EX-4.9 5 a2106734zex-4_9.txt EXHIBIT 4.9 EXHIBIT 4.9 EXECUTION COPY PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT is entered into as of March 21, 2003 by and between United Stationers Supply Co., an Illinois corporation (the "Borrower"), United Stationers Inc., a Delaware corporation (the "Parent"), and the other Subsidiaries of the Parent listed on the signature page hereto (together with the Borrower and the Parent, collectively, the "Initial Grantors," and together with any additional Domestic Subsidiaries, whether now existing or hereafter formed which become parties to this Security Agreement by executing a Supplement hereto in substantially the form of Annex I, the "Grantors"), and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its capacity as agent (the "Agent") for the lenders party to the Credit Agreement referred to below. PRELIMINARY STATEMENT The Borrower, the Parent, the Agent and the Lenders are entering into a Five-Year Revolving Credit Agreement dated as of March 21, 2003 (as it may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). The Grantors are entering into this Pledge and Security Agreement (as it may be amended, restated, supplemented or otherwise modified from time to time, the "Security Agreement") in order to induce the Lenders to enter into and extend credit to the Borrower under the Credit Agreement. ACCORDINGLY, the Grantors and the Agent, on behalf of the Holders of Secured Obligations, hereby agree as follows: ARTICLE I DEFINITIONS 1.1. TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. 1.2. TERMS DEFINED IN NEW YORK UNIFORM COMMERCIAL CODE. Terms defined in the New York UCC which are not otherwise defined in this Security Agreement are used herein as defined in the New York UCC. 1.3. DEFINITIONS OF CERTAIN TERMS USED HEREIN. As used in this Security Agreement, in addition to the terms defined in the Preliminary Statement, the following terms shall have the following meanings: "Accounts" shall have the meaning set forth in Article 9 of the New York UCC or in the PPSA, as applicable. "Article" means a numbered article of this Security Agreement, unless another document is specifically referenced. "Chattel Paper" shall have the meaning set forth in Article 9 of the New York UCC or in the PPSA, as applicable. "Collateral" means all Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment Property, Pledged Deposits, Pledged Stock and Other Collateral, wherever located, in which any Grantor now has or hereafter acquires any right or interest, and the proceeds (including Stock Rights), insurance proceeds and products thereof, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto. "Commercial Tort Claims" means those certain currently existing commercial tort claims of any Grantor, including each commercial tort claim specifically described in Exhibit "E". "Control" shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the New York UCC. "Customer Advance Notes" shall mean customer advance notes permitted under the Credit Agreement. "Default" means an event described in Section 5.1. "Deposit Accounts" shall have the meaning set forth in Article 9 of the New York UCC. "Documents" shall have the meaning set forth in Article 9 of the New York UCC. "Equipment" shall have the meaning set forth in Article 9 of the New York UCC or in the PPSA, as applicable. "Exhibit" refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced. "Fixtures" shall have the meaning set forth in Article 9 of the New York UCC. "General Intangibles" shall have the meaning set forth in Article 9 of the New York UCC or the meaning of "intangibles" as set forth in the PPSA, as applicable. "Instruments" shall have the meaning set forth in Article 9 of the New York UCC or in the PPSA, as applicable. "Inventory" shall have the meaning set forth in Article 9 of the New York UCC or in the PPSA, as applicable. "Investment Property" shall have the meaning set forth in Article 9 of the New York UCC. 2 "New York UCC" means the New York Uniform Commercial Code AS IN EFFECT FROM TIME TO TIME. "Other Collateral" means any property of the Grantors, other than real estate, not included within the defined terms Accounts, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Investment Property and Pledged Deposits, including, without limitation, all cash on hand, letter-of-credit rights, letters of credit, Stock Rights and Deposit Accounts or other deposits (general or special, time or demand, provisional or final) with any bank or other financial institution, it being intended that the Collateral include all property of the Grantors other than real estate (subject to the limitations set forth in Article II). "Paid in Full" means (i) the payment in full in cash of the Secured Obligations (other than contingent indemnity obligations), (ii) the termination of all Commitments and (iii) the termination and/or cash collateralization of all Facility LCs, in each case, in accordance with the Credit Agreement. The term "Payment in Full" shall have a correlative meaning. "Pledged Deposits" means all time deposits of money (other than Deposit Accounts and Instruments), whether or not evidenced by certificates, which a Grantor may from time to time designate as pledged to the Agent or to any Holder of Secured Obligations as security for any Obligation, and all rights to receive interest on said deposits. "Pledged Stock" means, with respect to any Grantor, the shares of common and preferred stock (or other ownership interest) of each issuer identified in Exhibit "C" under the name of such Grantor and all other shares of capital stock (or other ownership interest) of whatever class of each such issuer, now or hereafter owned by such Grantor, and all certificates evidencing the same, and shall include, without limitation, all of the capital stock of the Parent's Domestic Subsidiaries (other than TOPCO) owned by such Grantor and the requisite percentage of the capital stock of all Material Foreign Subsidiaries required to be pledged pursuant to the Credit Agreement and owned by such Grantor. "PPSA" shall mean the PERSONAL PROPERTY SECURITY ACT in effect from time to time in the Province of Ontario or such similar legislation in effect in any other Province of Canada, as applicable, as amended or supplemented from time to time. "Receivables" means the Accounts, Chattel Paper, Documents, Investment Property, Instruments or Pledged Deposits, and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral. "Required Secured Parties" means (x) prior to an acceleration of the Secured Obligations under the Credit Agreement, the Required Lenders, (y) after an acceleration of the Secured Obligations under the Credit Agreement but prior to the date upon which the Credit Agreement has terminated by its terms and all of the Secured Obligations thereunder have been paid in full, Lenders and their Affiliates holding in the aggregate more than 50% of the total of (i) the unpaid principal amount of the Aggregate Outstanding Credit Exposure and (ii) the aggregate net early termination payments and all other amounts then due and unpaid from the Borrower to the Lenders or their Affiliates under Rate Management Transactions, as determined by the Agent in 3 its reasonable discretion, and (z) after the Credit Agreement has terminated by its terms and all of the Secured Obligations thereunder have been paid in full (whether or not the Secured Obligations under the Credit Agreement were ever accelerated), Lenders and their Affiliates (at the time of such termination) holding in the aggregate more than 50% of the aggregate net early termination payments and all other amounts then due and unpaid from the Borrower to the Lenders or their Affiliates under Rate Management Transactions, as determined by the Agent in its reasonable discretion. "Section" means a numbered section of this Security Agreement, unless another document is specifically referenced. "Security" has the meaning set forth in Article 8 of the New York UCC or in the PPSA, as applicable. "Stock Rights" means any securities, dividends or other distributions and any other right or property which any Grantor shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral and any securities, any right to receive securities and any right to receive earnings, in which any Grantor now has or hereafter acquires any right, issued by an issuer of such securities. "Supporting Obligation" shall have the meaning set forth in Article 9 of the New York UCC. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II GRANT OF SECURITY INTEREST Each of the Grantors hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Holders of Secured Obligations, a security interest in all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations. Notwithstanding the foregoing, the Collateral shall not include (i) (a) any Accounts, General Intangibles, Chattel Paper, Instruments, Documents or Investment Property which constitute Receivables subject to any Receivables Purchase Facility permitted under the Credit Agreement, and (b) any Deposit Accounts maintained in accordance with the requirements of the applicable Receivables Purchase Facility into which collections and other amounts related to those items described in clause (i)(a) are deposited (collectively, the "Securitization Collateral"), (ii) any Property to the extent that such grant of a security interest is prohibited by any applicable law or governmental authority, requires a consent not obtained of any governmental authority pursuant to any applicable law or is prohibited by, or constitutes a breach or default under or results in the termination of or requires any consent not obtained under, any contract, license, 4 agreement, instrument or other document evidencing or giving rise to such property or, in the case of any investment property, any applicable shareholder or similar agreement, except to the extent that such applicable law or the term in such contract, license, agreement, instrument or other document or shareholder or similar agreement providing for such prohibition, breach, default or termination of requiring such consent is ineffective under applicable law, (iii) with respect to any shares of stock or other ownership interests in any first-tier Foreign Subsidiary, the excess over 65% of all of the voting shares of stock or equity interests in such Foreign Subsidiary and (iv) any stock or other ownership interests of any Subsidiary of any first-tier Foreign Subsidiary. The Agent's security interest in any item constituting Securitization Collateral shall be released upon the sale, contribution or transfer thereof under the terms of the applicable Receivables Purchase Facility. Each of the Grantors acknowledges, for the purposes of the PPSA, that (i) value has been given, (ii) it has rights in the Collateral (other than after-acquired Collateral), (iii) it has not agreed to postpone the time of attachment of the security interest in the Collateral and (iv) it has received a duplicate copy of this Security Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES Each of the Initial Grantors represents and warrants to the Agent and the Holders of Secured Obligations, and each Grantor that becomes a party to this Security Agreement pursuant to the execution of a Security Agreement Supplement in substantially the form of Annex I represents and warrants (after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Security Agreement Supplement), that: 3.1. TITLE, AUTHORIZATION, VALIDITY AND ENFORCEABILITY. Such Grantor has good and valid rights in or the power to transfer the Collateral owned by it and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1.3, and has full corporate, limited liability company or partnership, as applicable, power and authority to grant to the Agent the security interest in such Collateral pursuant hereto. The execution and delivery by such Grantor of this Security Agreement has been duly authorized by proper corporate, limited liability company or partnership, as applicable, proceedings, and this Security Agreement constitutes a legal, valid and binding obligation of such Grantor and creates a security interest which is enforceable against such Grantor in all Collateral it now owns or hereafter acquires, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law), and (iii) requirements of reasonableness, good faith and fair dealing. When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit "D", the Agent will have a fully perfected first priority security interest in the Collateral owned by such Grantor in which a security interest may be perfected by filing under the applicable Uniform Commercial Code or PPSA, as applicable, subject to Liens permitted under Section 6.15 of the Credit Agreement, provided that nothing herein shall be deemed to constitute an agreement to 5 subordinate any of the Liens of the Agent under the Loan Documents to any Liens otherwise permitted under Section 6.15 of the Credit Agreement (other than Permitted Priority Liens). 3.2. CONFLICTING LAWS AND CONTRACTS. Neither the execution and delivery by such Grantor of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will violate (i) any applicable law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Grantor, or (ii) such Grantor's charter, articles or by-laws (or similar constitutive documents), or (iii) the provisions of any indenture, material instrument or material agreement to which such Grantor is a party or is subject, or by which it, or its Property is bound or affected, or conflict with or constitute a default thereunder, or result in or require the creation or imposition of any Lien in, of or on the Property of such Grantor pursuant to the terms of any such indenture, material instrument or material agreement (other than any Lien of the Agent on behalf of the Holders of Secured Obligations). 3.3. TYPE AND JURISDICTION OF ORGANIZATION. As of the date of the compliance certificate most recently delivered to the Agent pursuant to Section 6.1.3 of the Credit Agreement in connection with the most recent annual financial statements of the Parent delivered pursuant to Section 6.1.1 of the Credit Agreement (or, for the period prior to the delivery of the first such compliance certificate, as of the Closing Date) (such date being the "Reference Date"), the Borrower is a corporation organized under the laws of the State of Illinois; each of United Stationers Technology Services LLC and United Stationers Financial Services LLC is a limited liability company organized under the laws of the State of Illinois; each of the Parent and Azerty Incorporated is a corporation organized under the laws of the State of Delaware; and Lagasse, Inc. is a corporation organized under the laws of the State of Louisiana, in each case, except to the extent such Person has been merged with or into any other Person in a transaction permitted by the Credit Agreement or such Person has complied with the requirements of Section 4.1.4, and in each case, this representation shall be deemed amended to make reference to the correct Person, type of entity and/or jurisdiction, as applicable. 3.4. PRINCIPAL LOCATION. As of the Reference Date, such Grantor's mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed in Exhibit "A"; such Grantor has no other places of business except those set forth in Exhibit "A". 3.5. PROPERTY LOCATIONS. As of the Reference Date, the Inventory, Equipment and Fixtures of each Grantor are located solely at the locations of such Grantor described in Exhibit "A", except for such Inventory, Equipment or Fixtures which (i) are out for repair, (ii) have been sold or otherwise disposed of in accordance with the terms of the Credit Agreement, (iii) are in transit to a place described in Exhibit "A" or (iv) when taken together, have a net book value in the aggregate of $10,000,000 or less. All of said locations are owned by such Grantor except for locations (i) which are leased by such Grantor as lessee and designated in Part B of Exhibit "A" and (ii) at which Inventory or Equipment is held in a public warehouse or is otherwise held by a bailee or on consignment by such Grantor as designated in Part C of Exhibit "A". 3.6. NO OTHER NAMES. Except as set forth on Exhibit "A", during the three year period prior to the Closing Date and from the Closing Date through and including the Reference Date, 6 such Grantor has not conducted business under any name except the name in which it has executed this Security Agreement, which is the exact name as it appears in such Grantor's organizational documents, as amended, as filed with such Grantor's jurisdiction of organization as of the Closing Date. 3.7. ACCOUNTS AND CHATTEL PAPER. The names of the obligors, amounts owing, due dates and other information with respect to the Accounts and Chattel Paper owned by such Grantor are correctly stated, in all material respects, in all records of such Grantor relating thereto and in all invoices and reports with respect thereto furnished to the Agent by such Grantor from time to time. As of the time when each Account or each item of Chattel Paper arises, such Grantor shall be deemed to have represented and warranted that such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all material respects what they purport to be. 3.8. FILING REQUIREMENTS. As of the Reference Date, none of the Equipment owned by such Grantor is covered by any certificate of title required to be delivered pursuant to Section 4.3.2, except for the vehicles described in Part A of Exhibit "B". As of the Reference Date, none of the Collateral owned by such Grantor is of a type for which security interests or liens may be perfected by filing under any federal statute except for (i) the vehicles described in Part B of Exhibit "B" and (ii) patents, trademarks and copyrights held by such Grantor and described in Part C of Exhibit "B". 3.9. NO FINANCING STATEMENTS. No financing statement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed in any jurisdiction except financing statements (i) naming the Agent on behalf of the Holders of Secured Obligations as the secured party and (ii) in respect of Liens permitted by Section 6.15 of the Credit Agreement; PROVIDED, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Agent under the Loan Documents to any Liens otherwise permitted under Section 6.15 of the Credit Agreement (other than Permitted Priority Liens). 3.10. FEDERAL EMPLOYER IDENTIFICATION NUMBER; STATE ORGANIZATION NUMBER. Such Grantor's Federal employer identification number is, and if such Grantor is a registered organization, such Grantor's State organization number is set forth on Exhibit "A". 3.11. PLEDGED SECURITIES AND OTHER INVESTMENT PROPERTY. As of the Reference Date, Exhibit "C" sets forth a complete and accurate list of the Pledged Stock, and to the extent the same has a value in excess of $5,000,000 individually or $10,000,000 in the aggregate, Instruments, Securities and other Investment Property (to the extent the same do not constitute Cash Equivalent Investments or Customer Advance Notes) delivered to the Agent. Each Grantor is the direct and beneficial owner of each Instrument, Security and other type of Investment Property listed on Exhibit "C" as being owned by it, free and clear of any Liens, except for the security interest granted to the Agent for the benefit of the Holders of Secured Obligations hereunder. Each Grantor further represents and warrants that (i) all Pledged Stock which are shares of stock in a corporation or ownership interests in a partnership or limited liability company have been (to the extent such concepts are relevant with respect to such Pledged Stock) duly and validly issued, are fully paid and non-assessable and constitute, as of the Reference 7 Date, the percentage of the issued and outstanding shares of stock (or other equity interests) of the respective issuers thereof indicated on Exhibit "C" hereto and (ii) with respect to any certificates delivered to the Agent representing an ownership interest in a partnership or limited liability company, either such certificates are Securities as defined in Article 8 of the Uniform Commercial Code of the applicable jurisdiction or in the PPSA, as applicable, as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Agent so that the Agent may take steps to perfect its security interest therein as a General Intangible. ARTICLE IV COVENANTS From the date of this Security Agreement and thereafter until this Security Agreement is terminated in accordance with Section 8.14, each of the Initial Grantors agrees, and from and after the effective date of any Security Agreement Supplement applicable to any Grantor (and after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Security Agreement Supplement) and thereafter until this Security Agreement is terminated in accordance with Section 8.14 each such subsequent Grantor agrees: 4.1. GENERAL. 4.1.1 COMPLIANCE WITH CREDIT AGREEMENT. Each of the Grantors covenants that, so long as any Lender has any Commitment outstanding under the Credit Agreement or any amount payable under the Credit Agreement or any other Secured Obligations (other than contingent indemnity obligations) shall remain unpaid, it will, and, if necessary, will enable the Borrower and the Parent to, fully comply with those covenants and agreements of the Borrower and the Parent applicable to such Grantor set forth in the Credit Agreement. 4.1.2 FINANCING STATEMENTS AND OTHER ACTIONS; DEFENSE OF TITLE. Each Grantor hereby authorizes the Agent to file, and if requested will execute and deliver to the Agent, all financing statements describing the Collateral owned by such Grantor and other documents and take such other actions as may from time to time reasonably be requested by the Agent in order to maintain a first perfected security interest in and, if applicable, Control of, the Collateral owned by such Grantor, subject to Liens permitted under Section 6.15 of the Credit Agreement, provided that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Agent under the Loan Documents to any Liens otherwise permitted under Section 6.15 of the Credit Agreement (other than Permitted Priority Liens). Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure that the perfection of the security interest in the Collateral granted to the Agent herein. Each Grantor will take any and all actions necessary to defend title to the Collateral owned by such Grantor against all persons and to defend the security interest of the Agent in such Collateral and the priority thereof against any Lien not expressly 8 permitted hereunder. During the continuance of a Default the Borrower shall, upon the request of the Agent, provide a written summary of each property on which any Fixtures are located by any Grantor, including the legal description, county and street address of such property, together with the name and address of the record owner of each such property. 4.1.3 LIENS. No Grantor will create, incur, or suffer to exist any Lien on the Collateral owned by such Grantor except Liens permitted pursuant to Section 6.15 of the Credit Agreement, provided that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Agent under the Loan Documents to any Liens otherwise permitted under Section 6.15 of the Credit Agreement (other than Permitted Priority Liens). 4.1.4 CHANGE IN CORPORATE EXISTENCE, TYPE OR JURISDICTION OF ORGANIZATION, LOCATION, NAME. Each Grantor will, subject to Section 6.11 of the Credit Agreement: (i) preserve its existence and corporate structure as in effect on the Closing Date; (ii) not change its jurisdiction of organization; (iii) not maintain its place of business (if it has only one) or its chief executive office (if it has more than one place of business) at a location other than a location specified on Exhibit "A;" and (iv) not (a) have any Inventory, Equipment or Fixtures or proceeds or products thereof at a location other than a location specified in Exhibit "A", except for such Inventory, Equipment or Fixtures which (W) are out for repair, (X) have been sold or otherwise disposed of in accordance with the terms of the Credit Agreement, (Y) are in transit to a place described in Exhibit "A" or (Z) when taken together, have an aggregate net book value of $10,000,000 or less, (b) change its name or taxpayer identification number or (c) change its mailing address, unless, in each such case, such Grantor shall have given the Agent not less than 15 Business Days' (or such shorter time as to which the Agent and the Grantor shall agree) prior written notice of such event or occurrence and the Agent shall have either (x) determined that such event or occurrence will not adversely affect the validity, perfection or priority of the Agent's security interest in the Collateral, or (y) taken such steps (with the cooperation of such Grantor to the extent necessary or advisable) as are necessary or advisable to properly maintain the validity, perfection and priority of the Agent's security interest in the Collateral owned by such Grantor. 4.1.5 OTHER FINANCING STATEMENTS. No Grantor will suffer to exist, or sign or authorize the signing on its behalf or the filing of any financing statement naming it as debtor covering all or any portion of the Collateral owned by such Grantor, except any financing statement (i) authorized under Section 4.1.2 or (ii) filed to perfect a Lien permitted by Section 6.15 of the Credit Agreement; PROVIDED, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Agent under the 9 Loan Documents to any Liens otherwise permitted under Section 6.15 of the Credit Agreement (other than Permitted Priority Liens). 4.2. RECEIVABLES. 4.2.1 COLLECTION OF RECEIVABLES. Except as otherwise provided in this Security Agreement, each Grantor will collect and enforce, at such Grantor's sole expense and in its ordinary course of business, all amounts due or hereafter due to such Grantor under the Receivables owned by such Grantor. 4.2.2 DELIVERY OF INVOICES. Each Grantor will deliver to the Agent promptly upon its request after the occurrence and during the continuance of a Default duplicate invoices with respect to each Account owned by such Grantor and otherwise constituting Collateral hereunder bearing such language of assignment as the Agent shall specify. 4.2.3 DISCLOSURE OF RECEIVABLES. Upon the reasonable request of the Agent, each Grantor shall deliver to the Agent copies of any periodic reports prepared with respect to Receivables in connection with any Receivables Purchase Facility. 4.3. INVENTORY AND EQUIPMENT. 4.3.1 BAILMENT AGREEMENTS, ETC. With respect to each location (other than properties owned or leased by such Grantor) at which Inventory (other than catalogs) and/or Equipment with a net book value in excess of $10,000,000 is located, each Grantor shall deliver bailment agreements, warehouse receipts, financing statements or other documents reasonably satisfactory to the Agent to protect the Agent's and the Holders of Secured Obligations' security interest in such Inventory and/or Equipment. 4.3.2 TITLED VEHICLES. Upon the occurrence and during the continuance of a Default, each Grantor will give the Agent notice of its acquisition of any vehicle covered by a certificate of title the net book value of which, when taken together with all other vehicles covered by a certificate of title owned by any Grantor, exceeds $10,000,000 in the aggregate, and deliver to the Agent, upon request, the original of any vehicle title certificate and do all things necessary to have the Lien of the Agent noted on any such certificate to eliminate such excess. 4.4. INSTRUMENTS, SECURITIES, CHATTEL PAPER, DOCUMENTS AND PLEDGED DEPOSITS. Each Grantor will (i) deliver to the Agent immediately upon execution of this Security Agreement the originals of all Pledged Stock, and, to the extent the same has a value in excess of $5,000,000 individually or $10,000,000 in the aggregate, originals of all Chattel Paper, Securities and Instruments constituting Collateral (if any then exist and other than those constituting Cash Equivalent Investments or Customer Advance Notes), (ii) hold in trust for the Agent upon receipt and immediately thereafter deliver to the Agent any Pledged Stock, and, to the extent the same has a value in excess of $5,000,000 individually or $10,000,000 in the aggregate, originals of Chattel Paper, Securities and Instruments constituting Collateral (other than those constituting Cash Equivalent Investments or Customer Advance Notes), (iii) upon the designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Agent such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in blank, 10 marked with such legends and assigned as the Agent shall specify, and (iv) upon the Agent's request, after the occurrence and during the continuance of a Default, deliver to the Agent (and thereafter hold in trust for the Agent upon receipt and immediately deliver to the Agent) any Document evidencing or constituting Collateral. No Grantor shall permit any Person other than such Grantor or the Agent to maintain possession of any Customer Advance Note. 4.5. UNCERTIFICATED SECURITIES AND CERTAIN OTHER INVESTMENT PROPERTY. Each Grantor will permit the Agent (i) from time to time to cause each Subsidiary of the Parent that is an issuer (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Investment Property not represented by certificates which are Collateral owned by such Grantor, and (ii) after the occurrence and during the continuance of a Default to cause the appropriate other issuers (and, if held with a securities intermediary, such securities intermediary) of any other uncertificated securities or other types of Investment Property not represented by certificates which are Collateral owned by such Grantor, in each case, to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Investment Property not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Agent granted pursuant to this Security Agreement. Each Grantor will use all commercially reasonable efforts, (i) at all times with respect to each Subsidiary of the Parent that is an issuer of Investment Property constituting Collateral owned by such Grantor held with a financial intermediary, and (ii) after the occurrence and during the continuance of a Default with respect to all other Investment Property constituting Collateral owned by such Grantor held with a financial intermediary, to cause such financial intermediary to enter into a control agreement with the Agent in form and substance reasonably satisfactory to the Agent. 4.6. STOCK AND OTHER OWNERSHIP INTERESTS. 4.6.1 CHANGES IN CAPITAL STRUCTURE OF ISSUERS. No Grantor will (i) permit or suffer any issuer of Pledged Stock owned by such Grantor to dissolve, liquidate, retire any of its capital stock or other Instruments, Securities or other Investment Property evidencing ownership, reduce its capital or merge or consolidate with any other entity, or (ii) vote any of the Instruments, Securities or other Investment Property in favor of any of the foregoing, except to the extent permitted under the Credit Agreement. 4.6.2 ISSUANCE OF ADDITIONAL SECURITIES. No Grantor will permit or suffer (i) any issuer of Pledged Stock that is a Guarantor to issue any such securities or other ownership interests, any right to receive the same or any right to receive earnings, except to such Grantor or (ii) any issuer of Pledged Stock that is not a Guarantor to issue any such securities or other ownership interests, any right to receive the same or any right to receive earnings unless such issuance is made or offered to each holder of such securities based on their proportionate holdings thereof. 4.6.3 REGISTRATION OF PLEDGED SECURITIES AND OTHER INVESTMENT PROPERTY. Each Grantor will permit any registerable Collateral owned by such Grantor to be registered in the name of the Agent or its nominee at any time at the option of the Required Secured Parties following the occurrence and during the continuance of an Event of Default and without any further consent of such Grantor. 11 4.6.4 EXERCISE OF RIGHTS IN PLEDGED SECURITIES AND OTHER INVESTMENT PROPERTY. Each Grantor will permit the Agent or its nominee at any time during the continuance of a Default, without notice, to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Collateral owned by such Grantor or any part thereof, and to receive all dividends and interest in respect of such Collateral. 4.7. DEPOSIT ACCOUNTS. Each Grantor will upon the Agent's request during the continuance of a Default, (i) cause each bank or other financial institution in which it maintains (a) a Deposit Account to enter into a control agreement with the Agent, in form and substance reasonably satisfactory to the Agent in order to give the Agent Control of the Deposit Account or (b) other deposits (general or special, time or demand, provisional or final) to be notified of the security interest granted to the Agent hereunder and cause each such bank or other financial institution to acknowledge such notification in writing and/or (ii) deliver to each such bank or other financial institution a letter, in form and substance acceptable to the Agent, transferring ownership of the Deposit Account to the Agent or transferring dominion and control over each such other deposit to the Agent until such time as no Default exists. In the case of deposits maintained with Lenders, the terms of such letter shall be subject to the provisions of the Credit Agreement regarding setoffs. The provisions of this Section shall not apply to (x) a deposit account for which the Agent or any other Lender is the depositary bank and is in automatic control thereof and (y) any deposit accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Grantor's salaried employees or any other trust accounts. 4.8. LETTER-OF-CREDIT RIGHTS. Each Grantor will, upon the Agent's request, use commercially reasonable efforts to cause each issuer of a letter of credit that constitutes Collateral (other than letters of credit that constitute Supporting Obligations in respect of Collateral) having a face value in excess of $5,000,000, to consent to the assignment of proceeds of the letter of credit in order to give the Agent Control of the letter-of-credit rights to such letter of credit. 4.9. INTELLECTUAL PROPERTY. If, after the Closing Date, any Grantor obtains rights to any federally registered patent, trademark or copyright, or applies for or seeks federal registration of any new patentable invention, trademark or copyright, in addition to the patents, trademarks and copyrights described in Part C of Exhibit "B", which are all of such Grantor's federally registered patents, trademarks and copyrights as of the Closing Date, then such Grantor shall, on an annual basis or, after the occurrence and during the continuance of a Default, upon the request of the Agent, give the Agent notice thereof. Each Grantor agrees promptly upon request by the Agent to execute and deliver to the Agent any supplement to this Security Agreement or any other document reasonably requested by the Agent to evidence such security interest in a form appropriate for recording in the applicable federal office. Each Grantor also hereby authorizes the Agent to modify this Security Agreement unilaterally by amending Part C of Exhibit "B" to include any future patents, trademarks and/or copyrights of which the Agent receives notification from such Grantor pursuant hereto. 4.10. COMMERCIAL TORT CLAIMS. If, after the date hereof, any Grantor identifies the existence of a commercial tort claim belonging to such Grantor in respect of which such Grantor shall have filed a suit, and having, individually or together with all other such commercial tort 12 claims, in such Grantor's reasonable business judgment a value in excess of $10,000,000, that has arisen in the course of such Grantor's business in addition to the commercial tort claims described in Exhibit "E", which are all of such Grantor's commercial tort claims as of the Closing Date, then such Grantor shall give the Agent prompt notice thereof, but in any event not less frequently than quarterly. Each Grantor agrees promptly upon request by the Agent to execute and deliver to the Agent any supplement to this Security Agreement or any other document reasonably requested by the Agent to evidence the grant of a security interest therein in favor of the Agent. ARTICLE V DEFAULT 5.1. DEFAULT. The occurrence of any "Default" under, and as defined in, the Credit Agreement shall constitute a Default hereunder. 5.2. ACCELERATION AND REMEDIES. Upon the acceleration of the Secured Obligations under the Credit Agreement pursuant to Section 8.1 thereof, the Obligations and, to the extent provided for under the Rate Management Transactions evidencing the same, the Rate Management Obligations constituting Secured Obligations, shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and the Agent may, with the concurrence or at the direction of the Required Secured Parties, exercise any or all of the following rights and remedies: 5.2.1 Those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document, PROVIDED that this Section 5.2.1 shall not be understood to limit any rights or remedies available to the Agent and the Holders of Secured Obligations prior to a Default. 5.2.2 Those rights and remedies available to a secured party under the New York UCC or the PPSA, as applicable (whether or not the New York UCC or the PPSA applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank's right of setoff or bankers' lien) when a debtor is in default under a security agreement. 5.2.3 Without notice except as specifically provided in Section 8.1 or elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable. 5.2.4 Appoint by instrument in writing a receiver (which term as used in this Security Agreement includes a receiver and manager) or agent of all or any part of the Collateral and remove or replace from time to time any such receiver or agent. 5.2.5 Institute proceedings in any court of competent jurisdiction for the appointment of a receiver of all or any part of the Collateral. 13 5.2.6 Borrow for the purposes of carrying on the business of the Grantor or for the maintenance, preservation or protection of the Collateral and grant a security interest in the Collateral, whether or not in priority to the security interest granted herein, to secure repayment. The Agent, on behalf of the secured parties, may comply with any applicable state, Canadian provincial or federal law requirements in connection with a disposition of the Collateral, and such compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If, after the Credit Agreement has terminated by its terms and all of the Obligations have been paid in full, there remain Rate Management Obligations outstanding, the Required Secured Parties may exercise the remedies provided in this Section 5.2 upon the occurrence of any event which would allow or require the termination or acceleration of any Rate Management Obligations pursuant to the terms of the agreement governing any Rate Management Transaction. 5.3. GRANTORS' OBLIGATIONS UPON DEFAULT. Upon the request of the Agent during the continuance of a Default, each Grantor will: 5.3.1 ASSEMBLY OF COLLATERAL. Assemble and make available to the Agent the Collateral and all records relating thereto at any place or places specified by the Agent which is reasonably convenient to both parties. 5.3.2 SECURED PARTY ACCESS. Permit the Agent, to the extent such Grantor has the authority to do so, by the Agent's representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral and to remove all or any part of the Collateral. 5.4. LICENSE. The Agent is hereby granted a license or other right to use, following the occurrence and during the continuance of a Default, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, customer lists and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and, following the occurrence and during the continuance of a Default, such Grantor's rights under all licenses and all franchise agreements shall inure to the Agent's benefit. In addition, each Grantor hereby irrevocably agrees that the Agent may, following the occurrence and during the continuance of a Default, sell any of such Grantor's Inventory directly to any person, including without limitation persons who have previously purchased such Grantor's Inventory from such Grantor and in connection with any such sale or other enforcement of the Agent's rights under this Security Agreement, may sell Inventory which bears any trademark owned by or licensed to such Grantor and any Inventory that is covered by any copyright owned by or licensed to such Grantor and the Agent may finish any work in process and affix any trademark owned by or licensed to such Grantor and sell such Inventory as provided herein. 5.5. RECEIVER'S POWERS. 14 (a) Any receiver appointed by the Agent shall be vested with the rights and remedies which could have been exercised by the Agent in respect of each Grantor or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any supplemental instruments. The identity of the receiver, its replacement and its remuneration shall be within the sole and unfettered discretion of the Agent or any other Holder of Secured Obligations. (b) Any receiver appointed by the Agent shall act as agent for the Agent or any other Holder of Secured Obligations for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below), as agent for each Grantor. The receiver may sell, lease, or otherwise dispose of Collateral as agent for each Grantor or as agent for the Agent as the Agent may determine in its discretion. Each Grantor agrees to ratify and confirm all actions of the receiver acting as agent for each Grantor, and to release and indemnify the receiver in respect of all such actions. (c) The Agent, in appointing or refraining from appointing any receiver, shall not incur liability to the receiver, each Grantor or otherwise and shall not be responsible for any misconduct or negligence of the receiver. ARTICLE VI WAIVERS, AMENDMENTS AND REMEDIES Each of the Holders of Secured Obligations agrees that, except to the extent provided in Section 5.2, this Security Agreement may be enforced only by the actions of the Agent for the benefit of the Holders of Secured Obligations, and that no other Holder of Secured Obligations shall have any right individually to seek to enforce or to enforce this Security Agreement or to realize upon the security to be granted hereby (other than the right of setoff provided for in the Loan Documents). No delay or omission of the Agent to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Agent with the concurrence or at the direction of the Lenders required under Section 8.2 of the Credit Agreement and each Grantor, and then only to the extent in such writing specifically set forth, provided that the addition of any Domestic Subsidiary as a Grantor hereunder by execution of a Security Agreement Supplement in the form of Annex I (with such modifications as shall be acceptable to the Agent) shall not require receipt of any consent from or execution of any documentation by any other Grantor party hereto. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Agent until the non-contingent Secured Obligations have been paid in full. 15 ARTICLE VII PROCEEDS; COLLECTION OF RECEIVABLES 7.1. LOCKBOXES. Upon request of the Agent after the occurrence and during the continuance of a Default, each Grantor shall execute and deliver to the Agent irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Agent, which agreements shall be accompanied by an acknowledgment by the bank where the lockbox is located of the Lien of the Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to a special collateral account at the Agent. 7.2. COLLECTION OF RECEIVABLES. The Agent may at any time after the occurrence of a Default, by giving each Grantor written notice, elect to require that the Receivables be paid directly to the Agent for the benefit of the Holders of Secured Obligations. In such event, each Grantor shall, and shall permit the Agent to, promptly notify the account debtors or obligors under the Receivables owned by such Grantor of the Agent's interest therein and direct such account debtors or obligors to make payment of all amounts then or thereafter due under such Receivables directly to the Agent. Upon receipt of any such notice from the Agent, each Grantor shall thereafter hold in trust for the Agent, on behalf of the Holders of Secured Obligations, all amounts and proceeds received by it with respect to the Receivables and Other Collateral and immediately and at all times thereafter deliver to the Agent all such amounts and proceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. The Agent shall hold and apply funds so received as provided by the terms of Sections 7.3 and 7.4. 7.3. SPECIAL COLLATERAL ACCOUNT. The Agent may require all cash proceeds of the Collateral to be deposited in a special non-interest bearing cash collateral account with the Agent and held there as security for the Secured Obligations. No Grantor shall have any control whatsoever over said cash collateral account. If no Default is continuing, the Agent shall from time to time deposit the collected balances in said cash collateral account into the applicable Grantor's general operating account with the Agent. If any Default has occurred and is continuing, the Agent may (and shall, at the direction of the Required Lenders), from time to time, apply the collected balances in said cash collateral account to the payment of the Secured Obligations whether or not the Secured Obligations shall then be due. 7.4. APPLICATION OF PROCEEDS. The proceeds of the Collateral shall be applied by the Agent to payment of the Secured Obligations in the following order unless a court of competent jurisdiction shall otherwise direct: (a) FIRST, to payment of all costs and expenses of the Agent incurred in connection with the collection and enforcement of the Secured Obligations or of the security interest granted to the Agent pursuant to this Security Agreement; (b) SECOND, to payment of that portion of the Secured Obligations constituting accrued and unpaid interest and fees, pro rata among the Lenders and their Affiliates in accordance with the amount of such accrued and unpaid interest and fees owing to each of them; 16 (c) THIRD, to payment of the principal of the Secured Obligations and the net early termination payments and any other Rate Management Obligations then due and unpaid from the Borrower to any of the Lenders or their Affiliates, pro rata among the Lenders and their Affiliates in accordance with the amount of such principal and such net early termination payments and other Rate Management Obligations then due and unpaid owing to each of them; (d) FOURTH, to payment of any Secured Obligations (other than those listed above) pro rata among those parties to whom such Secured Obligations are due in accordance with the amounts owing to each of them; and (e) FIFTH, the balance, if any, after all of the Secured Obligations have been satisfied, shall be distributed by the Agent to the applicable Grantor or at its direction. ARTICLE VIII GENERAL PROVISIONS 8.1. NOTICE OF DISPOSITION OF COLLATERAL; CONDITION OF COLLATERAL. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the Borrower, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. 8.2. COMPROMISES AND COLLECTION OF COLLATERAL. Each Grantor and the Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In view of the foregoing, each Grantor agrees that the Agent may at any time and from time to time, if a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Agent in its sole discretion shall determine or abandon any Receivable, and any such action by the Agent shall be commercially reasonable so long as the Agent acts in good faith based on information known to it at the time it takes any such action. 8.3. SECURED PARTY PERFORMANCE OF GRANTOR'S OBLIGATIONS. Without having any obligation to do so, the Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Security Agreement and such Grantor shall reimburse the Agent for any reasonable amounts paid by the Agent pursuant to this Section 8.3. Each Grantor's obligation to reimburse the Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand. 8.4. AUTHORIZATION FOR SECURED PARTY TO TAKE CERTAIN ACTION. Each Grantor irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the 17 Agent and appoints the Agent as its attorney in fact (i) to execute on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the Agent's sole discretion to perfect and to maintain the perfection and priority of the Agent's security interest in the Collateral, (ii) to indorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the Agent's security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Collateral owned by such Grantor and which are Securities or with financial intermediaries holding other Investment Property as may be necessary or advisable to give the Agent Control over such Securities or other Investment Property, (v) to enforce payment of the Instruments, Accounts and Receivables in the name of the Agent or such Grantor, (vi) to apply the proceeds of any Collateral received by the Agent to the Secured Obligations as provided in Article VII and (vii) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder or under any other Loan Document), and each Grantor agrees to reimburse the Agent on demand for any reasonable payment made or any reasonable expense incurred by the Agent in connection therewith, provided that this authorization shall not relieve any Grantor of any of its obligations under this Security Agreement or under the Credit Agreement. Notwithstanding the foregoing, such powers of attorney granted with respect to clause (ii) and clauses (iv) through (vii) above shall be exercisable by the Agent only after the occurrence and during the continuance of a Default. 8.5. SPECIFIC PERFORMANCE OF CERTAIN COVENANTS. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.4, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Agent and the Holders of Secured Obligations, that the Agent and Holders of Secured Obligations have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Agent or the Holders of Secured Obligations to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 8.5 shall be specifically enforceable against the Grantors. 8.6. USE AND POSSESSION OF CERTAIN PREMISES. Upon the occurrence and during the continuance of a Default, the Agent shall be entitled to occupy and use any premises owned or leased by the Grantors where any of the Collateral or any records relating to the Collateral are located until the non-contingent Secured Obligations are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to pay any Grantor for such use and occupancy. 8.7. DISPOSITIONS NOT AUTHORIZED. No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in the Credit Agreement and notwithstanding any course of dealing between any Grantor and the Agent or other conduct of the Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in the Credit Agreement) shall be binding upon the Agent or the Holders of Secured Obligations unless such authorization is in writing signed by the Agent with the consent or at the direction of the Required Lenders. 18 8.8. BENEFIT OF AGREEMENT. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of the Grantors, the Agent and the Holders of Secured Obligations and their respective successors and permitted assigns (including all persons who become bound as a debtor to this Security Agreement), except that the Grantors shall not have the right to assign their rights or delegate their obligations under this Security Agreement or any interest herein (other than pursuant to a transaction permitted by the Credit Agreement), without the prior written consent of the Agent. 8.9. SURVIVAL OF REPRESENTATIONS. All representations and warranties of the Grantors contained in this Security Agreement shall survive the execution and delivery of this Security Agreement. 8.10. TAXES AND EXPENSES. The Grantors shall reimburse the Agent for any and all reasonable out-of-pocket expenses, costs and charges (including but not limited to reasonable outside attorneys', auditors' and accountants' fees and receiver's or agent's remuneration) paid or incurred by the Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including, to the extent permitted by Section 6.9 of the Credit Agreement, the expenses and charges associated with any periodic or special audit of the Collateral). Any and all costs and expenses incurred by the Grantors in the performance of actions required pursuant to the terms hereof shall be borne solely by the Grantors. 8.11. CONSENT. Each Grantor hereby consents to the holding of any Pledged Stock by the Agent for and on behalf of each and every one of the Holders of Secured Obligations. The Agent hereby acknowledges having received, as of the date hereof, evidence in writing of the security by the Grantor on the Pledged Stock and the share certificates in respect thereof. 8.12. CURRENCY. All references in this Security Agreement to dollars, unless otherwise specifically indicated, are expressed in currency of the United States of America. 8.13. HEADINGS. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement. 8.14. TERMINATION. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until the Secured Obligations (other than contingent indemnity obligations) have been Paid in Full. Notwithstanding the foregoing, the security interests granted hereunder (and any Grantor's obligations hereunder) shall be released in accordance with the provisions of Section 10.15 of the Credit Agreement. 8.15. ENTIRE AGREEMENT. This Security Agreement embodies the entire agreement and understanding between the Grantors and the Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Agent relating to the Collateral. 8.16. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL 19 LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. 8.17. INDEMNITY. Each Grantor hereby agrees, jointly with the other Grantors and severally, to indemnify the Agent and the Holders of Secured Obligations, and their respective successors, permitted assigns, agents and employees, from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including, without limitation, all expenses of litigation or preparation therefor whether or not the Agent or any Holder of Secured Obligations is a party thereto) imposed on, incurred by or asserted against the Agent or the Holders of Secured Obligations, or their respective successors, assigns, agents and employees, in any way relating to or arising out of this Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Agent or the Holders of Secured Obligations or any Grantor, and any claim for patent, trademark or copyright infringement), except to the extent the same are caused by the gross negligence or willful misconduct of such Person or solely by reason of the Agent's breach of the express terms of this Agreement. 8.18. SUBORDINATION OF INTERCOMPANY INDEBTEDNESS. Each Grantor agrees that any and all claims of such Grantor against any other Grantor (each an "Obligor") with respect to any "Intercompany Indebtedness" (as hereinafter defined), any endorser, obligor or any other guarantor of all or any part of the Secured Obligations, or against any of its properties shall be subordinate and subject in right of payment to the prior Payment in Full of all Secured Obligations (other than contingent indemnity obligations). Notwithstanding any right of any Grantor to ask, demand, sue for, take or receive any payment from any Obligor, all rights, liens and security interests of such Grantor, whether now or hereafter arising and howsoever existing, in any assets of any other Obligor shall be and are subordinated to the rights of the Holders of Secured Obligations and the Agent in those assets. No Grantor shall have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Secured Obligations (other than contingent indemnity obligations) shall have been Paid in Full. If all or any part of the assets of any Obligor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of such Obligor, whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any such Obligor is dissolved or if substantially all of the assets of any such Obligor are sold, then, and in any such event (such events (other than any such events permitted by the Credit Agreement) being herein referred to as an "Insolvency Event"), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any indebtedness of any Obligor to any Grantor ("Intercompany Indebtedness") shall be paid or delivered directly to the Agent for application on any of the Secured Obligations, due or to become due, until such Secured Obligations (other than contingent indemnity obligations) shall have first been Paid in Full. Should any payment, distribution, security or instrument or proceeds thereof be received by the applicable Grantor upon or with respect to the Intercompany Indebtedness after any Insolvency Event and prior to the satisfaction of all of the Secured Obligations (other than contingent 20 indemnity obligations) and the termination or expiration of all Commitments of the Lenders and Facility LCs issued pursuant to the Credit Agreement, such Grantor shall receive and hold the same in trust, as trustee, for the benefit of the Holders of Secured Obligations and shall forthwith deliver the same to the Agent, for the benefit of the Holders of Secured Obligations, in precisely the form received (except for the endorsement or assignment of the Grantor where necessary), for application to any of the Secured Obligations, due or not due, and, until so delivered, the same shall be held in trust by the Grantor as the property of the Holders of Secured Obligations. If any such Grantor fails to make any such endorsement or assignment to the Agent, the Agent or any of its officers or employees is irrevocably authorized to make the same. Each Grantor agrees that until the Secured Obligations (other than the contingent indemnity obligations) have been Paid in Full, no Grantor will assign or transfer to any Person (other than the Agent or the Borrower or another Grantor) any claim any such Grantor has or may have against any Obligor. ARTICLE IX NOTICES 9.1. SENDING NOTICES. Any notice required or permitted to be given under this Security Agreement shall be sent (and deemed received) in the manner and to the addresses set forth in Article XIII of the Credit Agreement; and any such notice delivered to the Borrower shall be deemed to have been delivered to all of the Grantors. 9.2. CHANGE IN ADDRESS FOR NOTICES. Each of the Grantors, the Agent and the Lenders may change the address for service of notice upon it by a notice in writing to the other parties. ARTICLE X THE AGENT Bank One, NA has been appointed Agent for the Holders of Secured Obligations hereunder pursuant to Article X of the Credit Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Agent hereunder is subject to the terms of the delegation of authority made by the Holders of Secured Obligations to the Agent pursuant to the Credit Agreement, and that the Agent has agreed to act (and any successor Agent shall act) as such hereunder only on the express conditions contained in such Article X. Any successor Agent appointed pursuant to Article X of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Agent hereunder. ARTICLE XI EXHIBITS The Grantors may from time to time update the Exhibits to this Security Agreement in writing such that any representations and warranties made hereunder as of a particular Reference Date shall be made in reference to the Exhibits to this Security Agreement as in effect on such Reference Date. Notwithstanding the foregoing, to the extent any action or 21 inaction resulting in a change to the information contained in any Exhibit to this Security Agreement independently required compliance with any other provision of the Security Agreement (or the Credit Agreement), then the updating of the relevant Exhibit shall not relieve, waive or excuse the independent Default arising under the Credit Agreement from such Grantor's non-compliance with any such provision pertaining to the underlying action or inaction. 22 IN WITNESS WHEREOF, each of the Grantors and the Agent have executed this Security Agreement as of the date first above written. UNITED STATIONERS INC. AZERTY INCORPORATED By: By: --------------------------------- ------------------------------- Name: Brian S. Cooper Name: Brian S. Cooper Title: Senior Vice President and Treasurer Title: Vice President and Treasurer LAGASSE, INC. UNITED STATIONERS TECHNOLOGY SERVICES LLC By: By: --------------------------------- ------------------------------- Name: Brian S. Cooper Name: Brian S. Cooper Title: Vice President and Treasurer Title: Vice President and Treasurer UNITED STATIONERS FINANCIAL SERVICES LLC UNITED STATIONERS SUPPLY CO. By: By: --------------------------------- ------------------------------- Name: Brian S. Cooper Name: Brian S. Cooper Title: Vice President and Treasurer Title: Senior Vice President, Treasurer and Assistant Secretary BANK ONE, NA (MAIN OFFICE CHICAGO), as Agent By: --------------------------------- Name: Molly Morawski Title: Director, Capital Markets SIGNATURE PAGE TO PLEDGE AND SECURITY AGREEMENT STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) The foregoing instrument was acknowledged before me this 21st day of March, 2003. -------------------------------------- Donald M. Salazar Notary Public My commission expires: 1-25-205 1 EXHIBIT "A" (See Sections 3.3, 3.4, 3.5, 3.6, 3.11 and 4.1.4 of Security Agreement) Place of Business (if it has only one) or Chief Executive Office (if more than one place of business) and Mailing Address, other names, Federal employer identification number, where applicable, and, if such Grantor is a registered organization, the State organization number: -------------------------- -------------------------- -------------------------- -------------------------- Attention: ---------------- FEIN: Organization Number: Other Names: Locations of Inventory and Equipment and Fixtures: A. PROPERTIES OWNED BY THE GRANTORS: B. PROPERTIES LEASED BY THE GRANTORS: C. PUBLIC WAREHOUSES OR OTHER LOCATIONS PURSUANT TO BAILMENT OR CONSIGNMENT ARRANGEMENTS: 2 EXHIBIT "B" (See Section 3.9 of Security Agreement) A. Vehicles subject to certificates of title:
Description Title Number & State Where Issued ----------- ---------------------------------
B. Aircraft/engines, ships, railcars and other vehicles governed by federal statute:
Description Registration Number ----------- -------------------
C. Patents, copyrights, trademarks protected under federal law*: ---------- * For (i) trademarks, show the trademark itself, the registration date and the registration number; (ii) trademark applications, show the trademark applied for, the application filing date and the serial number of the application; (iii) patents, show the patent number, issue date and a brief description of the subject matter of the patent; and (iv) patent applications, show the serial number of the application, the application filing date and a brief description of the subject matter of the patent applied for. Any licensing agreements for patents or trademarks should be described on a separate schedule. 3 EXHIBIT "C" List of Pledged Securities (See Section 3.13 of Security Agreement) A. STOCKS:
Issuer Certificate Number Number of Shares ------ ------------------ ----------------
B. BONDS:
Issuer Number Face Amount Coupon Rate Maturity ------ ------ ----------- ----------- --------
C. GOVERNMENT SECURITIES:
Issuer Number Type Face Amount Coupon Rate Maturity ------ ------ ---- ----------- ----------- --------
D. OTHER SECURITIES OR OTHER INVESTMENT PROPERTY (CERTIFICATED AND UNCERTIFICATED):
Issuer Description of Collateral Percentage Ownership Interest ------ ------------------------- -----------------------------
4 EXHIBIT "D" (See Section 3.1 of Security Agreement) OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED 5 EXHIBIT "E" (See Definition of "Commercial Tort Claims") COMMERCIAL TORT CLAIMS [Describe parties, case number(if applicable), nature of dispute] 6 ANNEX I to SUBSIDIARY SECURITY AGREEMENT Reference is hereby made to the Subsidiary Security Agreement (the "Agreement"), dated as of March 21, 2003, made by each of United Stationers Supply Co., an Illinois Corporation (the "Borrower"), United Stationers Inc., a Delaware corporation (the "Parent"), and the other Subsidiaries of the Parent listed on the signature pages thereto (together with the Borrower and the Parent, collectively, the "Grantors") (each an "Initial Grantor", and together with any additional Domestic Subsidiaries, including the undersigned, which become parties thereto by executing a Supplement in substantially the form hereof, the "Grantors"), in favor of the Agent. Capitalized terms used herein and not defined herein shall have the meanings given to them in the Agreement. By its execution below, the undersigned, [NAME OF NEW GRANTOR], a [__________________________] [corporation/limited liability company] agrees to become, and does hereby become, a Grantor under the Agreement and agrees to be bound by such Agreement as if originally a party thereto. By its execution below, the undersigned represents and warrants as to itself that all of the representations and warranties contained in the Agreement are true and correct in all respects as of the date hereof. [NAME OF NEW GRANTOR] represents and warrants that the supplements to the Exhibits to the Agreement attached hereto are true and correct in all respects and such supplements set forth all information required to be scheduled under the Agreement. [NAME OF NEW GRANTOR] shall take all steps necessary to perfect, in favor of the Agent, a first-priority security interest in and lien against [NAME OF NEW GRANTOR]'s Collateral, including, without limitation, delivering all certificated Securities to the Agent, and taking all steps necessary to properly perfect the Agent's interest in any uncertificated equity or membership interests. IN WITNESS WHEREOF, [NAME OF NEW GRANTOR], a [__________________] [corporation/limited liability company] has executed and delivered this Annex I counterpart to the Agreement as of this ___________ day of ____________, ____. [NAME OF NEW GRANTOR] By: ---------------------------- Title: ------------------------- 7