EXHIBIT 10.34
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST
GRANTED TO THE ADMINISTRATIVE AGENT PURSUANT TO THIS AGREEMENT AND THE EXERCISE
OF ANY RIGHT OR REMEDY BY THE LENDERS HEREUNDER ARE SUBJECT TO THE PROVISIONS OF
THE BRIDGE FACILITY INTERCREDITOR AGREEMENT, DATED AS OF MARCH 3, 2008 (THE
“BRIDGE FACILITY INTERCREDITOR AGREEMENT”) AMONG BANK OF AMERICA, N.A. AS SENIOR
AGENT, SPECIAL SITUATIONS INVESTING GROUP, INC., AS ADMINISTRATIVE AGENT FOR THE
LENDERS HEREUNDER, AND AMERICAN COLOR GRAPHICS, INC. IN THE EVENT OF ANY
CONFLICT BETWEEN THE TERMS OF THE BRIDGE FACILITY INTERCREDITOR AGREEMENT AND
THIS AGREEMENT, THE TERMS OF THE BRIDGE FACILITY INTERCREDITOR AGREEMENT SHALL
GOVERN.
 
SECURITY AGREEMENT
          THIS SECURITY AGREEMENT (this “Agreement”) dated as of March 3, 2008,
by and among ACG HOLDINGS, INC., a Delaware Corporation (“Parent”), AMERICAN
COLOR GRAPHICS, INC., a New York Corporation (the “Company”), each of THE
SUBSIDIARIES OF COMPANY listed on the signature page hereto (collectively with
the Parent and the Company, the “Grantors”) and Special Situations Investing
Group, Inc., as Administrative Agent (in such capacity, the “Administrative
Agent”) for the Secured Parties (as hereinafter defined).
          Pursuant to the Facility Agreement, dated as of March 3, 2008 (as
amended, supplemented or otherwise modified, the “Bridge Facility Agreement”),
entered into by and among the Grantors, the Lenders party thereto and Special
Situations Investing Group, Inc. in its capacity as Administrative Agent, said
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Bridge Facility Agreement, to extend certain credit and other
financial accommodations to the Company and each of the Grantors has agreed to
guarantee the obligations of the Company.
          To induce the Secured Parties to extend such credit and other
financial accommodations, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Grantor has
agreed to grant a security interest in the Collateral (as hereinafter defined)
as security for the Secured Obligations (as so defined).
          Accordingly, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
     1.1 Certain Uniform Commercial Code Terms. As used herein, the terms
“Accession”, “Account”, “As-Extracted Collateral”, “Chattel Paper”, “Commodity
Account”, “Commodity Contract”,

 

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“Deposit Account”, “Document”, “Electronic Chattel Paper”, “Equipment”,
“Fixture”, “General Intangible”, “Goods”, “Instrument”, “Inventory”, “Investment
Property”, “Letter-of-Credit Right”, “Payment Intangible”, “Proceeds” and
“Promissory Note” have the respective meanings set forth in Article 9 of the
NYUCC, and the terms “Entitlement Holder”, “Financial Asset”, “Securities
Account”, “Security”, and “Security Entitlement” have the respective meanings
set forth in Article 8 of the NYUCC.
     1.2 Bridge Facility Agreement Terms. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth for such
terms in Section 1.01 of the Bridge Facility Agreement. The rules of
interpretation set forth in Section 1.02 of the Bridge Facility Agreement apply
hereto as if set forth in full herein.
     1.3 Additional Definitions. In addition, as used herein:
          “Agreement” has the meaning assigned to such term in the preamble
hereto.
          “Bridge Facility Agreement” has the meaning assigned to such term in
the preamble hereto.
          “Casualty Event” means, with respect to any property of any Person,
any loss of or damage to, or any condemnation or other taking of, such property
for which such Person or any of its subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
          “Collateral” has the meaning assigned to such term in Section 3.
          “Collateral Account” has the meaning assigned to such term in
Section 4.1.
          “Company” has the meaning assigned to such term in the preamble
hereto.
          “Contingent Secured Obligations” means obligations of any Grantor in
respect of any claim that may be payable to any Secured Party by any Grantor
under any Loan Document that is not yet due and payable.
          “Copyright Collateral” means all Copyrights of each Grantor, whether
now owned or hereafter acquired by such Grantor, including each Copyright
identified in Annex 3.
          “Copyrights” means all copyrights, copyright registrations and
applications for copyright registrations, including all renewals and extensions
thereof, all rights to recover for past, present or future infringements thereof
and all other rights whatsoever accruing thereunder or pertaining thereto.
          “Event of Default” means each of the conditions set forth in
Section 9.01 of the Bridge Facility Agreement.
          “Grantor” has the meaning assigned to such term in the preamble
hereto.
          “Financial Accommodation” means any loan, advance, letter of credit or
overdraft, securities lending, discount or purchase of notes, security or other
instrument or property, acceptance, issuance or confirmation of any letter of
credit, guarantee or indemnity, interest rate, currency, equity or other similar
type of swap or protection agreement, foreign exchange agreement, cash
management arrangement or any other kind of agreement under which any Grantor
may be indebted or obligated to the Secured Parties in any manner, whether now
existing or hereafter arising, whether direct or indirect,

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absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or not secured, and however acquired by the
Secured Parties.
          “Intellectual Property” means, collectively, all Copyright Collateral,
all Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-how and
trade secrets; (b) all licenses or user or other agreements granted to any
Grantor with respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all proprietary information, customer lists,
identification of suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, materials standards, processing standards, performance standards,
catalogs, computer and automatic machinery software and programs; (d) all
accounting information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer programs
used for the compilation or printout of such information, knowledge, records or
data; (e) all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by any Grantor; and (f)
all causes of action, claims and warranties now or hereafter owned or acquired
by any Grantor in respect of any of the items listed above.
          “Issuers” means, collectively, (a) Persons that shall at any time be a
subsidiary of any Grantor, and (b) the issuer of any equity securities hereafter
owned by any Grantor.
          “Motor Vehicles” means motor vehicles, tractors, trailers and other
like property, if the title thereto is governed by a certificate of title or
ownership.
          “NYUCC” means the Uniform Commercial Code as in effect from time to
time in the State of New York.
          “Parent” has the meaning assigned to that term in the preamble hereto.
          “Patent Collateral” means all Patents of each Grantor, whether now
owned or hereafter acquired by such Grantor, including each Patent identified in
Annex 3, and all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect thereto.
          “Patents” means all patents and patent applications, including the
inventions and improvements described and claimed therein together with the
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, all income, royalties, damages and payments now
or hereafter due and/or payable with respect thereto, all damages and payments
for past or future infringements thereof and rights to sue therefor, and all
rights corresponding thereto throughout the world.
          “Permitted Investments” means any investments except those set-forth
in section 8.02 of the Bridge Facility Agreement.
          “Person” means any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
          “Requirement of Law” means, collectively, any and all requirements of
any Governmental Authority including, without limitation, any and all laws,
ordinances, rules, regulations or similar statutes or case law.
          “Secured Obligations” means the Obligations as defined in the Bridge
Facility Agreement.

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          “Secured Parties” means, collectively, the Administrative Agent and
the Lenders.
          “Shares” means shares of capital stock of a corporation, limited
liability company interests, partnership interests and other ownership or equity
interests of any class in any Person.
          “Trademark Collateral” means all Trademarks of each Grantor, whether
now owned or hereafter acquired by such Grantor, including each Trademark
identified in Annex 3, together, in each case, with the product lines and
goodwill of the business connected with the use of, and symbolized by, each such
trade name, trademark and service mark. Notwithstanding the foregoing, the
Trademark Collateral does not and shall not include any Trademark that would be
rendered invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.
          “Trademarks” means all trade names, trademarks and service marks,
logos, trademark and service mark registrations, and applications for trademark
and service mark registrations, including all renewals of trademark and service
mark registrations, all rights to recover for all past, present and future
infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world.
     1.4 Interpretation. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. References herein to any Section shall be to a Section hereof unless
otherwise specifically provided. The use herein of the word “include” or
“including”, when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not no limiting language (such as “without limitation” or
“but not limited to” or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein) and (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns.
     1.5 Administrative Agent Authority. Any power or authority granted to the
Administrative Agent pursuant to this agreement is subject to the restrictions
and terms of the Bridge Facility Intercreditor Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
     Each Grantor represents and warrants to the Administrative Agent that:
     2.1 Title. Each Grantor is the sole beneficial owner of the Collateral
pledged by it and no Lien exists upon such Collateral (and no right or option to
acquire the same exists in favor of any other Person) other than (a) the
security interest created or provided for herein, which security interest will,
upon perfection in accordance with the applicable provisions of the Uniform
Commercial Code or of Section 5.1 of this Agreement, constitute a valid First
Priority Lien on the Collateral, and (b) Permitted Liens and the other liens (if
any) expressly permitted by the Loan Documents.
     2.2 Names, Etc. The full and correct legal name, type of organization,
jurisdiction of organization, organizational ID number (if applicable) and
mailing address of each Grantor as of the date hereof are correctly set forth in
Annex 1.

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     2.3 Changes in Circumstances. No Grantor has (a) within the period of four
months prior to the date hereof, changed its location (as defined in
Section 9-307 of the NYUCC) or (b) except as specified in Annex 1, heretofore
changed its name.
     2.4 Intellectual Property. Annex 2 sets forth a complete and correct list
of all copyright registrations, patents, patent applications, trademark
registrations and trademark applications owned by each Grantor on the date
hereof (or, in the case of any supplement to said Annex 3, effecting a pledge
thereof, as of the date of such supplement).
          Except pursuant to licenses and other user agreements entered into by
any Grantor in the ordinary course of business that are listed in said Annex 2
(including as supplemented by any supplement effecting a pledge thereof), each
Grantor has done nothing to authorize or enable any other Person to use any
Copyright, Patent or Trademark listed in said Annex 2 (as so supplemented), and
all registrations listed in Annex 3 (as so supplemented) are, except as noted
therein, in full force and effect.
          To each Grantor’s knowledge, and as to each Grantor’s owned
Intellectual Property, as applicable, (i) except as set forth in Annex 2 (as
supplemented by any supplement effecting a pledge thereof), there is no
violation by others of any right of such Grantor with respect to any Copyright,
Patent or Trademark of such Grantor listed in Annex 2 (as so supplemented),
respectively, and (ii) no Grantor is infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no proceedings alleging
such infringement have been instituted or are pending against any Grantor, and
no written claim against any Grantor has been received by any Grantor, alleging
any such violation, except as may be set forth in Annex 2 (as so supplemented).
          No Grantor owns any Trademarks registered in the United States of
America to which the last sentence of the definition of Trademark Collateral
applies.
     2.6 Deposit Accounts and Securities Accounts. Annex 3 sets forth a complete
and correct list of all Deposit Accounts, Securities Accounts and Commodity
Accounts of each Grantor on the date hereof.
     2.7 Commercial Tort Claims. Annex 4 sets forth a complete and correct list
of all commercial tort claims of each Grantor in existence on the date hereof.
SECTION 3. COLLATERAL
     3.1 Collateral. As collateral security for the payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Secured
Obligations, each Grantor hereby pledges and grants to the Administrative Agent,
for the benefit of the Secured Parties, a security interest in all of such
Grantor’s right, title and interest in, to and under the following property, in
each case whether tangible or intangible, wherever located, and whether now
owned by such Grantor or hereafter acquired and whether now existing or
hereafter coming into existence (all of the property described in this
Section 3, in each case as qualified by the proviso to this Section 3, being
collectively referred to herein as “Collateral”):
     (a) all Accounts;
     (b) all As-Extracted Collateral;
     (c) all Chattel Paper;

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     (d) all Deposit Accounts;
     (e) all Documents;
     (f) all Equipment;
     (g) all Fixtures;
     (h) all General Intangibles;
     (i) all Goods not covered by the other clauses of this Section 3;
     (j) the Pledged Shares;
     (k) all Instruments, including all Promissory Notes;
     (l) all Intellectual Property;
     (m) all Inventory;
     (n) all Investment Property not covered by other clauses of this Section 3,
including all Securities, all Securities Accounts and all Security Entitlements
with respect thereto and Financial Assets carried therein, and all Commodity
Accounts and Commodity Contracts;
     (o) all Letter-of-Credit Rights;
     (p) all commercial tort claims, as defined in Section 9-102(a)(13) of the
NYUCC, arising out of the matters described in Annex 6;
     (q) all other tangible and intangible personal property whatsoever of such
Grantor; and
     (r) all Proceeds of any of the Collateral, all Accessions to and
substitutions and replacements for, any of the Collateral, and all offspring,
rents, profits and products of any of the Collateral, and, to the extent related
to any Collateral, all books, correspondence, credit files, records, invoices
and other papers (including all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Grantor or any computer
bureau or service company from time to time acting for such Grantor);
provided, that such assets and property shall constitute Collateral only to the
extent (i) that a security interest therein can be perfected by the filing of a
Uniform Commercial Code financing statement in the Office of the Secretary of
State of (a) the state of incorporation of the respective obligor or (b) the
state in which any goods constituting Fixtures are located; or (ii) that such
assets or properties consist of cash, securities and other financial assets held
in accounts currently subject to the control, as defined in Section 9-104 of the
NYUCC, of the First Lien Agent or as to which the First Lien Agent is an
entitlement holder, as defined in Section 8-106 of the Uniform Commercial Code.

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SECTION 4. FURTHER ASSURANCES
          In furtherance of the grant of the security interest pursuant to
Section 3, each Grantor hereby agrees with the Secured Parties as follows:
     4.1 Delivery and Other Perfection. Each Grantor shall promptly from time to
time give, execute, deliver, file, record, authorize or obtain all such
financing statements, continuation statements, notices, instruments, documents,
agreements or consents or other papers as may be necessary or desirable in the
reasonable judgment of the Secured Party to create, preserve, perfect, maintain
the perfection of or validate the security interest granted pursuant hereto or
to enable the Administrative Agent to exercise and enforce its rights hereunder
with respect to such security interest. Without limiting the foregoing, each
Grantor shall upon reasonable notice, at any time during normal business hours,
permit representatives of the Administrative Agent to inspect and make abstracts
from its books and records pertaining to the Collateral, and permit
representatives of the Administrative Agent to be present at any Grantor’s place
of business to receive copies of communications and remittances relating to the
Collateral, and forward copies of any notices or communications received by any
Grantor with respect to the Collateral, all in such manner as the Administrative
Agent may reasonably require.
     4.2 Other Financing Statements or Control. Except as otherwise permitted
under the Bridge Facility Agreement (including in respect of Permitted Liens),
no Grantor shall (a) file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to any of the Collateral in which the Administrative
Agent is not named as the sole secured party, or (b) cause or permit any Person
other than the Administrative Agent to have “control” (as defined in
Section 9-104, 9-105, 9-106 or 9-107 of the NYUCC) of any Deposit Account,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Right
constituting part of the Collateral.
     4.3 Preservation of Rights. No Secured Party shall be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
4.4 Remedies.
     (a) Rights and Remedies Generally upon Event of Default. If an Event of
Default shall have occurred and is continuing, the Administrative Agent shall
have all of the rights and remedies with respect to the Collateral of a secured
party under the NYUCC (whether or not the Uniform Commercial Code is in effect
in the jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted, including the right, to the fullest extent permitted by law to
exercise all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Administrative Agent were the sole and absolute owner
thereof (and each Grantor agrees to take all such action reasonably requested by
the Administrative Agent as may be appropriate to give effect to such right, and
without limiting the foregoing:
     (i) the Administrative Agent in its discretion may, in its name or in the
name of any Grantor or otherwise, demand, sue for, collect or receive any money
or other property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so;
     (ii) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise modify in
any reasonable respect the terms of, any of the Collateral;

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     (iii) the Administrative Agent may require any Grantor to notify (and each
Grantor hereby authorizes the Administrative Agent so to notify) each account
debtor in respect of any Account, Chattel Paper or General Intangible, and each
obligor on any Instrument, constituting part of the Collateral that such
Collateral has been assigned to the Administrative Agent hereunder, and to
instruct that any payments due or to become due in respect of such Collateral
shall be made directly to the Administrative Agent or as it may direct (and if
any such payments, or any other Proceeds of Collateral, are received by such
Grantor they shall be held in trust by such Grantor for the benefit of the
Administrative Agent and as promptly as possible remitted or delivered to the
Administrative Agent for application as provided herein);
     (iv) the Administrative Agent may require any Grantor to assemble the
Collateral at such place or places, reasonably convenient to the Administrative
Agent and such Grantor, as the Administrative Agent may direct;
     (v) the Administrative Agent may apply any money or other property
constituting Collateral to payment of such of the Secured Obligations that are
due and payable at such time;
     (vi) the Administrative Agent may sell, lease, assign or otherwise dispose
of all or any part of the Collateral, at such place or places as the
Administrative Agent deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is required
by applicable law and cannot be waived), and the Administrative Agent or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of any Grantor, any such demand, notice and right or
equity being hereby expressly waived and released. In the event of any sale,
assignment, or other disposition of any of the Trademark Collateral, the
goodwill connected with and symbolized by the Trademark Collateral subject to
such disposition shall be included. The Administrative Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the sale may be so
adjourned.
The Proceeds of each collection, sale or other disposition under this
Section 4.4 shall be applied in accordance with Section 4.8.
     (b) Certain Securities Act Limitations. Each Grantor recognizes that, by
reason of certain prohibitions contained in the Securities Laws, and applicable
state securities laws, the Administrative Agent may be compelled, with respect
to any sale of all or any part of the Collateral, to limit purchasers to those
who will agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges that any such private sales may be at prices
and on terms less favorable to the Administrative Agent than those obtainable
through a public sale without such restrictions, and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and that the Administrative Agent shall
have no obligation to engage in public sales and no obligation to delay the sale
of any Collateral for the period of time necessary to permit the issuer thereof
to register it for public sale.

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     (c) Notice. Each Grantor agrees that to the extent the Administrative Agent
is required by applicable law to give reasonable prior notice of any sale or
other disposition of any Collateral, ten business days’ notice shall be deemed
to constitute reasonable prior notice.
     4.5 Deficiency. If the proceeds of sale, collection or other realization of
or upon the Collateral pursuant to Section 5.5 are insufficient to cover the
costs and expenses of such realization and the payment in full of the Secured
Obligations, each Grantor shall remain liable for any deficiency.
     4.6 Locations; Names, Etc. Without at least 30 days’ prior written notice
to the Administrative Agent, no Grantor shall (i) change its location (as
defined in Section 9-307 of the NYUCC), (ii) change its name from the name shown
as its current legal name on Annex 1, or (iii) agree to or authorize any
modification of the terms of any item of Collateral that would result in a
change thereof from one Uniform Commercial Code category to another such
category (such as from a General Intangible to Investment Property), if the
effect thereof would be to result in a loss of perfection of, or diminution of
priority for, the security interests created hereunder in such item of
Collateral, or the loss of control (within the meaning of Section 9-104, 9-105,
9-106 or 9-107 of the NYUCC) over such item of Collateral.
     4.7 Private Sale. The Secured Parties shall incur no liability as a result
of the sale of the Collateral, or any part thereof, at any private sale pursuant
to Section 5.5 conducted in a commercially reasonable manner. Each Grantor
hereby waives any claims against the Secured Parties arising by reason of the
fact that the price at which the Collateral may have been sold at such a private
sale was less than the price that might have been obtained at a public sale or
was less than the aggregate amount of the Secured Obligations, even if the
Administrative Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
     4.8 Application of Proceeds. Except as otherwise herein expressly provided,
the Proceeds of any collection, sale or other realization of all or any part of
the Collateral pursuant hereto, and any other cash at the time held by the
Administrative Agent as part of the Collateral under this Section 4, shall be
applied by the Administrative Agent:
     First, to the payment of the reasonable out-of-pocket costs and expenses of
such collection, sale or other realization, including costs and expenses of the
Administrative Agent and the fees and expenses of its agents and counsel, and
all expenses incurred and advances made by the Administrative Agent in
connection therewith;
     Next, to the payment in full of the Secured Obligations (or, in the case of
any Contingent Secured Obligations, to the provision of cover as provided
below), in such order as the Administrative Agent shall in its sole discretion
determine; and
     Finally, to the payment to the relevant Grantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
For purposes hereof, whenever this Agreement contemplates that cover shall be
provided for Contingent Secured Obligations, such cover shall be effected by the
payment to the Administrative Agent of any amount that will be deposited into a
Collateral Account to be held by the Administrative Agent as collateral security
for the payment of such Contingent Secured Obligations as and when they become
due and payable.

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     4.9 Attorney-in-Fact. Without limiting any rights or powers granted by this
Agreement to the Administrative Agent while no Event of Default has occurred and
is continuing, upon the occurrence and during the continuance of any Event of
Default the Administrative Agent is hereby appointed the attorney-in-fact of
each Grantor for the purpose of carrying out the provisions of this Section 4
and taking any action and executing any instruments that the Administrative
Agent may reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 4 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
any Grantor representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
     4.10 Perfection and Recordation. Each Grantor authorizes the Administrative
Agent to file Uniform Commercial Code financing statements describing the
Collateral as “all assets” or “all personal property and fixtures” of such
Grantor, provided that no such description shall be deemed to modify the
description of Collateral set forth in Section 3.
     4.11 Termination. When all Secured Obligations shall have been paid in full
and all obligations of the Secured Parties to make available any Financial
Accommodation to the Grantors shall have expired or terminated, this Agreement
shall terminate, and the Administrative Agent shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the applicable Grantor. The
Administrative Agent shall also, at the expense of the Grantors, execute and
deliver to each Grantor upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the Liens on the Motor
Vehicles and such other documentation as shall be reasonably requested by the
Grantors to effect the termination and release of the Liens on the Collateral as
required by this Section 5.12.
     4.12 Further Assurances. Each Grantor agrees that, from time to time upon
the written request of the Administrative Agent, such Grantor will execute and
deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement. The Administrative Agent shall promptly release any
Lien covering any asset that has been disposed of in accordance with the
provisions of the Bridge Facility Agreement.
SECTION 5. MISCELLANEOUS
     5.1 Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given to a Grantor or the
Administrative Agent, shall be sent to such Person’s address as set forth in the
Bridge Facility Agreement or in any other relevant Loan Document. Each notice
hereunder shall be in compliance with Section 11.02 of the Bridge Facility
Agreement.
     5.2 Amendments, Etc. No amendment, modification, termination or waiver of
any provision of this Agreement, or consent to any departure by any Grantor
therefrom, shall in any event be effective without the written concurrence of
the Administrative Agent, with the consent of applicable Lenders to the extent
required by Section 11.01 of the Bridge Facility Agreement. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. Notwithstanding anything to the contrary herein,
no Secured Party that is a Defaulting Lender under the Bridge Facility Agreement
shall have any right to approve or disapprove any amendment, modification,
waiver or consent hereunder. Any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given. No
notice to or demand on any Grantor in any case shall

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entitle any Grantor to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver, or consent
effected in accordance with this Section 5.2 shall be binding upon each party
hereto at the time outstanding, and each future party hereto.
     5.3 Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto and the successors and assigns of the Secured
Parties. No rights or obligations of any Grantor hereunder nor any interest of
any Grantor herein may be assigned or delegated by such Grantor without the
prior written consent of the Administrative Agent, with the consent of all
affected Lenders (other than a Defaulting Lender). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
     5.4 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Administrative Agent or any Secured Party in the exercise of any power, right or
privilege hereunder or under any other Loan Document 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 of any other power,
right or privilege. The rights, powers and remedies given to the Administrative
Agent and each Secured Party hereby are cumulative and shall be in addition to
and independent of all rights, powers and remedies existing by virtue of any
statute or rule of law or in any of the other Loan Documents. Any forbearance or
failure to exercise, and any delay in exercising, any right, power or remedy
hereunder shall not impair any such right, power or remedy or be construed to be
a waiver thereof, nor shall it preclude the further exercise of any such right,
power or remedy.
     5.5 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.
     5.6 Severability. In case any provision in or obligation hereunder shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
     5.7 Headings. Section headings herein are included herein for convenience
of reference only and shall not constitute a part hereof for any other purpose
or be given any substantive effect.
     5.8 Applicable Law. This Agreement and the rights and obligations of the
Parties hereunder shall be governed by, and shall be construed and enforced in
accordance with the laws of the State of New York.
5.9 Consent to Jurisdiction.
          (a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT
OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS,
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF NEW YORK, COUNTY OF NEW CASTLE AND CITY OF WILMINGTON. BY EXECUTING AND
DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY (i) ACCEPTS GENERALLY AND UNCONDITIONALLY

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THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (ii) WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS; (iii) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO THE APPLICABLE GRANTOR AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 10.1 OF THE CREDIT AGREEMENT IS SUFFICIENT TO CONFER
PERSONAL JURISDICTION OVER THE APPLICABLE GRANTOR IN ANY SUCH PROCEEDING IN ANY
SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT; AND (iv) AGREES THAT ADMINISTRATIVE AGENT AND SECURED PARTIES RETAIN
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
          (b) EACH GRANTOR HEREBY AGREES THAT PROCESS MAY BE SERVED ON IT BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE ADDRESSES
PERTAINING TO IT AS SPECIFIED IN SECTION 10.1 OF THE CREDIT AGREEMENT. ANY AND
ALL SERVICE OF PROCESS AND ANY OTHER NOTICE IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE EFFECTIVE AGAINST ANY GRANTOR IF GIVEN BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER MEANS OR MAIL WHICH
REQUIRES A SIGNED RECEIPT, POSTAGE PREPAID, MAILED AS PROVIDED ABOVE.
     5.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO
WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS GRANTOR
SECURITY INTEREST OR THE GRANTOR SECURED PARTY RELATIONSHIP THAT IS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED
FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 6.10 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO GRANTOR SECURITY INTEREST HEREUNDER. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.

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     5.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
     5.12 Effectiveness. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and receipt by
Parent and Administrative Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
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     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.

            AMERICAN COLOR GRAPHICS, INC.
      By:           Name:   Patrick W. Kellick        Title:   Executive Vice
President and Chief Financial Officer     

            ACG HOLDINGS, INC.
      By:           Name:           Title:      

S-1

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            SPECIAL SITUATIONS INVESTING GROUP, INC.
As Administrative Agent
      By:           Name:           Title:   Authorized Signatory   

S-2

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ANNEX 1
NAMES, ORGANIZATION TYPE, CHANGE IN CIRCUMSTANCE

             
Legal Name
  Organization   Jurisdiction of   Organizational
Mailing Address
  Type   Organization   ID Number

Annex 1-1

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ANNEX 2
COPYRIGHT COLLATERAL, PATENT COLLATERAL AND TRADEMARK COLLATERAL
COPYRIGHTS

[___]
PATENTS

[___]
TRADEMARKS

[___]

Annex 3-1

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ANNEX 3
LIST OF DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND
COMMODITY ACCOUNTS
[________________________]
Contact:
Phone:
Fax:

      Account Name   Account Number      

Annex 4-1

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ANNEX 4
LIST OF COMMERCIAL TORT CLAIMS
[________________________]

Annex 5-1