NOW, THEREFORE, in consideration of the premises and to induce the Trustee and the Collateral Agent to enter into the Indenture and induce the Holders to purchase the Notes, the Grantors hereby agree with the Collateral Agent, for the benefit of the Secured Parties, as follows:

 

1.             Defined Terms .

 

(a)           Unless otherwise defined herein, terms defined in the Indenture and used herein shall have the meanings given to them in the Indenture and all terms defined in the Uniform Commercial Code from time to time in effect in the State of New York (the “ NY UCC ”) and not defined herein shall have the meanings specified therein.

 

(b)           The following terms shall have the following meanings:

 

“ Accounts ” shall mean all “accounts” as such term is defined in Article 9 of the NY UCC.

 

“ Authorized Representative ” shall mean any duly authorized representative of any holder of Other Pari Passu Lien Obligations under any Other Pari Passu Lien Agreement designated as “Authorized Representative” for such holder in an Other Pari Passu Lien Secured Party Consent delivered to the Collateral Agent.

 

“ Chattel Paper ” shall mean all “chattel paper” as such term is defined in Article 9 of the NY UCC.

 

“ Collateral ” shall have the meaning assigned to such term in Section 2.

 

“ Collateral Account ” shall mean any collateral account established by the Collateral Agent as provided in subsection 5.1.

 

“ Collateral Access Agreement ” means any landlord waiver or other agreement, in form and substance reasonably satisfactory to the Collateral Agent, between the Collateral Agent and any third party (including any bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of any Loan Party for any real property where any Collateral is located, which agreement or letter shall provide access rights, contain a waiver or subordination of all Liens or claims that the landlord, bailee or consignee may assert against the Collateral at that location, as such landlord waiver or other agreement may be amended, restated, or otherwise modified from time to time.

 

“ Collateral Agent ” shall have the meaning assigned to such term in the recitals hereto.

 

“ Collateral Deposit Account ” shall have the meaning assigned to such term in Section 5.2.

 

“ Control Agreement ” means with respect any Deposit Account or Securities Account maintained by any Grantor, an agreement, establishing the Collateral Agent’s Control with

 

2

 

respect to such Deposit Account or Securities Account, among such Grantor, an institution maintaining such Grantor’s account, and the Collateral Agent.

 

“ Copyright License ” means any written agreement, now or hereafter in effect, granting any right to any third party under any copyright now owned or hereafter acquired by any Grantor (including all Copyrights) or that any Grantor otherwise has the right to license, or granting any right to any Grantor under any copyright now owned or hereafter acquired by any third party, and all rights of any Grantor under any such agreement, including those exclusive agreements listed on Schedule 1.

 

“ copyrights ” means, with respect to any Person, all of the following now owned or hereafter acquired by such Person: (i) all copyright rights in any work subject to the copyright laws of the United States or any other country or jurisdiction, whether as author, assignee, transferee or otherwise, whether registered or unregistered, whether statutory or common law and whether published or unpublished and (ii) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations and pending applications for registration in the United States Copyright Office.

 

 “ Copyrights ” means all copyrights now owned or hereafter acquired by any Grantor, including those listed on Schedule 2.

 

“ Deposit Accounts ” shall mean all “deposit accounts,” as such term is defined in Article 9 of the NY UCC.

 

“ Discharge of Obligations ” shall mean both (i) in the case of the Indenture, the discharge or defeasance of the Indenture in accordance with Sections 8.1 and 8.2 thereof and (ii) in the case of each Other Pari Passu Lien Agreement, the repayment of the Other Pari Passu Lien Obligations under such agreement or such other event which entitles the Grantors to obtain a release of the Liens securing such Other Pari Passu Lien Obligations under the Security Documents.

 

“ Documents ” shall mean all “documents,” as such term is defined in Article 9 of the NY UCC.

 

“ Equipment ” shall mean all “equipment,” as such term is defined in Article 9 of the NY UCC.

 

“ Event of Default ” shall mean an “Event of Default” under and as defined in the Indenture or any Other Pari Passu Lien Agreement.

 

 “ Excluded Accounts ” shall mean (a) prior to the Discharge of ABL Obligations (as defined in the Intercreditor Agreement), any Deposit Account or Securities Account established solely to hold the identifiable proceeds of any sale of ABL Collateral after an Event of Default (as defined in the Credit Agreement), (b) Deposit Accounts exclusively used for funding zero balance disbursement Deposit Accounts in respect of payroll, payroll taxes and other employee wage and benefit payments and (c) other Deposit Accounts the average daily balance of which do not contain more than $1.0 million in the aggregate for all such Deposit Accounts at

 

3

 

any time.

 

“ Excluded Property ” shall mean:

 

(a)           any permit or license issued by a governmental authority to any Grantor or any agreement to which any Grantor is a party, in each case, only to the extent and for so long as the terms of such permit, license or agreement or any requirement of law applicable thereto, validly prohibit the creation by such Grantor of a security interest in such permit, license or agreement in favor of the Collateral Agent (after giving effect to Sections 9-406(d), 9-407(a), 9-408(a) or 9-409 of the UCC (or any successor provision or provisions) or any other applicable law (including the Bankruptcy Code) or principles of equity);

 

(b)           assets owned by any Grantor on the date hereof or hereafter acquired and any proceeds thereof that are subject to a Lien securing a Capital Lease Obligation permitted to be incurred pursuant clauses (7) or (12) of the definition of “Permitted Liens” in the Indenture to the extent and for so long as the contract or other agreement in which such Lien is granted (or the documentation providing for such Capital Lease Obligation) validly prohibits the creation of any other Lien on such assets and proceeds;

 

(c)           any property of a person existing at the time such person is acquired or merged with or into or consolidated with any Grantor that is subject to a Lien permitted by clause (17) of the definition of “Permitted Liens” in the Indenture to the extent and for so long as the contract or other agreement in which such Lien is granted validly prohibits the creation of any other Lien on such property;

 

(d)           any intent-to-use trademark application to the extent and for so long as creation by a Grantor of a security interest therein would result in the loss by such Grantor of any material rights therein;

 

(e)           assets of the Grantors held outside of the United States;

 

(f)            assets of the Company’s foreign Subsidiaries;

 

(f)            any capital stock, notes, instruments, other equity interests and other securities of any Subsidiary or Affiliate of the Company (other than any Securities Account); provided that (x) notwithstanding the foregoing, intercompany Indebtedness held by any Grantor shall be deemed Collateral, but no notes or securities evidencing the same shall be required to be delivered to the Collateral Agent hereunder and such notes or securities (but not the Indebtedness underlying such notes and securities) shall not be Collateral, (y) no Grantor or any of its Subsidiaries shall pledge or grant any security interest in any such note or security to any Person without the consent of the Collateral Agent and (z) the intercompany loans (or any whole or partial replacements or refinancings thereof) made on July 31, 2009 and on or about the date hereof to one or more Canadian Subsidiaries of the Issuer shall not be evidenced by a note or a security; and

 

4

---

 

(g)           any property or asset only to the extent and for so long as the grant of a security interest in such property or asset is prohibited by any applicable law or requires a consent not obtained of any governmental authority pursuant to applicable law, statute or regulation;

 

provided , however , that (A) Excluded Property shall not include any Proceeds, substitutions or replacements of any Excluded Property referred to in clause (a), (b), (c), (d), (e), (f) or (g)  (unless such Proceeds, substitutions or replacements would constitute Excluded Property referred to in clause (a), (b), (c), (d), (e), (f) or (g)) and (B) any property or asset that constitutes Excluded Property by reason of any violation or restriction shall cease to be Excluded Property upon the ineffectiveness, lapse or termination of such prohibition or restriction.

 

“ Final Date ” shall mean the date upon which there has been a Discharge of Obligations with respect to the Indenture and each Other Pari Passu Lien Agreement.

 

“ General Intangibles ” shall mean all “general intangibles” as such term is defined in Article 9 of the NY UCC.

 

“ Guarantors ” shall mean each Grantor other than the Company.

 

“ Grantor ” shall mean the Company and each of the other Grantors identified in the recitals hereto.

 

“ Instruments ” shall mean all “instruments,” as such term is defined in Article 9 of the NY UCC.

 

“ Intellectual Property ” shall mean all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise now owned or hereafter acquired, including (a) all proprietary information used or useful arising from the business including all goodwill, trade secrets, trade secret rights, know-how, customer lists, processes of production, confidential business information, techniques, processes, formulas and all other proprietary information, and (b) the Copyrights, the Patents, the Trademarks and the Licenses and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

 

“ Investment Property ” shall mean all Securities (whether certificated or uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts and Commodity Accounts of any Grantor, whether now or hereafter acquired by any Grantor, in each case with respect to Securities (other than Securities in a wholly-owned Subsidiary of the Company) to the extent the grant by a Grantor of a Security Interest therein pursuant to this Security Agreement in its right, title and interest in any such Securities is not prohibited by any shareholder, joint venture or similar agreement governing such Securities without the consent of any other party thereto (other than a Grantor), would not give any other party (other than a Grantor) to any such shareholder, joint venture or similar agreement governing such Securities the right to terminate its obligations thereunder or is permitted with consent (other than any consent of a Grantor) if all necessary consents to such grant of a Security Interest have been obtained from the other parties

 

5

 

thereto (other than to the extent that any such prohibition would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law) (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents).

 

“ Letter of Credit Rights ” shall mean all “letter of credit rights” as such term is defined in Article 9 of the NY UCC.

 

“ License ” shall mean any Patent License, Trademark License, Copyright License or other license or sublicense to which any Grantor is a party.

 

“ Mortgaged Property ” shall mean each real property designated as “Mortgaged Property” on Schedule III to the Purchase Agreement and any other real property subject to a Mortgage.

 

“ Motor Vehicle Laws ” shall mean all U.S. Federal, state, provincial and local laws, regulations, rules and judicial or agency determinations and orders applicable to the ownership and/or operation of vehicles (including, without limitation, the Rolling Stock), or the business of the transportation of goods by motor vehicle, including, without limitation, laws, regulations, rules and judicial or agency determinations and orders promulgated or administered by the Federal Highway Administration, the Federal Motor Carrier Safety Administration, the National Highway Traffic Safety Administration, the Surface Transportation Board and other state, provincial and local Governmental Authorities with respect to vehicle safety and registration and motor carrier insurance, financial assurance, credit extension, contract carriage, tariff and reporting requirements.

 

“ Note Documents ” means the Notes, the Guarantees, the Indenture, the Security Documents and the Intercreditor Agreement.

 

“ NY UCC ” has the meaning assigned to such term in Section 1(a).

 

“ Obligations ” shall mean the collective reference to the Note Obligations and the Other Pari Passu Lien Obligations.

 

“ Other Pari Passu Lien Agreement ” shall mean any indenture, credit agreement or other agreement, if any, pursuant to which any Grantor has or will incur Other Pari Passu Lien Obligations; provided that, in each case, the Indebtedness thereunder has been designated as Other Pari Passu Lien Obligations pursuant to and in accordance with Section 8.17.

 

“ Other Pari Passu Lien Obligations ” shall mean all obligations, liabilities and indebtedness (including, without limitation, principal, premium, interest (including, without limitation, all interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency, reorganization or similar proceeding of any Grantor at the rate provided for in the respective documentation, whether or not a claim for post-petition interest is allowed in any such proceeding)) owing under any Other Pari Passu Lien Agreement that has been designated as Other Pari Passu Lien Obligations pursuant to Section 8.17 .

 

6

 

“ Other Pari Passu Lien Secured Party Consent ” shall mean a consent in the form of Annex 4 to this Security Agreement executed by the Authorized Representative of any holders of Other Pari Passu Lien Obligations pursuant to Section 8.17.

 

“ Patent License ” means any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a patent, now owned or hereafter acquired by any Grantor (including all Patents) or that any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a patent, now owned or hereafter acquired by any third party, is in existence, and all rights of any Grantor under any such agreement, including those exclusive agreements listed on Schedule 3.

 

“ patents ” means, with respect to any Person, all of the following now owned or hereafter acquired by such Person:  (a) all letters patent of the United States or the equivalent thereof in any other country or jurisdiction, all registrations and recordings thereof, and all applications for letters patent of the United States or the equivalent thereof in any other country or jurisdiction, including registrations and pending applications in the United States Patent and Trademark Office or any similar offices in any other country or jurisdiction, and (b) all rights and privileges arising under applicable law with respect to such Person’s use of any patents, all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.

 

“ Patents ” means all patents now owned or hereafter acquired by any Grantor, including those listed on Schedule 4.

 

“ Proceeds ” shall mean all “proceeds” as such term is defined in Article 9 of the NY UCC.

 

“ Required Secured Parties ” shall mean the holders of a majority in an aggregate principal amount of (i) the Notes, subject in all cases to Section 9.2 of the Indenture, and (ii) any Indebtedness constituting Other Pari Passu Lien Obligations, in each case, excluding for all purposes of this definition any holder of such debt whose vote is required to be disregarded under the Indenture or the applicable Other Pari Passu Lien Agreement.

 

“ Rolling Stock ” shall mean all trucks, trailers, tractors, service vehicles, automobiles, other registered mobile equipment and any other Equipment covered by a certificate of title or ownership.

 

“ Secured Parties ” shall mean (i) the Holders; (ii) the Trustee, (iii) the Collateral Agent, (iv) the holders of any Other Pari Passu Lien Obligation and (v) any Authorized Representative; (vi) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Note Document and (vii) any successors, indorsees, transferees and assigns of each of the foregoing.

 

“ Securities Accounts ” shall mean all “securities accounts,” as such term is defined in Article 9 of the NY UCC.

 

7

 

“ Security Agreement ” shall mean this Security Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“ Security Interest ” shall have the meaning assigned to such term in Section 2.

 

“ Trademark License ” means any written agreement, now or hereafter in effect, granting to any third party any right to use any trademark now owned or hereafter acquired by any Grantor (including any Trademark) or that any Grantor otherwise has the right to license, or granting to any Grantor any right to use any trademark now owned or hereafter acquired by any third party, and all rights of any Grantor under any such agreement, including those exclusive agreements listed on Schedule 5.

 

“ trademarks ” means, with respect to any Person, all of the following now owned or hereafter acquired by such Person:  (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now owned or hereafter acquired, all registrations and recordings thereof (if any), and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all extensions or renewals thereof, (ii) all goodwill associated therewith or symbolized thereby and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill.

 

“ Trademarks ” means all trademarks now owned or hereafter acquired by any Grantor, including those listed on Schedule 6 hereto.

 

(c)           The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement, and Section, subsection and Schedule references are to this Security Agreement unless otherwise specified. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”

 

(d)           The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

 

(e)           Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof

 

2.             Grant of Security Interest .

 

(a)           Each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest (the “ Security Interest ”) in all of the following property now owned or hereafter acquired by such Grantor or in which such Grantor now has or at any time in future may acquire

 

8

---

 

any right, title or interest (collectively, the “ Collateral ”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations:

 

(i)              all Accounts;

 

(ii)             all cash and/or money;

 

(iii)            all Chattel Paper;

 

(iv)            all Deposit Accounts;

 

(v)             all Documents;

 

(vi)            all General Intangibles;

 

(vii)           all Instruments;

 

(viii)          all Intellectual Property;

 

(ix)            all Goods, including Equipment, Inventory and Rolling Stock;

 

(x)             all Investment Property;

 

(xi)            all Commercial Tort Claims described on Appendix F to the Perfection Certificate;

 

(xii)           all Supporting Obligations;

 

(xiii)          all Letter of Credit Rights;

 

(xiv)          books and records pertaining to the Collateral;

 

(xv)           any other contract rights or rights to payment of money, insurance claims and proceeds; and

 

(xvi)          to the extent not otherwise included, all Proceeds and products of any and all of the foregoing.

 

Notwithstanding anything to the contrary contained in clauses (i) through (xvi) above, the security interest created by this Security Agreement shall not extend to, and the term “Collateral” shall not include, any Excluded Property.

 

(b)           Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Collateral or any part thereof and amendments or continuations thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including whether such

 

9

---

 

Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor.  Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner such as “all assets” or “all personal property, whether now owned or hereafter acquired.”  Each Grantor agrees to provide such information to the Collateral Agent promptly upon request.

 

Each Grantor also ratifies its authorization for the Collateral Agent to file in any relevant jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

The Collateral Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office or any similar office in any other country) such documents executed by any Grantor as may be necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor over each Grantor’s registrations and applications for Copyrights, Patents and Trademarks, and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party.

 

Notwithstanding the foregoing authorizations, it shall be the responsibility of the Grantors to file or cause to be made all filings specified in this Section and this Section shall not be construed to impose any duty or obligation upon the Collateral Agent.

 

The Security Interests are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.

 

3.             Representations And Warranties .

 

Each Grantor hereby represents and warrants to the Collateral Agent and each Secured Party that:

 

3.1.               Title; No Other Liens .  Except for the Security Interest granted to the Collateral Agent for the benefit of the Secured Parties pursuant to this Security Agreement and other Liens permitted by the Indenture and each Other Pari Passu Lien Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others.  No security agreement, financing statement or other public notice with respect to all or any part of the Collateral that evidences a Lien securing any material Indebtedness is on file or of record in any public office, except such as have been filed in favor of the Collateral Agent, for the benefit of the Secured Parties, pursuant to this Security Agreement or are permitted by the Indenture.

 

3.2.               Perfected First Priority Liens .

 

(a)           Subject to the limitations set forth in clause (b) of this subsection 3.2, the Security Interests granted pursuant to this Security Agreement (i) will constitute valid perfected Security Interests in the Collateral in favor of the Collateral Agent, for the benefit of the Secured Parties, as collateral security for the Obligations, upon (A) the filing of all financing statements

 

10

---

 

naming each Grantor as “debtor” and the Collateral Agent as “secured party” and describing the Collateral in the applicable filing offices, (B) delivery of all Instruments, Chattel Paper and certificated Securities, together with instruments of transfer or assignment duly executed in blank, (C) in the case of Rolling Stock the ownership of which, under applicable law (including, without limitation, any Motor Vehicle Law), is evidenced by a certificate of title or ownership, the notation of the Security Interest created hereunder noted thereon and (D) completion of the filing, registration and recording of a fully executed agreement substantially in the form of Annex 3 hereto and containing a description of all Collateral constituting registrations and applications for Intellectual Property in the United States Patent and Trademark Office within the three-month period (commencing as of the date hereof) or, in the case of Collateral constituting registrations and applications for Intellectual Property acquired after the date hereof, thereafter pursuant to 35 USC §261 and 15 USC §1060 and the regulations thereunder with respect to United States Patents and United States registered and applied for Trademarks; and in the United States Copyright Office within the one-month period (commencing as of the date hereof) or, in the case of Collateral constituting registrations and applications for Intellectual Property acquired after the date hereof, thereafter with respect to United States registered Copyrights pursuant to 17 USC §205 and the regulations thereunder and otherwise as may be required pursuant to the laws of any other necessary jurisdiction to the extent that a security interest may be perfected by such filings, registrations and recordings, and (ii) are prior to all other Liens on the Collateral other than (A) Liens in favor of the secured parties under the Credit Agreement as set forth in the Intercreditor Agreement and (B) Permitted Liens and any equivalent provision of each Other Pari Passu Lien Agreement.

 

(b)           Notwithstanding anything to the contrary herein, no Grantor shall be required to perfect the Security Interests granted by this Security Agreement (including Security Interests in cash, cash accounts and Investment Property) by any means other than by (i) filings pursuant to the Uniform Commercial Codes of the relevant State(s), (ii) filings with the registrars of motor vehicles or other appropriate authorities in the relevant jurisdictions, (iii) filings approved by United States government offices with respect to registrations and applications of Intellectual Property, (iv) in the case of Collateral that constitutes Tangible Chattel Paper, Instruments, Certificated Securities or Negotiable Documents, possession by the Collateral Agent in the United States, and (v) the obtaining of Control Agreements over Deposit Accounts and Securities Accounts (including, without limitation, those listed on Schedule 8) other than Excluded Accounts; provided , however , that each Grantor shall be required to do the following in order to perfect the Security Interests granted under this Security Agreement: (i) comply with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Collateral Agent to enforce, the Collateral Agent’s security interest in such Collateral; (ii) obtain governmental and other third party waivers, consents and approvals in form and substance satisfactory to the Collateral Agent, including any consent of any licensor, lessor or other person obligated on the Collateral, (iii) obtain waivers from mortgagees and landlords in form and substance satisfactory to the Collateral Agent, and (iv) take all actions under any earlier versions of the NY UCC or under any other law, as reasonably determined by the Collateral Agent to be applicable.  No Grantor shall be required to complete any filings or other action with respect to the perfection of Security Interests in any jurisdiction outside the United States.

 

11

 

(c)           It is understood and agreed that the Security Interests in cash, Deposit Accounts and Investment Property created hereunder shall not prevent the Grantors from using such assets in the ordinary course of their respective businesses.

 

3.3.               Collateral Locations .  On the Issue Date, all of such Grantor’s locations where Inventory is located (except for Equipment or Inventory in transit, that has been sold (including sales on consignment or approval in the ordinary course of business), that is out for repair or maintenance or any Collateral with a value less than $1,000,000 in the aggregate) are listed on Schedule 7.  All such locations are owned by such Grantor except for locations (i) which are leased by the Grantor as lessee and designated in part (b) of Schedule 7 and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in part (c) of Schedule 7.

 

3.4.               Accounts and Chattel Paper .  The names of the obligors, amounts owing, due dates and other information with respect to its Accounts and Chattel Paper are and will be correctly stated at the time furnished in all records of such Grantor relating thereto and in all invoices and other reports with respect thereto furnished to the Collateral Agent by such Grantor from time to time.

 

3.5.               Inventory .  With respect to any Inventory that is Collateral, (a) such Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to any third party upon such sale or other disposition other than the payment of royalties incurred pursuant to the sale of such Inventory in the ordinary course of business, (b) such Inventory has been produced in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder, to the extent required thereby and (c) the completion of manufacture, sale or other disposition of such Inventory by the Collateral Agent after the occurrence and during the continuation of an Event of Default shall not require the consent of any Person (other than any landlord with respect to any leased real property of such Grantor in respect of which no Collateral Access Agreement has been obtained or as required by applicable Law) and shall not constitute a breach or default under any contract or agreement to which such Grantor is a party or to which such property is subject.

 

3.6.               Perfection Certificate .  All information set forth on the Perfection Certificate relating to the Collateral and the Mortgaged Property is accurate and complete, and there has been no change in any of such information since the date on which the Perfection Certificate was signed by such Grantor.

 

4.             Covenants .

 

Each Grantor hereby covenants and agrees with the Collateral Agent and the Secured Parties that, from and after the date of this Security Agreement until the Final Date:

 

12

 

4.1.               Maintenance of Perfected Security Interest; Further Documentation .

 

(a)           Such Grantor shall maintain the Security Interest created by this Security Agreement as a perfected Security Interest having at least the priority described in subsection 3.2 and shall defend such Security Interest against the claims and demands of all Persons whomsoever, in each case subject to subsection 3.2(b).

 

(b)           Such Grantor will furnish to the Collateral Agent and the Secured Parties from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection therewith as the Collateral Agent may reasonably request.  In addition, within 30 days after the end of each calendar quarter, such Grantor will deliver to the Collateral Agent a written supplement hereto substantially in the form of Annex 2 hereto with respect to any additional registrations and applications for Copyrights, Patents, Trademarks and any material exclusive Licenses acquired by such Grantor after the date hereof, all in reasonable detail.

 

(c)           Subject to clause (d) below and subsection 3.2(b), each Grantor agrees that at any time and from time to time, at the reasonable request of the Collateral Agent, at the expense of such Grantor, it will execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Collateral Agent or the Required Secured Parties may reasonably request, in order (x) to grant, preserve, protect and perfect the validity and priority of the Security Interests created or intended to be created hereby or (y) to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral, including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Security Interests created hereby, all at the expense of such Grantor.

 

(d)           Notwithstanding anything in this subsection 4.1 to the contrary, (i) with respect to any assets acquired by such Grantor after the date hereof that are required by the Indenture or any Other Pari Passu Lien Agreement to be subject to the Lien created hereby or (ii) with respect to any Person that, subsequent to the date hereof, becomes a Subsidiary of the Company that is required by the Indenture or any Other Pari Passu Lien Agreement to become a party hereto, the relevant Grantor after the acquisition or creation thereof shall promptly take all actions required by the Indenture, any applicable provisions of any Other Pari Passu Lien Agreement or this subsection 4.1.

 

4.2.               Changes in Locations, Name, etc .  Each Grantor will furnish to the Collateral Agent promptly (and in any event within 30 days of such change) a written notice of any change (i) in its legal name, (ii) in its jurisdiction of incorporation or organization, (iii) in the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it (including the establishment of any such new office), (iv) in its identity or type of organization or corporate structure or (v) in its Federal Taxpayer Identification Number or organizational identification number.  Each Grantor agrees promptly to provide the Collateral Agent with certified organizational documents reflecting any

 

13

---

 

of the changes described in the first sentence of this paragraph.  Each Grantor agrees to promptly take all actions reasonably necessary or advisable to maintain a valid, legal and perfected security interest in all the Collateral having at least the priority described in subsection 3.2.

 

4.3.               Notices .  Each Grantor will advise the Collateral Agent and the Secured Parties promptly, in reasonable detail, of any Lien of which it has knowledge (other than the Security Interests created hereby or Liens permitted under the Indenture and each Other Pari Passu Lien Agreement) on any of the Collateral which would adversely affect, in any material respect, the ability of the Collateral Agent to exercise any of its remedies hereunder.

 

4.4.               Filings with the United States Patent and Trademark Office and the United States Copyright Office . On the Issue Date, each Grantor agrees to file all appropriate and necessary documents with the United States Patent and Trademark Office and the United States Copyright Office required to record the Security Interest created hereunder and evidence that the registrations and applications for United States Trademarks, Patents and Copyrights listed on Schedules 2, 4 and 6 hereto are free and clear of any Liens (other than any Lien created under this Security Agreement or Permitted Liens) recorded in such offices in respect of such registrations and applications for United States Trademarks, Patents and Copyright.

 

4.5.               Commercial Tort Claims .  Each Grantor shall promptly, and in any event within ten Business Days after the same is acquired by it, notify the Collateral Agent of any commercial tort claims (as defined in the UCC) acquired by it which could reasonably be expected to result in award damages in excess of $1,000,000 in writing signed by such Grantor providing the brief details thereof and grant to the Collateral Agent in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance substantially the same as any such writing provided under the ABL Security Documents (as defined in the Intercreditor Agreement), if any.

 

4.6.               Collateral Access Agreements .  Each Grantor shall use its commercially reasonable efforts to obtain as soon as practicable after the date hereof with respect to each location not owned by such Grantor set forth in Schedule 7 a Collateral Access Agreement, from the lessor of each leased property, mortgagee of owned property or bailee or consignee with respect to any warehouse, processor or converter facility or other location where Collateral having a value in excess of $1,000,000 is stored or located and use commercially reasonable efforts to obtain a Collateral Access Agreement from each lessor of each leased property, mortgagee of owned property or bailee or consignee with respect to any warehouse, processor or converter facility or other location where Collateral having a value in excess of $1,000,000 is stored or located from time to time; provided that the aggregate value of Collateral stored or located at these locations not owned by the Grantors for which the applicable Grantor has not used commercially reasonable efforts to obtain Collateral Access Agreements from the applicable lessors, bailees or consignees shall not exceed $15,000,000 in the aggregate.

 

4.7.               Instruments and Tangible Chattel Paper .  As of the date hereof, no amounts payable under or in connection with any of the Collateral are evidenced by any Instrument or Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper listed in Schedule 10 to the Perfection Certificate.  Each Instrument and each item of Tangible Chattel Paper listed in Schedule 10 to the Perfection Certificate has been properly endorsed, assigned

 

14

---

 

and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank.  If any amount then payable under or in connection with any of the Collateral shall be evidenced by any Instrument or Tangible Chattel Paper, and such amount, together with all amounts payable evidenced by any Instrument or Chattel Paper not previously delivered to the Collateral Agent exceeds $500,000 in the aggregate for all Grantors, the Grantor acquiring such Instrument or Tangible Chattel Paper shall promptly (but in any event within five days after receipt thereof) endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify.

 

4.8.               Special Covenants with Respect to Rolling Stock . Each Grantor shall cause all Rolling Stock, now owned or hereafter acquired by any Grantor, which, under applicable law, is required to be registered, to be properly registered (including, without limitation, the payment of all necessary taxes and receipt of any applicable permits) in the name of such Grantor and cause all Rolling Stock, now owned or hereafter acquired by any Grantor, the ownership of which, under applicable law (including, without limitation, any Motor Vehicle Law), is evidenced by a certificate of title or ownership, to be properly titled in the name of such Grantor, and in the case of any individual Rolling Stock of an Grantor with a fair market value in excess of $50,000, the applicable Grantor shall notify the Collateral Agent of any such Rolling Stock acquired after the date hereof and the Security Interest of the Collateral Agent created hereunder shall be noted thereon.  At the Collateral Agent’s request at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall deliver to the Collateral Agent the certificates of title covering each item of Rolling Stock the perfection of which is governed by the notation on the certificate of title of the Collateral Agent’s Security Interest created hereunder. No Grantor shall request any Rolling Stock be released from the Lien created by the Security Documents unless such a release is permitted by the Note Documents and no such release shall be requested at any time after the occurrence and during the continuation of an Event of Default.

 

4.9.               Investment Property .   If any Grantor shall, now or at any time hereafter, hold or acquire any certificated securities not constituting Excluded Property, such Grantor shall forthwith endorse, assign and deliver the same to the Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent may from time to time specify.  If any securities now or hereafter acquired by any Grantor are uncertificated and are issued to such Grantor or its nominee directly by the issuer thereof, such Grantor shall immediately notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (a) cause the issuer to agree to comply without further consent of such Grantor or such nominee, at any time with instructions from the Collateral Agent as to such securities, or (b) arrange for the Collateral Agent to become the registered owner of the securities.  If any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Grantor are held by such Grantor or its nominee through a securities intermediary or commodity intermediary, such Grantor shall immediately notify the Collateral Agent thereof and, at the Collateral Agent’s request and option, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply, in each case without further consent

 

15

---

 

of such Grantor or such nominee, at any time with entitlement orders or other instructions from the Collateral Agent to such securities intermediary as to such securities or other investment property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Collateral Agent to such commodity intermediary, or (ii) in the case of financial assets or other investment property held through a securities intermediary, arrange for the Collateral Agent to become the entitlement holder with respect to such investment property, with such Grantor being permitted, only with the consent of the Collateral Agent, to exercise rights to withdraw or otherwise deal with such investment property.  The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such entitlement orders or instructions or directions to any such issuer, securities intermediary or commodity intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by such Grantor, unless an Event of Default has occurred and is continuing, or, after giving effect to any such investment and withdrawal rights not otherwise permitted by the Note Documents and the Other Pari Passu Lien Agreements, would occur.  The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Collateral Agent is the securities intermediary.  The provisions of this Section 4.9 shall be subject to the Intercreditor Agreement.

 

4.10.             Letter-of-Credit Rights .  If any Grantor is, now or at any time hereafter, a beneficiary under a letter of credit now or hereafter, such Grantor shall promptly notify the Collateral Agent thereof and, at the request and option of the Collateral Agent, such Grantor shall, pursuant to an agreement in form and substance satisfactory to the Collateral Agent, use its commercially reasonable efforts to, either (a) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Collateral Agent of the proceeds of the letter of credit or (b) arrange for the Collateral Agent to become the transferee beneficiary of the letter of credit, with the Collateral Agent agreeing, in each case, that the proceeds of the letter of credit are to be applied as provided herein.

 

4.11.             Deposit Accounts and Securities Accounts .   Subject to the Intercreditor Agreement, for each Deposit Account and Securities Account (including, without limitation, those listed on Schedule 8) that (i) prior to the Discharge of ABL Obligations, to the extent such Deposit Account or Securities Account constitutes ABL Priority Collateral (as defined in the Intercreditor Agreement), that any Grantor causes the depositary bank or securities intermediary, as applicable, to agree to comply without further consent of such Grantor, at any time with instructions from the collateral agent for the Credit Agreement to such depositary bank or securities intermediary, directing the disposition of funds or financial assets, as applicable, from time to time credited to such deposit account or securities account (provided that if the collateral agent or administrative agent under the Credit Agreement shall have entered into a control agreement with such depository bank or securities intermediary, the Collateral Agent shall enter into a similar control agreement) or (ii) from and after the Discharge of ABL Obligations or to the extent such Deposit Account or Securities Account, as applicable, does not constitute ABL Priority Collateral, that any Grantor, now or at any time hereafter, opens or maintains, such Grantor shall, at the Collateral Agent’s request and option, pursuant to a Control Agreement in form and substance satisfactory to the Collateral Agent, use its commercially reasonable efforts to cause the depositary bank or securities intermediary, as applicable, to agree to comply without further consent of such Grantor, at any time with instructions from the Collateral Agent to such depositary

 

16

 

bank or securities intermediary directing the disposition of funds or financial assets from time to time credited to such deposit account or securities account.  The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any such instructions or withhold any withdrawal rights from such Grantor, unless an Event of Default has occurred and is continuing.  The provisions of this paragraph shall not apply to any Excluded Accounts.

 

4.12.             The Collateral Agent shall have the right at any time or times, to verify the validity, amount or any other matter relating to any Collateral, by mail, telephone, facsimile transmission or otherwise.

 

4.13.             Insurance .

 

(a)           Maintenance of Insurance .  Each Grantor will maintain with financially sound and reputable insurers insurance with respect to its properties, including, without limitation, the Mortgaged Property, and business against such casualties and contingencies as shall be in accordance with general practices of businesses engaged in similar activities in similar geographic areas.  Such insurance shall be in such minimum amounts that such Grantor will not be deemed a co-insurer under applicable insurance laws, regulations and policies and otherwise shall be in such amounts, contain such terms, be in such forms and be for such periods as may be reasonably satisfactory to the Collateral Agent.  In addition, all such insurance shall be payable to the Collateral Agent as loss payee under a “standard” or “New York” loss payee clause for the benefit of the Secured Parties and the Collateral Agent. Without limiting the foregoing, each Grantor will (a) keep all of its physical property insured with casualty or physical hazard insurance on an “all risks” basis, with broad form flood and earthquake coverages and electronic data processing coverage, with a full replacement cost endorsement and an “agreed amount” clause in an amount equal to 100% of the full replacement cost of such property, (b) maintain all such workers’ compensation or similar insurance as may be required by law and (c) maintain, in amounts and with deductibles equal to those generally maintained by businesses engaged in similar activities in similar geographic areas, general public liability insurance against claims of bodily injury, death or property damage occurring, on, in or about the properties of the Grantors, business interruption insurance, and product liability insurance.

 

(b)           Insurance Proceeds .  The proceeds of any casualty insurance in respect of any casualty loss of any of the Collateral shall, subject to the rights, if any, of other parties with an interest having priority in the property covered thereby and subject to the Intercreditor Agreement, (a) so long as no Default or Event of Default has occurred and is continuing be disbursed to the applicable Grantor for direct application by such Grantor solely to the repair or replacement of such Grantor’s property so damaged or destroyed except to the extent such proceeds are required to be applied to the Obligations as provided by the terms of the Credit Agreement, and (b) in all other circumstances, be held by the Collateral Agent as cash collateral for the Obligations.  Subject to the Intercreditor Agreement, the Collateral Agent may, at its sole option, disburse from time to time all or any part of such proceeds so held as cash collateral, upon such terms and conditions as the Collateral Agent may reasonably prescribe, for direct application by the applicable Grantor solely to the repair or replacement of such Grantor’s property so damaged or destroyed, or the Collateral Agent may apply all or any part of such proceeds held as cash collateral to the Obligations with the Commitment (if not then terminated) being reduced by the

 

17

---

 

amount so applied to the Obligations.

 

(c)           Continuation of Insurance .  All policies of insurance shall provide for at least thirty (30) days prior written cancellation notice to the Collateral Agent.  In the event of failure by the Grantors to provide and maintain insurance as herein provided, the Collateral Agent may, at its option, provide such insurance and charge the amount thereof to the Grantors.  The Grantors shall furnish the Collateral Agent with certificates of insurance and policies evidencing compliance with the foregoing insurance provision.

 

5.             Remedial Provisions .

 

(a)           Certain Matters Relating to Accounts .  The Collateral Agent hereby authorizes each Grantor to collect such Grantor’s Accounts and the Collateral Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default.  If required in writing by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Accounts, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly endorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion