Document:

Exhibit 10.2

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT, dated as of July 17, 2008,
between VERTIS, INC., a Delaware corporation (“Borrower”), VERTIS
HOLDINGS, INC., a Delaware corporation (“Holdings”), ENTERON GROUP LLC,
a Delaware limited liability company (“Enteron”), WEBCRAFT, LLC, a
Delaware limited liability company (“Webcraft”), WEBCRAFT CHEMICALS,
LLC, a Delaware limited liability company (“Webcraft Chemicals”), USA
DIRECT, LLC, a Delaware limited liability company (“USA Direct”), VERTIS
MAILING, LLC, a Delaware limited liability company (“Mailing”) (each a “Grantor”
and collectively, the “Grantors”), each a debtor and
debtor-in-possession under chapter 11 of the Bankruptcy Code, and GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation, in its capacity as Agent
for Lenders.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Senior Secured,
Priming and Super Priority Debtor-in-Possession Credit Agreement dated as of
the date hereof by and among Grantors, the Persons named therein as Credit Parties,
Agent and Lenders (including all annexes, exhibits and schedules thereto, as
from time to time amended, restated, supplemented or otherwise modified, the “Credit
Agreement”), Lenders have agreed to make the Loans and to incur Letter of
Credit Obligations on behalf of Grantors;

 

WHEREAS, in order to induce Agent and Lenders to enter
into the Credit Agreement and the other Loan Documents and to induce Lenders to
make the Loans and to incur Letter of Credit Obligations as provided for in the
Credit Agreement, Grantors have agreed to grant a continuing Lien on the
Collateral (as hereinafter defined) to secure the Obligations;

 

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

 

1.                                       Defined Terms.

 

(a)          All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement or in Annex A
thereto.  All other terms contained in
this Security Agreement, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein.

 

(b)         “Uniform Commercial Code jurisdiction” means any jurisdiction
that has adopted all or substantially all of Article 9 as contained in the
2000 Official Text of the Uniform Commercial Code, as recommended by the
National Conference of Commissioners on Uniform State Laws and the American Law
Institute, together with any subsequent amendments or modifications to the
Official Text.

 

 

2.                                       Grant of Lien.

 

(a)          To secure the prompt and complete payment, performance
and observance of all of the Obligations and all renewals, extensions,
restructurings and refinancings thereof, each Grantor hereby grants, assigns,
conveys, mortgages, pledges, hypothecates and transfers to Agent, for itself
and the benefit of Lenders, a Lien upon all of its right, title and interest
in, to and under all personal property and other assets, whether now owned by
or owing to, or hereafter acquired by or arising in favor of such Grantor
(including under any trade names, styles or derivations thereof), and whether
owned or consigned by or to, or leased from or to, such Grantor, and regardless
of where located (all of which being hereinafter collectively referred to as
the “Collateral”), including:

 

(i)                                     all Accounts;

 

(ii)                                  all Chattel Paper;

 

(iii)                               all Documents;

 

(iv)                              all General Intangibles (including
payment intangibles and Software);

 

(v)                                 all Goods (including Inventory, Equipment
and Fixtures);

 

(vi)                              all Instruments;

 

(vii)                           all Investment Property;

 

(viii)                        all Deposit Accounts (as such term is
defined in the Code) of Grantor, including blocked accounts, concentration
accounts, Disbursement Accounts, and all other bank accounts and all deposits
therein;

 

(ix)                                all money, cash or cash equivalents of
Grantor;

 

(x)                                   all Supporting Obligations and Letter-of
Credit Rights of Grantor;

 

(xi)                                all commercial tort claims of Grantor;
and

 

(xii)                             to the extent not otherwise included, all
Proceeds, tort claims, insurance claims and other rights to payment not
otherwise included in the foregoing and products of the foregoing and all
accessions to, substitutions and replacements for, and rents and profits of, each
of the foregoing.

 

(b)         In addition, to secure the prompt and complete
payment, performance and observance of the Obligations and in order to induce
Agent and Lenders as aforesaid, Grantor hereby grants to Agent, for itself and
the benefit of Lenders, a right of setoff against the property of each Grantor
held by Agent or any Lender, consisting of property described above in Section 2(a) now
or hereafter in the possession or custody of or in transit to Agent 

 

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or any Lender, for any purpose, including safekeeping,
collection or pledge, for the account of such Grantor, or as to which such
Grantor may have any right or power.

 

(c)          This Security Agreement, the Credit Agreement, the
Interim Order, the Final Order, and the other Loan Documents supplement each
other, and the grants, priorities, rights and remedies of the Agent and Lenders
hereunder and thereunder are cumulative. 
The Liens and security interests referred to in this Section 2
and in the Loan Documents are deemed valid and perfected by entry of the
Interim Order and the Final Order.  The
Agent may, but shall not be required to, file any financing statements,
mortgages, notices of lien or similar instruments in any jurisdiction or filing
office, or to take possession of any Collateral or to take any other action in
order to validate or perfect the Liens and security interests granted by or
pursuant to this Security Agreement, the Interim Order, the Final Order or any
other Loan Document.  If the Agent shall,
in its discretion, from time to time choose to file such financing statements,
mortgages, notices of lien or similar instruments, take possession of any
Collateral, or to take any other action to validate or perfect any such
security interests or Liens, all such documents shall be deemed to have been
filed or recorded at the time and on the date of entry of the Interim Order.

 

(d)         The Liens, security interests, lien priorities,
administrative expense claim priorities and other rights and remedies granted
to the Agent and Lenders pursuant to this Security Agreement, the Interim
Order, the Final Order, and the other Loan Documents (specifically including
but not limited to the existence, perfection, and priority of the Liens and
security interests provided herein and therein, and the administrative expense
claim 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 debt by any of the Grantors (pursuant to Section 364 of the
Bankruptcy Code or otherwise), or by any dismissal or conversion of any of the
Prepackaged Chapter 11 Cases, or by any other act or omission whatsoever.  Without limitation, notwithstanding any such
order, financing, extension, incurrence, dismissal, conversion, act or
omission:

 

(i)                                     subject to the Carve-Out Expense
provisions of the Credit Agreement, no costs or expenses of administration
which have been or may be incurred in the Prepackaged Chapter 11 Cases or any
conversion of the same or in any other proceedings related thereto, and no
priority claims, are or will be prior to or on a parity with any claim of the
Agent or Lenders against the Grantors in respect of any Obligation; and

 

(ii)                                  the Liens and security interests in favor
of the Agent and Lenders set forth in this Section 2 and in the
Loan Documents shall constitute valid and perfected first priority Liens and
security interests, subject only to Liens permitted under the Credit Agreement,
Permitted Encumbrances and the Carve-Out Expense provisions of the Credit
Agreement, and shall be prior to all other Liens and interests, now existing or
hereafter arising, in favor of any other creditor or any other person
whatsoever.

 

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3.                                       Agent’s and Lenders’ Rights; Limitations
on Agent’s and Lenders’ Obligations.

 

(a)          It is expressly agreed by Grantors that, anything
herein or in any other Loan Document to the contrary notwithstanding, each
Grantor shall remain liable under each of its Contractual Obligations,
including all Licenses, to observe and perform all the conditions and
obligations to be observed and performed by it thereunder.  Neither Agent nor any Lender shall have any
obligation or liability under any Contractual Obligation by reason of or
arising out of this Security Agreement or any other Loan Document or the
granting herein of a Lien thereon or the receipt by Agent or any Lender of any
payment relating to any Contractual Obligation pursuant hereto.  Neither Agent nor any Lender shall be
required or obligated in any manner to perform or fulfill any of the
obligations of any Grantor under or pursuant to any Contractual Obligation, or
to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any
party under any Contractual Obligation, or to present or file any claims, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.

 

(b)         At any time after an Event of Default has occurred and
is continuing, without prior notice to Grantor, Agent may notify Account
Debtors and other Persons obligated on any of the Collateral that Agent has a
security interest therein, and that payments shall be made directly to Agent,
for itself and the benefit of Lenders. 
Upon the request of Agent, each Grantor shall so notify Account Debtors
and other Persons obligated on Collateral. 
Once any such notice has been given to any Account Debtor or other
Person obligated on Collateral, each Grantor shall not give any contrary
instructions to such Account Debtor or other Person without Agent’s prior
written consent.

 

(c)          Agent may at any time in Agent’s own name, in the name
of a nominee of Agent or in the name of any Grantor communicate (by mail,
telephone, facsimile or otherwise) with Account Debtors, parties to Contractual
Obligations and obligors in respect of Instruments to verify with such Persons,
to Agent’s satisfaction, the existence, amount, terms of, and any other matter
relating to, Accounts, Instruments, Chattel Paper and/or payment
intangibles.  If a Default or Event of
Default shall have occurred and be continuing, each Grantor, at its own
expense, shall cause the independent certified public accountants then engaged
by such Grantor to prepare and deliver to Agent and each Lender at any time and
from time to time promptly upon Agent’s request the following reports with
respect to Grantor: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as Agent may request.  Each Grantor, at its own expense, shall
deliver to Agent the results of each physical verification, if any, which such
Grantor may in its discretion have made, or caused any other Person to have
made on its behalf, of all or any portion of its Inventory.

 

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4.                                       Representations and Warranties. 
The Grantors jointly and severally, represent and warrant that:

 

(a)          Each Grantor has rights in and the power to transfer
each item of the Collateral upon which it purports to grant a Lien hereunder
free and clear of any and all Liens other than Liens permitted under the Credit
Agreement and Permitted Encumbrances.

 

(b)         No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all
or any part of the Collateral is on file or of record in any public office,
except such as may have been filed (i) by any Grantor in favor of Agent
pursuant to this Security Agreement or the other Loan Documents, (ii) in
connection with any Liens permitted under the Credit Agreement and Permitted
Encumbrances, and (iii) by any Grantor in favor of the secured parties
under the Pre-Petition Credit Agreement and related pre-petition loan
documents.

 

(c)          This Security Agreement is effective to create a valid
and continuing Lien on and, upon entry of the Interim Order or the Final Order
(as applicable) or upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, for
itself and the benefit of Lenders, on the Collateral with respect to which a
Lien may be perfected by entry of the Interim Order or the Final Order (as
applicable) or a filing pursuant to the Code. 
Such Lien is prior to all other Liens, except Permitted Encumbrances
that would be prior to Liens in favor of Agent for the benefit of Agent and
Lenders as a matter of law, and is enforceable as such as against any and all
creditors of and purchasers from Grantor (other than purchasers and lessees of
Inventory in the ordinary course of business and non-exclusive licensees of
General Intangibles in the ordinary course of business).  Upon the entry of the Interim Order and the
Final Order, all action by any Grantor necessary or desirable to protect and
perfect such Lien on each item of the Collateral has been duly taken.  Other than as listed on Schedule III,
Grantor does not sell any Inventory to any Person on approval or on any other
basis which entitles the customer to return, or which may obligate any Grantor
to repurchase, such Inventory.  Except as
provided in the Interim Order or the Final Order (as applicable), no
authorization, approval or consent is required to be obtained from any
Governmental Authority or other Person for the grant of the security interest
herein, the perfection thereof or the exercise by Agent of its rights and
remedies hereunder.

 

(d)         Schedule II hereto lists all domestic Stock, Instruments,
Documents, Letter of Credit Rights and Chattel Paper in respect of which each
Grantor has an interest as of the date hereof. 
Except as provided in the Interim Order or the Final Order (as applicable),
all action by such Grantor necessary or desirable to protect and perfect the
Lien of Agent on each item set forth on Schedule II (including the
delivery of all originals thereof to Agent and the legending of all Chattel
Paper as required by Section 5(b) hereof) has been duly
taken.  The Lien of Agent, for the
benefit of Agent and Lenders, on the Collateral listed on Schedule II hereto
is prior to all other Liens, except Liens permitted under the Credit Agreement
and 

 

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Permitted Encumbrances that would be prior to the
Liens in favor of Agent as a matter of law, and is enforceable as such against
any and all creditors of and purchasers any Grantor.

 

(e)          Each Grantor’s name as it appears in official filings
in the state of its incorporation or other organization, the type of entity of
each Grantor (including corporation, partnership, limited partnership or
limited liability company), organizational identification number issued by each
Grantor’s state of incorporation or organization or a statement that no such
number has been issued, Grantor’s state of organization or incorporation, the
location of Grantor’s chief executive office, principal place of business, all
warehouses, consignees and processors with whom Inventory is stored or located
and other premises where Collateral is stored or located, and the locations of
its books and records concerning the Collateral are set forth on Schedule
III hereto.  Schedule III
hereto also sets forth the name as it appears in official filings in the state
of its incorporation or other organization of any Person from whom Grantor has
acquired assets during the past five (5) years, other than assets acquired
in the ordinary course of Grantor’s business. 
Each Grantor has only one state of incorporation or organization.

 

(f)            With respect to the Accounts, except as specifically
disclosed on the most recent Borrowing Base Certificate or other collateral
report delivered to Agent (i) they represent bona fide sales or leases of
Inventory or rendering of services to Account Debtors in the ordinary course of
each Grantor’s business and are not evidenced by a judgment, Instrument or
Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted with respect thereto and no Grantor has made any agreement with any
Account Debtor for any extension of time for the payment thereof, any
compromise or settlement for less than the full amount thereof, any release of
any Account Debtor from liability therefor, or any deduction therefrom except a
discount or allowance allowed by such Grantor in the ordinary course of its
business for prompt payment and disclosed to Agent; (iii) to each Grantor’s
knowledge, there are no facts, events or occurrences which in any way impair
the validity or enforceability thereof or could reasonably be expected to
reduce the amount payable thereunder as shown on any Grantor’s books and
records and any invoices, statements and Borrowing Base Certificate or other
collateral report delivered to Agent and Lenders with respect thereto; (iv) no
Grantor has received any notice of proceedings or actions which are threatened
or pending against any Account Debtor which might result in any adverse change
in such Account Debtor’s financial condition; and (v) no Grantor has
knowledge that any Account Debtor is unable generally to pay its debts as they
become due; and (vi) they constitute the legally valid and binding
obligation of the applicable Account Debtors. 
Further with respect to the Accounts (x) the amounts shown on all
invoices, statements and Borrowing Base Certificate or other collateral report
which may be delivered to the Agent with respect thereto are actually and
absolutely owing to such Grantor as indicated thereon and are not in any way
contingent; (y) no payments have been or shall be made thereon except
payments immediately delivered to the applicable Blocked Accounts or to the
Agent as required by the Credit Agreement; and (z) to each Grantor’s
knowledge, all Account Debtors have the capacity to contract.

 

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(g)         With respect to the Inventory (i) all such
Inventory is located at one of the locations set forth on Schedule III
hereto, (ii) no Inventory is now, or shall at any time or times hereafter be
stored at any other location without Agent’s prior consent, and if Agent gives
such consent, the applicable Grantor will concurrently therewith obtain, to the
extent required by the Credit Agreement, bailee, landlord and mortgagee
agreements, (iii) the applicable Grantor has good, indefeasible and
merchantable title to such Inventory and such Inventory is not subject to any
Lien or security interest or document whatsoever except for the Lien granted to
Agent, for the benefit of Agent and Lenders, and except for Liens permitted
under the Credit Agreement and Permitted Encumbrances, (iv) such Inventory
is not subject to any licensing, patent, royalty, trademark, trade name or
copyright agreements with any third parties which would require any consent of
any third party upon sale or other disposition of that Inventory or the payment
of any monies to any third party upon such sale or other disposition, and (v) the
completion of manufacture, sale or other disposition of such Inventory by Agent
following an Event of Default shall not require the consent of any Person and
shall not constitute a breach or default under any contract or agreement to
which Grantor is a party or to which such property is subject.

 

(h)         no Grantor has any interest in, or title to, any material
Patent, Trademark or Copyright except as set forth in Schedule 3.9 to the
Credit Agreement.  This Security
Agreement is effective to create a valid and continuing Lien on and, upon the
entry of the Interim Order and the Final Order (as applicable) or upon filing
of the Copyright Security Agreements with the United States Copyright Office
and filing of the Patent Security Agreements and the Trademark Security
Agreements with the United States Patent and Trademark Office, perfected Liens
in favor of Agent on each Grantor’s federally registered Patents, Trademarks
and Copyrights and such perfected Liens are enforceable as such as against any
and all creditors of and purchasers from any Grantor.  Upon the entry of the Interim Order and the
Final Order (as applicable) or upon filing of the Copyright Security Agreements
with the United States Copyright Office and filing of the Patent Security
Agreements and the Trademark Security Agreements with the United States Patent
and Trademark Office and the filing of appropriate financing statements listed
on Schedule I hereto, all action necessary or desirable to protect and
perfect Agent’s Lien on each Grantor’s federally registered Patents, Trademarks
or Copyrights shall have been duly taken.

 

5.                                       Covenants.  The Grantors,
jointly and severally, covenant and agree with Agent, for the benefit of Agent
and Lenders, that from and after the date of this Security Agreement and until
the Termination Date:

 

(a)          Further Assurances; Pledge of Instruments; Chattel
Paper.

 

(i)                                     At any time and from time to time, upon
the written request of Agent and at the sole expense of Grantors and without
any further order of the Bankruptcy Court, each Grantor shall promptly and duly
execute and deliver any and all such further instruments and documents and take
such further actions as Agent may deem necessary or desirable to obtain the
full benefits of this Security Agreement and of the 

 

7

 

rights and powers herein granted, including (A) all consents and
approvals necessary or appropriate for the assignment to or for the benefit of
Agent of any Contractual Obligation, including any License, held by such
Grantor and to enforce the security interests granted hereunder; and (B) filing
any financing or continuation statements under the Code with respect to the
Liens granted hereunder or under any other Loan Document as to those
jurisdictions that are not Uniform Commercial Code jurisdictions.

 

(ii)                                  Unless Agent shall otherwise consent in
writing (which consent may be revoked), each Grantor shall deliver to Agent all
Collateral consisting of negotiable Documents, certificated Stock, Chattel
Paper and Instruments (in each case, accompanied by stock powers, allonges or
other instruments of transfer executed in blank) promptly after such Credit
Party receives the same.  Upon acquiring
any negotiable Document, certificated Stock, Chattel Paper or Instrument, in
each such case having a value in excess of $100,000, Grantors will provide
prompt written notice thereof to Agent.

 

(iii)                               Each Grantor shall, in accordance with the terms of
the Credit Agreement, obtain waivers or subordinations of Liens from landlords,
bailees and mortgagees and signed acknowledgements of Agent’s Liens from
bailees having possession of any Grantor’s Goods that they hold for the benefit
of Agent.

 

(iv)                              Grantor shall obtain (A) authenticated
letters of control from each issuer of uncertificated securities pledged
hereunder to the extent such issuer is not itself a party hereto, if applicable,
and (B) Control Agreements from a securities intermediary or commodities
intermediary issuing or holding any financial assets or commodities to or for
any Grantor in accordance with Section 4.9 of the Credit Agreement, if
any.

 

(v)                                 As and to the extent required by the
Credit Agreement, Grantor shall obtain a Control Agreement with each bank or
financial institution holding a Deposit Account for Grantor.

 

(vi)                              If any Grantor is or becomes the
beneficiary of a letter of credit in excess of $250,000, Grantor shall
promptly, and in any event within two (2) Business Days after becoming a
beneficiary, notify Agent thereof and enter into a tri-party agreement with
Agent and the issuer and/or confirmation bank with respect to Letter-of-Credit
Rights assigning such Letter-of-Credit Rights to Agent and directing all
payments thereunder to a Deposit Account subject to a Control Agreement in
favor of Agent, all in form and substance reasonably satisfactory to Agent.

 

(vii)                           To the extent not otherwise provided upon entry of the
Interim Order and the Final Order (as applicable), Grantor shall take all steps
necessary to grant Agent control of all electronic Chattel Paper in accordance
with the Code and all 

 

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“transferable records” as defined in each of the Uniform Electronic
Transactions Act and the Electronic Signatures in Global and National Commerce
Act.

 

(viii)                        Each Grantor hereby irrevocably authorizes the Agent
at any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Collateral (i) as all assets of such
Grantor or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the
Code or such jurisdiction, or (ii) as being of an equal or lesser scope or
with greater detail, and (b) contain any other information required by
part 5 of Article 9 of the Code for the sufficiency or filing office
acceptance of any financing statement or amendment, including (i) whether
such Grantor is an organization, the type of organization and any organization
identification number issued to such Grantor, and (ii) in the case of a
financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. 
Each Grantor agrees to furnish any such information to the Agent promptly
upon request.  Each Grantor also ratifies
its authorization for the Agent to have filed in any Uniform Commercial Code
jurisdiction any initial financing statements or amendments thereto if filed
prior to the date hereof.

 

(ix)                                Each Grantor shall promptly, and in any
event within two (2) Business Days after the same is acquired by it,
notify Agent of any commercial tort claim in excess of $250,000 acquired by it
and unless otherwise consented by Agent, Grantor shall enter into a supplement
to this Security Agreement, granting to Agent a Lien in such commercial tort
claim.

 

(b)         Maintenance of Records.  Grantors
shall keep and maintain, at its own cost and expense, satisfactory and complete
records of the Collateral in accordance with past business practice, including
a record of any and all payments received and any and all credits granted with
respect to the Collateral and all other dealings with the Collateral.  Grantors shall mark its books and records
pertaining to the Collateral to evidence this Security Agreement and the Liens
granted hereby.  If any Grantor retains
possession of any Chattel Paper or Instruments with Agent’s consent, such
Chattel Paper and Instruments shall be marked with the following legend:  “This writing and the obligations evidenced
or secured hereby are subject to the security interest of General Electric
Capital Corporation, as Agent, for the benefit of Agent and certain Lenders.”

 

(c)          Covenants Regarding Patent, Trademark and Copyright
Collateral.

 

(i)                                     Grantor shall notify Agent immediately if
it knows or has reason to know that any application or registration relating to
any material Patent, Trademark or Copyright (now or hereafter existing) may
become abandoned or dedicated, or of any adverse determination or development (including
the institution of, or any such 

 

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determination or development in, any proceeding in the
United States Patent and Trademark Office, the United States Copyright Office
or any court) regarding Grantor’s ownership of any material Patent, Trademark
or Copyright, its right to register the same, or to keep and maintain the same.

 

(ii)                                  In no event shall any Grantor, either
itself or through any agent, employee, licensee or designee, file an
application for the registration of any material Patent, Trademark or Copyright
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency without giving Agent prior written
notice thereof, and, upon request of Agent, each Grantor shall execute and
deliver any and all Patent Security Agreements, Copyright Security Agreements
or Trademark Security Agreements as Agent may request to evidence Agent’s Lien
on such Patent, Trademark or Copyright, and the General Intangibles of such
Grantor relating thereto or represented thereby.

 

(iii)                               Grantors shall take all actions necessary
or requested by Agent to maintain and pursue each application, to obtain the
relevant registration and to maintain the registration of each of the material
Patents, Trademarks and Copyrights (now or hereafter existing), including the
filing of applications for renewal, affidavits of use, affidavits of
noncontestability and opposition and interference and cancellation proceedings,
unless such Grantor shall determine that such Patent, Trademark or Copyright is
no longer material to the conduct of its business.

 

(iv)                              In the event that any of the material
Patent, Trademark or Copyright Collateral is infringed upon, or misappropriated
or diluted by a third party, such Grantor shall comply with Section 5(a)(ix) of
this Security Agreement.  Such Grantor
shall, unless such Grantor shall reasonably determine that such material
Patent, Trademark or Copyright Collateral is no longer material to the conduct
of its business or operations, promptly sue for infringement, misappropriation
or dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and shall take such other actions as Agent shall
deem appropriate under the circumstances to protect such material Patent,
Trademark or Copyright Collateral.

 

(d)         Compliance with Terms of Accounts, etc. 
Grantors will perform and comply in all material respects with all
obligations in respect of the Collateral and all other agreements to which it
is a party or by which it is bound relating to the Collateral.

 

(e)          Limitation on Liens on Collateral. 
No Grantor will create, permit or suffer to exist, and will defend the
Collateral against, and take such other action as is necessary to remove, any
Lien on any of the Collateral except Liens permitted under the Credit Agreement
and Permitted Encumbrances, and will defend the right, title and interest of
Agent and Lenders in and to any of Grantor’s rights under the Collateral
against the claims and demands of all Persons whomsoever.

 

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(f)            Further Identification of Collateral. 
Grantors will, if so requested by Agent, furnish to Agent, as often as
Agent reasonably requests, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as Agent may reasonably request, all in such detail as Agent may
specify.  Grantors shall promptly notify
Agent in writing upon acquiring any interest hereafter in property that is of a
type where a security interest or lien must be or may be registered, recorded
or filed under, or notice thereof given under, any federal statute or
regulation.

 

(g)         Notices.  Grantors will
advise Agent promptly, in reasonable detail, (i) of any Lien (other than
Liens permitted under the Credit Agreement and Permitted Encumbrances) or claim
made or asserted against any of the Collateral, and (ii) of the occurrence
of any other event which could reasonably be expected to have a Material
Adverse Effect on the aggregate value of the Collateral or on the Liens created
hereunder or under any other Loan Document.

 

(h)         Good Standing Certificates. 
If and whenever requested by Agent, Grantors shall provide to Agent a
certificate of good standing from its state of incorporation or organization.

 

(i)             Organizational/Collateral Location Changes; No
Reincorporation.    Grantor will give Agent at least thirty
(30) days prior written notice of any change required to be made to Schedule
III hereto, to the extent needed to make said Schedule III up to
date and accurate.  Without limiting the
prohibitions on mergers involving the Grantors contained in the Credit
Agreement, no Grantor shall reincorporate or reorganize itself under the laws
of any jurisdiction other than the jurisdiction in which it is incorporated or
organized as of the date hereof without the prior written consent of Agent.

 

(j)             Terminations; Amendments Not Authorized. 
Grantor acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement filed in favor of Agent without the prior written consent of Agent
and agrees that it will not do so without the prior written consent of Agent,
subject to Grantor’s rights under Section 9-509(d)(2) of the Code.

 

(k)          Authorized Terminations.  Following the
Termination Date, Agent will promptly deliver to Grantor for filing or
authorize Grantor to prepare and file termination statements and releases in accordance
with Section 9-513(c) of the Code.

 

(l)             Use of Collateral.  Grantors will
do nothing to impair the rights of Agent in any of the Collateral.  Grantor will not use or permit any Collateral
to be used unlawfully or in violation of any provision of applicable law, or
any insurance policy covering any of the Collateral.  Without limiting the foregoing, Grantor will
not permit the production of Inventory in violation of any provision of the
Fair Labor Standards Act and Grantor will not adjust, settle or compromise the
amount or payment of any Account, or release wholly or 

 

11

 

partly any Account Debtor thereof or allow any credit
or discount thereon (other than credits and discounts in the ordinary course of
business).

 

(m)       Federal Claims.  Grantors
shall notify Agent promptly of any Collateral which constitutes a claim against
the United States government or any instrumentality or agent thereof, the
assignment of which claim is restricted by federal law.  Upon the request of Agent, Grantor shall take
such steps as may be necessary to comply with any applicable federal assignment
of claims laws or other comparable laws.

 

6.                                       Agent’s Appointment as Attorney-In-Fact.

 

On the Closing Date each Grantor shall execute and
deliver to Agent a power of attorney (the “Power of Attorney”)
substantially in the form attached hereto as Exhibit A.  The power of attorney granted pursuant to the
Power of Attorney is a power coupled with an interest and shall be irrevocable
until the Termination Date.  The powers
conferred on Agent, for the benefit of Agent and Lenders, under the Power of
Attorney are solely to protect Agent’s interests (for the benefit of Agent and
Lenders) in the Collateral and shall not impose any duty upon Agent or any
Lender to exercise any such powers. 
Agent agrees that (a) except for the powers granted in clause (h) of
the Power of Attorney, it shall not exercise any power or authority granted
under the Power of Attorney unless an Event of Default has occurred and is
continuing, and (b) Agent shall account for any moneys received by Agent
in respect of any foreclosure on or disposition of Collateral pursuant to the
Power of Attorney provided that none of Agent nor any Lender shall have any
duty as to any Collateral, and Agent and Lenders shall be accountable only for
amounts they actually receive as a result of the exercise of such powers.  NONE OF AGENT, LENDERS OR THEIR RESPECTIVE
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE
RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF
ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO
THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A
COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES.

 

7.                                       Remedies; Rights Upon Default.

 

(a)          In addition to all other rights and remedies granted
to it under this Security Agreement, the Credit Agreement, the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, if any Event of Default shall have occurred
and be continuing, Agent may exercise all rights and remedies of a secured
party under the Code without application to or order of the Bankruptcy
Court.  Without limiting the generality
of the foregoing, each Grantor expressly agrees that in any such event Agent,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon such Grantor or any other Person (all and each of which
demands, 

 

12

 

advertisements and notices are hereby expressly waived
to the maximum extent permitted by the Code and other applicable law), may
forthwith (personally or through its agents or attorneys) enter upon the
premises of such Grantor where any Collateral is located, without any
obligation to pay rent, through self-help, without judicial process, without
first obtaining a final judgment or giving such Grantor or any other Person
notice and opportunity for a hearing on Agent’s claim or action and may take
possession of, collect, receive, assemble, process, appropriate, remove and
realize upon the Collateral, or any part thereof, and may forthwith sell,
lease, license, assign, give an option or options to purchase, or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part
thereof, in one or more parcels at a public or private sale or sales, at any
exchange at such prices as it may deem acceptable, for cash or on credit or for
future delivery without assumption of any credit risk.  To facilitate the foregoing, Agent shall have
the right to take possession of Grantor’s original books and records, to obtain
access to Grantor’s data processing equipment, computer hardware and Software
and to use all of the foregoing and the information contained therein in any
manner which Agent deems appropriate. 
Agent or any Lender shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase for the benefit of Agent and Lenders, the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption each Grantor hereby releases. 
Such sales may be adjourned and continued from time to time with or
without notice.  Agent shall have the
right to conduct such sales on any Grantor’s premises or elsewhere and shall
have the right to use any Grantor’s premises without charge for such time or
times as Agent deems necessary or advisable.

 

(b)         If any Event of Default shall have occurred and be
continuing, each Grantor further agrees, at Agent’s request, to assemble the
Collateral and make it available to Agent at a place or places designated by
Agent which are reasonably convenient to Agent and such Grantor whether at such
Grantor’s premises or elsewhere.  Without
limiting the foregoing, Agent shall also have the right to require that Grantor
store and keep any Collateral pending further action by Agent, and while
Collateral is so stored or kept, provide such guards and maintenance services
as shall be necessary to protect the same and to preserve and maintain the
Collateral in good condition.  Until
Agent is able to effect a sale, lease, license or other disposition of
Collateral, Agent shall have the right to hold or use Collateral, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving
Collateral or its value or for any other purpose deemed appropriate by
Agent.  Agent shall have no obligation to
any Grantor to maintain or preserve the rights of any Grantor as against third
parties with respect to Collateral while Collateral is in the possession of
Agent.  Agent may, if it so elects, seek
the appointment of a receiver or keeper to take possession of Collateral and to
enforce any of Agent’s remedies (for the benefit of Agent and Lenders), with
respect to such appointment without prior notice or hearing as to such
appointment.  Agent shall apply the net
proceeds of any sale, lease, license, other disposition of, or any collection,
recovery, receipt, or realization on, the Collateral to the Obligations as
provided in the Credit Agreement, and only after so paying over such net
proceeds, and after the payment by Agent of any other amount required by any
provision of law, need Agent 

 

13

 

account for the surplus, if any, to any Grantor.  To the maximum extent permitted by applicable
law, each Grantor waives all claims, damages, and demands against Agent or any
Lender arising out of the repossession, retention or sale of the Collateral
except such as arise solely out of the gross negligence or willful misconduct
of Agent or such Lender as finally determined by a court of competent
jurisdiction.  Each Grantor agrees that
ten (10) days prior notice by Agent of the time and place of any public
sale or of the time after which a private sale may take place is reasonable
notification of such matters. 
Notwithstanding any such notice of sale, Agent shall not be obligated to
make any sale of Collateral.  In
connection with any sale, lease, license or other disposition of Collateral,
Agent may disclaim any warranties that might arise in connection therewith and
Agent shall have no obligation to provide any warranties at such time.  Grantors shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations, including any attorneys’ fees or other
expenses incurred by Agent or any Lender to collect such deficiency.

 

(c)          Except as otherwise specifically provided herein, each
Grantor hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection with this
Security Agreement or any Collateral.

 

(d)         To the extent that applicable law imposes duties on
the Agent to exercise remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it is not commercially unreasonable for
the Agent (i) to fail to incur expenses reasonably deemed significant by
the Agent to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to
exercise collection remedies against Account Debtors and other Persons
obligated on Collateral directly or through the use of collection agencies,
liquidators and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as the Grantor, for
expressions of interest in acquiring all or any portion of such Collateral, (vii) to
hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized nature, (viii) to
dispose of Collateral by utilizing internet sites that provide for the auction of
assets of the types included in the Collateral or that have the reasonable
capacity of doing so, or that match buyers and sellers of assets, (ix) to
dispose of assets in wholesale rather than retail markets, (x) to disclaim
disposition warranties, such as title, possession or quiet enjoyment, (xi) to
purchase insurance or credit enhancements to insure the Agent against risks of
loss, collection or disposition of Collateral or to provide to the Agent a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent

 

14

 

deemed appropriate by the Agent, to obtain the
services of other brokers, investment bankers, consultants, liquidators and
other professionals to assist the Agent in the collection or disposition of any
of the Collateral.  Each Grantor
acknowledges that the purpose of this Section 7(d) is to
provide non-exhaustive indications of what actions or omissions by the Agent
would not be commercially unreasonable in the Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Agent shall
not be deemed commercially unreasonable solely on account of not being
indicated in this Section 7(d). 
Without limitation upon the foregoing, nothing contained in this Section 7(d) shall
be construed to grant any rights to any Grantor or to impose any duties on
Agent that would not have been granted or imposed by this Security Agreement or
by applicable law in the absence of this Section 7(d).

 

(e)          Neither the Agent nor the Lenders shall be required to
make any demand upon, or pursue or exhaust any of their rights or remedies
against, any Grantor, any other obligor, guarantor, pledgor or any other Person
with respect to the payment of the Obligations or to pursue or exhaust any of
their rights or remedies with respect to any Collateral therefor or any direct
or indirect guarantee thereof.  Neither
the Agent nor the Lenders shall be required to marshal the Collateral or any
guarantee of the Obligations or to resort to the Collateral or any such
guarantee in any particular order, and all of its and their rights hereunder or
under any other Loan Document shall be cumulative.  To the extent it may lawfully do so, each
Grantor absolutely and irrevocably waives and relinquishes the benefit and
advantage of, and covenants not to assert against the Agent or any Lender, any
valuation, stay, appraisement, extension, redemption or similar laws and any
and all rights or defenses it may have as a surety now or hereafter existing
which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise.

 

8.                                       Grant of License to Use Property. 
For the purpose of enabling Agent to exercise rights and remedies under Section 7
hereof (including, without limiting the terms of Section 7 hereof,
in order to take possession of, collect, receive, assemble, process,
appropriate, remove, realize upon, sell, lease, license, assign, give an option
or options to purchase or otherwise dispose of Collateral) at such time as
Agent shall be lawfully entitled to exercise such rights and remedies, each
Grantor hereby grants to Agent, for the benefit of Agent and Lenders, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Grantors) to use, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all
Software and programs used for the compilation or printout thereof and an
irrevocable license (exercisable without payment of rent or other compensation
to each Grantor) to use and occupy all real estate owned or leased by Grantor.

 

9.                                       Limitation on Agent’s and Lenders’ Duty
in Respect of Collateral.  Agent and each Lender shall
use reasonable care with respect to the Collateral in its 

 

15

 

possession or under its control. 
Neither Agent nor any Lender shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of Agent or such Lender, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.  Agent shall be deemed to have
exercised reasonable care in the custody and preservation the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property.  Agent
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehousemen, carrier, forwarding agency, consignee or other
agent or bailee selected by Agent in good faith.

 

10.                                 Reinstatement. 
This Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Grantor
for liquidation or reorganization, should any Grantor become insolvent or make
an assignment for the benefit of any creditor or creditors or should a receiver
or trustee be appointed for all or any significant part of any Grantor’s
assets, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

11.                                 Expenses and Attorneys Fees. 
Without limiting Grantor’s obligations under the Credit Agreement or the
other Loan Documents, Grantor agrees to promptly pay all fees, costs and
expenses (including reasonable attorneys’ fees and expenses) incurred in
connection with (a) protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, (b) creating,
perfecting, maintaining and enforcing Agent’s Liens and (c) collecting,
enforcing, retaking, holding, preparing for disposition, processing and
disposing of Collateral.

 

12.                                 Notices.  Except as
otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other party, or
whenever any of the parties desires to give and serve upon any other party any
communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be given in the manner, and deemed received, as provided
for in the Credit Agreement.

 

13.                                 Limitation by Law. 
All rights, remedies and powers provided in this Security Agreement may
be exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law that
may be controlling 

 

16

 

and to be limited to the extent necessary so that they shall not render
this Security Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.

 

14.                                 Termination of this Security Agreement. 
Subject to Section 10 hereof, this Security Agreement shall
terminate upon the Termination Date.

 

15.                                 Successors and Assigns. 
This Security Agreement and all obligations of each Grantor hereunder
shall be binding upon the successors and assigns of such Grantor (including any
debtor-in-possession on behalf of such Grantor) and shall, together with the
rights and remedies of Agent, for the benefit of Agent and Lenders, hereunder,
inure to the benefit of Agent and Lenders, all future holders of any instrument
evidencing any of the Obligations and their respective successors and assigns.  No sales of participations, other sales,
assignments, transfers or other dispositions of any agreement governing or
instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner impair the Lien granted to Agent, for the benefit
of Agent and Lenders, hereunder.  No
Grantor may assign, sell, hypothecate or otherwise transfer any interest in or
obligation under this Security Agreement.

 

16.                                 Counterparts. 
This Security Agreement and any amendments, waivers, consents or supplements
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts taken together shall
constitute but one in the same instrument. 
This Security Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.  This Security Agreement may be authenticated
by manual signature, facsimile or, if approved in writing by Agent, electronic
means, all of which shall be equally valid.

 

17.                                 Applicable Law. 
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPALS.

 

18.                                 Headings.  Section headings
are included herein for convenience of reference only and shall not constitute
a part of this Security Agreement for any other purposes or be given
substantive effect.

 

19.                                 Benefit of Lenders. 
All Liens granted or contemplated hereby shall be for the benefit of
Agent, individually, and Lenders, and all proceeds or payments realized from
Collateral in accordance herewith shall be applied to the Obligations in
accordance with the terms of the Credit Agreement.

 

[Signature Pages Follow]

 

17

 

IN WITNESS WHEREOF, each of the parties hereto has
caused this Security Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.

 

 

	
   

  	
  VERTIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ENTERON GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
					

 

 

	
   

  	
  WEBCRAFT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEBCRAFT CHEMICALS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  USA DIRECT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VERTIS MAILING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John
  V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief
  Legal Officer

  
					

 

 

	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION, as
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alan Garson

  
	
   

  	
  Name:

  	
  Alan
  Garson

  
	
   

  	
  Title:

  	
  Its
  Duly Authorized SignatoryExhibit 10.3

 

HOLDINGS
PLEDGE AGREEMENT

 

This
HOLDINGS PLEDGE AGREEMENT, dated as of July 17, 2008 (together with all
amendments, if any, from time to time hereto, this “Agreement”) between
VERTIS HOLDINGS, INC., a Delaware corporation (the “Pledgor”) and GENERAL
ELECTRIC CAPITAL CORPORATION in its capacity as Agent for Lenders (“Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
pursuant to that certain Senior Secured Priming and Superpriority
Debtor-In-Possession Credit Agreement, dated as of the date hereof, by and
among Vertis, Inc., as Borrower, Pledgor, the other Persons named therein
as Credit Parties, Agent and the Persons signatory thereto from time to time as
Lenders (including all annexes, exhibits and schedules thereto, and as from
time to time amended, restated, supplemented or otherwise modified (the “Credit
Agreement”) the Lenders have agreed to make Loans to, and incur Letter of
Credit Obligations for the benefit of, Borrower;

 

WHEREAS,
Pledgor is the record and beneficial owner of the shares of Stock listed in Part A
of Schedule I hereto and the owner of the promissory notes and
Instruments listed in Part B of Schedule I hereto;

 

WHEREAS,
Pledgor benefits from the credit facilities made available to Borrower under
the Credit Agreement; and

 

WHEREAS,
in order to induce Agent and Lenders to make the Loans and to incur the Letter
of Credit Obligations as provided for in the Credit Agreement, Pledgor has
agreed to pledge the Pledged Collateral to Agent in accordance herewith.

 

NOW,
THEREFORE, in consideration of the premises and the covenants hereinafter
contained and to induce Lenders to make Loans and to incur Letter of Credit
Obligations under the Credit Agreement, it is agreed as follows:

 

1.                                       Definitions.  Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined, and the
following shall have (unless otherwise provided elsewhere in this Agreement)
the following respective meanings (such meanings being equally applicable to
both the singular and plural form of the terms defined):

 

“Bankruptcy
Code” means title 11, United States Code, as amended from time to time, and
any successor statute thereto.

 

“Instrument”
has the meaning assigned to such term in the Credit Agreement.

 

 

“Investment
Property” has the meaning assigned to such term in the Credit Agreement.

 

“Pledged
Collateral” has the meaning assigned to such term in Section 2
hereof.

 

“Pledged
Entity” means an issuer of Pledged Shares or Pledged Indebtedness.

 

“Pledged
Indebtedness” means the Indebtedness evidenced by promissory notes and
Instruments listed on Part B of Schedule I hereto;

 

“Pledged
Shares” means those shares listed on Part A of Schedule I
hereto.

 

“Secured
Obligations” has the meaning assigned to such term in Section 3
hereof.

 

2.                                       Pledge.  Pledgor hereby pledges to Agent, and grants
to Agent for itself and the benefit of Lenders, a first priority security
interest in all of the following (collectively, the “Pledged Collateral”):

 

(a)          the
Pledged Shares and the certificates representing the Pledged Shares, and all
dividends, distributions, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and

 

(b)         such
portion, as determined by Agent as provided in Section 6(d) below,
of any additional shares of stock of a Pledged Entity from time to time
acquired by Pledgor in any manner (which shares shall be deemed to be part of
the Pledged Shares), and the certificates representing such additional shares,
and all dividends, distributions, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Stock; and

 

(c)          the
Pledged Indebtedness and the promissory notes or instruments evidencing the
Pledged Indebtedness, and all interest, cash, instruments and other property
and assets from time to time received, receivable or otherwise distributed in
respect of the Pledged Indebtedness; and

 

(d)         all
Investment Property and any instruments evidencing the Investment Property, and
all interest, cash, instruments and other property and assets from time to time
received, receivable or otherwise distributed in respect of the Investment
Property; and

 

(e)          all
additional Indebtedness arising after the date hereof and owing to Pledgor and
evidenced by promissory notes or other instruments, together with such promissory
notes and instruments, and all interest, cash, instruments and other property and
assets from time to time received, receivable or otherwise distributed in
respect of that Pledged Indebtedness.

 

3.                                       Security
for Obligations.  This Agreement
secures, and the Pledged Collateral is security for, the prompt payment in full
when due, whether at stated maturity, by acceleration or otherwise, and
performance of all Obligations of any kind under or in connection with the
Credit Agreement and the other Loan Documents and all obligations of Pledgor
now or hereafter existing under this Agreement including, without limitation,
all fees, costs and expenses whether 

 

2

 

in connection with collection actions hereunder or
otherwise (collectively, the “Secured Obligations”).

 

4.                                       Delivery
of Pledged Collateral.  All
certificates and all promissory notes and instruments evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Agent, for itself
and the benefit of Lenders, pursuant hereto. 
All Pledged Shares shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Agent and all promissory notes or other instruments evidencing the Pledged
Indebtedness shall be endorsed by Pledgor.

 

5.                                       Representations
and Warranties.  Pledgor represents
and warrants to Agent that:

 

(a)          Pledgor
is, and at the time of delivery of the Pledged Shares to Agent will be, the
sole holder of record and the sole beneficial owner of such Pledged Collateral
pledged by Pledgor free and clear of any Lien thereon or affecting the title
thereto, except for any Lien created by this Agreement and any Liens permitted
under the Credit Agreement; Pledgor is and at the time of delivery of the
Pledged Indebtedness to Agent will be, the sole owner of such Pledged
Collateral free and clear of any Lien thereon or affecting title thereto,
except for any Lien created by this Agreement and any Liens permitted under the
Credit Agreement;

 

(b)         All
of the Pledged Shares have been duly authorized, validly issued and are fully
paid and non-assessable; the Pledged Indebtedness has been duly authorized,
authenticated or issued and delivered by, and is the legal, valid and binding
obligations of, the Pledged Entities, and no such Pledged Entity is in default
thereunder;

 

(c)          Pledgor
has the right and requisite authority to pledge, assign, transfer, deliver,
deposit and set over the Pledged Collateral pledged by Pledgor to Agent as
provided herein;

 

(d)         None
of the Pledged Shares or Pledged Indebtedness has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws
of any jurisdiction to which such issuance or transfer may be subject;

 

(e)          All
of the Pledged Shares are presently owned by Pledgor, and, other than as
described on Schedule I hereto, are presently represented by the
certificates listed on Part A of Schedule I hereto.  As of the date hereof, there are no existing
options, warrants, calls or commitments of any character whatsoever relating to
the Pledged Shares;

 

(f)            No
consent, approval, authorization or other order or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required (i) for the pledge by Pledgor of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Pledgor, or (ii) for the exercise by Agent of the voting or
other rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally;

 

(g)         The
entry of the Interim Order and/or the Final Order, as applicable, or the
pledge, assignment and delivery of the Pledged Collateral pursuant to this
Agreement will create a valid first priority Lien on and a first priority
perfected security interest in favor of the Agent for the 

 

3

 

benefit of Agent
and Lenders in the Pledged Collateral and the proceeds thereof, securing the
payment of the Secured Obligations, subject to no other Lien other than Liens
permitted under the Credit Agreement;

 

(h)         This
Agreement has been duly authorized, executed and delivered by Pledgor and
constitutes a legal, valid and binding obligation of Pledgor enforceable
against Pledgor in accordance with its terms except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and the effects of general principles of equity;

 

(i)             The
Pledged Shares constitute 100% of the issued and outstanding shares of Stock of
each Pledged Entity; and

 

(j)             Except
as disclosed on Part B of Schedule I, none of the Pledged
Indebtedness is subordinated in right of payment to other Indebtedness (except
for the Secured Obligations) or subject to the terms of an indenture.

 

The
representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.

 

6.                                       Covenants.  Pledgor covenants and agrees that until the
Termination Date:

 

(a)          Without
the prior written consent of Agent, Pledgor will not sell, assign, transfer,
pledge, or otherwise encumber any of its rights in or to the Pledged
Collateral, or any unpaid dividends, interest or other distributions or
payments with respect to the Pledged Collateral or grant a Lien in the Pledged
Collateral, unless otherwise expressly permitted by the Credit Agreement;

 

(b)         Pledgor
will, at its expense, promptly execute, acknowledge and deliver all such
instruments and take all such actions as Agent from time to time may reasonably
request in order to ensure to Agent and Lenders the benefits of the Liens in
and to the Pledged Collateral intended to be created by this Agreement,
including the filing of any necessary Code financing statements, which may be
filed by Agent with or (to the extent permitted by law) without the signature
of Pledgor, and will cooperate with Agent, at Pledgor’s expense, in obtaining
all necessary approvals and making all necessary filings under federal, state,
local or foreign law in connection with such Liens or any sale or transfer of
the Pledged Collateral;

 

(c)          Pledgor
has and will defend the title to the Pledged Collateral and the Liens of Agent
in the Pledged Collateral against the claim of any Person and will maintain and
preserve such Liens; and

 

(d)         Pledgor
will, upon obtaining ownership of any additional Stock or promissory notes or
instruments of a Pledged Entity or Stock or promissory notes or instruments
otherwise required to be pledged to Agent pursuant to any of the Loan
Documents, which Stock, notes or instruments are not already Pledged
Collateral, promptly (and in any event within three (3) Business Days)
deliver to Agent a Pledge Amendment, duly executed by Pledgor, in substantially
the form of Schedule II hereto (a “Pledge Amendment”) in respect
of any such additional Stock, notes or instruments, pursuant to which Pledgor
shall pledge to Agent all of 

 

4

 

such additional
Stock, notes and instruments.  Pledgor
hereby authorizes Agent to attach each Pledge Amendment to this Agreement and
agrees that all Pledged Shares and Pledged Indebtedness listed on any Pledge
Amendment delivered to Agent shall for all purposes hereunder be considered
Pledged Collateral.

 

7.                                       Pledgor’s
Rights.  As long as no Default or
Event of Default shall have occurred and be continuing and until written notice
shall be given to Pledgor in accordance with Section 8(a) hereof:

 

(a)          Pledgor
shall have the right, from time to time, to vote and give consents with respect
to the Pledged Collateral, or any part thereof for all purposes not
inconsistent with the provisions of this Agreement, the Credit Agreement or any
other Loan Document; provided, however, that no vote shall be
cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of Agent in respect of the Pledged
Collateral or which would authorize, effect or consent to (unless and to the
extent expressly permitted by the Credit Agreement):

 

(i)                                     the
dissolution or liquidation, in whole or in part, of a Pledged Entity;

 

(ii)                                  the
consolidation or merger of a Pledged Entity with any other Person;

 

(iii)                               the sale, disposition or
encumbrance of all or substantially all of the assets of a Pledged Entity,
except for Liens in favor of Agent;

 

(iv)                              any
change in the authorized number of shares, the stated capital or the authorized
share capital of a Pledged Entity or the issuance of any additional shares of
its Stock; or

 

(v)                                 the
alteration of the voting rights with respect to the Stock of a Pledged Entity;
and

 

(b)                                 (i)                                     Pledgor
shall be entitled, from time to time, to collect and receive for its own use
all cash dividends and interest paid in respect of the Pledged Shares and
Pledged Indebtedness to the extent not in violation of the Credit Agreement other
than any and all: (A) dividends and interest paid or payable other
than in cash in respect of any Pledged Collateral, and instruments and other
property received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral; (B) dividends and other
distributions paid or payable in cash in respect of any Pledged Shares in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in capital of a Pledged
Entity; and (C) cash paid, payable or otherwise distributed, in respect of
principal of, or in redemption of, or in exchange for, any Pledged Collateral; provided,
however, that until actually paid all rights to such distributions shall
remain subject to the Lien created by this Agreement; and

 

(ii)                                  all
dividends and interest (other than such cash dividends and interest as are
permitted to be paid to Pledgor in accordance with clause  (i) above)
and all other distributions in respect of any of the Pledged Shares or Pledged
Indebtedness, whenever paid or made, shall be delivered to Agent to hold as
Pledged Collateral and shall, if received by Pledgor, 

 

5

 

be
received in trust for the benefit of Agent, be segregated from the other
property or funds of Pledgor, and be forthwith delivered to Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement).

 

8.                                       Defaults
and Remedies; Proxy.

 

(a)          Upon
the occurrence of an Event of Default and during the continuation of such Event
of Default, and concurrently with written notice to Pledgor, Agent (personally
or through an agent) is hereby authorized and empowered to transfer and
register in its name or in the name of its nominee the whole or any part of the
Pledged Collateral, to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations, to exercise the voting and all other rights as a holder
with respect thereto, to collect and receive all cash dividends, interest,
principal and other distributions made thereon, to sell in one or more sales after
ten (10) days’ notice of the time and place of any public sale or of the
time at which a private sale is to take place (which notice Pledgor agrees is
commercially reasonable) the whole or any part of the Pledged Collateral and to
otherwise act with respect to the Pledged Collateral as though Agent was the
outright owner thereof.  Any sale shall
be made at a public or private sale at Agent’s place of business, or at any
place to be named in the notice of sale, either for cash or upon credit or for
future delivery at such price as Agent may deem fair, and Agent may be the
purchaser of the whole or any part of the Pledged Collateral so sold and hold
the same thereafter in its own right free from any claim of Pledgor or any
right of redemption.  Each sale shall be
made to the highest bidder, but Agent reserves the right to reject any and all
bids at such sale which, in its discretion, it shall deem inadequate.  Demands of performance, except as otherwise
herein specifically provided for, notices of sale, advertisements and the
presence of property at sale are hereby waived and any sale hereunder may be
conducted by an auctioneer or any officer or agent of Agent.  PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND
APPOINTS AGENT AS THE PROXY AND ATTORNEY-IN-FACT OF PLEDGOR WITH RESPECT TO THE
PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE THE PLEDGED SHARES, WITH FULL
POWER OF SUBSTITUTION TO DO SO.  THE
APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST
AND SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE.  IN ADDITION TO THE RIGHT TO VOTE THE PLEDGED
SHARES, THE APPOINTMENT OF AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE
THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO
WHICH A HOLDER OF THE PLEDGED SHARES WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF
SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER
OF ANY PLEDGED SHARES ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON
(INCLUDING THE ISSUER OF THE PLEDGED SHARES OR ANY OFFICER OR AGENT THEREOF),
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT. 
NOTWITHSTANDING THE FOREGOING, AGENT SHALL NOT HAVE ANY DUTY TO EXERCISE
ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE
TO DO SO OR FOR ANY DELAY IN DOING SO.

 

6

 

(b)         If,
at the original time or times appointed for the sale of the whole or any part
of the Pledged Collateral, the highest bid, if there be but one sale, shall be
inadequate to discharge in full all the Secured Obligations, or if the Pledged
Collateral be offered for sale in lots, if at any of such sales, the highest
bid for the lot offered for sale would indicate to Agent, in its discretion,
that the proceeds of the sales of the whole of the Pledged Collateral would be
unlikely to be sufficient to discharge all the Secured Obligations, Agent may,
on one or more occasions and in its discretion, postpone any of said sales by
public announcement at the time of sale or the time of previous postponement of
sale, and no other notice of such postponement or postponements of sale need be
given, any other notice being hereby waived; provided, however,
that any sale or sales made after such postponement shall be after ten (10) days’
notice to Pledgor.

 

(c)          If,
at any time when Agent in its sole discretion determines, following the
occurrence and during the continuance of an Event of Default, that, in
connection with any actual or contemplated exercise of its rights (when
permitted under this Section 8) to sell the whole or any part of
the Pledged Shares hereunder, it is necessary or advisable to effect a public
registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
“Act”), Pledgor shall, in an expeditious manner, cause the Pledged
Entities to:

 

(i)                                     Use
commercially reasonable efforts to prepare and file with the Securities and
Exchange Commission (the “Commission”) a registration statement with
respect to the Pledged Shares and in good faith use commercially reasonable
efforts to cause such registration statement to become and remain effective;

 

(ii)                                  Use
commercially reasonable efforts to prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with respect
to the sale or other disposition of the Pledged Shares covered by such
registration statement whenever Agent shall desire to sell or otherwise dispose
of the Pledged Shares;

 

(iii)                               Use commercially
reasonable efforts to furnish to Agent such numbers of copies of a prospectus
and a preliminary prospectus, in conformity with the requirements of the Act,
and such other documents as Agent may request in order to facilitate the public
sale or other disposition of the Pledged Shares by Agent;

 

(iv)                              Use
commercially reasonable efforts to register or qualify the Pledged Shares
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions within the United States and Puerto Rico as Agent
shall request, and do such other reasonable acts and things as may be required
of it to enable Agent to consummate the public sale or other disposition in
such jurisdictions of the Pledged Shares by Agent;

 

(v)                                 Furnish,
at the request of Agent, on the date that shares of the Pledged Collateral are
delivered to the underwriters for sale pursuant to such registration or, if the
security is not being sold through underwriters, on the date that the
registration statement with respect to such Pledged Shares becomes effective, (A) an
opinion, dated such date, of the independent counsel representing such
registrant for the purposes of such registration, addressed 

 

7

 

to the underwriters,
if any, and in the event the Pledged Shares are not being sold through
underwriters, then to Agent, in customary form and covering matters of the type
customarily covered in such legal opinions; and (B) a comfort letter,
dated such date, from the independent certified public accountants of such
registrant, addressed to the underwriters, if any, and in the event the Pledged
Shares are not being sold through underwriters, then to Agent, in a customary
form and covering matters of the type customarily covered by such comfort
letters and as the underwriters or Agent shall reasonably request.  The opinion of counsel referred to above
shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as Agent may
reasonably request.  The letter referred
to above from the independent certified public accountants shall additionally
cover such other financial matters (including information as to the period ending
not more than five (5) Business Days prior to the date of such letter)
with respect to the registration in respect of which such letter is being given
as Agent may reasonably request; and

 

(vi)                              Otherwise
use commercially reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable but not later than 18 months after the effective
date of the registration statement, an earnings statement covering the period
of at least 12 months beginning with the first full month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act.

 

(d)         All
expenses incurred in complying with Section 8(c) hereof,
including, without limitation, all filing fees (including all expenses incident
to filing with the National Association of Securities Dealers, Inc.),
printing expenses, fees and disbursements of counsel for the registrant, the
fees and expenses of counsel for Agent, expenses of the independent certified
public accountants (including any special audits incident to or required by any
such registration) and expenses of complying with the securities or blue sky
laws or any jurisdictions, shall be paid by Pledgor.

 

(e)          If,
at any time when Agent shall determine to exercise its right to sell the whole
or any part of the Pledged Collateral hereunder, such Pledged Collateral or the
part thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Act, Agent may, in its discretion (subject only to
applicable requirements of law), sell such Pledged Collateral or part thereof
by private sale in such manner and under such circumstances as Agent may deem
necessary or advisable, but subject to the other requirements of this Section 8,
and shall not be required to effect such registration or to cause the same to
be effected.  Without limiting the
generality of the foregoing, in any such event, Agent in its discretion (x) may,
in accordance with applicable securities laws, proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Pledged Collateral or part thereof could be or shall have been
filed under said Act (or similar statute), (y) may approach and negotiate
with a single possible purchaser to effect such sale, and (z) may restrict
such sale to a purchaser who is an accredited investor under the Act and who
will represent and agree that such purchaser is purchasing for its own account,
for investment and not with a view to the distribution or sale of such Pledged
Collateral or any part thereof.  In
addition to a private sale as provided above in this Section 8, if
any of the Pledged Collateral shall not be freely distributable to the public
without registration under the Act (or similar statute) at the time of any
proposed sale pursuant to this Section 8, then Agent shall not be
required to effect such registration or cause the same to be 

 

8

 

effected but, in its
discretion (subject only to applicable requirements of law), may require that
any sale hereunder (including a sale at auction) be conducted subject to
restrictions:

 

(i)                                     as
to the financial sophistication and ability of any Person permitted to bid or purchase
at any such sale;

 

(ii)                                  as
to the content of legends to be placed upon any certificates representing the
Pledged Collateral sold in such sale, including restrictions on future transfer
thereof;

 

(iii)                               as to the
representations required to be made by each Person bidding or purchasing at
such sale relating to that Person’s access to financial information about
Pledgor and such Person’s intentions as to the holding of the Pledged
Collateral so sold for investment for its own account and not with a view to
the distribution thereof; and

 

(iv)                              as
to such other matters as Agent may, in its discretion, deem necessary or
appropriate in order that such sale (notwithstanding any failure so to
register) may be effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors’ rights and the Act and all applicable
state securities laws.

 

(f)            Pledgor
recognizes that Agent may be unable to effect a public sale of any or all the
Pledged Collateral and may be compelled to resort to one or more private sales
thereof in accordance with clause (e) above.  Pledgor also acknowledges that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being
private.  Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the Pledged Entity to register such securities for
public sale under the Act, or under applicable state securities laws, even if
Pledgor and the Pledged Entity would agree to do so.

 

(g)         Pledgor
agrees to the maximum extent permitted by applicable law that following the
occurrence and during the continuance of an Event of Default it will not at any
time plead, claim or take the benefit of any appraisal, valuation, stay,
extension, moratorium or redemption law now or hereafter in force in order to
prevent or delay the enforcement of this Agreement, or the absolute sale of the
whole or any part of the Pledged Collateral or the possession thereof by any
purchaser at any sale hereunder, and Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. 
Pledgor agrees that it will not interfere with any right, power and
remedy of Agent provided for in this Agreement or now or hereafter existing at
law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by Agent of any one or more of such rights, powers or
remedies.  No failure or delay on the
part of Agent to exercise any such right, power or remedy and no notice or
demand which may be given to or made upon Pledgor by Agent with respect to any
such remedies shall operate as a waiver thereof, or limit or impair Agent’s
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against Pledgor in any respect.

 

(h)         Pledgor
further agrees that a breach of any of the covenants contained in this Section 8
will cause irreparable injury to Agent, that Agent shall have no adequate
remedy at law in 

 

9

 

respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 8 shall be specifically enforceable against Pledgor,
and Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that the
Secured Obligations are not then due and payable in accordance with the
agreements and instruments governing and evidencing such obligations.

 

9.                                       Waiver.  No delay on Agent’s part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Pledgor by Agent with respect to any power
of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Agent’s right to take any action or to exercise any
power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice Agent’s rights as against Pledgor in any respect.

 

10.                                 Assignment.  Agent may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided
in, and in accordance with, the Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.

 

11.                                 Termination.  Immediately following the Termination Date,
Agent shall deliver to Pledgor the Pledged Collateral pledged by Pledgor at the
time subject to this Agreement and all instruments of assignment executed in
connection therewith, free and clear of the Liens hereof and, except as
otherwise provided herein, all of Pledgor’s obligations hereunder shall at such
time terminate.

 

12.                                 Lien
Absolute.  All rights of Agent
hereunder, and all obligations of Pledgor hereunder, shall be absolute and
unconditional irrespective of:

 

(a)          any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document or any other agreement or instrument governing or evidencing any
Secured Obligations;

 

(b)         any
change in the time, manner or place of payment of, or in any other term of, all
or any part of the Secured Obligations, or any other amendment or waiver of or
any consent to any departure from the Credit Agreement, any other Loan Document
or any other agreement or instrument governing or evidencing any Secured
Obligations;

 

(c)          any
exchange, release or non-perfection of any other Collateral, or any release or
amendment or waiver of or consent to departure from any guaranty, for all or
any of the Secured Obligations;

 

(d)         the
insolvency of any Credit Party; or

 

(e)          any
other circumstance which might otherwise constitute a defense available to, or
a discharge of, Pledgor.

 

13.                                 Release.  Pledgor consents and agrees that Agent may at
any time, or from time to time, in its discretion:

 

10

 

(a)          renew,
extend or change the time of payment, and/or the manner, place or terms of
payment of all or any part of the Secured Obligations; and

 

(b)         exchange,
release and/or surrender all or any of the Collateral (including the Pledged
Collateral), or any part thereof, by whomsoever deposited, which is now or may
hereafter be held by Agent in connection with all or any of the Secured
Obligations; all in such manner and upon such terms as Agent may deem proper,
and without notice to or further assent from Pledgor, it being hereby agreed
that Pledgor shall be and remain bound upon this Agreement, irrespective of the
value or condition of any of the Collateral, and notwithstanding any such
change, exchange, settlement, compromise, surrender, release, renewal or
extension, and notwithstanding also that the Secured Obligations may, at any
time, exceed the aggregate principal amount thereof set forth in the Credit
Agreement, or any other agreement governing any Secured Obligations.  Pledgor hereby waives notice of acceptance of
this Agreement, and also presentment, demand, protest and notice of dishonor of
any and all of the Secured Obligations, and promptness in commencing suit
against any party hereto or liable hereon, and in giving any notice to or of
making any claim or demand hereunder upon Pledgor.  No act or omission of any kind on Agent’s
part shall in any event affect or impair this Agreement.

 

14.                                 Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Pledgor or any Pledged Entity for liquidation or reorganization, should Pledgor
or any Pledged Entity become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of Pledgor’s or a Pledged Entity’s assets, and shall continue
to be effective or be reinstated, as the case may be, if at any time payment
and performance of the Secured Obligations, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Secured Obligations, whether as a “voidable
preference”, “fraudulent conveyance”, or otherwise, all as though such payment
or performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.

 

15.                                 Miscellaneous.

 

(a)          Agent
may execute any of its duties hereunder by or through agents or employees and
shall be entitled to advice of counsel concerning all matters pertaining to its
duties hereunder.

 

(b)         Pledgor
agrees to promptly reimburse Agent for actual out-of-pocket expenses, including,
without limitation, reasonable counsel fees, incurred by Agent in connection
with the administration and enforcement of this Agreement.

 

(c)          Neither
Agent, nor any of its respective officers, directors, employees, agents or
counsel shall be liable for any action lawfully taken or omitted to be taken by
it or them hereunder or in connection herewith, except for its or their own
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.

 

(d)         THIS
AGREEMENT SHALL BE BINDING UPON PLEDGOR AND ITS SUCCESSORS AND ASSIGNS
(INCLUDING A DEBTOR-IN-POSSESSION ON BEHALF 

 

11

 

OF PLEDGOR), AND
SHALL INURE TO THE BENEFIT OF, AND BE ENFORCEABLE BY, AGENT AND ITS SUCCESSORS
AND ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE
WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR AND ON
BEHALF OF AGENT AND PLEDGOR.

 

16.                                 Severability.  If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.

 

17.                                 Notices.  Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person or
sent by registered or certified mail, return receipt requested, with proper
postage prepaid, or by facsimile transmission and confirmed by delivery of a
copy by personal delivery or United States Mail as otherwise provided herein:

 

If to Agent, at:

 

GENERAL
ELECTRIC CAPITAL

CORPORATION

500
West Monroe Street

Chicago,
Illinois 60661

ATTN:  Vertis, Inc., Account Officer

Fax:  (617) 607-9174

 

With
a copy to:

 

GENERAL
ELECTRIC CAPITAL

CORPORATION

201
Merritt 7

P.O. Box
5201

Norwalk,
Connecticut  06851

ATTN:  General Counsel

Global
Sponsor Finance

Fax:  (203) 956-4216

 

and

 

12

 

GENERAL
ELECTRIC CAPITAL

CORPORATION

500
West Monroe Street

Chicago,
Illinois 60661

ATTN:  Corporate Counsel

Global
Sponsor Finance

Fax:  (312) 441-6876

 

and

 

Winston &
Strawn LLP

200
Park Avenue

New
York, NY 10166

Attn:
William D. Brewer, Esq.

Fax:
(212) 294-4700

 

and

 

Winston &
Strawn LLP

35
West Wacker Drive

Chicago,
IL 60601

Attn: Brian
I. Swett, Esq.

   
      Peter J. Young, Esq.

Fax:
(312) 558-5700

 

If to
Pledgor, at:

 

Vertis Holdings, Inc.

250 West Pratt Street

Baltimore, MD 
21201

ATTN: 
Treasurer

Fax:  (410)
454-0887

 

With a copy to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attn: Warren T. Buhle, Esq.

Fax: (212) 310-8007

 

13

 

or at such other address
as may be substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice.  Every notice,
demand, request, consent, approval, declaration or other communication
hereunder shall be deemed to have been duly served, given or delivered (a) upon
the earlier of actual receipt and three (3) Business Days after deposit in
the United States Mail, registered or certified mail, return receipt requested,
with proper postage prepaid, (b) upon transmission, when sent by telecopy
or other similar facsimile transmission (with such telecopy or facsimile
promptly confirmed by delivery of a copy by personal delivery or United States
Mail as otherwise provided in this Section 17, (c) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid,
or (d) when delivered, if hand-delivered by messenger.  Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.

 

18.                                 Section Titles.  The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

 

19.                                 Counterparts.  This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.  This Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by
Agent, electronic means, all of which shall be equally valid.

 

20.                                 Benefit
of Lenders.  All security interests
granted or contemplated hereby shall be for the benefit of Agent and Lenders,
and all proceeds or payments realized from the Pledged Collateral in accordance
herewith shall be applied to the Obligations in accordance with the terms of
the Credit Agreement.

 

21.                                 Authorization.  Each Pledgor hereby irrevocably authorizes the Agent
at any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Pledged Collateral (i) as all assets of
such Pledgor or words of similar effect, regardless of whether any
particular asset comprised in the Pledged Collateral falls within the scope of Article 9
of the Code or such jurisdiction, or (ii) as being of an equal or lesser
scope or with greater detail, and (b) contain any other information
required by part 5 of Article 9 of the Code for the sufficiency or filing
office acceptance of any financing statement or amendment, including whether
such Pledgor is an organization, the type of organization and any organization
identification number issued to such Pledgor. 
Each Pledgor agrees to furnish any such information to
the Agent promptly upon request. 
Each Pledgor also ratifies its authorization for the Agent to
have filed in any Uniform Commercial Code jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof.

 

14

 

[Signature Page Follows]

 

15

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.

 

 

	
   

  	
  VERTIS HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John V. Howard, Jr.

  
	
   

  	
  Name:

  	
  John V. Howard, Jr.

  
	
   

  	
  Title:

  	
  Chief Legal Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL 

  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alan Garson

  
	
   

  	
  Name:

  	
  Alan Garson

  
	
   

  	
  Its
  Duly Authorized Signatory

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