Exhibit 10.9




 





 


 


DEBTOR-IN-POSSESSION SECURITY AGREEMENT


 


By


 


FAIRPOINT COMMUNICATIONS, INC.,


 


and


 


ITS SUBSIDIARIES PARTY HERETO,

as Grantors,


 


and


 


BANK OF AMERICA, INC.,


as Collateral Agent


 






 


Dated as of October 30, 2009


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  Uniform
  Commercial Code Defined Terms

  	
  2

  
	
  SECTION 1.02.

  	
  Credit
  Agreement Defined Terms

  	
  2

  
	
  SECTION 1.03.

  	
  Definition
  of Certain Terms Used Herein

  	
  2

  
	
  SECTION 1.04.

  	
  Rules of
  Construction

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  AUTHORITY OF COLLATERAL AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  General
  Authority of the Collateral Agent over the Collateral

  	
  6

  
	
  SECTION 2.02.

  	
  Remedies
  Not Exclusive

  	
  7

  
	
  SECTION 2.03.

  	
  Waiver
  and Estoppel

  	
  7

  
	
  SECTION 2.04.

  	
  Limitation
  on Collateral Agents’ Duty in Respect of Collateral

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  SECURITY INTERESTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  Security
  Interests

  	
  8

  
	
  SECTION 3.02.

  	
  Perfection
  and Priority

  	
  9

  
	
  SECTION 3.03.

  	
  Claim
  Priorities

  	
  9

  
	
  SECTION 3.04.

  	
  Modifications

  	
  10

  
	
  SECTION 3.05.

  	
   

  	
  10

  
	
  SECTION 3.06.

  	
  No
  Assumption of Liability

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  Title
  and Authority

  	
  11

  
	
  SECTION 4.02.

  	
  Validity
  of Security Interest

  	
  11

  
	
  SECTION 4.03.

  	
  Limitations
  on and Absence of Other Liens

  	
  11

  
	
  SECTION 4.04.

  	
  Jurisdiction
  of Organization

  	
  11

  
	
  SECTION 4.05.

  	
  Instruments
  and Tangible Chattel Paper

  	
  11

  
	
  SECTION 4.06.

  	
  Deposit
  Accounts and Investment Property

  	
  12

  
	
  SECTION 4.07.

  	
  Real
  Estate Interests

  	
  12

  



 


i

















 


	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  Protection
  of Security

  	
  13

  
	
  SECTION 5.03.

  	
  Taxes;
  Encumbrances

  	
  13

  
	
  SECTION 5.04.

  	
  Assignment
  of Security Interest

  	
  14

  
	
  SECTION 5.05.

  	
  Continuing
  Obligations of the Grantors

  	
  14

  
	
  SECTION 5.06.

  	
  Use
  and Disposition of Collateral

  	
  14

  
	
  SECTION 5.07.

  	
  Limitation
  on Modification of Accounts

  	
  14

  
	
  SECTION 5.08.

  	
  Insurance

  	
  14

  
	
  SECTION 5.09.

  	
  Certain
  Covenants and Provisions Regarding Patent, Trademark and Copyright Collateral

  	
  14

  
	
  SECTION 5.10.

  	
  Other
  Actions

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  Remedies
  upon Default

  	
  19

  
	
  SECTION 6.02.

  	
  Application
  of Proceeds

  	
  21

  
	
  SECTION 6.03.

  	
  Grant
  of License to Use Intellectual Property

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01.

  	
  Notices

  	
  22

  
	
  SECTION 7.02.

  	
  Survival
  of Agreement

  	
  22

  
	
  SECTION 7.03.

  	
  Binding
  Effect

  	
  22

  
	
  SECTION 7.04.

  	
  Successors
  and Assigns

  	
  23

  
	
  SECTION 7.05.

  	
  GOVERNING
  LAW

  	
  23

  
	
  SECTION 7.06.

  	
  Waivers;
  Amendment; Several Agreement

  	
  23

  
	
  SECTION 7.07.

  	
  Severability

  	
  24

  
	
  SECTION 7.08.

  	
  Counterparts

  	
  24

  
	
  SECTION 7.09.

  	
  Headings

  	
  24

  
	
  SECTION 7.10.

  	
  Termination

  	
  24

  
	
  SECTION 7.11.

  	
  Financing
  Statements

  	
  24

  
	
  SECTION 7.12.

  	
  Collateral
  Agent Appointed Attorney-in-Fact

  	
  25

  



 


ii

















 


	
  ANNEXES

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex
  I

  	
  Form of
  Issuer Acknowledgement

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule
  1

  	
  Copyrights

  	
   

  
	
  Schedule
  2

  	
  Licenses

  	
   

  
	
  Schedule
  3

  	
  Patents

  	
   

  
	
  Schedule
  4

  	
  Trademarks

  	
   

  
	
  Schedule
  5

  	
  Commercial
  Tort Claims

  	
   

  
	
  Schedule
  6

  	
  Jurisdiction
  of Organization

  	
   

  
	
  Schedule
  7

  	
  Deposit
  Accounts

  	
   

  
	
  Schedule
  8

  	
  Securities
  and Commodities Accounts

  	
   

  
	
  Schedule
  9

  	
  Real
  Estate Interests

  	
   

  



 


iii














 


DEBTOR-IN-POSSESSION
SECURITY AGREEMENT


 


This  DEBTOR-IN-POSSESSION SECURITY AGREEMENT (as
amended, amended and restated, supplemented or otherwise modified from time to
time, this “Agreement”), dated as of October 30, 2009 among
FAIRPOINT COMMUNICATIONS, INC., a Delaware corporation and a debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code (as defined in the
Credit Agreement referred to below)  (“FairPoint”),
FairPoint Logistics, Inc., a South Dakota corporation and a debtor and
debtor-in-possession under Chapter 11 of the Bankruptcy Code (“FairPoint
Logistics”; and together with FairPoint, each a “Borrower” and
collectively the “Borrowers”), each Subsidiary of FairPoint listed on the
signature pages hereto, each a debtor and debtor-in-possession under
Chapter 11 of the Bankruptcy Code 
(together with the Borrowers, the “Grantors”) and BANK OF
AMERICA, N.A., as Collateral Agent (in such capacity, and together with any
successors and assigns in such capacity, the “Collateral Agent”) for the
benefit of the Secured Creditors (as defined below).


 


R E C I T A L S


 


WHEREAS,
the Borrowers and each of the other Grantors have filed in the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”) a voluntary petition for relief under Chapter 11 of the Bankruptcy
Code and have continued in the possession of their assets and in the management
of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code,
and such reorganization cases are being jointly administered under Case Number
09-16335-brl (the “Cases”).


 


WHEREAS,
the Borrowers, the lenders from time to time party thereto (the “Lenders”)
and Bank of America, N.A., as Administrative Agent, have entered into a
Debtor-In-Possession Credit Agreement, dated as of October 27, 2009 (as
amended, modified, restated and/or supplemented from time to time, the “Credit
Agreement”), providing for the making of Loans to, and the issuance of, and
participation in, Letters of Credit for the account of the Borrowers and/or one
or more of their Subsidiaries, all as contemplated therein (the Lenders, the
Letter of Credit Issuer, the Administrative Agent, the Collateral Agent and the
Pledgee referred to in the Pledge Agreement are herein called the “Secured
Creditors”).


 


WHEREAS,
it is a condition precedent to the making of Loans and the issuance of, and
participation in, Letters of Credit under the Credit Agreement that each
Grantor shall have executed and delivered to the Collateral Agent this
Agreement.


 


WHEREAS,
each Grantor desires to execute this Agreement to satisfy the condition described
in the preceding paragraph.


 


NOW
THEREFORE, in consideration of the foregoing and other benefits accruing each
Grantor, the receipt and sufficiency of which are hereby acknowledged, each
Grantor hereby makes the following representations and warranties to the
Collateral Agent for the benefit of the Secured Creditors and hereby covenants
and agrees with the Collateral Agent (for the benefit of the Secured
Creditors), as follows:


 

















 


ARTICLE
I



DEFINITIONS


 


SECTION 1.01.                 Uniform
Commercial Code Defined Terms.  Unless otherwise defined herein, terms used
herein that are defined in the UCC shall have the meanings assigned to them in
the UCC, including the following which are capitalized herein:


 


“Accounts”;
“Bank”; “Certificates of Title”; “Chattel Paper”; “Commercial
Tort Claim”; “Commodity Account”; “Commodity Contract”; “Commodity
Customer”; “Commodity Intermediary”; “Deposit Accounts”; “Documents”;
“Electronic Chattel Paper”; “Entitlement Holder”; “Entitlement
Order”; “Equipment”; “Financial Asset”; “Fixtures”; “Goods”;
“Instruments” (as defined in Article 9 rather than Article 3);
“Inventory”; “Investment Property”; “Letter-of-Credit Rights”;
“Letters of Credit”; “Securities”; “Securities Account”; “Securities
Intermediary”; “Security Entitlement”; “Supporting Obligations”;
and “Tangible Chattel Paper”.


 


SECTION 1.02.                 Credit
Agreement Defined Terms. 
Capitalized terms used but not otherwise defined herein that are defined
in the Credit Agreement shall have the meanings given to them in the Credit
Agreement.


 


SECTION 1.03.                 Definition
of Certain Terms Used Herein.  As used herein, the following terms shall
have the following meanings:


 


“Account
Debtor” shall mean any Person who is or who may become obligated to any
Grantor under, with respect to or on account of an Account.


 


“Accounts
Receivable” shall mean all Accounts and all right, title and interest in
any returned goods, together with all rights, titles, securities and guarantees
with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens
and pledges, whether voluntary or involuntary, in each case whether now existing
or owned or hereafter arising or acquired.


 


“Bankruptcy
Court” shall have the meaning assigned to such term in the Recitals of this
Agreement.


 


“Books
and Records” shall mean all instruments, files, records, ledger sheets and
documents evidencing, covering or relating to any of the Collateral.


 


“Borrowers”
shall have the meaning assigned to such term in the introductory paragraph of
this Agreement.


 


“Cases”
shall have the meaning assigned to such term in the Recitals of this Agreement.


 


“Charges”
shall mean any and all property and other taxes, assessments and special assessments,
levies, fees and all governmental charges imposed upon or assessed against, and
all claims (including, without limitation, landlords’, carriers’, mechanics’,
maritime, workmen’s, 


 


2

















 


repairmen’s, laborers’, materialmen’s, suppliers’ and
warehousemen’s Liens and other claims arising by operation of law) against, all
or any portion of the Collateral.


 


“Collateral
Agent” shall have the meaning assigned to such term in the introductory paragraph
of this Agreement.


 


“Collateral
Estate” shall have the meaning assigned to such term in Section 2.01(c).


 


“Commodity
Account Control Agreement” shall mean an agreement in form and substance
reasonably satisfactory to the Collateral Agent establishing the Collateral
Agent’s Control with respect to a Commodity Account.


 


“Control”
shall mean (i) in the case of each Deposit Account, “control,” as such
term is defined in Section 9-104 of the UCC, (ii) in the case of any
Security Entitlement, “control,” as such term is defined in Section 8-106(d) of
the UCC, and (iii) in the case of any Commodity Contract, “control,” as
such term is defined in Section 9-106(b) of the UCC.


 


“Control
Agreement” shall mean, collectively, the Deposit Account Control
Agreements, the Securities Account Control Agreements and the Commodity Account
Control Agreements.


 


“Copyright License” shall mean each
agreement, now or hereafter in effect, granting any right to any third party
under any Copyright now or hereafter owned by any Grantor or which such Grantor
otherwise has the right to license, or granting any right to such Grantor under
any Copyright now or hereafter owned by any third party, and all rights of such
Grantor under any such agreement.


 


“Copyrights”
shall mean, collectively, with respect to each Grantor, all copyrights (whether
statutory or common law, whether registered or unregistered and whether
published or unpublished) and all copyright registrations and applications made
by such Grantor in the United States, in each case, whether now owned or
hereafter created or acquired by or assigned to such Grantor, including,
without limitation, the copyrights, registrations and applications listed in Schedule
1 to this Agreement, together with any and all (i) rights and
privileges arising under applicable law with respect to such Grantor’s use of
such copyrights, (ii) reissues, renewals, continuations and extensions
thereof, (iii) income, fees, royalties, damages, claims and payments now
or hereafter due and/or payable with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof and (iv) rights to sue for past, present or future infringements
thereof.


 


“Credit
Agreement” shall have the meaning assigned to such term in the Recitals of
this Agreement.


 


“Deposit
Account Control Agreement” shall mean an agreement that is in form and substance
reasonably satisfactory to the Collateral Agent establishing the Collateral
Agent’s Control with respect to any Deposit Account.


 


“General
Intangibles” shall mean, collectively, all “general intangibles,” as such
term is defined in the UCC, and in any event shall include, without limitation,
all choses in action and causes of action and all other intangible personal
property of any Grantor of every kind and nature


 


3

















 


now owned or hereafter acquired by any Grantor,
including all rights and interests in partnerships, limited partnerships,
limited liability companies and other unincorporated entities, corporate or
other business records, indemnification claims, contract rights (including
rights under leases, whether entered into as lessor or lessee, and other
agreements), Intellectual Property, goodwill, registrations, franchises and tax
refund claims.


 


“Intellectual
Property” shall mean all intellectual property of every kind and nature now
owned in the United States by a Grantor, or hereafter acquired by any Grantor,
including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade
secrets, confidential or proprietary technical and business information,
know-how or other confidential or proprietary data or information, software and
databases.


 


“Lenders”
shall have the meaning assigned to such term in the Recitals of this Agreement.


 


“License”
shall mean any United States Patent License, Trademark License or Copyright
License or other United States license or sublicense in respect of Intellectual
Property to which any Grantor is a party including, without limitation, those
listed on Schedule 2 to this Agreement.


 


“Patent
License” shall mean any agreement, now or hereafter in effect, granting to
any third party any right to make, use or sell any invention covered by a
Patent, now or hereafter owned by any Grantor or which any Grantor otherwise
has the right to license, or granting to any Grantor any right to make, use or
sell any invention a Patent, now or hereafter owned by any third party, and all
rights of any Grantor under any such agreement.


 


“Patents” shall mean all of the following now
owned or hereafter acquired in the United States by a Grantor:  (a) all letters patent and all
applications for letters patent, including registrations, recordations and
pending applications in the United States Patent and Trademark Office,
including those listed on Schedule 3 to this Agreement, and (b) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.


 


“Permit”
shall mean any permit, approval, authorization, license, variance or permission
required from a governmental authority under an applicable law.


 


“Pledge
Agreement” means the Debtor-In-Possession Pledge Agreement, dated as of the
date hereof, made by FairPoint and certain of its Subsidiaries party thereto in
favor of the Collateral Agent, as the same may be amended, restated,
supplemented or otherwise modified from time to time.


 


“Pledge
Agreement Collateral” shall “Collateral” under and as defined in the Pledge
Agreement.


 


“Proceeds”
shall mean, collectively, all “proceeds,” as such term is defined in the UCC,
and in any event shall include, without limitation, any consideration received
from the sale, exchange, license, lease or other disposition of any asset or
property that constitutes Collateral, any 


 


4

















 


value received as a consequence of the possession of
any Collateral and any payment received from any insurer or other Person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property that constitutes Collateral,
and shall include (a) all cash and negotiable instruments received by or
held on behalf of the Collateral Agent, (b) any claim of any Grantor
against any third party for (and the right to sue and recover for and the
rights to damages or profits due or accrued arising out of or in connection
with) (i) past, present or future infringement of any Patent now or
hereafter owned by any Grantor, or licensed under a Patent License, (ii) past,
present or future infringement or dilution of any Trademark now or hereafter
owned by any Grantor or licensed under a Trademark License or injury to the
goodwill associated with or symbolized by any Trademark now or hereafter owned
by any Grantor, (iii) past, present or future breach of any License and (iv) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License and (c) any and all other
amounts from time to time paid or payable under or in connection with any of
the Collateral.


 


“Real Estate Interests” means,
with respect to a Grantor, all Real Property Owned and all Real Property
Leaseholds, whether now owned or held, or hereafter acquired.


 


“Real Property Leaseholds” means
all leases now or hereafter owned or held by a Grantor, of real property
whether improved or unimproved and all rights, interests and estates, real and
personal, arising under or in connection with such leases and such real
property, including without limitation all buildings and all personal property
and fixtures included under such leases.


 


“Real Property Owned” means all
parcels of land now or hereafter owned by a Grantor, together with the right,
title and interest of such Grantor in and to adjacent streets, the air space
and development rights, all rights of way, privileges, tenements, hereditaments
and appurtenances thereto, and fixtures, easements, all royalties and rights
pertaining to the use of the real property, including, without limitation, all
alleys, vaults and drainage together with all buildings and other improvements
now or hereafter erected thereon and all fixtures and personal property
appertaining thereto and all additions thereto and all substitutions and
replacements thereof.


 


“Secured
Creditors” shall have the meaning assigned to such term in the Recitals of
this Agreement.


 


“Securities
Account Control Agreement” shall mean an agreement in form and substance
reasonably satisfactory to the Collateral Agent establishing the Collateral
Agent’s Control with respect to any Securities Account.


 


“Security
Interests” shall  mean the Liens and
security interests granted in Section 3.01 of this Agreement to secure the
Obligations.


 


“Trademark
License” shall mean any agreement, now or hereafter in effect, granting to
any third party any right to use any Trademark now or hereafter owned by any
Grantor or that any Grantor otherwise has the right to license, or granting to
any Grantor any right to use any Trademark now or hereafter owned by any third
party, and all rights of any Grantor under any such agreement.


 


5

















 


“Trademarks”
shall mean all of the following now owned or hereafter acquired in the United
States by a Grantor:  (a) all
trademarks, service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos, other
source or business identifiers, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all registrations and
recordations thereof, and all applications filed in connection therewith,
including registrations and registration applications in the United States
Patent and Trademark Office or any State of the United States, and all
extensions or renewals thereof, including those listed on Schedule 4
to this Agreement and, (b) all goodwill associated therewith or symbolized
thereby.


 


“UCC”
shall mean the Uniform Commercial Code as in effect from time to time in the
State of New York; provided, however, that if by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of the
Collateral Agent’s and the Secured Creditors’ security interest in any item or
portion of the Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term “UCC”
shall mean the Uniform Commercial Code as in effect on the date hereof in such
other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions relating to
such provisions.


 


SECTION 1.04.                 Rules of
Construction.  Unless the
context otherwise requires:


 


(1)                                  a term has the
meaning assigned to it;


 


(2)                                  an accounting
term not otherwise defined has the meaning assigned to it in accordance with
GAAP;


 


(3)                                  “or” is not
exclusive;


 


(4)                                  words in the
singular include the plural, and in the plural include the singular;


 


(5)                                  where the
context requires, provisions relating to any Collateral, when used in relation
to a Grantor, shall refer to such Grantor’s Collateral or any relevant part
thereof.


 


ARTICLE
II



AUTHORITY OF COLLATERAL AGENT


 


SECTION 2.01.                 General
Authority of the Collateral Agent over the Collateral.  The Collateral Agent hereby agrees that it
holds and will hold all of its right, title and interest in, to and under this
Agreement and the Collateral granted to the Collateral Agent hereunder whether
now existing or hereafter arising (all such right, title and interest being
hereinafter referred to as the “Collateral Estate”) under and subject to
the conditions set forth in this Agreement; and the Collateral Agent further agrees
that it will hold such Collateral Estate for the benefit of the Secured
Creditors, for the enforcement of the payment of all Obligations (subject to
the limitations and priorities set forth herein and in the Financing Orders)
and as security for the performance of 


 


6

















 


and
compliance with the covenants and conditions of this Agreement and each of the
Credit Documents.


 


SECTION 2.02.                 Remedies
Not Exclusive No remedy conferred upon or reserved to the Collateral
Agent herein or in the other Credit Documents is intended to be exclusive of
any other remedy or remedies, but every such remedy shall be cumulative and
shall be in addition to every other remedy conferred herein or in any other
Credit Document or now or hereafter existing at law or in equity or by statute.


 


No
delay or omission by the Collateral Agent to exercise any right, remedy or
power hereunder or under any other Credit Document shall impair any such right,
remedy or power or shall be construed to be a waiver thereof, and every right,
power and remedy given by this Agreement or any Credit Document to the
Collateral Agent may be exercised from time to time and as often as may be
deemed expedient by the Collateral Agent.


 


If the
Collateral Agent shall have proceeded to enforce any right, remedy or power
under this Agreement or under any other Credit Document and the proceeding for
the enforcement thereof shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the Collateral Agent, then
the Grantors, the Collateral Agent and the other Secured Creditors shall,
subject to any determination in such proceeding, severally and respectively be
restored to their former positions and rights hereunder or thereunder with
respect to the Collateral Estate and in all other respects, and thereafter all
rights, remedies and powers of the Collateral Agent shall continue as though no
such proceeding had been taken.


 


SECTION 2.03.                 Waiver
and Estoppel.  Subject to
the terms of the Credit Documents, each Grantor agrees, to the extent it may lawfully
do so, that it will not at any time in any manner whatsoever claim, or take the
benefit or advantage of, any appraisement, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force, which may delay, prevent or otherwise affect the performance or enforcement
of this Agreement or any Credit Document and hereby waives all benefit or
advantage of all such laws and covenants that it will not hinder, delay or
impede the execution of any power granted to the Collateral Agent in this
Agreement or any Credit Document but will suffer and permit the execution of
every such power as though no such law were in force.


 


Each
Grantor, to the extent it may lawfully do so, on behalf of itself and all who
may claim through or under it, including without limitation any and all
subsequent creditors, vendees, assignees and licensors, waives and releases all
rights to demand or to have any marshaling of the Collateral upon any sale,
whether made under any power of sale granted herein or in any other Credit
Document or pursuant to judicial proceedings or upon any foreclosure or any enforcement
of this Agreement or any Credit Document and consents and agrees that all the
Collateral may at any such sale be offered and sold as an entirety.


 


Each Grantor waives, to the
extent permitted by applicable law, presentment, demand, protest and any notice
of any kind (except notices explicitly required hereunder or under any Credit
Document or the Financing Orders) in connection with this Agreement and the
other Credit Documents and any action taken by the Collateral Agent with
respect to the Collateral.


 


7

















 


SECTION 2.04.                 Limitation
on Collateral Agents’ Duty in Respect of Collateral.  Beyond its duties as to the custody thereof
expressly provided herein or in any other Credit Document and to account to the
Secured Creditors and the Grantors for moneys and other property received by it
hereunder or under any Credit Document and any other express duties specified
in the Credit Documents, the Collateral Agent shall have no duty to the
Grantors or to the Secured Creditors as to any Collateral in its possession or
control or in the possession or control of any of its agents or nominees, or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. In addition, the Collateral Agent shall in
no way be responsible for the payment of any costs incurred in connection with
preserving or disposing of Collateral pursuant to Section 506(c) of
the Bankruptcy Code and the Collateral may not be charged for the incurrence of
any such cost.


 


ARTICLE
III



SECURITY INTERESTS


 


SECTION 3.01.                 Security
InterestsAs security for the payment and performance, as the
case may be, in full of the Obligations, each Grantor hereby sells, conveys,
assigns, sets over, mortgages, pledges, hypothecates and transfers to the
Collateral Agent, for the ratable benefit of the Secured Creditors, and hereby
grants to the Collateral Agent, for the ratable benefit of the Secured Creditors,
a security interest in, all of such Grantor’s right, title and interest in, to
and under the following property, together with the Real Estate Interests and
all other property or interests therein covered by any of the Financing Orders,
wherever located, and whether now existing or hereafter arising or acquired
from time to time (the “Collateral”):(a) Accounts Receivable;


 


(b)                                 Books and
Records;


 


(c)                                  cash and
Deposit Accounts;


 


(d)                                 Chattel Paper;


 


(e)                                  Commercial Tort
Claims described on Schedule 5 to this Agreement;


 


(f)                                    Documents;


 


(g)                                 Equipment;


 


(h)                                 Fixtures;


 


(i)                                     General
Intangibles;


 


(j)                                     Goods;


 


(k)                                  Instruments;


 


(l)                                     Inventory;


 


(m)                               Investment
Property;


 


8

















 


(n)                                 Letter-of-Credit
Rights;


 


(o)                                 Letters of
Credit;


 


(p)                                 Supporting
Obligations;


 


(q)                                 Intellectual
Property;


 


(r)                                    to the extent
not covered by clauses (a) through (r) of this definition, all
other personal property, whether tangible or intangible; and


 


(s)                                  all Proceeds
and products of any and all of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of, each of
the foregoing, and any and all Proceeds of any insurance, indemnity, warranty
or guaranty payable to such Grantor from time to time with respect to any of
the foregoing;


 


provided that,
notwithstanding the foregoing, “Collateral” shall not include (i) Pledge
Agreement Collateral or any equity interests in an Excluded Entity (as defined
in the Pledge Agreement), (ii) any Causes of Action (as defined in the
Financing Orders) but, subject to the entry of the Final Order, the Collateral
shall include any Proceeds or property recovered in respect of any Causes of
Action and (iii) FCC licenses and PUC authorizations to the extent (and
only to the extent) that any Grantor is prohibited from granting a lien and
security interest therein pursuant to applicable law, but the Collateral shall
include, to the maximum extent permitted by law, all rights incident or
appurtenant to all FCC licenses and PUC authorizations and the right to receive
all proceeds derived from or in connection with the sale, assignment or
transfer of such FCC licenses and PUC authorizations.


 


SECTION 3.02.                 Perfection
and Priority.  Upon the
entry of the Interim Order and the Final Order, as applicable, all Liens and
security interests granted to the Collateral Agent hereunder shall constitute
valid and perfected Liens on all of the Collateral having the priority
specified therein and shall automatically, and without further action by any
Person, perfect such Liens and security interests against the Collateral; provided,
however, nothing herein shall prevent the Collateral Agent, from otherwise
perfecting, maintaining, protecting or enforcing the Liens and security
interests in the Collateral granted hereunder. Notwithstanding any failure on
the part of any Grantor to take any action required by this Agreement, or
perform or fulfill any of the obligations of such Grantor under or pursuant to
this Agreement, the Liens and security interests granted herein shall be deemed
valid, enforceable and perfected by entry of each Financing Order.  No financing statement, notice of lien,
mortgage, deed of trust or similar instrument in any jurisdiction or filing
office need be filed or any other action taken in order to validate and perfect
the Liens and security interest granted by or pursuant to this Agreement or the
Financing Orders.


 


SECTION 3.03.                 Claim
Priorities.  All
Obligations shall constitute, in accordance with Section 364(c)(1) of
the Bankruptcy Code, claims against each Grantor in its Case that are administrative
expense claims having priority over any and all administrative expenses of the
kind specified in Sections 503(b) or 507(b) of the Bankruptcy Code,
subject only to the Carve-Out.


 


9

















 


SECTION 3.04.                 Modifications.


 


(a)                                  The Liens, lien priority,
administrative priorities and other rights and remedies granted to the
Collateral Agent pursuant to this Agreement and the Financing Orders (including
the existence, perfection and priority of the Liens provided herein and therein
and the administrative priority provided herein and therein) shall not be
modified, altered or impaired in any manner by any other financing or extension
of credit or incurrence of any Indebtedness by any of the Grantors (pursuant to
Section 364 of the Bankruptcy Code or otherwise), or by any dismissal or
conversion of any Case, or by any other act or omission whatsoever.  Without limitation, notwithstanding any such
order, financing, extension, incurrence, dismissal, conversion, act or
omission:


 


(1)                                  except for the
Carve-Out having priority over the Obligations, no costs or expenses of
administration that have been or may be incurred in any of the Cases or any
conversion of the same or in any other proceedings related thereto, and no
priority claims, are or shall be prior to or on a parity with any claim of the
Secured Creditors against the Grantors in respect of any Obligation;


 


(2)                                  the Liens
granted herein and in the Orders shall constitute valid and perfected first
priority Liens and security interests and shall be prior to all other Liens,
now existing or hereafter arising, in favor of any other creditor or any other
Person whatsoever (subject only to (A) valid, perfected, nonavoidable and
enforceable Liens existing as of the Petition Date, (B) the extent such
postpetition perfection is expressly permitted by the Bankruptcy Code, valid,
nonavoidable and enforceable Liens existing as of the Petition Date, but
perfected after the Petition Date, and (C) the Carve-Out);


 


(3)                                  the Liens
granted hereunder shall constitute valid and perfected without the necessity
that financing statements be filed or that any other action be taken under applicable
nonbankruptcy law; and


 


(4)                                  notwithstanding
any failure on the part of any Credit Party or the Secured Creditors to
perfect, maintain, protect or enforce the Liens in the Collateral granted hereunder,
the Financing Orders shall, automatically and without further action by any Person,
perfect such Liens against the Collateral.


 


SECTION 3.05.                 Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one or more financing
statements (including fixture filings), continuation statements, filings with
the United States Patent and Trademark Office, United States Copyright Office or
other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the Security Interests granted by each Grantor, without
the signature of any Grantor, and naming any Grantor or the Grantors as debtors
and the Collateral Agent as secured party.


 


SECTION 3.06.                 No
Assumption of Liability.  The
Security Interests are granted as security only and shall not subject the
Collateral Agent or any other Secured Creditor to, or in any way alter or
modify, any obligation or liability of any Grantor with respect to or arising
out of the Collateral.


 


10














 


ARTICLE
IV



REPRESENTATIONS AND WARRANTIES


 


The
Grantors jointly and severally represent and warrant to the Collateral Agent
and other the Secured Creditors that:


 


SECTION 4.01.                 Title
and Authority.  Each
Grantor has good and valid rights in and title to the Collateral with respect
to which it has purported to grant the Security Interests hereunder and,
subject to the entry of the Financing Orders by the Bankruptcy Court, has full
power and authority to grant to the Collateral Agent, for the benefit of the
Secured Creditors, the Security Interests in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the
terms of this Agreement, without the consent or approval of any other Person
other than any consent or approval which has been obtained.


 


SECTION 4.02.                 Validity
of Security Interest.  The
Security Interests constitute legal and valid security interests in all the
Collateral securing the payment and performance of the Obligations.  As of the date hereof, all information set
forth herein, including the Schedules annexed hereto is correct and
complete.  As of the date hereof, the
Collateral described on the Schedules annexed hereto constitutes all of the
property of such type of Collateral owned or held by the Grantors.


 


SECTION 4.03.                 Limitations
on and Absence of Other Liens.  The Collateral is owned by the Grantors free
and clear of any Lien, except for Permitted Liens and subject to the
Carve-Out.  The Grantors have not filed
or consented to the filing of (a) any financing statement or analogous
document under the UCC or any other applicable laws covering any Collateral, (b) any
assignment in which any Grantor assigns any Collateral or any security
agreement or similar instrument covering any Collateral with the United States
Patent and Trademark Office and the United States Copyright Office or (c) any
assignment in which any Grantor assigns any Collateral or any security
agreement or similar instrument covering any Collateral with any foreign
governmental, municipal or other office, which financing statement or analogous
document, assignment, security agreement or similar instrument is still in
effect, except, in each case, for Permitted Liens.


 


SECTION 4.04.                 Jurisdiction
of Organization.  As of the
Closing Date, Schedule 6 hereto identifies each Grantor’s corporate (or,
if not a corporation, legal) name, its jurisdiction of incorporation or
organization, the type of entity it was organized as and the state organization
identification number of such Grantor (if the state of its incorporation or
organization provides such organization number).  No Grantor will change its name, the state in
which it is organized or its type of organization.


 


SECTION 4.05.                 Instruments
and Tangible Chattel Paper.  As of the date
hereof, each Instrument and each item of Tangible Chattel Paper has been properly
endorsed, assigned and delivered to the Collateral Agent, and, if necessary,
accompanied by instruments of transfer or assignment duly executed in
blank.  If any amount individually in excess
of $250,000 or in the aggregate in excess of $1,000,000 payable under or in
connection with any of the Collateral shall be evidenced by any Instrument or
Tangible Chattel Paper, the Grantor acquiring such Instrument or Tangible
Chattel Paper shall forthwith endorse, assign and deliver the same to the
Collateral Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as the Collateral Agent may from time to time specify.


 


11

















 


SECTION 4.06.                 Deposit
Accounts and Investment Property.  (i)  Each Grantor hereby represents and
warrants that as of the date hereof (1) it has neither opened nor
maintains any Deposit Accounts other than the accounts listed in Schedule 7
to this Agreement, (2) it has neither opened nor maintains any Securities
Accounts or Commodity Accounts other than those listed in Schedule 8 to
this Agreement and (3) it does not hold, own or have any interest in any
certificated securities or uncertificated securities other than those constituting
Pledge Agreement Collateral or those maintained in Securities Accounts or
Commodity Accounts listed in Schedule 8 to this Agreement.


 


SECTION 4.07.                 Real
Estate Interests.  Each
Grantor has good and marketable title to, or valid leasehold interests in, all
Real Estate Interests owned or leased by it, including, without limitation, the
Real Estate Interests listed on Schedule 9 to this Agreement, and none
of such properties and assets is subject to any Lien, except Permitted Liens.


 


(a)                                  Set forth on Schedule
9 is a complete and accurate list of (i) all Real Property Owned, (ii) the
chief executive office and principal place of business of each Grantor and any
other location in which any Grantor’s Books and Records are located and (iii) all
other Real Property Leaseholds in which the aggregate fair market value of
Collateral located at each such Real Property Leasehold exceeds $1,000,000, in
each case showing as of the Closing Date the current street address (including,
where applicable, county, state and other relevant jurisdictions) and record
owner.


 


(b)                                 All Permits
required to have been issued or appropriate to enable all Real Estate Interests
of the Grantors to be lawfully occupied and used for all of the purposes for
which they are currently occupied and used have been lawfully issued and are in
full force and effect, other than those that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.


 


(c)                                  No Real Estate
Interest currently, or to the knowledge of the Grantors, previously owned,
operated, leased by or for the Grantors, is subject to any pending or, to the
knowledge of such Grantor, threatened, claim order, agreement, notice of
violation, notice of potential liability or pursuant to Environmental Laws
other than those that would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.


 


(d)                                 No Grantor has
received any notice, or has any knowledge, of any pending, threatened or
contemplated condemnation proceeding affecting any Real Estate Interests of
such Grantor or any part thereof, except those which, in the aggregate, would
not have a Material Adverse Effect.


 


(e)                                  There are no
material facts, circumstances or conditions arising out of or relating to the
operations or ownership of Real Estate Interests owned, operated or leased by
the Grantors that are not specifically included in the information furnished to
the Collateral Agent.


 


SECTION 4.08.                 Intellectual
Property.


 


(a)                                  Schedule 1 attached
hereto contains a complete and accurate list, as of the date hereof, of all
Copyrights owned by each Grantor.


 


12





















 


(b)                                 Schedule 2 attached
hereto contains a complete and accurate list, as of the date hereof, of (i) all
Licenses under which any Grantor has licensed to a third party any of its
rights or interests in any Intellectual Property and (ii) all material
Licenses under which any Grantor is the licensee or sublicensee (other than
Licenses in respect of general software or telephone switch software, which
Licenses are not, to the Grantors’ knowledge, assignable by such Grantor).


 


(c)                                  Schedule 3 attached
hereto contains a complete and accurate list, as of the date hereof, of all
Patents owned by each Grantor.


 


(d)                                 Schedule 4 attached
hereto contains a complete and accurate list, as of the date hereof, of all
Trademarks owned by each Grantor.


 


ARTICLE
V



COVENANTS


 


SECTION 5.01.                 Protection
of Security.  Each
Grantor shall, at its own cost and expense, take any and all actions reasonably
necessary to defend the Security Interests of the Collateral Agent in the
Collateral and the priority thereof against any Lien other than Permitted
Liens.


 


SECTION 5.02.                 Further
Assurances.  Each Grantor
agrees, at its own expense, to execute, acknowledge, deliver and cause to be
duly filed all such further instruments and documents and take all such actions
as the Collateral Agents may from time to time reasonably request to better
assure, preserve, protect and perfect the Security Interests and the rights and
remedies created hereby, including the payment of any fees and taxes required
in connection with the execution and delivery of this Agreement, the granting
of the Security Interests and the filing of any financing statements or other
documents in connection herewith or therewith.


 


SECTION 5.03.                 Taxes;
Encumbrances.  At its
option, the Collateral Agent may discharge past due taxes, assessments,
charges, fees, Liens, security interests or other encumbrances at any time
levied or placed on the Collateral except to the extent the same constitute
Permitted Liens, and may pay for the maintenance and preservation of the
Collateral to the extent any Grantor fails to do so as required by this Agreement
and each Grantor jointly and severally agrees to reimburse the Collateral Agent
on demand for any payment made or any expense incurred by the Collateral Agent
pursuant to the foregoing authorization, together with interest thereon at the
rate then in effect in respect of the Loans, and such amounts shall constitute
Obligations secured by the Collateral; provided, however, that nothing in this Section 5.03
shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Creditor to cure
or perform, any covenants or other promises of any Grantor with respect to
taxes, assessments, charges, fees, liens, security interests or other
encumbrances and maintenance as set forth herein or in the other Credit Documents.  Performance of such Grantor’s obligations as
permitted under this Section 5.03 shall in no way constitute for the
purpose of the Cases a violation of the automatic stay provided by Section 362
of the Bankruptcy Code and each Grantor hereby waives applicability thereof.


 


13

















 


SECTION 5.04.                 Assignment
of Security Interest.  If at any
time any Grantor shall take a security interest in any property of an Account
Debtor or any other Person to secure payment and performance of an Account in
an amount in excess of $250,000, such Grantor shall promptly assign such
security interest to the Collateral Agent. 
Such assignment need not be filed of public record unless necessary to
continue the perfected status of the security interest against creditors of and
transferees from the Account Debtor or other Person granting the security
interest.


 


SECTION 5.05.                 Continuing
Obligations of the Grantors.  Each Grantor shall remain liable to observe
and perform all the conditions and obligations to be observed and performed by
it under each contract, agreement or instrument relating to the Collateral, all
in accordance with the terms and conditions thereof, and each Grantor jointly
and severally agrees to indemnify and hold harmless the Collateral Agent and
the Secured Creditors from and against any and all liability for such
performance except to the other extent resulting from the gross negligence or
willful misconduct of the Collateral Agent or the other Secured Creditors, as
applicable.


 


SECTION 5.06.                 Use and
Disposition of Collateral.  None
of the Grantors shall grant any Lien in respect of the Collateral other than
Liens securing the Obligations and Permitted Liens.


 


SECTION 5.07.                 Limitation
on Modification of Accounts.  None of the Grantors will, without the
Collateral Agent’s prior written consent, grant any extension of the time of
payment of any of the Accounts Receivable, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partly, any
Person liable for the payment thereof or allow any credit or discount
whatsoever thereon, other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business and consistent
with its past practices and in accordance with such prudent and standard
practices used in industries in which such Grantor is engaged.


 


SECTION 5.08.                 Insurance.  The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage
to the Collateral in accordance with Section 6.03 of the Credit
Agreement.  Each Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor’s true
and lawful agent (and attorney-in-fact) for the purpose, during the continuance
of an Event of Default, of making, settling and adjusting claims in respect of
Collateral under policies of insurance, endorsing the name of such Grantor on
any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect thereto.


 


SECTION 5.09.      Certain Covenants and
Provisions Regarding Patent, Trademark and Copyright Collateral. Each
Grantor agrees that it will not, nor will it permit any of its licensees to, do
any act, or knowingly omit to do any act, whereby any Patent which is material
to the conduct of such Grantor’s business may become invalidated or dedicated
to the public.


 


(b)                                 Each Grantor
(either itself or through its licensees or its sublicenses) will, for each
Trademark material to the conduct of such Grantor’s business,  (i) maintain such Trademark in full
force free from any claim of abandonment or invalidity for nonuse, (ii) maintain
the quality of products and services offered under such Trademark, (iii) not
knowingly use or knowingly 


 


14

















 


permit the use of such Trademark in violation
of any third party rights in a manner that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.


 


(c)                                  Each Grantor
shall notify the Collateral Agents as soon as practicable if it knows or has
reason to know that any Patent, Trademark or Copyright material to the conduct
of its business becomes or is reasonably likely to become abandoned, forfeited
or dedicated to the public, or of any adverse determination or development
including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or United States
Copyright Office regarding such Grantor’s ownership of any Patent, Trademark or
Copyright material to the conduct of its business, or its right to register the
same, or to keep and maintain the same.


 


(d)                                 Each Grantor
hereby agrees that with respect to all Intellectual Property owned by such
Grantor on the date hereof, it will, if requested by the Collateral Agent,
execute and deliver any and all agreements, instruments or documents as the
Collateral Agent may reasonably request to evidence the Collateral Agent’s
security interest in such Intellectual Property, which agreements, instruments
or documents may be filed with the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States.


 


(e)                                  In the event
that any Grantor, either itself or through any agent, employee, licensee or
designee, files an application for or, following the Closing Date, becomes the
registered owner of, any Patent, Trademark or Copyright (or for the
registration of any Trademark or Copyright) with the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States, such Grantor shall promptly (and in
any event within thirty (30) days) notify the Collateral Agent of such
occurrence, and shall execute and deliver any and all agreements, instruments,
documents and papers as the Collateral Agent may reasonably request to evidence
the Collateral Agent’s security interest in such Patent, Trademark or Copyright
or application therefor, and each Grantor hereby appoints the Collateral Agent
as its attorney-in-fact to execute and file such writings solely for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, is irrevocable until this Agreement is
terminated.


 


(f)                                    Each Grantor
will take all necessary steps that are consistent with its reasonable business
judgment in any proceeding before the United States Patent and Trademark
Office, United States Copyright Office or any office or agency in any political
subdivision of the United States to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to
obtain the relevant grant or registration) and to maintain each issued Patent
and each registration of the Trademarks or Copyrights that is material to the
conduct of any Grantor’s business, including timely filings of applications for
renewal, affidavits of use, affidavits of incontestability and payment of
maintenance fees, and, if consistent with its reasonable business judgment, to
initiate opposition, interference and cancellation proceedings against third
parties.


 


(g)                                 In the event
that any Grantor has reason to believe that any Collateral consisting of a
Patent, Trademark or Copyright which is material to its business has been or is
about to be infringed, misappropriated or diluted by a third party, such
Grantor promptly shall notify the 


 


15

















 


Collateral Agent and shall, if consistent
with its reasonable business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.


 


(h)                                 To each Grantor’s
knowledge, on and as of the date hereof, such Grantor is not infringing upon
any Patent, Trademark or Copyright of any other Person other than such infringement
that, individually or in the aggregate, would not (or would not reasonably be
expected to) result in a Material Adverse Effect and no proceedings have been
instituted or are pending against such Grantor or, to such Grantor’s knowledge,
threatened, and no claim against such Grantor has been received by such
Grantor, alleging any such violation.


 


(i)                                     Upon the
occurrence and during the continuance of an Event of Default (but subject to
the Financing Orders), each Grantor shall upon the written request of the
Collateral Agent use its commercially reasonable efforts to obtain all
requisite consents or approvals by the licensor of each Copyright License,
Patent License or Trademark License to effect the assignment of all of such
Grantor’s right, title and interest thereunder to the Collateral Agent or its
designee.


 


(j)                                     Upon the
occurrence and during the continuance of a Default or Event of Default, each
Grantor shall, upon the written request of the Collateral Agent, provide a list
to the Collateral Agent of all material Licenses to which each Grantor is a
party.


 


SECTION 5.10.                 Other
Actions.  In order to further ensure the
attachment, perfection and priority of, and the ability of the Collateral Agent
to enforce, the Collateral Agent’s security interests in the Collateral, each
Grantor agrees, in each case at such Grantor’s own expense, to take the
following actions with respect to the following Collateral:


 


(a)                                  In the event
the Grantors have cash, Investment Property or other funds maintained in any
Deposit Accounts (other than (i) a Deposit Account exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of a Grantor’s salaried employees and (ii) the FairPoint
Logistics, Inc. Dual Pole Fund Deposit Account ending with the last four
digits 2606, maintained by FairPoint Logistics at Fidelity Investments, so long
as the amount of cash contained therein does not at any time exceed the lesser
of (A) the amount required to comply with the PUC order issued prior to
the date hereof in which the cash contained therein relates and (B) $2,100,000)
and/or Security Accounts, Borrower shall promptly notify the Collateral Agent
and, if requested by the Collateral Agent, 
the Grantors shall promptly enter into Control Agreements in favor of
the Collateral Agent with the banks, Securities Intermediaries or Commodity
Intermediaries with which such Deposit Accounts and Security Accounts are
maintained granting to the Collateral Agents Control over such accounts.  Each Collateral Agent agrees with each
Grantor that, in the case of a Deposit Account subject to the Collateral Agent’s
Control, the Collateral Agent shall not give any instructions directing the disposition
of funds from time to time credited to any Deposit Account or withhold any
withdrawal rights from such Grantor with respect to funds from time to time
credited to any Deposit Account or, in the case of a Securities Account or
Commodity Account subject to each Collateral Agent’s Control, the Collateral
Agent shall not give any Entitlement Orders or instructions or directions to
any Securities Intermediary or Commodity Intermediary, and shall not withhold
its consent to the exercise of any withdrawal or dealing rights by such
Grantor, unless, in each case and subject 


 


16

















 


to the Financing Orders, an Event of Default
has occurred and is continuing or, after giving effect to any withdrawal, would
occur.


 


(b)                                 If any Grantor
shall at any time hold or acquire any certificated securities constituting
Investment Property that are not Pledge Agreement Collateral, such Grantor
shall promptly (and in any event with fifteen (15) Business Days) endorse,
assign and deliver the same to the Collateral Agent, accompanied by such
instruments of transfer or assignment duly executed in blank, all in form and
substance reasonably satisfactory to the Collateral Agent.  If any securities now or hereafter acquired
by any Grantor constituting Investment Property that are not Pledged Agreement
Collateral are uncertificated and are not held in accounts required to be subject
to a Control Agreement, such Grantor shall promptly (and in any event within
fifteen (15) Business Days) notify the Collateral Agent thereof and, if
requested by the Collateral Agent, shall use commercially reasonable efforts to
cause the issuer to agree to comply with instructions from the Collateral Agent
as to such securities, without further consent of any Grantor pursuant to an
issuer’s acknowledgement in the form attached hereto as Annex I.


 


(c)                                  As between the
Collateral Agent and the Grantors, the Grantors shall bear the investment risk
with respect to the Investment Property, and the risk of loss of, damage to or
the destruction of the Investment Property, whether in the possession of, or
maintained as a security entitlement or deposit by, or subject to the control
of, the Collateral Agent, a Securities Intermediary, a Commodity Intermediary,
any Grantor or any other Person; provided, however, that nothing
contained in this Section 5.10(c) shall release or relieve any
Securities Intermediary or Commodity Intermediary of its duties and obligations
to the Grantors or any other Person under any Control Agreement or under
applicable law.


 


(d)                                 Each Grantor
shall promptly pay all Charges and fees arising on or after the date hereof
with respect to the Investment Property pledged by it under this Agreement,
except that no such Charge or fee need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings,
reserves in conformity with GAAP with respect thereto have been provided on the
books of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the
Collateral or any interest therein.  In
the event any Grantor shall fail to make such payment contemplated in the immediately
preceding sentence, the Collateral Agent may do so for the account of such
Grantor and the Grantors shall promptly reimburse and indemnify the Collateral
Agent from all costs and expenses incurred by the Collateral Agent under this Section 5.10(d),
together with interest thereon at the rate then in effect in respect of the
Loans, and such amounts shall constitute Obligations secured by the
Collateral.  Performance of such Grantor’s
obligations as permitted under this Section 5.10(d) shall in no way
constitute for the purpose of the Cases a violation of the automatic stay
provided by Section 362 of the Bankruptcy Code and each Grantor hereby
waives applicability thereof.


 


(e)                                  Electronic
Chattel Paper and Transferable Records.  If any amount
individually in excess of $250,000 or in the aggregate in excess of $1,000,000
payable under or in connection with any of the Collateral shall be evidenced by
any Electronic Chattel Paper or any “transferable record,” as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act, or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, the Grantor
acquiring such Electronic Chattel Paper or transferable 


 


17

















 


record shall promptly notify the Collateral
Agent thereof and shall take such action as the Collateral Agent may reasonably
request to vest in the Collateral Agent control under UCC Section 9-105 of
such Electronic Chattel Paper or control under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect
in such jurisdiction, of such transferable record.  The Collateral Agent agrees with such Grantor
that the Collateral Agent will arrange, pursuant to procedures reasonably
satisfactory to the Collateral Agent and so long as such procedures will not
result in the Collateral Agent’s loss of control, for the Grantor to make
alterations to the Electronic Chattel Paper or transferable record permitted
under UCC Section 9-105 or, as the case may be, Section 201 of the
Federal Electronic Signatures in Global and National Commerce Act of Section 16
of the Uniform Electronic Transactions Act for a party in control to allow
without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Grantor
with respect to such Electronic Chattel Paper or transferable record.


 


(f)                                    Letter-of-Credit
Rights.  If any Grantor is at any
time a beneficiary under a Letter of Credit now or hereafter issued in favor of
such Grantor in an amount individually in excess of $250,000 or in the
aggregate in excess of $1,000,000, such Grantor shall promptly notify the
Collateral Agent and, if requested by the Collateral Agent, such Grantor shall
use commercially reasonable efforts to pursuant to an agreement in form and
substance satisfactory to the Collateral Agent, either (i) arrange for the
issuer and any confirmer of such Letter of Credit to consent to an assignment
to the Collateral Agent of the proceeds of any drawing under the Letter of
Credit or (ii) arrange for the Collateral Agent to become the transferee
beneficiary of such Letter of Credit.


 


(g)                                 Commercial
Tort Claims.  As of the date
hereof each Grantor hereby represents and warrants that it holds no Commercial
Tort Claims other than those listed on Schedule 5 to this
Agreement.  If any Grantor shall at any
time hold or acquire a Commercial Tort Claim having a value individually in
excess of $250,000 or in the aggregate in excess of $1,000,000 such Grantor
shall promptly notify the Collateral Agent thereof and, if requested by the
Collateral Agent, grant to the Collateral Agent in writing signed by such
Grantor a security interest therein and in the Proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to the Collateral Agent.


 


(h)                                 Motor
Vehicles.  Upon the
request of the Collateral Agent, each Grantor shall deliver to the Collateral
Agent originals of the certificates of title or ownership for the motor vehicles
(and any other Equipment covered by Certificates of Title or ownership) owned
by it with each Collateral Agent listed as a lienholder therein.  Such requirement shall apply to the Grantors
if any such motor vehicle (or any such other Equipment) is valued over
$250,000, provided that the value of all such motor vehicles (and such
Equipment) as to which any Grantor has not delivered a Certificate of Title or
ownership is over $250,000.


 


(i)                                     Landlord’s
Access Agreements/Bailee Letters.  With respect to each Real Property Leasehold
and each warehouse or other storage facility located in the United States of
America owned by any Person other than a Grantor, if Inventory, Equipment or
other personal property of any Grantor with a fair market value in excess of
$500,000 is regularly maintained at such location, Borrowers shall notify the
Collateral Agents thereof and, if requested by the Collateral 


 


18

















 


Agent, will use its commercially reasonable
efforts to deliver a landlord waiver and access agreement or bailee letter, as
applicable, in form and substance reasonably satisfactory to the Collateral
Agent.


 


ARTICLE
VI



REMEDIES


 


SECTION 6.01.                 Remedies upon Default. 
After the occurrence and during the continuance of an Event of Default,
upon five (5) days’ notice to the Grantors (with a copy to counsel for the
Committee and to the United States Trustee for the Southern District of New
York), the Collateral Agent shall have the right to take any of or all the
following actions at the same or different times:  (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or nonexclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine
(other than in violation of applicable law or any then existing licensing
arrangements to the extent that waivers cannot be obtained), and (b) with
or without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured creditor under the UCC or
other applicable law.  Without limiting
the generality of the foregoing, each Grantor agrees that the Collateral Agent
shall have the right, subject to the mandatory requirements of applicable law,
to sell or otherwise dispose of all or any part of the Collateral, at public or
private sale or at any broker’s board or on any securities exchange, for cash,
upon credit or for future delivery as the Collateral Agent shall deem
appropriate.  The Collateral Agent shall
be authorized at any such sale (if it deems it advisable to do so) to restrict
the prospective bidders or purchasers to Persons who will represent and agree
that they are purchasing the Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon consummation
of any such sale the Collateral Agent shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.  Each such purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by law)
all rights of redemption, stay and appraisal which such Grantor now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted.


 


The
Collateral Agent shall give a Grantor ten (10) Business Days’ prior
written notice (which each Grantor agrees is reasonable notice within the
meaning of Section 9-611 of the UCC) of the Collateral Agent’s intention
to make any sale or other disposition of such Grantor’s Collateral.  Such notice, in the case of a public sale,
shall state the time and place for such sale and, in the case of a sale at a
broker’s board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale.  At any such sale, the Collateral, or portion 


 


19

















 


thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Collateral Agent may (in its sole and
absolute discretion) determine.  Neither
Collateral Agent shall be obligated to make any sale of any Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. 
The Collateral 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 sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned.  In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the sale price
is paid by the purchaser or purchasers thereof, but the Collateral Agent shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice.  At any public (or, to the extent permitted by
law, private) sale made pursuant to this Section, any Secured Creditor may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
Obligation then due and payable to such Secured Creditor from any Grantor as a
credit against the purchase price, and such Secured Creditor may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to any Grantor therefor.  For purposes hereof, a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of
Default shall have been remedied and the Obligations paid in full.  As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court
or courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.  Any sale
pursuant to the provisions of this Section shall be deemed to conform to
the commercially reasonable standards as provided in Section 9-611 of the
UCC.


 


The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Collateral Agent, and that no other Secured Creditor shall have any
right individually to seek to enforce or to enforce this Agreement or to
realize upon the security to be granted hereby, it being understood and agreed
that such rights and remedies may be exercised by the Collateral Agent for the
benefit of the Secured Creditors upon the terms of this Agreement.  Exercise by the Collateral Agent of the
powers granted under this Agreement is not a violation of the automatic stay
provided by Section 362 of the Bankruptcy Code and each Grantor waives the
applicability thereof.  The Secured
Creditors shall be entitled to all of the rights and benefits of section 552(b) of
the Bankruptcy Code, and the “equities of the case” exception under section 552(b) of
the Bankruptcy Code shall not apply to the Secured Creditors with respect to
proceeds, product, offspring or profits of any of the Collateral.


 


20














 


SECTION 6.02.                 Application
of Proceeds.


 


(a)                                  All moneys
collected by the Collateral Agent upon any sale or other disposition of the
Collateral, together with all other moneys received by the Collateral Agent or
the Collateral Agent hereunder, shall be applied as follows:


 


(1)                                  first, to any fees,
indemnities or expense reimbursements then due and owing to the Administrative
Agent, the Collateral Agent or the Pledgee under the Pledge Agreement;


 


(2)                                  second, to the extent
proceeds remain after the application pursuant to preceding clause (i), an
amount equal to the outstanding Obligations to the Secured Creditors shall be
paid to the Secured Creditors, with each Secured Creditor receiving an amount
equal to its outstanding Obligations or, if the proceeds are insufficient to
pay in full all such Obligations, its Pro Rata Share of the
amount remaining to be distributed to be applied, with respect to the
Obligations, firstly, to the payment of interest in respect of the
unpaid principal amount of Loans outstanding, secondly, to the payment
of principal of Loans outstanding, then to the other Obligations; and


 


(3)                                  third, to the extent
proceeds remain after the application pursuant to the preceding clauses (i) and
(ii) and following the termination of this Agreement pursuant to Section 7.10
hereof, to the relevant Grantor or, to the extent directed by such Grantor or a
court of competent jurisdiction, to whomever may be lawfully entitled to
receive such surplus.


 


(b)                                 For purposes of
this Agreement, “Pro Rata Share” shall mean, when calculating a Secured
Creditor’s portion of any distribution or amount, the amount (expressed as a
percentage) equal to a fraction the numerator of which is the then outstanding
amount of the relevant Obligations owed such Secured Creditor and the
denominator of which is the then outstanding amount of all Obligations.


 


(c)                                  All payments
required to be made to the Secured Creditors hereunder shall be made to the
Administrative Agent for the account of the respective Secured Creditors.


 


(d)                                 It is
understood that each Grantor shall remain jointly and severally liable to the
extent of any deficiency between (x) the amount of the Obligations for
which it is liable directly or as a Guarantor that are satisfied with proceeds
of the Collateral and (y) the aggregate outstanding amount of the
Obligations.


 


SECTION 6.03.                 Grant
of License to Use Intellectual Property.  For the purpose of enabling the Collateral
Agent to exercise rights and remedies under this Article at such time as
the Collateral Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to the Collateral Agent a nonexclusive
license (exercisable without payment of royalty or other compensation to the
Grantors) to use, license or sublicense any of the Collateral, except to the
extent that such license may not be granted as a result of a pre-existing
exclusive license arrangement, consisting of Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer 


 


21

















 


software
and programs used for the compilation or printout thereof.  The use of such license by the Collateral
Agent shall be exercised, at the option of the Collateral Agent, after the
occurrence and during the continuation of an Event of Default; provided
that any license, sublicense or other transaction entered into by the
Collateral Agent in accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.  Such license shall be irrevocable until this
Agreement is terminated.


 


ARTICLE
VII



MISCELLANEOUS


 


SECTION 7.01.                 Notices. All notices
and other communications hereunder shall be in writing (including telegraphic,
telex, telecopier, facsimile or cable communication) and shall be delivered,
telegraphed, telexed, telecopied, faxed, cabled, or mailed (by first class
mail, postage prepaid):


 


(1)                                  if to any
Grantor, at its address set forth opposite its signature below;


 


(2)                                  if to the
Collateral Agent, at:


 


Bank of America, N.A.
 901 Main Street

Dallas, TX 75202

Attention:  Garrett Dolt

Fax:  (214) 530-3008


 


(3)                                  if to any
Secured Creditor (other than the Collateral Agent), either (x) to the
Administrative Agent, at the address of the Administrative Agent specified in
the Credit Agreement or (y) at such address as such Secured Creditor shall
have specified in the Credit Agreement;


 


or at such other address as shall have
been furnished in writing by any Person described above to the party required
to give notice hereunder.


 


SECTION 7.02.                 Survival
of Agreement.  All
covenants, agreements, representations and warranties made by any Grantor
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Credit Document
shall be considered to have been relied upon by the Collateral Agents and the
other Secured Creditors and shall survive the making by the Lenders of the
Loans and the Lenders’ issuance of and participations in Letters of Credit,
regardless of any investigation made by the Secured Creditors or on their
behalf, and shall continue in full force and effect until this Agreement shall
terminate.


 


SECTION 7.03.                 Binding
Effect.  This Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf of
such Grantor shall have been delivered to the Collateral Agent and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Grantor and the Collateral Agents and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral 


 


22

















 


Agent
and the other Secured Creditors and their respective successors and assigns,
except that no Grantor shall have the right to assign or transfer its rights or
obligations hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly permitted by each of
the other Credit Documents.


 


SECTION 7.04.                 Successors
and Assigns.  Whenever in
this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of any Grantor or the
Collateral Agent that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and assigns.


 


SECTION 7.05.                 GOVERNING
LAW.


 


(a)                                  THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE SECURED CREDITORS AND OF THE UNDERSIGNED
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.  Except for matters within the exclusive
jurisdiction of the Bankruptcy Court, any legal action or proceeding with
respect to this Agreement or any other Credit Document may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this
Agreement, each Grantor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts.  Each Grantor further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each Grantor at its address set forth opposite
its signature below, such service to become effective 30 days after such
mailing.  Nothing herein shall affect the
right of any of the Secured Creditors to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any Grantor in any other jurisdiction.


 


(b)                                 Except for
matters within the exclusive jurisdiction of the Bankruptcy Court, each Grantor
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any other Credit Document brought in
the courts referred to in clause (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that such action or
proceeding brought in any such court has been brought in an inconvenient forum.


 


(c)                                  EACH GRANTOR
AND THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.


 


SECTION 7.06.                 Waivers;
Amendment; Several Agreement.  None of the
terms and conditions of this Agreement may be changed, waived, modified or varied
in any manner whatsoever unless in writing duly signed by the Collateral Agent
(with the consent of the Required 


 


23

















 


Lenders
or, to the extent required by Section 11.11 of the Credit Agreement, all
of the Lenders) and each Grantor affected thereby, provided that
 no such change, waiver, modification or variance shall be made to Section 6.02
hereof of this Section 7.06 without the consent of each Secured
Creditor adversely affected thereby.


 


SECTION 7.07.                 Severability.  In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the validity
of such provision in any other jurisdiction). 
The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.  It is
understood and agreed among the parties that this Agreement shall create
separate security interests in the Collateral securing the Obligations as
provided in Section 3.01, and that any determination by any court with
jurisdiction that the security interest securing any Obligation or class of
Obligations is invalid for any reason shall not in and of itself invalidate the
security interest securing any other Obligations hereunder.


 


SECTION 7.08.                 Counterparts. 
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute a single contract and shall become effective as provided in Section 7.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.


 


SECTION 7.09.                 Headings.  Article and Section headings used
herein are for the purpose of reference only, are not part of this Agreement
and are not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.


 


SECTION 7.10.                 Termination. After the
Termination Date (as defined below), this Agreement shall terminate (provided
that all indemnities set forth herein shall survive any such termination) and
the Collateral Agent, at the request and expense of the Grantors, will, if requested
by the Grantors, execute and deliver to the Grantors a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement as
provided above, and will duly assign, transfer and deliver to such Grantor
(without recourse and without any representation or warranty) such of the
Collateral as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Collateral Agent
hereunder.  As used in this Agreement, “Termination
Date” shall mean the date upon which the Total Revolving Commitment has
been terminated, no Note under the Credit Agreement is outstanding (and all
Loans have been paid in full), all Letters of Credit have been cancelled (or
have expired, undrawn) or collateralized to the satisfaction of the
Administrative Agent and all other Obligations have been paid in full (other
than arising from indemnities for which no request has been made).


 


SECTION 7.11.                 Financing
Statements.  Each
Grantor hereby irrevocably authorizes the Collateral Agent at any time and from
time to time to file in any relevant jurisdiction any initial financing
statements and amendments thereto that contain the information required by Article 9
of the Uniform Commercial Code of each applicable jurisdiction for the filing of
any financing statement or amendment relating to the Collateral, including (i) whether
such Grantor is 


 


24

















 


an
organization, the type of organization and any organizational identification
number issued to such Grantor, (ii) any financing or continuation
statements or other documents without the signature of such Grantor where
permitted by law, including the filing of a financing statement describing the
Collateral as “all assets now owned or hereafter acquired by the Grantor or in
which Grantor otherwise has rights” and (iii) in the case of a financing
statement filed as a fixture filing or covering Collateral constituting
minerals or the like to be extracted or timber to be cut, a sufficient
description of the real property to which such Collateral relates.


 


SECTION 7.12.                 Collateral Agent Appointed
Attorney-in-Fact.
Each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such
Grantor for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instrument that the Collateral Agent may
deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable until this Agreement is terminated and coupled with
an interest.  Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, after
the occurrence and during the continuance of an Event of Default (but subject
to the terms of the Financing Orders), with full power of substitution either
in the Collateral Agent’s name or in the name of such Grantor, (a) to
receive, endorse, assign or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral
or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral; (c) to
ask for, demand, sue for, collect, receive and give acquittance for any and all
moneys due or to become due under and by virtue of any Collateral; (d) to
sign the name of any Grantor on any invoice or bill of lading relating to any
of the Collateral; (e) to send verifications of Accounts to any Account
Debtor; (f) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (g) to settle, compromise, compound,
adjust or defend any actions, suits or proceedings relating to all or any of
the Collateral; (h) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent; and (i) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and
things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided, that nothing herein contained
shall be construed as requiring or obligating the Collateral Agent to make any
commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Collateral Agent, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby.  The Collateral Agent
and the other Secured Creditors shall be accountable only for amounts actually
received as a result of the exercise of the powers granted to them herein, and
neither they nor their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their respective own gross negligence or willful misconduct.


 


[Signatures on Following Page]


 


25

















 


[SIGNATURE PAGES OMITTED]


 

















 


Annex 1
to the

Debtor-In-Possession Security Agreement


 


[Form of]


 


ISSUER’S ACKNOWLEDGMENT AGREEMENT


 


AGREEMENT (as amended, modified, restated and/or
supplemented from time to time, this “Agreement”), dated as of [ , 20 ],
among the undersigned grantor (the “Grantor”), BANK OF AMERICA, N.A.,
not in its individual capacity but solely as Collateral Agent (the “Collateral
Agent”), and [ ], as the issuer of the Investment Property (the “Issuer”).


 


W
I T N E S S E T H :


 


WHEREAS, the Grantor, certain of its affiliates and
the Collateral Agent have entered into a Debtor-In-Possession Security Agreement,
dated as of October 30, 2009 (as amended, modified, restated and/or
supplemented from time to time, the “Security Agreement”), (a) under
which, among other things, in order to secure the payment of the Obligations,
the Grantor has pledged o the Collateral Agent for the benefit of the Secured
Creditors, and has granted a security interest in favor of the Collateral Agent
for the benefit of the Secured Creditors in, all of the right, title and
interest of the Grantor in and to substantially all of its assets, including
all Investment Property from time to time issued by the Issuer, whether now
existing or hereafter from time to time acquired by the Grantor (with all of
such Investment Property being herein collectively called the “Issuer
Pledged Interests”); and


 


WHEREAS, the Grantor desires the Issuer to enter
into this Agreement in order to vest in the Collateral Agent control of the
Issuer Pledge Interests and to provide for the rights of the parties under this
Agreement;


 


NOW THEREFORE, in consideration of the premises and
the mutual promises and agreements contained herein, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:


 


1.                                       The Grantor
hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby
agrees, to comply with any and all instructions and orders originated by the
Collateral Agent (and its successors and assigns) regarding any and all of the
Issuer Pledged Interests without the further consent by the registered owner
(including the Grantor), and, following its receipt of a notice from the
Collateral Agent stating that the Collateral Agent is exercising exclusive
control of the Issuer Pledged Interests, not to comply with any instructions or
orders regarding


 






(a) Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Security Agreement.


 


1

















 


any
or all of the Issuer Pledged Interests originated by any person or entity other
than the Collateral Agent (and its successors and assigns) or a court of
competent jurisdiction.


 


2.                                       The Issuer
hereby certifies that (i) no notice of any security interest, lien or
other encumbrance or claim affecting the Issuer Pledged Interests (other than
the security interest of the Collateral Agent) has been received by it, and (ii) the
security interest of the Collateral Agent in the Issuer Pledged Interests has
been registered in the books and records of the Issuer.


 


3.                                       The Issuer
hereby represents and warrants that (i) the pledge by the Grantor of, and
the granting by the Grantor of a security interest in, the Issuer Pledged
Interests to the Collateral Agent, for the benefit of the Secured Creditors,
does not violate the charter, by-laws, partnership agreement, membership
agreement or any other agreement governing the Issuer or the Issuer Pledged
Interests, and (ii) the Issuer Pledged Interests consisting of capital
stock of a corporation are fully paid and nonassessable.


 


4.                                       All notices,
statements of accounts, reports, prospectuses, financial statements and other
communications to be sent to the Grantor by the Issuer in respect of the Issuer
will also be sent to the Collateral Agent at the following address:


 


[  ]


[  ]


Attention:  [  ]


Telephone
No.:  [  ]


Telecopier
No.:  [  ]


 


5.                                       Following its
receipt of a notice from the Collateral Agent stating that the Collateral Agent
is exercising exclusive control of the Issuer Pledged Interests and until the
Collateral Agent shall have delivered written notice to the Issuer that all of
the Obligations have been paid in full and this Agreement is terminated, the
Issuer will send any and all redemptions, distributions, interest or other
payments in respect of the Issuer Pledged Interests from the Issuer for the
account of the Collateral Agent only by wire transfers to such account as the
Collateral Agent shall instruct.


 


6.                                       Except as
expressly provided otherwise in Sections 4 and 5, all notices, instructions,
orders and communications hereunder shall be sent or delivered by mail,
telegraph, telex, telecopy, cable or overnight courier service and all such
notices and communications shall, when mailed, telexed, telecopied, cabled or
sent by overnight courier, be effective when deposited in the mails or
delivered to overnight courier, prepaid and properly addressed for delivery on
such or the next Business Day, or sent by telex or telecopier, except that
notices and communications to the Collateral Agent or the Issuer shall not be effective
until received.  All notices and other
communications shall be in writing and addressed as follows:


 


(a)                                  if to the
Grantor, at:


 


Attention:  

Telephone No.:  

Fax No.:


 


2

















 


(b)                                 if to the
Collateral Agent, at the address given in Section 4 hereof;


 


(c)                                  if to the
Issuer, at:


 


or at such other address as shall have been
furnished in writing by any Person described above to the party required to
give notice hereunder.  As used in this Section 6,
“Business Day” means any day other than a Saturday, Sunday, or other day
in which banks in New York are authorized to remain closed.


 


7.                                       This Agreement
shall be binding upon the successors and assigns of the Grantor and the Issuer
and shall inure to the benefit of and be enforceable by the Collateral Agent
and its successors and assigns.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which shall constitute one instrument.  In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto. 
None of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever except in writing signed by
the Collateral Agent, the Issuer and the Grantor.


 


8.                                       This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to its principles of conflict of laws.


 


3

















 


IN WITNESS WHEREOF, the Grantor, the Collateral
Agent and the Issuer have caused this Agreement to be executed by their duly
elected officers duly authorized as of the date first above written.


 


 


	
   

  	
  [                                      ],

  
	
   

  	
   

  	
  as
  Grantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  [                                      ],

  
	
   

  	
   

  	
  not
  in its individual capacity but solely

  
	
   

  	
   

  	
  as
  Collateral Agent and Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  [                                      ],

  
	
   

  	
   

  	
  as
  the Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: