Document:

Exhibit 10.2

 

EXECUTION COPY

 

THIS AMENDED AND RESTATED LOAN
PROCEEDS NOTE AMENDS AND RESTATES IN ITS ENTIRETY THE LOAN PROCEEDS NOTE, DATED
MARCH 13, 2007, ISSUED BY LEVEL 3 COMMUNICATIONS, LLC TO LEVEL 3
FINANCING, INC. IN THE INITIAL PRINCIPAL AMOUNT OF $1,400,000,000.00.

 

AMENDED AND RESTATED

LOAN PROCEEDS NOTE

 

	
  PRINCIPAL SUM:

  	
   

  	
  US$1,620,000,000.00

  
	
   

  	
   

  	
   

  
	
  ISSUE DATE:

  	
   

  	
  April 16, 2009

  
	
   

  	
   

  	
   

  
	
  PAYEE:

  	
   

  	
  Level 3 Financing, Inc., a Delaware corporation

  

 

Level 3 Communications, LLC, a limited
liability company organized under the laws of the State of Delaware (the “Payor”),
for value received, hereby promises to pay ON DEMAND to the order of the Payee
stated above, the Principal Sum stated above (or so much thereof as shall not
have been prepaid) and to pay interest (computed on the basis of a 360-day year
comprised of twelve 30-day months) on the unpaid principal hereof from the
Issue Date stated above, or from the most recent date to which interest has
been paid, at the rates payable by the Payee in respect of its $1,620,000,000
Tranche A Term Loans (as defined in the Credit Agreement (as defined below))
and Tranche B Term Loans (as defined in the Credit Agreement and, together with
the Tranche A Term Loans, the “Term Loans”) incurred under the Credit
Agreement dated March 13, 2007, as amended and restated by the Amendment
Agreement dated as of April 16, 2009 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Payee, Level 3 Communications, Inc., the Lenders party thereto and Merrill
Lynch Capital Corporation, as Administrative Agent and Collateral Agent, in
cash in arrears on each Interest Payment Date (as defined in the Credit
Agreement), commencing on such date when the first payment of interest is due
or made on the Term Loans, until such Principal Sum shall have been paid in
full.  Payments of principal and interest
shall be made in US dollars and in immediately available funds at the
appropriate office of the Payee (as designated by the Payee to the Payor).  The Payee may demand payment of the unpaid
principal of this Note in whole or in part at any time.  In the event the Payee shall demand payment
in connection with a prepayment of the Term Loans which, pursuant to the Credit
Agreement, requires a prepayment premium, fee or breakage cost payment, the
Payor shall pay a premium, fee or breakage cost payment, as the case may be, on
the principal amount repaid in an amount equal to the amount of such premium,
fee or breakage cost payment under the Credit Agreement.

 

No failure or delay on the part of the Payee
in exercising any of its rights, powers or privileges hereunder shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude
any other or further exercise of any right, power or privilege.  The remedies provided herein are cumulative
and are not exclusive of any remedies provided by law.

 

Presentment and demand for payment, notice of
default, dishonor or nonpayment, protest and notice of protest and all other
demands and notices in connection with delivery, acceptance, performance or
enforcement of this Note are hereby waived by the Payor.

 

 

Neither the Payor nor other parties hereafter
becoming liable for payment of this Note shall ever be required to pay interest
on this Note at a rate in excess of the maximum interest that may be lawfully
charged under applicable law, and the provisions of this paragraph shall
control over all provisions of this Note which may be in apparent conflict
herewith.  In the event that the Payee
shall collect monies which are deemed to constitute interest which would
increase the effective interest rate on this Note to a rate in excess of that
permitted to be charged by applicable law, all such sums deemed to constitute
interest in excess of the lawful rate shall, upon such determination, at the
option of the Payee, be either immediately returned to the Payor or credited
against the principal balance of this Note then outstanding, in which event any
and all penalties of any kind under applicable law as a result of such excess
interest shall be inapplicable.

 

The Payee may assign this Note without the
consent of the Payor.  The Payor may not
assign any of its rights and obligations under this Note without the prior
written consent of the Payee.  Any
assignment made in violation of the foregoing prohibition shall be void.

 

This Note and the rights and obligations of
the Payee and Payor hereunder shall be governed by, and interpreted and
construed in accordance with, the laws of the State of New York, without
regard to conflicts of law principles thereof.

 

[remainder of page intentionally blank;  signature page is the next page]

 

2

 

IN WITNESS WHEREOF, the undersigned has
executed and delivered this Loan Proceeds Note as of the date first above
written.

 

	
   

  	
  LEVEL
  3 COMMUNICATIONS, LLC,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  Robin Grey

  
	
   

  	
   

  	
   Name:
  Robin Grey

  
	
   

  	
   

  	
   Title:
  Senior Vice President & Treasurer

  

 

 

Agreed
and Accepted:

 

	
  LEVEL
  3 FINANCING, INC.,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Robin Grey

  	
   

  
	
   

  	
   Name:
  Robin Grey

  	
   

  
	
   

  	
   Title:
  Senior Vice President & Treasurer

  	
   

  

 

[SIGNATURE PAGE TO AMENDED AND RESTATED LOAN PROCEEDS NOTE]

 

3

 

BOND POWER

 

FOR
VALUE RECEIVED, Level 3 Financing, Inc.,

hereby
sells, assigns and transfers unto

 

                                                                                                                                                                                                         
the Note, dated April 16, 2009, in the principal amount of $1,620,000,000
issued by Level 3 Communications, LLC to Level 3 Financing, Inc. and hereby irrevocably
constitutes and appoints                                                         
attorney to transfer the said Note with full power of substitution in the
premises.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEVEL
  3 FINANCING, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   

  	
   Title:

  

 

4Exhibit 10.3

 

EXECUTION
COPY

 

 

 

AMENDED AND RESTATED LOAN
PROCEEDS NOTE

 

COLLATERAL AGREEMENT

 

dated as of

 

March 13, 2007,

 

as amended and restated as of

 

April 16, 2009

 

among

 

LEVEL 3 FINANCING, INC.

 

LEVEL 3 COMMUNICATIONS, LLC

 

and

 

MERRILL LYNCH CAPITAL CORPORATION

as Collateral Agent

 

 

[CS&M Ref No. 4408-174]

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  
	
  SECTION 1.01. Credit Agreement

  	
  2

  
	
  SECTION 1.02. Other Defined Terms

  	
  2

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  Security Interests in
  Personal Property

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01. Security Interest

  	
  4

  
	
  SECTION 2.02. Representations and Warranties

  	
  5

  
	
  SECTION 2.03. Covenants

  	
  7

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  Remedies

  	
   

  
	
   

  	
   

  
	
  SECTION 3.01. Remedies Upon Default

  	
  9

  
	
  SECTION 3.02. Application of Proceeds

  	
  11

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION 4.01. Notices

  	
  11

  
	
  SECTION 4.02. Security Interest Absolute

  	
  11

  
	
  SECTION 4.03. Survival of Agreement

  	
  12

  
	
  SECTION 4.04. Binding Effect; Several Agreement

  	
  12

  
	
  SECTION 4.05. Successors and Assigns

  	
  12

  
	
  SECTION 4.06. Collateral Agent’s Fees and Expenses;
  Indemnification

  	
  13

  
	
  SECTION 4.07. Collateral Agent Appointed
  Attorney-in-Fact

  	
  13

  
	
  SECTION 4.08. Applicable Law

  	
  14

  

 

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  SECTION 4.09. Waivers; Amendment

  	
  14

  
	
  SECTION 4.10. WAIVER OF JURY TRIAL

  	
  14

  
	
  SECTION 4.11. Severability

  	
  15

  
	
  SECTION 4.12. Counterparts

  	
  15

  
	
  SECTION 4.13. Headings

  	
  15

  
	
  SECTION 4.14. Jurisdiction; Consent to Service of
  Process

  	
  15

  
	
  SECTION 4.15. Termination or Release

  	
  16

  
	
  SECTION 4.16. Right of Setoff

  	
  16

  
	
  SECTION 4.17. Compliance with Laws

  	
  17

  
	
  SECTION 4.18. Collateral Agent

  	
  17

  
	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
  Specified Jurisdictions

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Annual Loan Proceeds Note Perfection
  Certificate

  	
   

  

 

 

AMENDED AND RESTATED LOAN
PROCEEDS NOTE COLLATERAL AGREEMENT dated as of March 13, 2007, as amended
and restated as of April 16, 2009, among LEVEL 3 FINANCING, INC., a
Delaware corporation (the “LPN
Lender”), LEVEL 3
COMMUNICATIONS, LLC, a Delaware limited liability company (“LPN Borrower”) and MERRILL LYNCH CAPITAL CORPORATION
(“MLCC”), as collateral agent (in such capacity, the “Collateral
Agent”).

 

PRELIMINARY STATEMENT

 

Reference is made to (i) the
Credit Agreement dated as of March 13, 2007, as amended and restated by
the Amendment Agreement dated as of April 16, 2009 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among the LPN Lender, as
Borrower, Level 3 Communications, Inc. (“Level 3”), the lenders
from time to time party thereto (the “Lenders”) and MLCC, as administrative agent
(in such capacity, the “Administrative Agent”) and Collateral Agent, (ii) the
Loan Proceeds Note Collateral Agreement dated as of December 1, 2004  (the “Existing Loan Proceeds Note
Collateral Agreement”) among the LPN Lender, the LPN Borrower and MLCC, as
collateral agent, and (iii) the Amended and Restated Loan Proceeds Note
dated as of March 13, 2007 (as amended and restated as of April 16,
2009, and as it may be further amended from time to time pursuant to Sections
9.02(d) and 6.11 of the Credit Agreement, together with any additional
loan proceeds note issued to evidence additional Indebtedness incurred by the
Borrower in connection with additional loans made pursuant to Section 9.02(d) of
the Credit Agreement, the “Loan Proceeds Note”), between the LPN
Borrower as payor and the LPN Lender as payee. 
The lenders under the Credit Agreement have agreed to extend credit to
the Borrower pursuant to, and upon the terms and subject to the conditions
specified in, the Credit Agreement.  The
obligations of the Lenders to extend such credit to the Borrower are
conditioned upon, among other things, (i) the pledge of the Loan Proceeds
Note by the LPN Lender to the Collateral Agent for the benefit of the secured
parties under the collateral agreement dated as of March 13, 2007 (as
amended, supplemented or otherwise modified from time to time, the “Term Loan Collateral Agreement”), among the LPN Lender, Level 3,
the subsidiaries of Level 3 identified therein and MLCC, as collateral agent
and (ii) the execution and delivery of this Agreement by the LPN Borrower
and the LPN Lender.  The LPN Borrower is
an affiliate of the LPN Lender, will derive substantial benefits from the
extension of credit to the LPN Lender pursuant to the Credit Agreement and is
willing to execute and deliver this Agreement in order to induce the Lenders to
extend such credit.

 

Accordingly, the parties
hereto agree, and the Existing Loan Proceeds Note Collateral Agreement is
hereby amended and restated in its entirety, as follows:

 

 

ARTICLE I

 

Definitions

 

SECTION 1.01. Credit
Agreement.  (a)  Capitalized
terms used in this Agreement and not otherwise defined herein have the meanings
set forth in the Credit Agreement.  All
terms defined in the New York UCC (as such term is defined herein) and not
defined in this Agreement or in the Credit Agreement have the meanings
specified in the New York UCC.  All
references to the Uniform Commercial Code shall mean the New York UCC, unless
the context otherwise requires.

 

(b) The rules of
construction specified in Section 1.02 of the Credit Agreement also apply
to this Agreement.

 

SECTION 1.02. Other
Defined Terms.  As used in this
Agreement, the following terms have the meanings specified below:

 

“Administrative Agent”
has the meaning assigned to such term in the preliminary statement of this
Agreement.

 

“Annual
Loan Proceeds Note Perfection Certificate” means a certificate
substantially in the form of Exhibit A, completed and supplemented
with the schedules and attachments contemplated thereby, and duly executed by
an authorized officer of the LPN Borrower.

 

“Article 9
Collateral” has the meaning assigned to such term in Section 2.01.

 

“Collateral” means the Article 9
Collateral.

 

“Collateral Agent”
has the meaning assigned to such term in the preamble of this Agreement.

 

“Credit
Agreement” has the meaning assigned to such term in the
preliminary statement of this Agreement.

 

“Effective Date Loan
Proceeds Note Perfection Certificate” has the meaning assigned to such term
in the Credit Agreement.

 

“Equipment” has the
meaning assigned to such term in Section 9-102 of the New York UCC.

 

“Fixture” has the
meaning assigned to such term in Section 9-102 of the New York UCC.

 

“Existing Loan Proceeds
Note Collateral Agreement” has the meaning assigned to such term in the
preliminary statement of this Agreement.

 

2

 

“Grantor” means the
LPN Borrower.

 

“Inventory” has the
meaning assigned to such term in Section 9-102 of the New York UCC.

 

“Lenders” has the
meaning assigned to such term in the preliminary statement of this Agreement.

 

“Level 3” has
the meaning assigned to such term in the preamble of this Agreement.

 

“Loan Proceeds Note”
has the meaning assigned to such term in the preamble of this Agreement.

 

“LPN Borrower” has
the meaning assigned to such term in the preamble of this Agreement.

 

“LPN Lender” has the
meaning assigned to such term in the preamble of this Agreement.

 

“MLCC” has the
meaning assigned to such term in the preamble of this Agreement.

 

“New
York UCC” means the Uniform Commercial Code as from time to
time in effect in the State of New York.

 

“Obligations” means (a) the
due and punctual payment of (i) the principal of and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loan Proceeds Note, when and as due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise and (ii) all other monetary obligations of the LPN Borrower
to the Secured Party under the Loan Proceeds Note and this Agreement, including
fees, costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary obligations incurred during
the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) and (b) the
due and punctual performance of all other obligations of the LPN Borrower under
or pursuant to the Loan Proceeds Note and this Agreement.

 

“Proceeds” has the
meaning assigned to such term in Section 9-102 of the New York UCC.

 

“Secured
Party” means the LPN Lender.  It is
understood that the Loan Proceeds Note, together with the rights of the LPN
Lender hereunder, are being assigned to the Collateral Agent as Collateral (as
such term is defined in the Term Loan Collateral Agreement) pursuant to the
Term Loan Collateral Agreement.  The
Grantor hereby consents to the assignment of the Loan Proceeds Note, together
with the rights of the 

 

3

 

LPN
Lender hereunder, to the Collateral Agent as Collateral (as such term is
defined in the Term Loan Collateral Agreement) pursuant to the Collateral
Agreement.

 

“Security
Interest” has the meaning assigned to such term in Section 2.01.

 

“Specified Jurisdiction”
means any state specified on Schedule 1 hereto, as it may be
supplemented pursuant to Section 4.09(b).

 

ARTICLE II

 

Security Interests in Personal Property

 

SECTION 2.01. Security
Interest.  (a)  As security
for the payment or performance, as the case may be, in full of the Obligations,
the Grantor hereby assigns and pledges to the Collateral Agent, its successors
and assigns, for the benefit of the Secured Party, and hereby grants to the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Party, a security interest (the “Security Interest”) in, all right,
title or interest in or to any and all of the following assets and properties
now owned or at any time hereafter acquired by the Grantor or in which the
Grantor now has or at any time in the future may acquire any right, title or
interest (collectively, the “Article 9 Collateral”):

 

(i)            all Equipment
located in any Specified Jurisdiction;

 

(ii)           all Inventory
located in any Specified Jurisdiction;

 

(iii)          all Fixtures
located in any Specified Jurisdiction; and

 

(iv)          to the extent
not otherwise included, all Proceeds and products of any and all of the foregoing
and all collateral security and guarantees given by any Person with respect to
any of the foregoing.

 

Notwithstanding the foregoing, the Article 9
Collateral shall not include any of the following assets now owned or hereafter
acquired which would otherwise be included in the Article 9 Collateral: (a) assets
transferred to a Person that is not the Grantor, and is not required under the
Credit Agreement to become a Grantor (as defined in the Term Loan Collateral
Agreement), in compliance with the Credit Agreement, (b) assets subject to
Liens permitted by Section 6.05(ii)(2), (3) or (4), 6.05(iv) or
6.05(v) of the Credit Agreement to the extent the documentation creating
such Liens or governing the Indebtedness secured thereby would prohibit Liens
on such assets created hereunder, (c) assets which contain a valid and
enforceable prohibition on the creation of a security interest therein, to the
extent and for so long as such prohibition remains in effect and is valid and
effective to prohibit the creation of a security interest therein
notwithstanding Sections 9-406 through 9-409 of the applicable Uniform
Commercial Code, (d) Vehicles, (e) aircraft, (f) real estate
interests (including but not limited to leasehold interests), other 

 

4

 

than fixtures, (g) any Equipment,
Inventory or Fixtures not located in a Specified Jurisdiction or (h) any
state certificate from any relevant state public utilities commission
authorizing the Grantor to do business.

 

(b) The 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
(including fixture filings and transmitting utility filings) with respect to
the Article 9 Collateral or any part thereof and amendments thereto that (i) indicate
the Article 9 Collateral as all assets of the Grantor (or, if the
Collateral Agent shall so elect, identifying the Collateral in greater detail)
or words of similar effect; provided that such description states that
the collateral does not include any Equipment, Inventory or Fixtures unless the
same are located in a Specified Jurisdiction (as defined herein) (it being
understood that such description shall not result in the creation of a security
interest in any assets expressly excluded from the Article 9 Collateral by
the immediately preceding paragraph), and (ii) contain the information
required by Article 9 of the Uniform Commercial Code of each applicable
jurisdiction for the filing of any financing statement or amendment,
including  (A) whether the Grantor
is an organization, the type of organization and any organizational
identification number issued to the Grantor and (B) in the case of a
financing statement filed as a fixture filing, a sufficient description of the
real property to which such Article 9 Collateral relates.  The Grantor agrees to provide such
information, other than real property descriptions, to the Collateral Agent
promptly upon request.  Notwithstanding
the foregoing, it is understood that the Grantor shall have no obligation to
provide a real property description for central fixture filings or local
fixture filings.

 

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

 

(c) The Security
Interest is granted as security only and shall not subject the Collateral Agent
or the Secured Party to, or in any way alter or modify, any obligation or
liability of the Grantor with respect to or arising out of the Article 9
Collateral.

 

SECTION 2.02. Representations
and Warranties.  The Grantor
represents and warrants to the Collateral Agent and the Secured Party that:

 

(a) On the date hereof, the Grantor has
good and valid rights in and title to the Article 9 Collateral with
respect to which it has purported to grant a Security Interest hereunder and
has full power and authority to grant to the Collateral Agent the Security
Interest in such Article 9 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 that has been obtained.

 

(b) The Effective Date Loan Proceeds
Note Perfection Certificate has been duly prepared, completed and executed and
the information set forth therein necessary to achieve the perfection and
priority of the security interests 

 

5

 

contemplated
herein (including (x) the exact legal name of the Grantor and (y) the
jurisdiction of organization of the Grantor) is correct and complete as of the
Effective Date.

 

(c) Uniform Commercial Code financing
statements (including fixture filings and transmitting utility filings, as
applicable) or other appropriate filings, recordings or registrations
containing a description of the Article 9 Collateral have been prepared by
the Collateral Agent based upon the information provided to the Administrative
Agent in the Effective Date Loan Proceeds Note Perfection Certificate for
filing in each governmental, municipal or other office specified in the
Effective Date Loan Proceeds Note Perfection Certificate (or specified by
notice from the Grantor to the Administrative Agent after the Effective Date in
the case of filings, recordings or registrations required by
Sections 5.03, 5.12 or 5.13 of the Credit Agreement).  Such filings are all the filings, recordings
and registrations that are necessary as of the Effective Date to publish notice
of and protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Collateral Agent (for the benefit of the
Secured Party) in respect of all Article 9 Collateral in which the
Security Interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the
filing of continuation statements.

 

(d) The Security Interest constitutes (i) a
legal and valid security interest in all the Article 9 Collateral securing
the payment and performance of the Obligations and (ii) subject to the
filings described in Section 2.02(b), a perfected security interest in all
Article 9 Collateral in which a security interest may be perfected by
filing, recording or registering a financing statement or analogous document in
the United States (or any political subdivision thereof) and its territories
and possessions pursuant to the Uniform Commercial Code or other applicable law
in such jurisdictions.  The Security Interest
is and shall be prior to any other Lien on any of the Article 9
Collateral, other than Liens expressly permitted pursuant to Section 6.05
of the Credit Agreement.

 

(e) The Article 9 Collateral is
owned by the Grantor free and clear of any Lien, except for Liens expressly
permitted pursuant to Section 6.05 of the Credit Agreement.  The Grantor has neither filed nor consented
to the filing of (i) any financing statement or analogous document under
the Uniform Commercial Code or any other applicable laws covering any Article 9
Collateral, (ii) any assignment in which the Grantor assigns any
Collateral or any security agreement or similar instrument covering any Article 9
Collateral with the United States Patent and Trademark Office or the United
States Copyright Office or (iii) any assignment in which the Grantor
assigns any Article 9 Collateral or any security agreement or similar
instrument covering any Article 9 Collateral with any foreign
governmental, municipal or other office, which financing statement or analogous
document, assignment, security agreement or similar instrument is still 

 

6

 

in effect, except, in each case, for Liens expressly permitted pursuant
to Section 6.05 of the Credit Agreement.

 

SECTION 2.03. Covenants.  (a)  The Grantor agrees to maintain, at
its own cost and expense, such complete and accurate records with respect to
the Article 9 Collateral as is prudent in the conduct of its business,
and, at such time or times as the Collateral Agent may reasonably request, to
prepare and deliver as soon as reasonably practicable to the Collateral Agent a
duly certified schedule or schedules in form and detail satisfactory to the
Collateral Agent showing the identity, amount and location of any and all Article 9
Collateral.

 

(b) The Grantor shall,
at its own expense, take any and all actions necessary to defend title to the Article 9
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Article 9 Collateral and the priority thereof
against any Lien not expressly permitted pursuant to Section 6.05 of the
Credit Agreement.  Notwithstanding the
foregoing, in no event shall the Grantor be required to provide descriptions of
real estate for central fixture filings or local fixture filings.

 

(c) The 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 Agent may from time to time request to better assure, preserve,
protect and perfect the Security Interest 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
Interest and the filing of any financing statements (including fixture filings,
other than central fixture filings that require a real property description and
local fixture filings, and transmitting utility filings) or other documents in
connection herewith or therewith.  The
Grantor agrees that it will use its best efforts to take such action as shall
be necessary in order that all representations and warranties hereunder shall
be true and correct in all material respects with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent
of the specific identification of such Collateral.

 

(d) The Collateral
Agent and such Persons as the Collateral Agent may designate shall have the
right, at the Grantor’s own cost and expense, to inspect the Article 9
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Article 9 Collateral
is located, to discuss the Grantor’s affairs with the officers of the Grantor
and their independent accountants and to verify under reasonable procedures, in
accordance with Section 5.03 of the Credit Agreement, the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Article 9 Collateral, including, in the case of Accounts
or Article 9 Collateral in the possession of any third person, by
contacting Account Debtors or the third person possessing such Article 9
Collateral for the purpose of making such a verification.  The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with the Secured Party.  The rights under
this paragraph may only be exercised if an Event of Default has occurred and is
continuing.

 

7

 

(e) 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 Article 9 Collateral and not expressly permitted
pursuant to Section 6.05 of the Credit Agreement, and may pay for the
maintenance and preservation of the Article 9 Collateral to the extent the
Grantor fails to do so as required by the Credit Agreement or this Agreement,
and the Grantor 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; provided, however, that nothing in this
paragraph shall be interpreted as excusing the Grantor from the performance of,
or imposing any obligation on the Collateral Agent or the Secured Party to cure
or perform, any covenants or other promises of the Grantor with respect to
Taxes, assessments, charges, fees, Liens, security interests or other
encumbrances and maintenance as set forth herein or in the other Loan
Documents.

 

(f)  As
between the Grantor, the Collateral Agent and the Secured Party, the 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 Article 9 Collateral, all in accordance with the terms and
conditions thereof, and the Grantor agrees to indemnify and hold harmless the
Collateral Agent and the Secured Party from and against any and all liability
for such performance.

 

(g) The
Grantor shall not make or permit to be made an assignment, pledge or
hypothecation of the Article 9 Collateral nor shall it grant any other
Lien in respect of the Article 9 Collateral, except as expressly permitted
by Section 6.05 of the Credit Agreement. 
The Grantor shall neither make nor permit to be made any transfer of the
Article 9 Collateral, except as expressly permitted by Sections 6.07,
6.08, 6.10 and 9.14 of the Credit Agreement.

 

(h) The
Grantor, at its own expense, shall maintain or cause to be maintained insurance
covering physical loss or damage to the Inventory and Equipment in accordance
with the requirements set forth in Section 5.07 of the Credit
Agreement.  The Grantor irrevocably
makes, constitutes and appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as the Grantor’s true
and lawful agent (and attorney-in-fact) for the purpose, upon the occurrence
and during the continuance of an Event of Default, of making, settling and
adjusting claims in respect of Article 9 Collateral under policies of
insurance, endorsing the name of the 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.  In the event that the Grantor at any time or
times shall fail to obtain or maintain any of the policies of insurance
required hereby or under the Credit Agreement or to pay any premium in whole or
part relating thereto, the Collateral Agent may, without waiving or releasing
any obligation or liability of the Grantor hereunder or any Event of Default,
in its sole discretion, obtain and maintain such policies of insurance and pay
such premium and take any other actions with respect thereto as the Collateral
Agent deems advisable.  All sums
disbursed by the Collateral Agent in connection with this paragraph, including
attorneys’ fees, court costs, expenses and other charges relating thereto,
shall 

 

8

 

be payable, upon demand, by the
Grantor to the Collateral Agent and shall be additional Obligations secured
hereby.

 

(i)  Each
year, at the time of delivery of the certificate pursuant to paragraph (c) of
Section 5.01 of the Credit Agreement, the Grantor shall deliver to the
Collateral Agent a certificate of an authorized officer of the Grantor (i) setting
forth the information required pursuant to the Annual Loan Proceeds Note
Perfection Certificate or confirming that there has been no change in such
information since the date of the Effective Date Loan Proceeds Note Perfection
Certificate or the date of the most recent certificate delivered pursuant to
this Section and (ii) certifying that all Uniform Commercial Code
financing statements (excluding fixture filings) or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral required to be set
forth therein have been filed of record in each United States governmental,
municipal or other appropriate office in each jurisdiction identified pursuant
to clause (i) above to the extent necessary to perfect and continue the
perfection of the security interests under this Agreement for a period of not
less than 18 months after the date of such certificate (except as noted therein
with respect to any continuation statements to be filed within such period).

 

ARTICLE III

 

Remedies

 

SECTION 3.01.
Remedies Upon Default.  Upon the
occurrence and during the continuance of an Event of Default, the Grantor
agrees to deliver each item of Collateral to the Collateral Agent on demand,
and it is agreed that the Collateral Agent shall have the right to take any of
or all the following actions at the same or different times: with or without
legal process and with or without prior notice or demand for performance, to
take possession of the Article 9 Collateral and without liability for
trespass to enter any premises where the Article 9 Collateral may be
located for the purpose of taking possession of or removing the Article 9
Collateral and, generally, to exercise any and all rights afforded to a secured
party under the Uniform Commercial Code or other applicable law.  Without limiting the generality of the
foregoing, the 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 a 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
the Grantor, and the Grantor hereby waives (to the extent 

 

9

 

permitted by law) all rights of
redemption, stay and appraisal which the 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 the Grantor 10 days’ written notice (which the Grantor
agrees is reasonable notice within the meaning of Section 9-611 of the
New York UCC or its equivalent in other jurisdictions) of the Collateral
Agent’s intention to make any sale of 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 (if any) of such sale.  At any such sale, the Collateral, or portion
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.  The Collateral Agent shall
not 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, the Secured Party 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 the Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
claim then due and payable to the Secured Party from the Grantor as a credit
against the purchase price, and the Secured Party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to the 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 the Grantor
shall not 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 under 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 3.01
shall be deemed to conform to the 

 

10

 

commercially reasonable standards as provided in Section 9-610(b) of
the New York UCC or its equivalent in other jurisdictions.

 

SECTION 3.02.
Application of Proceeds.  The
Collateral Agent shall apply the Proceeds of any collection, sale or
foreclosure of, or other realization upon, any Collateral, and any Collateral
consisting of cash, as follows:

 

FIRST, to the payment of all
costs and expenses incurred by the Collateral Agent (in its capacity as such
hereunder or under the Loan Proceeds Note) in connection with such collection,
sale, foreclosure or realization or otherwise in connection with this
Agreement, the Loan Proceeds Note or any of the Obligations, including all
court costs and the fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Collateral Agent hereunder or under the
Loan Proceeds Note on behalf of the Grantor and any other costs or expenses
incurred in connection with the exercise of any right or remedy hereunder or
under the Loan Proceeds Note;

 

SECOND, to the payment in full
of the Obligations (the amounts so applied to be distributed to the Secured
Party in accordance with the amounts of the Obligations owed to it on the date
of any such distribution); and

 

THIRD, to the Grantor, its
successors or assigns, or as a court of competent jurisdiction may otherwise
direct.

 

The Collateral
Agent shall have absolute discretion (as between the Secured Party and the
Grantor) as to the time of application of any such proceeds, moneys or balances
in accordance with this Agreement.  Upon
any sale of Collateral by the Collateral Agent (including pursuant to a power
of sale granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.

 

ARTICLE IV

 

Miscellaneous

 

SECTION 4.01.
Notices.  All communications and
notices hereunder shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 9.01 of the Credit
Agreement.  All communications and
notices hereunder to the Grantor shall be given to it in care of the Borrower
as provided in Section 9.01 of the Credit Agreement.

 

SECTION 4.02.
Security Interest Absolute.  All
rights of the Collateral Agent hereunder, the Security Interest, the grant of a
security interest in the Collateral and all obligations of the Grantor
hereunder shall be absolute and unconditional 

 

11

 

irrespective of (a) any
lack of validity or enforceability of the Loan Proceeds Note, the Credit Agreement,
any other Loan Document, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent
to any departure from the Loan Proceeds Note, the Credit Agreement, any other
Loan Document or any other agreement or instrument, (c) any exchange,
release or non-perfection of any Lien on other collateral, or any release or
amendment or waiver of or consent under or departure from any guarantee,
securing or guaranteeing all or any of the Obligations, or (d) any other
circumstance that might otherwise constitute a defense available to, or a discharge
of, the Grantor in respect of the Obligations or this Agreement.

 

SECTION 4.03.
Survival of Agreement.  All
covenants, agreements, representations and warranties made by the Grantor in
the Loan Proceeds Note, the Loan Documents and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the other parties hereto and shall survive the execution and delivery
of the Loan Proceeds Note, the Loan Documents and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Secured Party, the Collateral Agent or any Lender
may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended under the Credit Agreement, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under any
Loan Document is outstanding.

 

SECTION 4.04.
Binding Effect; Several Agreement. 
This Agreement shall become effective as to the Grantor and the Secured
Party when a counterpart hereof executed on behalf of such party 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 the Grantor and the Secured Party and their respective permitted
successors and assigns, and shall inure to the benefit of the Grantor, the
Secured Party and the Collateral Agent and their respective permitted
successors and assigns, except that the Grantor shall not 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 contemplated by this Agreement or the Credit Agreement.  This Agreement shall be construed as a
separate agreement with respect to the Grantor and the Secured Party and may be
amended, modified, supplemented, waived or released with respect to the Grantor
or the Secured Party without the approval of the Grantor or the Secured Party,
as the case may be, and without affecting the obligations of the Grantor or the
Secured Party, as the case may be, hereunder.

 

SECTION 4.05.
Successors and Assigns.  Whenever
in this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the permitted successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of the Grantor, the
Secured Party or the Collateral Agent that 

 

12

 

are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.

 

SECTION 4.06.
Collateral Agent’s Fees and Expenses; Indemnification.  (a)  The parties hereto agree that
the Collateral Agent shall be entitled to reimbursement of its expenses
incurred hereunder to the extent provided in Section 9.03 of the Credit
Agreement.

 

(b) Without
limitation of its indemnification obligations under the other Loan Documents,
the Grantor agrees to indemnify the Collateral Agent, the Secured Party and the
other Indemnitees against, and hold each Indemnitee harmless to the extent set
forth in Section 9.03(b) of the Credit Agreement (as if Section 9.03(b) of
the Credit Agreement included the Secured Party as an Indemnitee).

 

(c) Any
such amounts payable as provided hereunder shall be additional Obligations
secured hereby.  The provisions of this Section 4.06
shall remain operative and in full force and effect regardless of the
termination of this Agreement, the Loan Proceeds Note or any Loan Document, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement, the Loan Proceeds Note or any Loan Document, or any
investigation made by or on behalf of the Collateral Agent or the Secured
Party.  All amounts due under this Section 4.06
shall be payable on written demand therefor and shall bear interest at the rate
specified in Section 2.06 of the Credit Agreement.

 

SECTION 4.07.
Collateral Agent Appointed Attorney-in-Fact.  The Grantor hereby appoints the Collateral
Agent as its attorney-in-fact 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 and coupled with an interest.  Without limiting the generality of the
foregoing, the Collateral Agent shall have the right, upon the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Collateral Agent’s name or in the name of the Grantor (a) to
receive, endorse, assign and/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
sign the name of the Grantor on any invoice or bill of lading relating to any
of the Collateral; (d) 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; (e) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; and (f) 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,
however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to 

 

13

 

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 Secured Party
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 the Grantor
for any act or failure to act hereunder, except for their own gross negligence
or willful misconduct.

 

SECTION 4.08.
Applicable Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 4.09.
Waivers; Amendment.  (a)  No
failure or delay by the Collateral Agent or the Secured Party in exercising any
right or power hereunder or under the Loan Proceeds Note shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power.  The rights and
remedies of the Collateral Agent and the Secured Party hereunder and under the
Loan Proceeds Note are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. 
No waiver of any provision of this Agreement or the Loan Proceeds Note
or consent to any departure by the Grantor or the Secured Party therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  No notice or demand on the Grantor or the
Secured Party in any case shall entitle the Grantor or the Secured Party, as
the case may be, to any other or further notice or demand in similar or other
circumstances.

 

(b) Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Collateral Agent, the Grantor and the Secured Party with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 9.02 of the Credit Agreement, provided,
however, the Grantor may amend Schedule 1 hereto by adding, but not
deleting, jurisdictions thereto by written notice to the Collateral Agent.  Such notice shall constitute an amendment to Schedule 1
without further action by the Secured Party or the Collateral Agent.

 

SECTION 4.10.
WAIVER OF JURY TRIAL.  EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN
PROCEEDS NOTE, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).   EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS 

 

14

 

REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
PROCEEDS NOTE AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 410.

 

SECTION 4.11.
Severability.  In the event any
one or more of the provisions contained in this Agreement, the Loan Proceeds
Note or any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein 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.

 

SECTION 4.12.
Counterparts.  This Agreement may
be executed in counterparts (and by different parties hereto on different
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 4.04. 
Delivery of an executed signature page to this Agreement by
facsimile or other transmission shall be as effective as delivery of a manually
signed counterpart of this Agreement.

 

SECTION 4.13.
Headings.  Article and Section headings
and the Table of Contents used herein are for convenience 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 4.14.
Jurisdiction; Consent to Service of Process.  (a)  Each of the Grantor and the Secured
Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or Federal
court of the United States of America, sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any other Loan Document, or for recognition or
enforcement of any judgment, and each of the Grantor and the Secured Party
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court.  The Grantor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement, the Loan Proceeds
Note or any Loan Document shall affect any right that the Collateral Agent or
the Secured Party may otherwise have to bring any action or proceeding relating
to this Agreement, the Loan Proceeds Note or any other Loan Document against
the Grantor or the Secured Party or its respective properties in the courts of
any jurisdiction.

 

15

 

(b) Each
of the Grantor and the Secured Party hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, the
Loan Proceeds Note or any Loan Document in any court referred to in paragraph (a) of
this Section.  Each of the Grantor and
the Secured Party hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

 

(c) Each of
the Grantor and the Secured Party hereby irrevocably consents to service of
process in the manner provided for notices in Section 4.01.  Nothing in this Agreement, the Loan Proceeds
Note or any other Loan Document will affect the right of the Collateral Agent
to serve process in any other manner permitted by law.

 

SECTION 4.15.
Termination or Release.  (a) 
This Agreement and the Security Interest and all other security interests
granted hereby shall terminate when all the Obligations (other than wholly contingent
indemnification obligations) then due and owing have been indefeasibly paid in
full.

 

(b) The
Liens created by this Agreement in the Collateral or any portion thereof shall
be released under the circumstances, at the times and in the manner set forth
in Section 9.14 of the Credit Agreement as if the Collateral hereunder
constitutes “Collateral” as such term is defined in the Credit Agreement.

 

(c) In
connection with any termination or release pursuant to paragraph (a) or
(b) above, the Collateral Agent shall execute and deliver to the Grantor,
at the Grantor’s expense, all documents that the Grantor shall reasonably
request to evidence such termination or release.  Any execution and delivery of documents
pursuant to this Section 4.15 shall be without recourse to or warranty by
the Collateral Agent.  Without limiting
the provisions of Section 4.06, the Grantor shall reimburse the Collateral
Agent upon demand for all costs and out of pocket expenses, including the fees,
charges and disbursements of counsel, incurred by it in connection with any
action contemplated by this Section 4.15.

 

SECTION 4.16.
Right of Setoff.  If an Event of
Default shall have occurred and is continuing, the Secured Party is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any
time owing by the Secured Party to or for the credit or the account of the
Grantor against any and all of the obligations of the Grantor now or hereafter
existing under this Agreement held by the Secured Party, irrespective of
whether or not the Secured Party shall have made any demand under this
Agreement and although such obligations may be unmatured.  The rights of the Secured Party under this Section are
in addition to other rights and remedies (including other rights of setoff)
which the Secured Party may have.

 

16

 

SECTION 4.17.
Compliance with Laws. 
Notwithstanding anything herein to the contrary, no action shall be
taken by the Collateral Agent or the Secured Party with respect to any license,
permit, certificate or authorization issued by the Federal Communications Commission
or any other Federal or state Governmental Authority applicable to or having
jurisdiction over the Grantor, or with respect to the Equity Interests of any
Person holding any such license, permit, certificate or authorization, unless
and until any approval required for such action under the Federal
Communications Act of 1934 or any other applicable Federal or state law, or any
applicable rule or regulation thereunder, shall have been satisfied.

 

SECTION 4.18.
Collateral Agent.  The Secured
Party hereby irrevocably appoints the Collateral Agent as its agent and
authorizes the Collateral Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Collateral Agent by the terms of
this Agreement, together with such actions and powers as are reasonably
incidental thereto.  The Secured Party
agrees as set forth in Article VIII of the Credit Agreement with respect
to the matters specified therein relating to the Collateral Agent and its
duties under this Agreement (as if the same were set forth in this Agreement).
Notwithstanding the foregoing (including as set forth in Article VIII of
the Credit Agreement), the Secured Party acknowledges and agrees that (i) it
is assigning all of its rights hereunder and under the Loan Proceeds Note under
the Term Loan Collateral Agreement to the Collateral Agent for the benefit of
the Secured Parties (as defined in the Term Loan Collateral Agreement) under
the Term Loan Collateral Agreement, (ii) the Collateral Agent shall act
hereunder for the benefit of the Secured Parties (as defined in the Term Loan
Collateral Agreement) under the Term Loan Collateral Agreement, (iii) the
Collateral Agent shall not be subject to any duties or obligations, including
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (iv) the Collateral Agent shall not have any duty to
take any discretionary action or exercise any discretionary powers contemplated
by this Agreement, (v) the Collateral shall not have any duty to disclose,
and shall not be liable for the failure to disclose, to the Secured Party any
information relating to the LPN Borrower and (vi) the Collateral Agent is
undertaking the obligations hereunder solely for the benefit of the Secured
Parties (as defined in the Term Loan Collateral Agreement) under the Term Loan
Collateral Agreement.

 

[remainder of page intentionally
left blank; signature page is next page]

 

17

 

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

 

	
   

  	
  LEVEL 3 FINANCING, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Robin Grey

  
	
   

  	
   

  	
  Name: Robin Grey

  
	
   

  	
   

  	
  Title: Senior Vice President

  

 

 

	
   

  	
  LEVEL 3 COMMUNICATIONS, LLC,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Robin Grey

  
	
   

  	
   

  	
  Name: Robin Grey

  
	
   

  	
   

  	
  Title: Senior Vice President

  

 

 

	
   

  	
  MERRILL LYNCH CAPITAL CORPORATION, 

  
	
   

  	
  as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Scott Tolchin

  
	
   

  	
   

  	
  Name: Scott Tolchin

  
	
   

  	
   

  	
  Title: Vice President

  

 

LEVEL 3 COMMUNICATIONS, LLC

LOAN PROCEEDS NOTE

COLLATERAL AGREEMENT

 

 

Schedule 1 to

Loan Proceeds Note

Collateral Agreement

 

Specified Jurisdictions

 

1.               Alabama

2.               Arkansas

3.               California

4.               Colorado

5.               District
of Columbia

6.               Florida

7.               Idaho

8.               Illinois

9.               Iowa

10.         Kansas

11.         Kentucky

12.         Louisiana

13.         Maine

14.         Maryland

15.         Massachusetts

16.         Michigan

17.         Minnesota

18.         Mississippi

19.         Missouri

20.         Montana

21.         Nebraska

22.         Nevada

23.         New
Hampshire

24.         New
Mexico

25.         North
Carolina

26.         North
Dakota

27.         Ohio

28.         Oklahoma

29.         Oregon

30.         Rhode
Island

31.         South
Carolina

32.         South
Dakota

33.         Texas

34.         Utah

35.         Vermont

36.         Virginia

37.         Washington

38.         Wisconsin

39.         Wyoming

 

 

Exhibit A to

Loan Proceeds Note

Collateral Agreement

 

FORM OF ANNUAL LOAN PROCEEDS NOTE
PERFECTION CERTIFICATE

 

Reference is made to (i) the
Credit Agreement dated as of March 13, 2007, as amended and restated by
the Amendment Agreement dated as of April 16, 2009 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Level 3 Financing, Inc. (the “Borrower”), Level 3 Communications, Inc.,  the lenders from time to time party thereto
(the “Lenders”), Merrill Lynch Capital Corporation, as Administrative
Agent for the Lenders (in such capacity, the “Administrative Agent”) and
(ii) the Amended and Restated Loan Proceeds Note Collateral Agreement
dated as of March 13, 2007, as amended and restated as of April 16,
2009 (as amended, supplemented or otherwise modified from time to time, the “Collateral
Agreement”), among the Borrower, Level 3 Communications, LLC (“Level 3
LLC”) and the Administrative Agent, as collateral agent.  Capitalized terms used but not defined herein
have the meanings assigned in the Credit Agreement or the Collateral Agreement,
as applicable. As used herein the term “Perfection Certificate” shall mean as
applicable either the Effective Date Loan Proceeds Note Perfection Certificate
or the last delivered Annual Loan Proceeds Note Perfection Certificate.

 

The
undersigned, an authorized officer of Level 3 LLC, hereby certifies to the
Administrative Agent and each other Secured Party as follows:

 

1.                                       Names.  (a)  
The exact legal name of Level 3 LLC, as such name appears in its
respective certificate of formation has not changed since delivery of the
previous Perfection Certificate or has changed to:

 

Complete
only if there is a change since delivery of the previous Perfection Certificate:                      .

 

(b) 
Except as set forth in Schedule 1(b), Level 3 LLC has not changed its
identity or corporate structure in any way within the past five years other than
as disclosed on the previous Perfection Certificate.  Changes in identity or corporate structure
would include mergers, consolidations and acquisitions, as well as any change
in the form, nature or jurisdiction of organization.  With regard to mergers, consolidations or
acquisitions, Schedule 1(b) sets forth the information required by
Sections 1 and 2 of this certificate with respect to each acquiree or
constituent party to such merger, consolidation or acquisition.

 

Complete
only if there is a change since delivery of the previous Perfection Certificate:                      .

 

(c)  Set
forth below is the Organizational Identification Number, if any, issued by the
jurisdiction of formation of Level 3 LLC:

 

 

Complete only if there is a change since delivery
of the previous Perfection Certificate:                      .

 

(d)  Set
forth below is the Federal Taxpayer Identification Number of Level 3 LLC:

 

Complete only if there is a change since
delivery of the previous Perfection Certificate:                      .

 

(e) All
of the States where Level 3 LLC, being a Transmitting Utility, maintains any
Equipment that is Collateral used in the business in which Level 3 LLC is
primarily engaged are as follows:

 

Complete only if there is a change since
delivery of the previous Perfection Certificate:                      .

 

(f)  (i) 
Set forth on Schedule 1(f)(i) hereto are the names and addresses of
all Persons other than Level 3 LLC that have possession of any of the
Collateral, the possession of which Collateral by the Collateral Agent is
necessary to perfect or establish priority in any security interest in such
Collateral and (ii) except as set forth on Schedule 1(f)(ii) attached
hereto, there is no material portion of any Collateral owned by Level 3 LLC in
the possession of a Person other than Level 3 LLC.

 

Complete only if there is a change since
delivery of the previous Perfection Certificate:                      .

 

2.                                       Formation
Information.  The jurisdiction of
formation of Level 3 LLC has not changed since delivery of the last Perfection
Certificate or has changed as follows:

 

Complete
only if there is a change since delivery of the previous Perfection
Certificate:

 

	
   

  	
  Grantor:

  	
   

  	
  Jurisdiction:

  

 

[remainder of page intentionally
left blank; signature page is next page]

 

 

IN WITNESS
WHEREOF, the undersigned have duly executed this certificate on this
[   ] day of [       ].

 

	
   

  	
  [                                     ],

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

LEVEL 3 COMMUNICATIONS, LLC

ANNUAL LOAN PROCEEDS NOTE PERFECTION CERTIFICATE

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