtors to Agent, on behalf of the Benefitted
Parties, as the same may be amended, supplemented, restated or otherwise
modified from time to time.
28
"Copyrights" means any and all United States and foreign copyrights, all
mask works fixed in semi-conductor chip products (as defined under 17 U.S.C. 901
of the U.S. Copyright Act), whether registered or unregistered, now or hereafter
in force throughout the world, all registrations and applications referred to in
Schedule IV of this Agreement therefor all rights corresponding thereto
throughout the world, all extensions and renewals of any thereof, the right to
xxx for past infringements of any of the foregoing, and all Proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments,
claims, damages, and Proceeds of suit.
"Depository Account" shall mean collectively, one or more depository
accounts established by Agent, on behalf of the Benefitted Parties, at each
Collecting Bank or at a centrally located Bank.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods of any Debtor including,
without limitation, all bills of lading, seaway bills, dock warrants, dock
receipts, warehouse receipts and orders for the delivery of goods, and any other
document which in the regular course of business or financing is treated as
adequately evidencing that the Person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" means all "equipment" (as defined in the UCC), all furniture,
furnishings, Fixtures, machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"Fixtures" means all "fixtures" (as defined in the UCC) of any Debtor
including, without limitation, plant fixtures, trade fixtures and business
fixtures, wherever located, and all additions and accessions thereto and
replacements therefor.
"General Intangibles" shall mean "general intangibles" as such term is
defined in Section 9-102 of the UCC, including, without limitation, rights to
the payment of money (other than receivables), Trademarks, Copyrights, Patents,
Trade Secrets, and licenses including, without limitation, Copyright Licenses,
Patent Licenses, Trademark Licenses, and Trade Secret Licenses, and franchises
(except in the case of licenses and franchises in respect of which the assignor
is the licensee or franchisee if the agreement in respect of such license or
franchise prohibits by its terms any assignment or grant of a security
interest), limited and general partnership interests, limited liability company
interests and joint venture interests, federal and state income tax refunds,
trade names, distributions on certificated securities (as defined in section
8-102(a)(4) of the UCC) and uncertificated securities (as defined in section
8-102(a)(18) of the UCC), computer programs and other computer software,
inventions, designs, goodwill, proprietary rights, customer lists, supplier
contracts, sale orders, correspondence, advertising materials, payments due in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any property, reversionary interests in pension and profit-sharing
plans and reversionary, beneficial and residual interests in trusts, credits
with and other claims against any Person, together with any collateral for any
of the foregoing and the rights under any security agreement granting a security
interest in such collateral.
29
"Instruments" means all "instruments", "chattel paper" and "letters of
credit" (each as defined in the UCC) in which any Debtor has any rights
including, without limitation, all checks, drafts, notes, bonds, debentures and
certificates of deposit.
"Intellectual Property" shall mean, collectively, Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses, Trade
Secrets, and Trade Secret Licenses, and all memoranda, notes and records with
respect to any research and development, whether now owned or hereafter
acquired, all goodwill associated with any of the foregoing, and Proceeds of all
of the foregoing, including, without limitation, Proceeds of insurance policies
thereon.
"Investment Property" means all "investment property" (as defined in the
UCC) of any Debtor, including, without limitation, all securities (certificated
and uncertificated), securities accounts, securities entitlements, commodity
contracts and commodity accounts (as each such term is defined in the UCC).
"Patent Licenses" means all of the Debtor's right, title and interest in
and to any and all agreements providing for the granting of any right in or to
any Patents (whether the Debtor is the licensor or the licensee thereunder)
including, without limitation, each agreement referred to in Schedule IV hereof.
"Patent Security Agreement" means, if any, a patent security agreement, in
such form as is reasonably acceptable to, or requested by, the Agent, executed
and delivered by Debtors to Agent, on behalf of the Benefitted Parties, as the
same may be amended, supplemented, restated or otherwise modified from time to
time effect from time to time.
"Patents" means any and all United States and foreign patents and
applications for letters patent throughout the world, including, but not limited
to, each patent and patent application referred to in Schedule IV of this
Agreement, all reissues, divisions, continuations, continuations-in-part,
extensions, renewals, and reexaminations of any of the foregoing, all rights
corresponding thereto throughout the world, and all Proceeds of the foregoing
including, without limitation, licenses, royalties, income, payments, claims,
damages, and Proceeds of suit and the right to xxx for past infringements of any
of the foregoing.
"Proceeds" means all "proceeds" (as defined in the UCC) of, and all other
profits, rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, any Collateral including, without limitation, all claims of
any Debtor against third parties for loss of, damage to or destruction of, or
for Proceeds payable under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing or
hereafter arising.
"Secured Obligations" has the meaning assigned to that term in Section 3.
"Security Interests" means the security interests granted pursuant to
Section 2 hereof and pursuant to any Copyright Security Agreement, any Patent
Security Agreement and any Trademark Security Agreement, as well as all other
security interests created or assigned as
30
additional security for the Secured Obligations pursuant to the provisions of
this Agreement and the other Loan Documents.
"System" shall mean each telecommunications system constructed or to be
constructed, developed, owned and/or operated by any Debtor in the United States
of America as a competitive local exchange carrier or an incumbent local
exchange carrier, and all replacements, enhancements or additions thereto.
"Trade Secret Licenses" means all of the Debtors' right, title and
interest in and to any and all agreements providing for the granting of any
right in or to any Trade Secrets (whether the Debtor is the licensor or the
licensee thereunder) including, without limitation, each agreement referred to
in Schedule VI hereof.
"Trade Secrets" means all of the Debtors' right, title and interest in and
to trade secrets and all other confidential or proprietary information and
know-how now or hereafter owned or used in, or contemplated at any time for use
in, the business of such Debtor (all of the foregoing being collectively called
a "Trade Secret"), whether or not such Trade Secret has been reduced to a
writing or other tangible form, including all documents and things embodying,
incorporating, or referring in any way to such Trade Secret, the right to xxx
for past infringement of any; Trade Secret, and all proceeds of the foregoing,
including, without limitation, licenses, royalties, income, payments, claims,
damages and proceeds of suit.
"Trademark Licenses" means all of the Debtors' right, title and interest
in and to any and all agreement providing for the granting of any right in or to
any Trademarks (whether the Debtor is the licensor or the licensee
thereunder)including, without limitation, each agreement referred to in Schedule
IV hereof.
"Trademark Security Agreement" means, if any, a Trademark Security
Agreement, in such form as is reasonably acceptable to, or requested by, the
Agent, executed and delivered by Debtors to Agent, on behalf of the Benefitted
Parties, as the same may be amended supplemented, restated, or otherwise
modified from time to time.
"Trademarks" means any and all United States and foreign trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, certification marks, collective marks,
logos, other source or business identifiers, designs and general intangibles of
a like nature, all registrations and applications for any of the foregoing
(except for those intent-to-use applications in the United States if there has
been no actual use of the xxxx), including, but not limited to the registrations
and applications referred to in Schedule IV of this Agreement, all extensions or
renewals of any of the foregoing; all of the goodwill of the business connected
with the use of and symbolized by any of the foregoing; and the right to xxx for
past infringement or dilution of any of the foregoing or for any injury to
goodwill, and all Proceeds of the foregoing, including, without limitation,
license royalties, income, payments, claims, damages, and Proceeds of suit.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interests in any Collateral or the availability
31
of any remedy hereunder is governed by the Uniform Commercial Code as in effect
on or after the date hereof in any other jurisdiction, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection or availability of such remedy.
32
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
CHOICE ONE COMMUNICATIONS INC.
CHOICE ONE COMMUNICATIONS OF NEW YORK INC.
CHOICE ONE COMMUNICATIONS OF CONNECTICUT INC.
CHOICE ONE COMMUNICATIONS OF MAINE INC.
CHOICE ONE COMMUNICATIONS OF MASSACHUSETTS INC.
CHOICE ONE OF NEW HAMPSHIRE INC.
CHOICE ONE COMMUNICATIONS OF OHIO INC.
CHOICE ONE COMMUNICATIONS OF PENNSYLVANIA INC.
CHOICE ONE COMMUNICATIONS OF RHODE ISLAND INC.
CHOICE ONE COMMUNICATIONS OF VERMONT INC.
CHOICE ONE COMMUNICATIONS INTERNATIONAL INC.
CHOICE ONE ONLINE INC.
CHOICE ONE COMMUNICATIONS OF VIRGINIA INC.
CHOICE ONE COMMUNICATIONS SERVICES INC.
US XCHANGE INC.
US XCHANGE OF INDIANA, L.L.C.
US XCHANGE OF ILLINOIS, L.L.C.
US XCHANGE OF MICHIGAN, L.L.C.
US XCHANGE OF WISCONSIN, L.L.C., each as a Borrower
By: /S/ Xxxx Xxxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxxx
Title: Chief Financial Officer
Signature Page to Security Agreement
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /S/ Xxxxxxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
