Exhibit 10.9

 

Execution Copy

 

Security Agreement

 

This SECURITY AGREEMENT (this “Security Agreement”), dated as of February 9,
2015, is made by DFI Holdings, LLC, a Pennsylvania limited liability company
(“Distribution Buyer”), KPS Holdco, LLC, a Pennsylvania limited liability
company (“Products Buyer” and together with Distribution Buyer, the “Buyers”),
Kable Media Services, Inc., a Delaware corporation (“KMS”), Kable Distribution
Services, Inc., a Delaware corporation (“KDS”), Kable News Company, Inc., an
Illinois corporation (“KNC”), Kable News International, Inc., a Delaware
corporation (“KNI”), Kable Distribution Services of Canada, Ltd., a Canadian
corporation incorporated in Ontario, Canada (“KDSC”), and Kable Product
Services, Inc., a Delaware corporation (“KPS” and together with KMS, KDS, KNI,
KNC and KDSC, the “Company Group”, and the Company Group collectively with
Distribution Buyer and Products Buyer, the “Debtors”), in favor of American
Republic Investment Co., a Delaware corporation (“Secured Party” and together
with the Debtors, the “Parties”).

 

WITNESSETH:

 

WHEREAS, the Secured Party owns all of the issued and outstanding shares of
capital stock of KMS;

 

WHEREAS, KMS owns all of the issued and outstanding shares of capital stock of
KDS, KNC and KPS;

 

WHEREAS, KDS owns all of the issued and outstanding shares of capital stock of
KNI, and KNC owns all of the issued and outstanding shares of capital stock of
KDSC;

 

WHEREAS, the Secured Party and the Buyers will enter into a Stock Purchase
Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to
which Products Buyer is acquiring all of the issued and outstanding shares of
KPS and Distribution Buyer is acquiring all of the issued and outstanding shares
of KMS, and will thereby become the direct or indirect owners of the Company
Group (the “Transaction”);

 

WHEREAS, all capitalized terms used but not otherwise defined in this Security
Agreement shall have the meanings ascribed to them in the Purchase Agreement
unless otherwise noted, and unless otherwise defined herein, terms used herein
that are defined in the UCC shall have the meanings assigned to them in the UCC.
The terms “Receivables” and “Inventory” have the respective meanings set forth
in the Line of Credit Note;

 

WHEREAS, in connection with the Transaction, the Secured Party, Buyers, Michael
P. Duloc and the Company Group are entering into the Transaction Agreements to
which they are a signatory;

 

WHEREAS, as a material part of and as a condition to the Transaction, Buyers and
the Company Group are entering into that certain Guaranty Agreement, dated as of
the date hereof (the “Guaranty”), pursuant to which Buyers and the Company Group
irrevocably, absolutely and unconditionally guarantee the full and prompt
payment and performance when due of the obligations under the Purchase Agreement
and the other Transaction Agreements (as more fully set forth in the Guaranty);

 

 

 

 

WHEREAS, as part of the Transaction, among other things, the Secured Party is
assuming material pension liabilities of the Company Group, assigning valuable
software and software licenses held by Affiliates of the Secured Party to the
Company Group, and extending a $2.0 million working capital line of credit to
the Company Group pursuant to the Line of Credit Note; and

 

WHEREAS, Buyers and Company Group are required to execute and deliver this
Security Agreement under section 2.2(b) of the Purchase Agreement in order to
secure their obligations under the Guaranty and the other Transaction
Agreements.

 

NOW, THEREFORE, in consideration of the foregoing and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the Debtors hereby covenant and agree as follows:

 

1.          Grant of Security Interest. As security for the prompt and complete
payment and performance when due by each Debtor of all of its Obligations (as
defined herein), each Debtor hereby pledges, assigns, collaterally assigns,
mortgages, hypothecates, conveys, transfers and grants to the Secured Party a
first-priority security interest in and to the following properties, assets and
rights of such Debtor, if any, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all of the same
being hereinafter collectively referred to as the “Collateral”): all personal
and fixture property of every kind and nature including all goods (including
Inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, Receivables, accounts, chattel paper (whether
tangible or electronic), deposit accounts, letter-of-credit rights (whether or
not the letter of credit is evidenced by a writing), commercial tort claims,
securities and all other investment property, supporting obligations, any other
contract rights or rights to the payment of money, insurance claims and
proceeds, tort claims, and all general intangibles, including to the extent a
security interest may be granted by the Debtor therein, all payment intangibles,
patents, patent applications, trademarks, trademark applications, trade names,
copyrights, copyright applications, software, engineering drawings, service
marks, customer lists, goodwill, and, to the extent a security interest may be
granted by the Debtor therein, all licenses, permits, agreements of any kind or
nature pursuant to which the Debtor possesses, uses, or has authority to possess
or use property (whether tangible or intangible) of others or pursuant to which
others possess, use or have authority to possess or use property (whether
tangible or intangible) of the Debtor, and all recorded data of any kind or
nature, regardless of the medium of recording including all software, writings,
plans, specifications and schematics.

 

The Collateral shall further include the following:

 

(a)          Substitutions. All substitutions, accessions, additions and
replacements to any of the foregoing; and

 

(b)          Products and Proceeds. All products and proceeds of any of the
foregoing, including each Debtor’s rights, title and interests, if any, in and
to insurance proceeds, proceeds of any voluntary or involuntary disposition or
diminution in value of any of the foregoing, and any claim respecting any
thereof (pursuant to judgment or otherwise) and all goods (including Inventory),
Receivables, accounts, general intangibles, chattel paper, instruments,
documents, consumer goods, equipment and inventory, wherever located, acquired
with the proceeds of any of the foregoing or proceeds thereof. The term
“proceeds” shall have the meaning assigned and ascribed to such term as set
forth in the UCC.

 

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The term “Notes” as used herein means the Line of Credit Note and the Buyer
Promissory Note, together with all attachments and amendments in effect from
time to time.

 

The term “Obligations” as used herein means any and all agreements, covenants,
indebtedness, liabilities and obligations of every kind and description of any
one or more of the Debtors (a) under the Purchase Agreement, the Guaranty, any
of the other Transaction Agreements (including the Notes), each of the
documents, agreements, certificates and instruments executed in connection with
any Transaction Agreement or the Lease Agreement, dated November 7, 2008,
between El Dorado Utilities, Inc. and KPS (as successor-in-interest to Kable
Specialty Packaging Services LLC) or (b) owing to the Secured Party or to any
Affiliate of the Secured Party, whether or not under the Transaction Agreements,
and, in each case of clause (a) or clause (b), whether such agreements,
covenants, indebtedness, liabilities and obligations are primary or secondary,
direct or indirect, absolute or contingent, sole, joint or several, secured or
unsecured, due or to become due, contractual or tortious, arising by operation
of law, by overdraft or otherwise, or now or hereafter existing, including
advances, principal, interest, fees, late fees, expenses, reasonable attorneys’
fees and costs or allocated fees and costs of Secured Party’s in-house legal
counsel, that have been or may hereafter be contracted or incurred.
Notwithstanding the foregoing, and for the avoidance of doubt, the term
Obligations shall include Note Documentation Costs (as defined in each of the
Notes) and no other attorneys’ fees or costs of Secured Party or any Affiliate
of Secured Party relating to negotiation and documentation of the Transaction
Agreements on or prior to the Closing Date.

 

2.           Priority. The security interest granted herein shall be a
first-priority security interest in all of the Collateral.

 

3.           Representations and Warranties. Each Debtor hereby represents and
warrants to the Secured Party, which representations and warranties shall
survive the execution and delivery of this Security Agreement, that:

 

(a)          The Debtor owns, or with respect to property hereafter acquired
will own, all of the Collateral free and clear of all liens, charges,
encumbrances, financing statements and adverse claims of any kind or nature
whatsoever with respect to the Debtor’s interest therein, in favor of any entity
other than the Secured Party.

 

(b)          The Debtor owns, or with respect to property hereafter acquired
will own, and is, or will be, entitled to collect, without right of counterclaim
or set-off, all of its respective portion of the accounts presently held and
those arising in the future, free and clear of all liens, charges, encumbrances,
financing statements and adverse claims of any nature whatsoever, other than
those in favor of the Secured Party.

 

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(c)          All financing statements, agreements, instruments and other
documents necessary to perfect the security interest granted by it to the
Secured Party in respect of the Collateral have been delivered to the Secured
Party in completed and, to the extent necessary or appropriate, duly executed
form for filing in each governmental, municipal or other office. Each Debtor
agrees that at its sole cost and expense, such Debtor will maintain the security
interest created by this Security Agreement in the Collateral as a perfected
first priority security interest.

 

(d)         As of the date hereof, (i) the Debtor has not opened and does not
maintain any deposit accounts other than the accounts listed in Schedule 3
hereto (collectively, the “Deposit Accounts”) and (ii) the Secured Party has a
perfected first priority security interest in each Deposit Account held in the
United States of America which security interest is perfected by control
pursuant to those certain deposit account control agreement(s) entered into by
the Debtor, the applicable depository bank(s) and the Secured Party
contemporaneously herewith.

 

(e)          The Collateral of the Debtor is not used or bought primarily for
personal, family or household purposes of the Debtor.

 

(f)          The grant of Collateral in this Security Agreement covers, and is
intended to cover, all assets of the Debtor.

 

(g)          Debtor is a corporation or limited liability company, duly
incorporated or formed, validly existing and in good standing under the Laws of
its jurisdiction of organization and has all requisite corporate or limited
liability company power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing as a corporation or limited liability
company in each jurisdiction where the ownership or operation of its properties
or conduct of its business requires such qualification, except where the failure
to be so qualified or in good standing, when taken together with all other such
failures, will not prevent, materially delay or materially impair Debtor’s
ability to consummate the transactions contemplated by this Security Agreement.

 

(h)          Each Debtor has all requisite corporate or limited liability
company power and authority to enter into this Security Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by each Debtor and the
consummation by each Debtor of this Security Agreement, have been duly and
validly adopted and approved by the board of directors or managers of each
Debtor and no other corporate proceedings on the part of each Debtor or its
stockholders are necessary with respect to any such matter. This Agreement has
been duly authorized, executed and delivered by the Debtor and such execution
and delivery and the performance by the Debtor of the Debtor’s obligations
hereunder will not violate any applicable provision of law or judgment, order or
regulation of any court or of any public or governmental agency or authority nor
conflict with or constitute a breach of or a default under the organizational
documents of the Debtor or any agreement or instrument to which Debtor is a
party or by which Debtor or any of its property is bound. This Agreement is a
legal, valid and binding obligation of Debtor enforceable in accordance with its
terms.

 

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EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF THE PARTIES IN THE
TRANSACTION AGREEMENTS, (A) NEITHER PARTY HERETO NOR ANY PERSON ON SUCH PARTY’S
BEHALF HAS MADE OR MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
WHATSOEVER, EITHER ORAL OR WRITTEN, WHETHER ARISING BY LAW, COURSE OF DEALING,
COURSE OF PERFORMANCE, USAGE OF TRADE OR OTHERWISE, ALL OF WHICH ARE EXPRESSLY
DISCLAIMED, AND (B) EACH PARTY HERETO ACKNOWLEDGES THAT, IN ENTERING INTO THIS
SECURITY AGREEMENT, IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY MADE
BY THE OTHER PARTY, OR ANY OTHER PERSON ON SUCH OTHER PARTY’S BEHALF.

 

4.           Change of Name, Jurisdiction or Residence. No Debtor shall change
its name, jurisdiction of incorporation, or the state of its principal place of
business unless it has given the Secured Party at least thirty (30) days prior
written notice thereof and has authorized, at the request of the Secured Party,
such additional financing statements with respect to the Collateral to be filed
in such jurisdictions as the Secured Party may deem necessary or desirable in
its sole discretion.

 

5.           Covenants. Each Debtor hereby covenants and agrees that:

 

(a)          The Debtor shall pay immediately upon demand all expenses,
including reasonable attorneys’ fees, legal expenses and costs, together with
interest from the date of such expenditure (at a rate per annum equal to six
percent (6%)), incurred by the Secured Party in enforcing the Obligations and
this Security Agreement. Payment of such expenses and interest shall be secured
by this Security Agreement.

 

(b)          The Debtor shall maintain complete and accurate financial
information concerning the Collateral. The Secured Party (a) shall have complete
access to all of Debtor’s premises during normal business hours and after notice
to Debtor, or at any time and without notice to Debtor if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Receivables and other Collateral and all of Debtor’s
books and records, and (b) Debtor shall promptly furnish to Secured Party such
copies of such books and records, including invoices and all documentation
relating to Receivables and other Collateral, or extracts therefrom as Secured
Party may reasonably request, and (c) Secured Party or its designee may use
during normal business hours such of Debtor’s personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral; provided that Secured Party
does not unreasonably interfere with Debtor’s ability to conduct its business in
the ordinary course.

 

(c)          The Debtor shall promptly notify the Secured Party of all claims
and demands made against any portion of the Collateral of which the Debtor
becomes aware and any information received by the Debtor that may materially
adversely affect the value of any Collateral or the rights and remedies of the
Secured Party relating thereto (including any liens, encumbrances or security
interests purporting to affect the title to the Collateral). In the event of any
such claim or demand, the Debtor shall promptly take such action as may be
reasonably necessary to protect the value of the Collateral.

 

(d)          The Debtor shall pay or cause to be paid, prior to the assessment
of any penalty for delinquency, all taxes, assessments or similar obligations
affecting the Collateral.

 

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(e)          The Debtor shall keep the Collateral free from any lien, charge,
encumbrance, financing statement or adverse claim in favor of any entity other
than the Secured Party, without the prior written consent of the Secured Party.
The Debtor shall protect and defend the Collateral against all claims thereto
(other than claims arising from the Secured Party’s gross negligence or willful
misconduct) and hereby indemnifies and agrees to defend and save the Secured
Party harmless against and with respect to any liability or claim in connection
therewith. Except for the replacement of Collateral in the ordinary course of
business or the removal of obsolete Collateral not required for the operation of
the Debtor’s business, the Debtor shall not sell, dispose of, or grant a
security interest or other encumbrance in any portion of the Collateral or
execute any financing statement covering any portion of the Collateral in favor
of any person other than the Secured Party, without the prior written consent of
the Secured Party. The Debtor may, however, sell or otherwise dispose of
Collateral in the ordinary course of business if the Debtor promptly replaces
such Collateral sold with substitute Collateral of substantially similar quality
and utility and of equal or greater value to the extent same is necessary for
the operation of the Debtor’s business.

 

(f)          The Debtor shall do all acts reasonably necessary to maintain,
preserve, protect and keep the Collateral in good condition and repair, ordinary
wear and tear excepted, shall not permit any waste or unusual or unreasonable
depreciation of Collateral to occur and shall not commit any act for which any
portion of the Collateral might be confiscated by any governmental or private
entity.

 

(g)         The Debtor shall not hereafter establish and maintain any deposit
account other than the accounts listed on Schedule 3 hereto unless (a) the
applicable Debtor shall have given the Secured Party thirty (30) days prior
written notice of its intention to establish such new deposit account with a
depository bank, (2) the depository bank shall be acceptable to the Secured
Party and (3) the Debtor shall otherwise be in full compliance with Sections 6,
7 and 8 hereof at all times with respect to all of its deposit accounts.

 

(h)          The Debtor shall keep and maintain, and require its subsidiaries to
keep and maintain, all of its and their property and assets in good order and
repair, maintain extended coverage, general liability, business interruption,
hazard, property and other insurance in amounts deemed sufficient by the Secured
Party and as is customary for businesses similar to the Debtor’s business, and
deliver to the Secured Party certificates of all such insurance in effect; and
cause all such policies covering any Collateral for the Obligations and business
interruption to contain loss payee endorsements in favor of the Secured Party
and to be subject to cancellation or reduction in coverage only upon thirty (30)
days prior written notice thereof to the Secured Party at its address set forth
in the Notice section hereof.

 

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6.          Lockbox Covenants. Each of KDS and KPS (each, a “Lockbox Debtor”)
hereby covenants and agrees that it shall establish and maintain at all times a
lockbox account (“Lockbox Account”) with PNC Bank, or such other depository bank
as is acceptable to Secured Party in its sole discretion (the “Bank”), for the
deposit of all cash, revenue and amounts received, including remittances from
its account debtors and any other proceeds of Receivables or proceeds of other
Collateral; and shall sign all agreements with Bank (and, as applicable, the
Secured Party) reasonably necessary to establish the Lockbox Account and pay all
fees and charges of the Bank associated therewith. No Lockbox Debtor shall have
any right of access to, or withdrawal from a Lockbox Account. Any and all cash,
revenue and amounts received, including remittances from account debtors and any
other proceeds of Receivables or proceeds of other Collateral, received at any
time by (or for) a Lockbox Debtor shall be received in trust for the Secured
Party and such Lockbox Debtor (or Person receiving any such amounts on behalf of
a Lockbox Debtor) shall promptly deposit all such amounts into the Lockbox
Account. Notwithstanding any other provision of this Security Agreement or any
Transaction Agreement, the requirements of the foregoing sentence and each other
requirement of this Section 6 shall have no cure period and failure to comply
with the requirements hereof shall result in an immediate Event of Default. On a
daily basis, the available balance in the Lockbox Accounts shall be transferred
to a designated account of the Secured Party (the “Designated Account”). On a
weekly basis, the Secured Party shall make a determination of (a) the amount of
outstanding Obligations due and payable and (b) amounts reasonably anticipated
to become Obligations due and payable (collectively, the “Determined Amount”)
and shall retain such Determined Amount in the Designated Account for
application to the outstanding and anticipated Obligations in such order and at
such time as the Secured Party shall determine in its sole discretion. The
Determined Amount shall be determined in the sole discretion of the Secured
Party. The Secured Party may remove the Determined Amount from the Designated
Account at any time. Any amounts in the Designated Account (that were
transferred into the Designated Account from the Lockbox Account during the week
preceding the Secured Party’s determination of the Determined Amount) in excess
of the Determined Amount shall be transferred to the designated account of the
Lockbox Debtors (the “Debtor Funding Account”) for use by such Lockbox Debtors
in their discretion in the ordinary course of their business, subject to Section
8 below. Each Lockbox Debtor shall enter into a Deposit Account Control
Agreement with the Secured Party and Bank, in form and substance satisfactory to
Secured Party, that provides, among other things, that the Lockbox Debtor shall
not have any right of access to, or withdrawal from the Lockbox Account, that
the Bank shall only comply with instructions of the Secured Party, and that
funds in the Lockbox Account shall be transferred only in accordance with the
Secured Party’s instructions. Each Lockbox Debtor shall be required to strictly
comply with the requirements of this Section 6 at all times that any Obligations
under the Notes remain outstanding or the Secured Party retains any obligation
to make loans or advance credit under the Line of Credit Note.

 

7.          Deposit Account Control Covenants. Each Debtor hereby covenants and
agrees that, to the extent that the Debtor maintains cash (other than cash
required to be maintained in a Lockbox Account under Section 6 above) it shall
be deposited into a lockbox, deposit, disbursement or similar account
(“Controlled Accounts” and together with the Lockbox Accounts, the “Blocked
Accounts”) established at a bank or banks (each such bank, a “Controlled Account
Bank”), which Controlled Accounts shall be subject to a “springing” or “with
activation” cash dominion control agreement in form and substance satisfactory
to Secured Party (each such control agreement, a “Control Agreement”). For the
avoidance of doubt, each Debtor Funding Account shall be subject to a Control
Agreement. Upon the occurrence of an Event of Default, Secured Party shall have
the right to immediately give notice to each Controlled Account Bank that it is
exercising its right of control over the Controlled Accounts under the
applicable Control Agreement, and after the date of such notice, (y) no Debtor
shall be permitted to withdraw or direct the withdrawal of proceeds from such
Controlled Accounts or give any instructions whatsoever concerning disposition
of the proceeds in the Controlled Accounts and (z) any funds in Controlled
Accounts shall be transferred to Secured Party for application to the
Obligations. Secured Party does not assume any responsibility for such
Controlled Account arrangement, including any claim of accord and satisfaction
or release with respect to deposits accepted by any Controlled Account Bank
thereunder.

 

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8.           Reporting. The Debtors hereby covenant and agree that they shall:

 

(a)          Annual Financial Statements. Furnish Secured Party within sixty
(60) days after the end of each fiscal year of Debtor, including (a) statements
of income on a consolidating basis (on a business segment basis) and
consolidated basis and (b) stockholders’ equity and cash flow from the beginning
of the current fiscal year to the end of such fiscal year and the balance sheet
as at the end of such fiscal year in each case on a consolidating basis (on a
business segment basis) and consolidated basis, all prepared in accordance with
U.S. generally accepted account principles (“GAAP”) and complete and correct in
all material respects, and in reasonable detail and reported upon on a
consolidated basis without qualification by an independent certified public
accounting firm selected by Debtors and reasonably satisfactory to Secured
Party.

 

(b)          Quarterly Financial Statements. Furnish Secured Party within thirty
(30) days after the end of each fiscal quarter, an unaudited balance sheet,
stockholder’s equity and cash flow of Debtors on a consolidating basis (on a
business segment basis) and consolidated basis and an unaudited statements of
operations on a consolidating basis (on a business segment basis) and
consolidated basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared in
accordance with GAAP and complete and correct in all material respects, subject
to the absence of footnotes and normal and recurring year-end adjustments that
individually and in the aggregate are not material to Debtors’ business.

 

(c)          Monthly Financial Statements and 13-Week Cash Budget. Furnish
Secured Party within twenty (20) days after the end of each month: (a) (other
than for the months of April, July, October and January, which shall be
delivered in accordance with the foregoing paragraph), an unaudited balance
sheet, stockholder’s equity and cash flow of Debtors on a consolidating basis
(on a business segment basis) and consolidated basis and an unaudited statements
of operations on a consolidating basis (on a business segment basis) and
consolidated basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared in accordance
with GAAP and complete and correct in all material respects, subject to the
absence of footnotes and normal and recurring year-end adjustments that
individually and in the aggregate are not material to Debtors’ business, and (b)
a 13-week rolling cash flow projection, which shall include all forecast cash
receipts, operating expenses, payroll and any other cash disbursements.

 

(d)          Other Reports. Furnish Secured Party as soon as available, but in
any event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Debtor shall send to its
stockholders.

 

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(e)          Additional Information. Furnish Secured Party with such additional
information as Secured Party shall reasonably request in order to enable Secured
Party to determine whether the terms, covenants, provisions and conditions of
this Agreement, the Notes and the other Transaction Agreements have been
complied with by Debtors including, without the necessity of any request by
Secured Party, (a) copies of all environmental audits and reviews, (b) at least
thirty (30) days prior thereto, notice of any Debtor’s opening of any new office
or place of business or any Debtor’s closing of any existing office or place of
business, and (c) promptly upon any Debtor’s learning thereof, notice of any
labor dispute to which any Debtor may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the expiration of any
labor contract to which any Debtor is a party or by which any Debtor is bound.

 

(f)          Projected Operating Budget. Furnish Secured Party, no earlier than
thirty (30) days prior to and not later than twenty (20) days after the
beginning of each fiscal year of Debtors commencing with the fiscal year
beginning May 1, 2015, a month by month projected operating budget and cash flow
of Debtors on a consolidated basis for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a certificate signed
by the President or Chief Financial Officer of each Debtor to the effect that
such budget and projections are based on good faith estimates and assumptions
believed by the Debtors to be reasonable as of the date of the applicable
projections or assumptions.

 

(g)          Variances From Operating Budget. Furnish Secured Party,
concurrently with the delivery of the financial statements and reports referred
to in Sections 8(a), (b) and (c), a written report summarizing all material
variances from budgets submitted by Debtors pursuant to Section 8(f) and the
13-week rolling cash flow projection submitted by Debtors pursuant to Section
8(c), in each case with a discussion and analysis by management with respect to
such variances.

 

9.           Further Assurances. At the request of Secured Party at any time and
from time to time, each Debtor shall, at its expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper, to create, evidence, perfect, maintain, maintain the
priority of, and enforce the security interests and the priority thereof in the
Collateral and to otherwise effectuate the provisions or purposes of this
Agreement.

 

10.          Secured Party’s Actions. Upon the occurrence of a failure to
perform any of the Obligations (including the failure to perform any covenant
under this Agreement) when due and if such failure is not cured within any
applicable cure period (such an occurrence, an “Event of Default”), the Secured
Party shall have the right, but shall not be obligated, to discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral, pay for insurance on the Collateral, pay for the maintenance and
preservation of the Collateral, sign and endorse any checks, notes, drafts,
money orders, acceptances or other forms of remittance payable to one or more
Debtors and any invoice, freight or express bill, bill of lading, or other
documents relating to the Collateral, demand, bring suit, collect or give
acquittance for any monies due on accounts or compromise, prosecute or defend
any action, claim or proceeding arising from the Collateral. The Secured Party
shall have the right to do any or all of the foregoing in the name of any one or
more of the Debtors or otherwise. Should a Debtor fail or refuse to perform any
Obligation, the Secured Party shall have the right to, at the Secured Party’s
sole discretion, without further notice to or demand upon the Debtor with
respect to such Event of Default and without releasing the Debtor from any
obligation, covenant or condition hereof, make, perform, observe, take or do the
same in such manner and to such extent as the Secured Party may, during any
period of time that the Debtor is in default hereunder, deem necessary to
protect the Collateral and the security provided by this Security Agreement. The
Debtors agree to reimburse the Secured Party on demand for any reasonable
payment made, or any reasonable expense incurred, including reasonable
attorneys’ fees, by the Secured Party in connection with the foregoing, together
with interest thereon from the date incurred (at a rate per annum equal to six
percent (6%)).

 

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11.         Default; Remedies. Upon the occurrence of an Event of Default, the
Secured Party shall have the right at its option and without notice or demand,
to declare all Obligations secured hereby immediately due and payable, and to do
one or more of the following:

 

(a)          Foreclose or otherwise enforce the Secured Party’s security
interest in any manner permitted by the UCC or other applicable Laws, or any
other applicable agreement.

 

(b)          With respect to accounts, at any time (including prior to an Event
of Default) give notice of assignment to any and all obligors or account debtors
under the accounts. Each Debtor hereby covenants and agrees that the Debtor will
cooperate fully with the Secured Party, and its employees and agents, and will
provide any and all documents deemed by the Secured Party to be necessary or
desirable to collect the accounts.

 

(c) Collect the accounts, take possession of the Collateral, or both. Secured
Party shall have the sole and exclusive right to collect the accounts following
an Event of Default. The Secured Party’s actual reasonable collection expenses,
including stationery and postage, telephone and telegraph, secretarial and
clerical expenses, may be charged to Debtors and added to the Obligations.

 

(d)          Receive, endorse, assign or deliver in the name of the Secured
Party or any Debtor any and all checks, drafts and other instruments for the
payment of money relating to the accounts, and each Borrower hereby waives
notice of presentment, protest and non-payment of any instrument so endorsed.
Each Debtor hereby irrevocably appoints and designates the Secured Party or its
designee as such Debtor’s attorney with power (i) at any time: (A) to endorse
such Debtor’s name upon any notes, acceptances, checks, drafts, money orders or
other evidences of payment or Collateral; (B) to sign such Debtor’s name on any
invoice or bill of lading relating to any of the accounts, drafts against
account debtors, assignments and verifications of accounts; (C) to send
verifications of accounts to any account debtor; (D) to sign such Debtor’s name
on all financing statements or any other documents or instruments deemed
necessary or appropriate by the Secured Party to preserve, protect, or perfect
the Secured Party’s interest in the Collateral and to file same; and (E) to
receive, open and dispose of all mail addressed to any Debtor; and (ii) at any
time following the occurrence and during the continuance of an Event of Default:
(A) to demand payment of the accounts; (B) to enforce payment of the accounts by
legal proceedings or otherwise; (C) to exercise all of such Debtor’s rights and
remedies with respect to the collection of the accounts and any other
Collateral; (D) to settle, adjust, compromise, extend or renew the accounts; (E)
to settle, adjust or compromise any legal proceedings brought to collect
accounts; (F) to prepare, file and sign such Debtor’s name on a proof of claim
in bankruptcy or similar document against any account debtor; (G) to prepare,
file and sign such Debtor’s name on any notice of lien, assignment or
satisfaction of lien or similar document in connection with the accounts; and
(H) to do all other acts and things necessary to carry out this Security
Agreement and any and all rights of the Secured Party. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence (as determined by a court of competent jurisdiction in a
final non-appealable judgment); this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. The Secured Party shall
have the right at any time to change the address for delivery of mail addressed
to any Debtor.

 

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(e)          Sell, lease or otherwise dispose of any Collateral at one or more
public or private sales, whether or not such Collateral is present at the place
of sale, for cash or credit or future delivery, on such terms and in such manner
as the Secured Party may determine. In the event of a sale, lease or other
disposition of the Collateral or of collection of the accounts:

 

(1)         Any person, including any Debtor and the Secured Party, may purchase
at the sale.

 

(2)         (A)         In connection with any sale or other dispositions of the
Collateral, the Parties agree that without limiting any other commercially
reasonable conduct as may be followed by the Secured Party, the following
procedures shall be deemed to comprise and constitute a commercially reasonable
sale (hereinafter referred to as the “sale”):

 

(i)   The Secured Party shall mail to the applicable Debtors written notice of
the sale not less than ten (10) days prior to such sale.

 

(ii)   In the event of a public sale, as often as (but no more than) required
under the UCC immediately preceding the sale, the Secured Party will publish
notice of the sale in an appropriate publication that the Secured Party selects.
The notice will advise prospective purchasers as to where they may obtain
information with respect to the Collateral.

 

(iii) Upon receipt of any written request to do so, the Secured Party will make
available to any bona fide prospective purchaser for inspection, within five (5)
Business Days following receipt of such request and during reasonable business
hours, such information (including records and documents with respect to the
accounts) as shall be necessary to enable a prospective purchaser to prepare a
bid.

 

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(B)         Notwithstanding paragraph (A) hereof to the contrary, in the event
the Secured Party offers to sell all or any part of the Collateral, the Secured
Party will be under no obligation to consummate a sale if, in its reasonable
business judgment, none of the offers received by them reasonably approximates
the fair value of such Collateral.

 

(3)         The Secured Party shall apply the proceeds of any sale, collection,
or disposition hereunder to payment of the following: (A) the expenses of such
sale or disposition, including the costs of publishing, recording, mailing and
posting notice; (B) the cost of any search and other evidence of title procured
in connection therewith and any transfer tax on any deed or conveyance or bill
of sale; (C) all sums expended under the terms hereof, not then repaid, with
accrued interest at the “prime rate” (as determined by reference to the Wall
Street Journal for applicable periods) plus 800 basis points; (D) all sums
required to satisfy the Obligations; and (E) the remainder, if any, to the
person or persons legally entitled thereto.

 

(4)         The Secured Party may require a Debtor to make the Collateral
available to the Secured Party at the Debtor’s place of business.

 

(f)          Recover from the Debtors all reasonable costs and expenses,
including reasonable attorneys’ fees, incurred or paid by the Secured Party in
exercising any right, power or remedy provided by this Security Agreement or by
Law.

 

12.         Power of Attorney. Each Debtor hereby irrevocably designates and
appoints Secured Party (and all persons designated by Secured Party) as Debtor’s
true and lawful attorney-in-fact, and authorizes Secured Party, in Debtor’s or
Secured Party’s name, to: (a) at any time an Event of Default exists or has
occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Debtor’s rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as the Secured Party deems
advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi)
discharge and release any Receivable, (vii) prepare, file and sign Debtor’s name
on any proof of claim in bankruptcy or other similar document against an account
debtor or other obligor in respect of any Receivables or other Collateral,
(viii) notify the post office authorities to change the address for delivery of
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Secured Party, and open
and dispose of all mail addressed to Debtor and handle and store all mail
relating to the Collateral; and (ix) do all acts and things which are necessary,
in Secured Party’s determination, to fulfill Debtor’s obligations under this
Agreement and the other Transaction Agreements and (b) at any time to (i) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Secured Party, (ii) have access to any lockbox
or postal box into which remittances from account debtors or other obligors in
respect of Receivables or other proceeds of Collateral are sent or received,
(iii) endorse Debtor’s name upon any items of payment in respect of Receivables
or constituting Collateral or otherwise received by Secured Party and deposit
the same in Secured Party’s account for application to the Obligations, (iv)
endorse Debtor’s name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or any goods pertaining
thereto or any other Collateral, including any warehouse or other receipts, or
bills of lading and other negotiable or non-negotiable documents, and (v) sign
Debtor’s name on any verification of Receivables and notices thereof to account
debtors or any secondary obligors or other obligors in respect thereof. Debtor
hereby releases Secured Party, its Affiliates (other than the Company Group) and
the members, managers, directors, officers, employees, agents, designees and
representatives of Secured Party or its Affiliates from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Secured Party’s own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.

 

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13.         Exercise of Remedies; No Waiver. All remedies conferred upon the
Secured Party shall be deemed cumulative with, and not exclusive of, any other
remedy conferred by any Transaction Agreement or by law or equity. The exercise
of any one remedy shall not preclude the exercise of any other. Failure of the
Secured Party to exercise any rights it may have upon any Debtor’s default shall
not be deemed to be a waiver of the Secured Party’s rights thereupon or to be a
release of any Debtor from its Obligations. The acceptance by the Secured Party
of any sum or performance after the same is due shall not constitute a waiver of
the right either to require prompt payment or performance, when due, of all
other sums and obligations hereby secured or to declare a default as herein
provided. The acceptance by the Secured Party of any sum in an amount less than
the sum then due shall not constitute a waiver of the obligation of any Debtor
to pay the entire sum then due. The waiver by the Secured Party of any default
hereunder shall not be deemed to constitute a waiver of any succeeding default.
Each Debtor waives any right to require the Secured Party to proceed against any
person or to exhaust any Collateral or to pursue any remedy in the Secured
Party’s power.

 

14.         Authorization to File Financing Statements. Each Debtor hereby
specifically and irrevocably authorizes the Secured Party, at any time and from
time to time, to file in any UCC jurisdiction any initial financing statements
and amendments thereto that (i) indicate that the Collateral consists of all
assets of the Debtor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the UCC, or is of an equal or lesser scope or with greater detail and (ii)
contain any other information required by part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement or amendment,
including (a) whether the Debtor is an organization, the type of organization of
the Debtor, and any organizational identification number issued to the Debtor,
and (b) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. Each
Debtor hereby covenants and agrees to furnish any such information to the
Secured Party promptly upon request.

 

15.         Term. This Security Agreement shall remain in full force and effect
until the Obligations shall have been indefeasibly paid in full and satisfied or
until an express release and termination is given in writing by the Secured
Party. No party to this Security Agreement or otherwise liable for the
Obligations shall be discharged by any extension of time, additional advances,
renewals and extensions of the underlying agreements and Obligations, the taking
of further security, releases of a part or all of the Collateral, or any other
acts.

 

13

 

  

16.         Waiver. The failure of any Debtor to comply with any of its
obligations or agreements herein contained may be waived only in writing by the
Secured Party. No waiver granted hereunder shall be deemed a waiver of any
subsequent breach or default of the same or similar nature. No failure or delay
by any Party in exercising any right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

 

17.         Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given: (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile (with
confirmation of transmission) if sent during normal business hours of the
recipient, and on the next Business Day if sent after normal business hours of
the recipient; or (d) on the third day after the date mailed, by certified or
registered mail, return receipt requested, postage prepaid. Such communications
must be sent to the respective Parties at the addresses set forth below (or to
such other address that may be designated by a party from time to time in
accordance with this Section).

 

Debtors: c/o DFI Holdings, LLC with a required copy to (which shall not
constitute notice):   3179 Deer Creek Road, Fox Rothschild LLP   Collegeville,
PA 19426 2700 Kelly Road, Suite 300   Attention: Michael P. Duloc Warrington, PA
18976   Fax: 815-734-5233 Attention: Jeffrey H. Nicholas     Fax: 215-345-7507  
    Secured c/o AMREP Corporation with a required copy to (which shall not
constitute notice): Party: 300 Alexander Park, Suite 204 Duane Morris LLP  
Princeton, New Jersey 08540 222 Delaware Avenue   Attention: General Counsel
Suite 1600   Fax: 609-716-8255 Wilmington, DE 19801     Attention: Christopher
Winter     Fax: 302-397-2455

 

18.         Governing Law; Consent to Jurisdiction and Waiver of Jury Trial.

 

(i)          This Security Agreement shall be governed by and construed in
accordance with the internal substantive Laws of the State of New York, without
giving effect to any choice of Law or conflict of Laws rules or provisions
(whether of the State of New York or any other jurisdiction) that would cause
the application of the Laws of any jurisdiction other than the State of New
York. The term “UCC” as used herein means the Uniform Commercial Code as
currently in effect in the State of New York.

 

14

 

 

 

(ii)         Each Party irrevocably submits to the exclusive jurisdiction of the
federal courts of the Southern District of New York or the courts of the State
of New York located in the City of New York for the purposes of any suit, action
or other proceeding arising out of this Security Agreement or any transaction
contemplated hereby. Each Party further agrees that service of any process,
summons, notice or document by U.S. registered mail to such Party’s respective
address set forth in the “Notices” section hereof shall be effective service of
process for any action, suit or proceeding with respect to any matters to which
it has submitted to jurisdiction in this Section. Each Party irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Security Agreement or the transactions
contemplated hereby in federal courts of the Southern District of New York or
the courts of the State of New York located in the City of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

 

19.         Counterparts. This Security Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Execution and delivery of
this Security Agreement by delivery of a facsimile or electronically recorded
copy in .pdf file format bearing a copy of the signature of a Party shall
constitute a valid and binding execution and delivery of this Security Agreement
by such Party. Such copies shall constitute enforceable original documents.

 

20.         Headings. The section headings contained in this Security Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Security Agreement.

 

21.         Entire Agreement. This Security Agreement embodies the entire
agreement and understanding of the Parties hereto in respect of the subject
matter herein. This Security Agreement supersedes all prior agreements and
understandings between the Parties with respect to the subject matter thereof.

 

22.         Amendment. Any provision of this Security Agreement may be amended
if, and only if, such amendment is in writing and is signed by each Party to
this Security Agreement.

 

23.         Binding Effect; Benefits. This Security Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective
successors and permitted assigns; nothing in this Security Agreement, express or
implied, is intended to confer on any Person other than the Parties and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Security Agreement.

 

24.         Joint Drafting. The Parties have participated jointly in the
negotiation and drafting of this Security Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Security Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Security Agreement.

 

15

 

  

25.         Severability. Whenever possible, each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Law. If any provision of this Security Agreement is held to be
prohibited by or invalid under applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Security Agreement so as to effect the
original intent of the Parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

 

26.         Interpretation. When a reference is made in this Security Agreement
to an Article, Section or Exhibit, such reference will be to an Article or
Section of, or an Exhibit to, this Security Agreement unless otherwise
indicated. Whenever the words “include,” “includes” or “including” are used in
this Security Agreement, they will be deemed to be followed by the words
“without limitation.” The words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Security Agreement will refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement. Unless the context expressly provides otherwise, any approval,
determination, election or authorization required to be obtained from a Party
shall be at such Party’s sole discretion. The word “or” is not exclusive. All
capitalized terms used and defined in this Security Agreement shall have the
meanings ascribed to them herein. All capitalized terms used but not otherwise
defined in this Security Agreement shall have the meanings ascribed to them in
the Purchase Agreement. All terms defined in this Security Agreement will have
such defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Security Agreement are applicable to the singular as well as
the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such term. Unless otherwise indicated, any agreement,
instrument or statute defined or referred to herein, or in any agreement or
instrument that is referred to herein, means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a Person
are also to its permitted successors and assigns.

 

27.         Assignability. This Security Agreement shall not be assignable by
any Party hereto without the prior written consent of the other Party.

 

28.         Specific Performance. Each Party agrees that irreparable damage
would occur in the event that any of the provisions of this Security Agreement
were not performed by them in accordance with the terms hereof and that each
Party shall be entitled to specific performance of the terms hereof (without the
need to post bond or any other security), in addition to any other remedy at law
or equity.

 

29.         Expenses. Each Party shall bear its own costs and expenses in
connection with this Security Agreement and the transactions contemplated
hereby, including all legal, accounting, financial advisory, consulting and all
other fees and expenses of third parties, except where specifically provided to
the contrary.

 

16

 

  

30.         Disclosure. Each Debtor consents to the Secured Party or its
Affiliates publicly disclosing this Security Agreement, including by filing such
documents with the Securities and Exchange Commission or the New York Stock
Exchange.

 

31.         Independent Counsel. Each Party certifies that it has read the terms
of this Security Agreement, that it understands the terms of this Security
Agreement, and that it is entering into this Security Agreement of its own
volition. Each Party warrants and represents that it has (a) been represented by
an attorney of its choice in connection with the Transaction and received
independent legal advice from its attorney regarding its decision with respect
to the advisability of making and entering into this Security Agreement, or (b)
had sufficient time, opportunity and means to engage an attorney of its choice
in order to be represented by such attorney in connection with the Transaction
and to receive independent legal advice from its attorney regarding its decision
with respect to the advisability of making and entering into this Security
Agreement, and has made a knowing and voluntary decision not to do so.

 

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17

 

  

IN WITNESS WHEREOF, the Parties have caused this Security Agreement to be duly
executed and delivered as of the date first written above.

 

DFI HOLDINGS, LLC   KPS HOLDCO, LLC       By: /s/ Michael P. Duloc   By: /s/
Michael P. Duloc   Name: Michael P. Duloc     Name: Michael P. Duloc   Title:
Manager     Title: Manager       KABLE MEDIA SERVICES, INC.   KABLE NEWS
INTERNATIONAL, INC.       By: /s/ Michael P. Duloc   By: /s/ Michael P. Duloc  
Name: Michael P. Duloc     Name: Michael P. Duloc   Title: President & Chief
Executive Officer     Title: President & Chief Executive Officer       KABLE
DISTRIBUTION SERVICES, INC.   KABLE DISTRIBUTION SERVICES OF CANADA, LTD.      
By: /s/ Michael P. Duloc   By: /s/ Michael P. Duloc   Name: Michael P. Duloc    
Name: Michael P. Duloc   Title: President & Chief Executive Officer     Title:
President & Chief Executive Officer       KABLE NEWS COMPANY, INC.   KABLE
PRODUCT SERVICES, INC.       By: /s/ Michael P. Duloc   By: /s/ Michael P. Duloc
  Name: Michael P. Duloc     Name: Michael P. Duloc   Title: President & Chief
Executive Officer     Title: President & Chief Executive Officer       American
republic investment co.           By: /s/ Peter M. Pizza       Name: Peter M.
Pizza       Title: Vice President    

 

Signature Page to Security Agreement

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