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Exhibit 10.35
FORM OF SUBSIDIARY SECURITY AGREEMENT
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THIS SECURITY AGREEMENT entered into this ____ day of October, 1997, by
and between [SUBSIDIARY], having its principal office at [422 Wards ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇] ("Debtor") and THE FIFTH THIRD BANK, an Ohio banking
corporation as Agent, ("Secured Party").
1. GRANTING CLAUSE.
To secure the Obligations (as defined in Section 2 hereof), Debtor
hereby grants to Secured Party a security interest in all of the property of the
type described in Exhibit A attached hereto and incorporated herein by reference
now or hereafter acquired by Debtor, including all substitutions, replacements,
additions and accessions thereto and therefor and all cash and noncash proceeds
from the sale, exchange, collection or other disposition thereof (such property
is hereinafter referred to as the "Collateral"). Terms used herein but not
otherwise defined shall have the meanings set forth in that certain Credit
Agreement dated as of October __, 1997 by and among ▇▇▇▇▇▇▇ Piano & Organ
Company ("▇▇▇▇▇▇▇"), Secured Party, as Agent and various lenders as the same may
be amended, modified, supplemented or restated from time to time (the "Credit
Agreement").
2. OBLIGATIONS SECURED HEREBY.
The security interest in the Collateral granted hereby secures and
covers the payment and performance by Debtor of all of its obligations under
that certain Guaranty of Debtor in favor of the Secured Party dated as of the
date hereof (the foregoing are referred to herein as the "Obligations").
3. DEBTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) COLLATERAL. Debtor hereby represents and warrants that (i)
except for the security interest granted hereby, Debtor is, or to the
extent that this Agreement provides that the Collateral is to be
acquired after the date hereof will be, the owner of the Collateral
free and clear of all liens, pledges, security interests or other
encumbrances of any nature whatsoever; and (ii) upon execution of this
Security Agreement and recording of applicable financing statements,
the security interest granted hereby will be the first, best and only
security interest in the Collateral subject to Permitted Liens.
(b) ENFORCEABILITY. Debtor represents and warrants that the
execution and performance of this Security Agreement has been duly
authorized by all appropriate action of Debtor and this Security
Agreement has been duly executed by Debtor, delivered to
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Secured Party and constitute legal, valid and binding obligations of
Debtor, enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy laws. Neither the execution or
delivery by Debtor of this Security Agreement nor the consummation by
Debtor of the transactions contemplated hereby nor compliance by Debtor
with the provisions hereof, conflicts with or results in a breach of
any of the provisions of the Articles of Incorporation or Code of
Regulations of Debtor or of the provisions of any other agreement,
instrument or understanding to which it is a party or by which it or
any of its assets or properties are bound.
(c) PROTECTION OF COLLATERAL. (i) Debtor will keep the
Collateral free from any lien, security interest or other encumbrance,
other than Permitted Liens, adverse to the security interest granted
hereby and in good order and repair and will not waste or destroy the
Collateral or any part thereof; (ii) Debtor will not use the Collateral
in violation of any statute, ordinance or regulation; (iii) in
accordance with the terms and conditions of the Credit Agreement and
applicable to Debtor to the same extent as applicable to ▇▇▇▇▇▇▇
therein, Secured Party may examine and inspect the Collateral at any
time, wherever located; (iv) Debtor will at any time and from time to
time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of
further assurance and other instruments and will take such other
action, as the Secured Party reasonably requests and reasonably deems
necessary or advisable to (a) grant Secured Party a security interest
in all or any portion of the Collateral, (b) maintain or preserve the
lien of this Agreement to carry out more effectively the purpose
hereof, (c) perfect, publish notice of or protect the validity of or of
any grant made or to be made by this Agreement, (d) enforce this
Agreement, or (e) preserve and defend the Collateral and the rights of
the Secured Party therein against the claims and demands of all persons
and entities claiming the same or any interest therein.
(d) PERFORMANCE OF OBLIGATIONS. Debtor will punctually perform
and observe all of the Obligations.
(e) MAINTENANCE AND INSPECTION OF RECORDS. In accordance with
the terms and conditions of the Credit Agreement and applicable to
Debtor to the same extent as applicable to ▇▇▇▇▇▇▇ therein, Debtor will
maintain accurate and complete records in respect of the Collateral and
shall at all reasonable times allow Secured Party by any officer,
employee or agent to examine, audit or inspect (including making
extracts from) such records and to arrange for verification of the
Collateral. Debtor also agrees to furnish such information or reports
relating to the Collateral as Secured Party may from time to time
reasonably request.
(f) INSURANCE AND TAXES.
(i) INSURANCE OF COLLATERAL. In accordance with the
terms and conditions of the Credit Agreement and applicable to
Debtor to the same extent as applicable to
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▇▇▇▇▇▇▇ therein, Debtor agrees to maintain insurance at all
times with respect to the Collateral and to deliver to Secured
Party, upon Secured Party's request, all such policies of
insurance. Such insurance policies shall comply with the
requirements of the Loan Agreement and applicable to Debtor to
the same extent as applicable to ▇▇▇▇▇▇▇ therein and contain
such terms, be in such form, for such periods and be written
by such companies as are reasonably satisfactory to Secured
Party and shall be payable to Secured Party and Debtor as
their interests may appear. All policies of insurance shall
provide for not less than thirty (30) days written notice to
Secured Party prior to any cancellation of such policies.
Debtor hereby makes, constitutes and appoints Secured Party as
its true and lawful attorney-in-fact for it and in its name
and place for the purpose of obtaining, adjusting, settling
and canceling such policies of insurance and endorsing any
drafts in respect thereof. The rights, powers and authority of
Secured Party herein granted shall commence and be in effect
on the date of this Agreement and shall remain in full force
and effect thereafter until the Obligations have been paid and
performed in full. If Debtor fails to maintain such insurance,
Secured Party may, at its option, maintain such insurance and
all premiums so paid by Secured Party will be payable upon
Secured Party's demand and until paid by Debtor will accrue
interest at the highest rate of interest provided for in the
Note.
(ii) PAYMENT OF TAXES AND ASSESSMENTS. In accordance
with the terms of the Credit Agreement and applicable to
Debtor to the same extent as applicable to ▇▇▇▇▇▇▇ therein,
Debtor agrees to promptly pay when due all taxes and
assessments imposed on or with respect to all the Collateral.
If such taxes and assessments are not paid when due, the
Secured Party may do so for Debtor's account and all
expenditures so paid by Secured Party will be added to the
principal balance of the Note, will be payable upon Secured
Party's demand and until paid by Debtor will accrue interest
at the highest rate of interest provided for in the Note.
(g) LOCATION OF COLLATERAL. Debtor covenants that the
Collateral will be kept at all times on the premises of the real estate
referred to in Exhibit A of this Agreement (the "Premises"), and Debtor
will not hold Collateral at locations other than the Premises, except,
in each case, to the extent that such Collateral is Inventory in
transit; provided, however, as contemplated by and provided for in
Section 1 hereof, Secured Party agrees that Debtor may, at any time and
from time to time, substitute or replace the Collateral ("Substituted
or Replaced Collateral") with Collateral of equal or greater value and
that Debtor may, in connection with each such substitution or
replacement, remove the Substituted or Replaced Collateral from such
premises.
(h) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Debtor in this Security
Agreement shall survive the execution and
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delivery of this instrument until such time as the Note and all other
Obligations shall have been paid or otherwise satisfied in full.
4. DEBTOR'S RIGHTS WITH RESPECT TO COLLATERAL.
Unless and until the occurrence of an Event of Default, Debtor shall
have the right to utilize the Collateral in the ordinary course of its business
and to substitute or replace the Collateral in accord with Section 3g hereof,
but shall not have the right to sell, lease or otherwise dispose of or transfer
the Collateral or any interest therein without the prior written consent of
Secured Party; provided, however, so long as an Event of Default shall not have
occurred and be continuing, any portion of the Collateral which constitutes
inventory or accounts receivable may be sold or transferred in the ordinary
course of business consistent with the past business practices of Debtor.
5. EVENTS OF DEFAULT AND REMEDIES.
(a) RIGHTS AND REMEDIES UPON DEFAULT. If any Event of Default
under the Loan Agreement shall have occurred and be continuing, Secured
Party may proceed to protect and enforce its rights under this
Agreement by suit in equity, action at law or any other appropriate
proceeding and Secured Party shall have, without limitation, all of the
rights and remedies provided by applicable law, including, without
limitation, the rights and remedies of a secured party under the
Uniform Commercial Code of the state governing disposition of the
Collateral. Debtor shall be liable for any deficiency remaining after
the collection of the Collateral and application of the proceeds to the
Obligations to the fullest extent permitted by applicable law.
(b) POWER OF ATTORNEY WITH RESPECT TO THE COLLATERAL. Secured
Party shall have the right upon the occurrence of an Event of Default
with respect to the payment of the Obligations, whether as scheduled,
by acceleration, or otherwise, to notify account debtors of its
security interest in the Accounts and to require payments to be made
directly to Secured Party at such address or in such manner as Secured
Party may deem appropriate. Upon request of Secured Party at any time,
Borrowers will so notify the account debtors and will indicate on all
▇▇▇▇▇▇▇▇ to the account debtors that the Accounts are payable to
Secured Party. To facilitate direct collection, Debtor hereby appoints
Secured Party and any officer or employee of Secured Party, as the
agent to (i) receive, open and dispose of all mail addressed to Debtor
and take therefrom any payments on or proceeds of other arrangements,
in which Debtor shall cooperate, to receive Debtor's mail, including
notifying the post office authorities to change the address for
delivery of mail addressed to Debtor to such address as Secured Party
shall designate, (ii) endorse the name of Debtor in favor of Secured
Party upon any and all checks, drafts, money orders, notes, acceptances
or other evidences or payment or Collateral that may come into Secured
Party's possession, (iii) sign and endorse the name of Debtor on any
invoice or ▇▇▇▇ of lading relating to any of the Accounts, on
verifications of
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Accounts sent to any Debtor, to drafts against account debtors, to
assignments of Accounts and to notices to account debtors, and (iv) do
all acts and things necessary to carry out this Agreement, including
signing the name of Debtor on any instruments required by law in
connection with the transactions contemplated hereby and on financing
statements as permitted by the Uniform Commercial Code. Debtor hereby
ratifies and approves all acts of such attorneys-in-fact, and neither
Secured Party nor any other such attorney-in-fact shall be liable for
any acts of commission or omission, or for any error of judgment or
mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as any of the Obligations remain unsatisfied.
Secured Party shall not, under any circumstances, be liable
for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any Accounts or any instrument
received in payment thereof or for any damage resulting therefrom
except for such acts or omissions resulting from Secured Party's gross
negligence or willful misconduct. Upon the occurrence of an Event of
Default, Secured Party may, without notice to or consent from Debtor,
▇▇▇ upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any
of the Accounts or any securities, instruments or insurance applicable
thereto and/or release the obligor thereon. Secured Party is authorized
to accept the return of the goods represented by any of the Accounts
without notice to or consent by Debtor, or without discharging or any
way affecting the Obligations hereunder.
Secured Party shall not be liable for or prejudiced by any
loss, depreciation or other damage to Accounts or other Collateral
unless caused by Secured Party's gross negligence or willful
misconduct, and Secured Party shall have no duty to take any action to
preserve or collect any Account or other Collateral.
(c) DISTRIBUTION OF COLLATERAL. Upon enforcement of this
Agreement following the occurrence of an Event of Default, the proceeds
of the Collateral shall be applied as received from time to time by the
Secured Party as follows:
FIRST: To the payment of all costs and expenses
incurred or accrued by the Secured Party (including the fees
and expenses of its attorneys, appraisers and agents) in
connection with any proceeding commenced to enforce this
Security Agreement or in connection with the taking, holding,
maintaining, preparing for sale, selling and the like of the
Collateral.
SECOND: To the payment of all amounts then due and
payable on the Note (first to the payment of delinquency
charges, then to the payment of default charges, then to the
payment of accrued interest and then to the payment of unpaid
principal).
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THIRD: To the payment of any surplus to Debtor or any
other person or entity legally entitled thereto.
(d) COSTS AND EXPENSES. Borrower absolutely and
unconditionally agrees to pay to Secured Party upon demand by Secured
Party all reasonable out-of-pocket costs and expenses which shall be
incurred or sustained by Secured Party or any of its directors,
officers, employees or agents as a consequence of, on account of, in
relation to or any way in connection with the exercise, protection or
enforcement (whether or not suit is instituted) any of its rights,
remedies, powers or privileges under this Agreement or any of the Loan
Documents or in, to or under all or any part of the Collateral or in
connection with any litigation, proceeding or dispute in any respect
related to this Agreement or any of the Loan Documents (including, but
not limited to, all of the reasonable fees and disbursements of
consultants, legal advisers, accountants, experts and agents for
Secured Party, the reasonable travel and living expenses away from home
of employees, consultants, experts or agents of Secured Party, and the
reasonable fees of agents, consultants and experts not in the full-time
employ of Secured Party for services rendered on behalf of Secured
Party).
(e) Debtor hereby confirms to Secured Party the continuing and
immediate right of set-off of Secured Party with respect to all
deposits, balances and other sums credited by or due from Secured Party
or any of the offices or branches of Secured Party to Debtor, which
right is in addition to any other rights which Secured Party may have
under applicable law. Regardless of the adequacy of any Collateral, if
any principal, interest or other sum payable by Debtor to Secured Party
under the Note or any of the Loan Documents is not paid to Secured
Party punctually when the same shall first become due and payable
(after giving effect to any applicable grace period), or if any Event
of Default shall at any time occur, any deposits, balances or other
sums credited by or due from Secured Party or any of the offices or
branches of Secured Party to Debtor may, without any prior notice of
any kind to Debtor or compliance with any other conditions precedent
now or hereafter imposed by statute, rule or law or otherwise (all of
which are hereby expressly and irrevocably waived by Debtors to the
extent permitted by law), be immediately set off, appropriated and
applied by Secured Party toward the payment and satisfaction of the
Obligations (but not to any other obligations of such Debtor to Secured
Party until all of the Obligations have been paid in full) in such
order and manner as Secured Party (in its sole and complete discretion)
may determine.
6. NO WAIVER; CUMULATIVE REMEDIES.
Secured Party shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder and no waiver
shall be valid unless in writing, signed by the Secured Party, and then only to
the extent therein set forth. A waiver by Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which Secured Party would otherwise have had on any future occasion. No
failure to exercise or any delay in exercising on the part of Secured Party any
right, power or privilege hereunder, shall operate
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as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights and remedies
provided by law.
7. SEVERABILITY OF PROVISIONS.
The provisions of this Security Agreement are severable, and if any
clause or provision hereof shall be held invalid or unenforceable in whole or in
part, then such invalidity or unenforceability shall attach only to such clause
or provision, or part thereof and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision in this
Security Agreement in any jurisdiction.
8. AMENDMENTS; CHOICE OF LAW; BINDING EFFECT.
(a) None of the terms or provisions of this Security Agreement
may be altered, modified or amended except by an instrument in writing,
duly executed by each of the parties hereto.
(b) This Security Agreement shall be governed by and be
construed and interpreted in accordance with the laws of the State of
Ohio.
(c) This Security Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns.
9. NOTICES.
All notices and demands hereunder shall be deemed to have been
delivered if made in accordance with the Credit Agreement. Such notices, if to
Secured Party, shall be to it at its address set forth therein, or if to Debtor,
shall be to it in care of ▇▇▇▇▇▇▇ at ▇▇▇▇▇▇▇'▇ address set forth in the Credit
Agreement. Either of the foregoing parties may change its address for notices
hereunder by giving notice of such change to the other party in accordance with
the provisions of the Credit Agreement.
10. HEADINGS.
The descriptive headings herein used are for convenience only and shall
not be deemed to limit or otherwise effect the construction of any provisions
hereof.
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11. COUNTERPART EXECUTION.
Security Agreement may be executed in several counterparts each of
which together shall constitute one and the same agreement.
12. DEFEASANCE CLAUSE.
If the Debtor shall pay the Note secured by this Agreement and perform
the other Obligations, then this Agreement and the security interest in the
Collateral granted hereby shall be void and terminated and Secured Party agrees
to execute such documents and do such acts as are necessary to release and
terminate such liens.
[Remainder of page intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF, the undersigned have caused this Security Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized, at _________________________ on the day and year first above
written.
WITNESSES: DEBTOR
[SUBSIDIARY]
By:
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Name:
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Title:
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AGENT
THE FIFTH THIRD BANK, AS AGENT
By:
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Name:
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Title:
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