EXHIBIT 10.37
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is dated as of September 27,
2001, by and among IOS Brands CORPORATION, a Delaware corporation (the
"Parent"), Florists' Transworld Delivery, Inc., a Michigan corporation (the
"Borrower"), and the other parties executing this Agreement under the heading
"Debtors" (the Parent, the Borrower and such other parties, along with any
parties who execute and deliver to the Agent (as defined below) an agreement
substantially in the form attached hereto as Schedule F, being hereinafter
referred to collectively as the "Debtors" and individually as a "Debtor"), each
with its mailing address at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and ▇▇▇▇▇▇ TRUST AND SAVINGS BANK, an Illinois banking corporation ("HTSB"),
with its mailing address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
acting as administrative agent hereunder for the Secured Creditors hereinafter
identified and defined (HTSB acting as such administrative agent and any
successor or successors to HTSB acting in such capacity being hereinafter
referred to as the "Agent").
PRELIMINARY STATEMENTS
A. The Borrower, the other Debtors, and HTSB, individually and as
Agent, have entered into a Credit Agreement dated as of September 27, 2001 (such
Credit Agreement as the same may be amended or modified from time to time,
including amendments and restatements thereof in its entirety, being hereinafter
referred to as the "Credit Agreement"), pursuant to which HTSB and such other
banks and financial institutions and letter of credit issuers from time to time
party to the Credit Agreement (HTSB, in its individual capacity, and such other
banks and financial institutions being hereinafter referred to collectively as
the "Lenders" and individually as a "Lender" and such letter of credit issuers
being hereinafter referred to collectively as the "L/C Issuers" and individually
as a "L/C Issuer") have agreed, subject to certain terms and conditions, to
extend credit and make certain other financial accommodations available to the
Borrower (the Agent, the Lenders, and the L/C Issuers, together with any
affiliates of the Lenders party to the Hedging Agreements referred to below,
being hereinafter referred to collectively as the "Secured Creditors" and
individually as a "Secured Creditor").
B. The Borrower and the other Debtors may from time to time enter into
one or more Hedging Agreements (as such term is defined in the Credit Agreement)
with respect to, among other things, interest rate exchange, swap, cap, collar,
floor, or other similar agreements and one or more foreign currency contracts,
currency swap contracts or other similar agreements with one or more of the
Lenders party to the Credit Agreement, or their affiliates, for the purpose of
hedging or otherwise protecting against interest rate and foreign currency
exposure.
C. As a condition to extending credit to the Borrower under the Credit
Agreement or entering into any Hedging Agreements, the Secured Creditors have
required, among other things, that each Debtor grant to the Agent for the
benefit of the Secured Creditors a lien on and security interest in the personal
property of such Debtor described herein subject to the terms and conditions
hereof.
D. The Parent owns, directly or indirectly, equity interests in each
other Debtor and the Parent and the Borrower provide the other Debtors with
financial, management, administrative, and technical support which enables such
Debtors to conduct their businesses in an orderly and efficient manner in the
ordinary course.
E. Each Debtor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Secured Creditors to the
Borrower.
NOW, THEREFORE, for good and valuable consideration, receipt whereof is
hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Terms defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein
shall mean and include the Debtors collectively and also each individually, with
all grants, representations, warranties and covenants of and by the Debtors, or
any of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; provided,
however, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
Section 2. Grant of Security Interest in the Collateral. (a) Each
Debtor hereby grants to the Agent for the benefit of the Secured Creditors a
lien on and security interest in, and right of set-off against, and acknowledges
and agrees that the Agent has and shall continue to have for the benefit of the
Secured Creditors a continuing lien on and security interest in, and right of
set-off against, all right, title and interest, whether now owned or existing or
hereafter created, acquired or arising, in and to all personal property of each
Debtor, including all of the following:
(a) Accounts (including Health-Care-Insurance Receivables,
if any);
(b) Chattel Paper;
(c) Instruments (including Promissory Notes);
(d) Documents;
(e) General Intangibles (including Payment Intangibles and
Software);
(f) Letter-of-Credit Rights;
(g) Supporting Obligations;
(h) Deposit Accounts;
-2-
(i) Investment Property (including certificated and
uncertificated Securities, Securities Accounts, Security Entitlements,
Commodity Accounts, and Commodity Contracts);
(j) Inventory;
(k) Equipment (including all software, whether or not the
same constitutes embedded software, used in the operation thereof);
(l) Fixtures;
(m) All rights to merchandise and other Goods (including
rights to returned or repossessed Goods and rights of stoppage in
transit) which are represented by, arise from, or relate to any of the
foregoing;
(n) All other personal property and interests in personal
property of such Debtor of any kind or description now held by any
Secured Creditor or at any time hereafter transferred or delivered to, or
coming into the possession, custody, or control of, any Secured Creditor,
or any agent or affiliate of any Secured Creditor, whether expressly as
collateral security or for any other purpose (whether for safekeeping,
custody, collection or otherwise), and all dividends and distributions on
or other rights in connection with any such property;
(o) All supporting evidence and documents relating to any
of the above-described property, including, without limitation, computer
programs, disks, tapes and related electronic data processing media, and
all rights of such Debtor to retrieve the same from third parties,
written applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes, and other evidences of indebtedness, insurance
certificates and the like, together with all books of account, ledgers,
and cabinets in which the same are reflected or maintained;
(p) All Accessions and additions to, and substitutions and
replacements of, any and all of the foregoing; and
(q) All Proceeds and products of the foregoing, and all
insurance of the foregoing and proceeds thereof;
all of the foregoing being herein sometimes referred to as the "Collateral". All
capitalized terms which are used in this Agreement which are defined in the
Uniform Commercial Code of the State of Illinois as in effect from time to time
("UCC") shall have the same meanings herein as such terms are defined in the
UCC, unless this Agreement shall otherwise specifically provide. For purposes of
this Agreement, the term "Receivables" means all rights to the payment of a
monetary obligation, whether or not earned by performance, and whether evidenced
by an Account, Chattel Paper, Instrument, General Intangible, or otherwise.
-3-
Section 3. Obligations Secured. This Agreement is made and given to
secure, and shall secure, the prompt payment and performance when due of (a) any
and all indebtedness, obligations and liabilities of the Debtors, and of any of
them individually, to the Secured Creditors, and to any of them individually,
under or in connection with or evidenced by the Credit Agreement or any other
Loan Document, including, without limitation, all obligations evidenced by the
Notes of the Borrower heretofore or hereafter issued under the Credit Agreement,
all obligations of the Borrower to reimburse the Secured Creditors for the
amount of all drawings on all Letters of Credit issued pursuant to the Credit
Agreement and all other obligations of the Borrower under all Applications
therefor, all obligations of the Debtors, and of any of them individually,
arising under or in connection with or otherwise evidenced by Hedging Agreements
with any one or more of the Secured Creditors, and all obligations of the
Debtors, and of any of them individually, arising under any guaranty issued by
it relating to the foregoing or any part thereof, in each case whether now
existing or hereafter arising (and whether arising before or after the filing of
a petition in bankruptcy and including all interest accrued after the petition
date), due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired and (ii) any and all expenses and charges,
legal or otherwise, suffered or incurred by the Secured Creditors, and any of
them individually, in collecting or enforcing any of such indebtedness,
obligations and liabilities or in realizing on or protecting or preserving any
security therefor, including, without limitation, the lien and security interest
granted hereby (all of the indebtedness, obligations, liabilities, expenses and
charges described above being hereinafter referred to as the "Obligations").
Notwithstanding anything in this Agreement to the contrary, the right of
recovery against any Debtor under this Agreement (other than the Parent and the
Borrower to which this limitation shall not apply) shall not exceed $1.00 less
than the lowest amount which would render such Debtor's obligations under this
Agreement void or voidable under applicable law, including fraudulent conveyance
law.
Section 4. Covenants, Agreements, Representations and Warranties. The
Debtors hereby covenant and agree with, and represent and warrant to, the
Secured Creditors that:
(a) Each Debtor is duly organized and validly existing in
good standing under the laws of the state of its organization. No
Debtor shall change its state of organization without the Agent's prior
written consent. Each Debtor is the sole and lawful owner of its
Collateral, and has full right, power, and authority to enter into this
Agreement and to perform each and all of the matters and things herein
provided for. The execution and delivery of this Agreement, and the
observance and performance of each of the matters and things herein set
forth, will not (i) contravene or constitute (x) a default under any
provision of any Debtor's organizational documents or, (y) a default
under any provision of law or any judgment, injunction, order or decree
binding on any Debtor or any covenant, indenture, or agreement of or
affecting any Debtor or any of its property which, in the case of any
default described in this clause (y), is reasonably likely to have a
Material Adverse Effect, or (ii) result in the creation or imposition
of any lien or encumbrance on any property of any Debtor except for the
lien and security interest granted to the Agent hereunder.
(b) Each Debtor's respective chief executive office is at
the location listed under Column 2 on Schedule A attached hereto
opposite such Debtor's name; and such
-4-
Debtor has no other executive offices or places of business other than
those listed under Column 3 on Schedule A attached hereto opposite such
Debtor's name. The Collateral owned or leased by each Debtor is and
shall remain in such Debtor's possession or control at the locations
listed under Columns 2 and 3 on Schedule A attached hereto opposite
such Debtor's name (collectively for each Debtor, the "Permitted
Collateral Locations"), except for (i) Collateral which in the ordinary
course of such Debtor's business is in transit between Permitted
Collateral Locations, (ii) Collateral aggregating less than $100,000 in
fair market value outstanding at any one time, and (iii) Inventory
temporarily located in warehouses not owned by the Debtor as described
in and pursuant to the conditions of Section 7(d) hereof. If for any
reason any Collateral is at any time kept or located at a location
other than a Permitted Collateral Location, the Agent shall
nevertheless have and retain a lien on and security interest therein.
The Debtors own and shall at all times own all Permitted Collateral
Locations, except to the extent otherwise disclosed under Columns 2 and
3 on Schedule A. No Debtor shall move its chief executive office or
maintain a place of business at a location other than those specified
under Columns 2 or 3 on Schedule A or permit any Collateral to be
located at a location other than a Permitted Collateral Location, in
each case without first providing the Agent at least 30 days' prior
written notice of the Debtor's intent to do so; provided that each
Debtor shall at all times maintain its chief executive office, places
of business, and Permitted Collateral Locations in the United States of
America and, with respect to any new chief executive office or place of
business or location of Collateral, such Debtor shall have taken all
action reasonably requested by the Agent to maintain the lien and
security interest of the Agent in the Collateral at all times fully
perfected and in full force and effect.
(c) Each Debtor's legal name, state of organization and
organizational number (if any) are correctly set forth under Column 1
on Schedule A of this Agreement. No Debtor has transacted business at
any time during the immediately preceding five-year period, and does
not currently transact business, under any other legal names or trade
names other than the prior legal names and trade names (if any) set
forth on Schedule B attached hereto. No Debtor shall change its legal
name or transact business under any other trade name without first
giving 30 days' prior written notice of its intent to do so to the
Agent.
(d) The Collateral and every part thereof is and shall be
free and clear of all security interests, liens (including, without
limitation, mechanics', laborers' and statutory liens), attachments,
levies and encumbrances of every kind, nature and description and
whether voluntary or involuntary, except for the lien and security
interest of the Agent therein and other Liens permitted by Section 8.8
of the Credit Agreement. Each Debtor shall warrant and defend the
Collateral against any material claims and demands of all persons at
any time claiming the same or any interest in the Collateral adverse to
any of the Secured Creditors.
(e) Each Debtor shall promptly pay when due all taxes,
assessments and governmental charges and levies upon or against it or
its Collateral, in accordance with the provisions of the Credit
Agreement.
-5-
(f) Each Debtor agrees it shall not waste or destroy the
Collateral or any part thereof and shall not be negligent in the care
or use of any Collateral. Each Debtor agrees it will not use,
manufacture, sell or distribute any Collateral in violation of any
statute, ordinance or other governmental requirement. Each Debtor will
perform in all material respects its obligations under any contract or
other agreement constituting part of the Collateral, it being
understood and agreed that the Secured Creditors have no responsibility
to perform such obligations.
(g) Subject to Sections 5(d), 6(a), 7(b), 7(c), and 8(c)
hereof and the terms of the Credit Agreement (including, without
limitation, Section 8.10 thereof), each Debtor agrees it will not,
without the Agent's prior written consent, sell, assign, mortgage,
lease, or otherwise dispose of the Collateral or any interest therein.
(h) Each Debtor shall insure its Collateral consisting of
tangible personal property against such risks and hazards as other
companies similarly situated insure against, and including in any event
loss or damage by fire, theft, burglary, pilferage, and loss in
transit, in amounts and under policies containing loss payable clauses
to the Agent as its interest may appear (and, if the Agent requests,
naming the Agent as additional insureds therein) by insurers reasonably
acceptable to the Agent. All premiums on such insurance shall be paid
by the Debtors and the policies of such insurance (or certificates
therefor) delivered to the Agent. All insurance required hereby shall
provide that any loss shall be payable notwithstanding any act or
negligence of the relevant Debtor, shall provide that no cancellation
thereof shall be effective until at least 30 days after receipt by the
relevant Debtor and the Agent of written notice thereof, and shall be
reasonably satisfactory to the Agent in all other respects. In case of
any material loss, damage to or destruction of the Collateral or any
part thereof, the relevant Debtor shall promptly give written notice
thereof to the Agent generally describing the nature and extent of such
damage or destruction. In case of any loss, damage to or destruction of
the Collateral or any part thereof, the relevant Debtor, whether or not
the insurance proceeds, if any, received on account of such damage or
destruction shall be sufficient for that purpose, at such Debtor's cost
and expense, will promptly repair or replace the Collateral so lost,
damaged or destroyed, except to the extent such Collateral is not
necessary to the conduct of such Debtor's business in the ordinary
course. In the event any Debtor shall receive any proceeds of such
insurance, such Debtor shall immediately pay over such proceeds of
insurance to the Agent which will thereafter be applied to the
reduction of the Obligations (whether or not then due) or held as
collateral security therefor, as the Agent may then determine or as
otherwise provided for in the Credit Agreement; provided, however, that
the Agent agrees to release such insurance proceeds to the relevant
Debtor for replacement or restoration of the portion of the Collateral
lost, damaged, or destroyed if, but only if, (i) at the time of release
no Default or Event of Default exists, (ii) written application for
such release is received by the Agent from the relevant Debtor within
30 days of the receipt of such proceeds, and (iii) the Agent has
received evidence reasonably satisfactory to it that the collateral
lost, damaged, or destroyed has been or will be replaced or restored to
its condition immediately prior to the loss, destruction, or other
event giving rise to the payment of such insurance proceeds. Each
Debtor hereby authorizes the Agent, at the Agent's option, to adjust,
compromise and settle any losses
-6-
under any insurance afforded at any time after the occurrence and
during the continuation of any Default or Event of Default, and such
Debtor does hereby irrevocably constitute the Agent, its officers,
agents and attorneys, as such Debtor's attorneys-in-fact, with full
power and authority after the occurrence and during the continuation of
any Default or Event of Default to effect such adjustment, compromise
and/or settlement and to endorse any drafts drawn by an insurer of the
Collateral or any part thereof and to do everything necessary to carry
out such purposes and to receive and receipt for any unearned premiums
due under policies of such insurance. Unless the Agent elects to
adjust, compromise or settle losses as aforesaid, any adjustment,
compromise and/or settlement of any losses under any insurance shall be
made by the relevant Debtor subject to final approval of the Agent
(regardless of whether or not an Event of Default shall have occurred)
in the case of losses exceeding $100,000. All insurance proceeds shall
be subject to the lien and security interest of the Agent hereunder.
UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE
INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE
INSURANCE AT THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN
THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S
INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY
NOT PAY ANY CLAIMS THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE
AGAINST SUCH DEBTOR IN CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY
LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER
PROVIDING THE AGENT WITH EVIDENCE THAT THE DEBTORS HAVE OBTAINED
INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE AGENT PURCHASES
INSURANCE FOR THE COLLATERAL, THE DEBTORS WILL BE RESPONSIBLE FOR THE
COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT
THE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE,
UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE
INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE OBLIGATIONS
SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF
INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON THEIR OWN.
(i) Each Debtor will at all times allow the Secured
Creditors and their respective representatives free access to and right
of inspection of the Collateral at such reasonable times and intervals
as the Agent or any other Secured Creditor may reasonably designate
and, in the absence of any existing Default or Event of Default, with
reasonable prior written notice to the relevant Debtor.
(j) If any Collateral is in the possession or control of
any agents or processors of a Debtor and the Agent so requests, such
Debtor agrees to notify such agents or processors in writing of the
Agent's security interest therein and instruct them to hold all such
Collateral for the Agent's account and subject to the Agent's
instructions. Each Debtor will, upon the request of the Agent,
authorize and instruct all bailees and any other parties, if any, at
any time processing, labeling, packaging, holding, storing, shipping or
transferring all or any part of the Collateral to permit the Secured
Creditors and their respective representatives to examine and inspect
any of the Collateral then in such
-7-
party's possession and to verify from such party's own books and
records any information concerning the Collateral or any part thereof
which the Secured Creditors or their respective representatives may
seek to verify. As to any premises not owned by a Debtor wherein any of
the Collateral is located, if any, such Debtor shall, upon the Agent's
request, cause each party having any right, title or interest in, or
lien on, any of such premises to enter into an agreement (any such
agreement to contain a legal description of such premises) whereby such
party disclaims any right, title and interest in, and lien on, the
Collateral, allows the removal of such Collateral by the Agent or its
agents or representatives, and otherwise is in form and substance
reasonably acceptable to the Agent.
(k) Upon the Agent's request, each Debtor agrees from time
to time to deliver to the Agent such evidence of the existence,
identity and location of its Collateral and of its availability as
collateral security pursuant hereto (including, without limitation,
schedules describing all Receivables created or acquired by such
Debtor, copies of customer invoices or the equivalent and original
shipping or delivery receipts for all merchandise and other goods sold
or leased or services rendered by it, together with such Debtor's
warranty of the genuineness thereof, and reports stating the book value
of its Inventory and Equipment by major category and location), in each
case the Agent may reasonably request. The Agent shall have the right
to verify all or any part of the Collateral in any manner, and through
any medium, which the Agent considers appropriate and reasonable, and
each Debtor agrees to furnish all assistance and information, and
perform any acts, which the Agent may reasonably require in connection
therewith.
(l) Each Debtor will comply in all material respects with
the terms and conditions of any and all leases, easements, right-of-way
agreements and other agreements binding upon such Debtor or affecting
the Collateral, in each case which cover the premises wherein the
Collateral is located, and any orders, ordinances, laws or statutes of
any city, state or other governmental entity, department or agency
having jurisdiction with respect to such premises or the conduct of
business thereon.
(m) Schedule C (or, in the case of trade names, Schedule B)
attached hereto contains a true, complete, and current listing of all
copyrights, copyright applications, trademarks, trademark applications,
tradenames, patents, patent rights or licenses, patent applications and
other intellectual property rights owned by each of the Debtors that
are registered with any governmental authority. The Debtors shall
promptly notify the Agent in writing of any additional intellectual
property rights acquired or arising after the date hereof, and shall
submit to the Agent a supplement to Schedule C to reflect such
additional rights (provided any Debtor's failure to do so shall not
impair the Agent's security interest therein). Each Debtor owns or
possesses rights to use all franchises, licenses, copyrights, copyright
applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights,
copyrights and rights with respect to the foregoing which are required
to conduct its business. No event has occurred which permits, or after
notice or lapse of time or both would permit, the revocation or
termination of any such rights, and the Debtors are not liable to any
person
-8-
for infringement under applicable law with respect to any such rights
as a result of its business operations.
(n) Each Debtor agrees to execute and deliver to the Agent
such further agreements, assignments, instruments and documents, and to
do all such other things, as the Agent may reasonably deem necessary or
appropriate to assure the Agent its lien and security interest
hereunder, including without limitation, (i) executing such financing
statements or other instruments and documents as the Agent may from
time to time reasonably require to comply with the UCC and any other
applicable law, (ii) executing such patent, trademark, and copyright
agreements as the Agent may from time to time reasonably require to
comply with the filing requirements of the United States Patent and
Trademark Office and the United States Copyright Office, (iii)
executing such control agreements with respect to all Deposit Accounts,
Securities Accounts, Letter-of-Credit Rights, and electronic Chattel
Paper, and to use commercially reasonable efforts to cause the relevant
depository institutions, financial intermediaries, and letter of credit
issuers to execute and deliver such control agreements, as the Agent
may from time to time reasonably require, and (iv) after the occurrence
of an Event of Default, assigning to the Agent its rights under any
surety bonds or instruments of which it is the beneficiary and
delivering the same to the Agent. Each Debtor hereby agrees that a
carbon, photographic, or other reproduction of this Agreement or any
such financing statement is sufficient for filing as a financing
statement by the Agent without notice thereof to such Debtor wherever
the Agent in its sole discretion desires to file the same. Each Debtor
hereby authorizes the Agent to file any and all financing statements
covering the Collateral or any part thereof as the Agent may require,
including financing statements describing the Collateral as "all
assets" or "all personal property" or words of like meaning. The Agent
may order such lien searches from time to time against each Debtor and
the Collateral as the Agent reasonably determines are necessary or
advisable to protect the perfection and priority of its security
interest in the Collateral, and the Debtor shall promptly reimburse the
Agent for all reasonable costs and expenses incurred in connection with
such lien searches. In the event for any reason the law of any
jurisdiction other than Illinois becomes or is applicable to the
Collateral or any part thereof, or to any of the Obligations, each
Debtor agrees to execute and deliver all such instruments and documents
and to do all such other things as the Agent deems necessary or
appropriate to preserve, protect and enforce the security interest of
the Agent under the law of such other jurisdiction.
(o) If any Debtor fails to perform any of the covenants and
agreements herein contained, the Agent may, at its option, and upon
prior notice to such Debtor (unless the Agent reasonably determines
that payment or performance without such notice is necessary to
protect, preserve or perfect its interests in the relevant Collateral),
perform the same and in so doing may expend such sums as the Agent
reasonably deems advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment
of any taxes, liens and encumbrances, expenditures made in defending
against any adverse claims, and all other expenditures which the Agent
may be compelled to make by operation of law or which the Agent may
make by agreement or otherwise for the protection of the security
hereof. All such sums and amounts so expended shall be repayable by
such Debtor immediately upon demand, shall constitute
-9-
additional Obligations secured hereunder, and shall bear interest from
the date said amounts are expended at the rate per annum (computed on
the basis of a year of 365 or 366 days, as the case may be, for the
actual number of days elapsed) determined by adding 2% to the Base Rate
from time to time in effect plus the Applicable Margin for Base Rate
Loans under the Revolving Credit, with any change in such rate per
annum as so determined by reason of a change in such Base Rate to be
effective on the date of such change in said Base Rate (such rate per
annum as so determined being hereinafter referred to as the "Default
Rate"). No such performance of any covenant or agreement by the Agent
on behalf of a Debtor, and no such advancement or expenditure therefor,
shall relieve any Debtor of any default under the terms of this
Agreement or in any way obligate any Secured Creditor to take any
further or future action with respect thereto. The Agent in making any
payment hereby authorized may do so according to any ▇▇▇▇, statement or
estimate procured from the appropriate public office or holder of the
claim to be discharged without inquiry into the accuracy of such ▇▇▇▇,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim. The Agent in performing any act
hereunder shall be the sole judge of whether the relevant Debtor is
required to perform the same under the terms of this Agreement. The
Agent is hereby authorized to charge any depository or other account of
any Debtor maintained with any Secured Creditor for the amount of such
sums and amounts so expended.
Section 5. Special Provisions Re: Receivables. (a) As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
Receivable that all warranties of such Debtor set forth in this Agreement are
true and correct with respect to such Receivable; that each Receivable and all
papers and documents relating thereto are genuine and in all respects what they
purport to be; that each Receivable is valid and subsisting; and, except as
disclosed to the Agent in writing, that no surety bond was required of the
Debtor or given by the Debtor in connection with such Receivable or the
contracts or purchase orders out of which the same arose.
(b) To the extent any Receivable or other item of Collateral is
evidenced by an Instrument or tangible Chattel Paper, each Debtor shall cause
such Instrument or tangible Chattel Paper to be pledged and delivered to the
Agent; provided, however, that, prior to the existence of a Default or Event of
Default and thereafter until otherwise required by the Agent, a Debtor shall not
be required to deliver any such Instrument or tangible Chattel Paper if and only
so long as the aggregate unpaid principal balance of all such Instruments and
tangible Chattel Paper held by the Debtors and not delivered to the Agent under
the Collateral Documents is less than $1,000,000 at any one time outstanding.
Unless delivered to the Agent or its agent, all tangible Chattel Paper and
Instruments shall contain a legend acceptable to the Agent indicating that such
Chattel Paper or Instrument is subject to the security interest of the Agent
contemplated by this Agreement.
(c) If any Receivable arises out of a contract with the United States
of America or any of its departments, agencies or instrumentalities, the
relevant Debtor agrees to, at the request of the Agent, execute whatever
instruments and documents are required by the Agent in order that such
Receivable shall be assigned to the Agent and that proper notice of such
assignment shall be given under the federal Assignment of Claims Act (or any
successor statute) or any similar statute relating to the assignment of such
Receivables.
-10-
(d) Unless and until an Event of Default occurs, any merchandise or
other goods which are returned by a customer or account debtor or otherwise
recovered may be resold by a Debtor in the ordinary course of its business as
presently conducted in accordance with Section 7(b) hereof; and, during the
existence of any Event of Default, such merchandise and other goods shall be set
aside at the request of the Agent and held by the relevant Debtor as trustee for
the Secured Creditors and shall remain part of the Secured Creditors'
Collateral. Unless and until an Event of Default occurs, the Debtors may settle
and adjust disputes and claims with its customers and account debtors, handle
returns and recoveries, and grant discounts, credits, and allowances in the
ordinary course of its business as presently conducted for amounts and on terms
which the relevant Debtor in good faith considers advisable; and, during the
existence of any Event of Default, at the Agent's request, the Debtors shall
notify the Agent promptly of all returns and recoveries and, on the Agent's
request, deliver any such merchandise or other goods to the Agent. During the
existence of any Event of Default, at the Agent's request, the Debtors shall
also notify the Agent promptly of all material disputes and claims and settle or
adjust them at no expense to the Agent, but no discount, credit, or allowance
other than on normal trade terms in the ordinary course of business as presently
conducted shall be granted to any customer or account debtor and no returns of
merchandise or other goods shall be accepted by any Debtor without the Agent's
consent. The Agent may, at all times during the existence of any Event of
Default, settle or adjust disputes and claims directly with customers or account
debtors for amounts and upon terms which the Agent reasonably considers
advisable.
Section 6. Collection of Receivables. (a) Except as otherwise
provided in this Agreement, each Debtor shall make collection of all of its
Receivables and may use the same to carry on its business in accordance with
ordinary and customary business practice and otherwise subject to the terms
hereof.
(b) Upon the occurrence of any Default or Event of Default, whether or
not the Agent has exercised any or all of its rights under other provisions of
this Section 6, in the event the Agent reasonably requests any Debtor to do so:
(i) all Instruments and Chattel Paper at any time
constituting part of the Receivables (including any postdated checks)
shall, upon receipt by such Debtor, be immediately endorsed to and
deposited with Agent; and/or
(ii) such Debtor shall instruct all customers and account
debtors to remit all payments in respect of Receivables or any other
Collateral to a lockbox or lockboxes under the sole custody and control
of the Agent and which are maintained at one or more post offices
selected by the Agent.
(c) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Agent has exercised any or all of
its rights under the other provisions of this Section 6, the Agent or its
designee may notify the relevant Debtor's customers and account debtors at any
time that Receivables have been assigned to the Agent or of the Agent's security
interest therein, and either in its own name, or such Debtor's name, or both,
demand, collect (including, without limitation, through a lockbox analogous to
that described in Section 6(b)(ii) hereof), receive, receipt for, ▇▇▇ for,
compound and give acquittance for any or
-11-
all amounts due or to become due on Receivables, and in the Agent's discretion
file any claim or take any other action or proceeding which the Agent may
reasonably deem necessary or appropriate to protect and realize upon the
security interest of the Agent in the Receivables or any other Collateral.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Sections
6(b) or 6(c) hereof may be handled and administered by the Agent in and through
a remittance account or accounts maintained at the Agent or by the Agent at a
commercial bank or banks selected by the Agent (collectively the "Depositary
Banks" and individually a "Depositary Bank"), and each Debtor acknowledges that
the maintenance of such remittance accounts by the Agent is solely for the
Agent's convenience and that the Debtors do not have any right, title or
interest in such remittance accounts or any amounts at any time standing to the
credit thereof. The Agent may, after the occurrence and during the continuation
of any Default or Event of Default, apply all or any part of any proceeds of
Receivables or other Collateral received by it from any source to the payment of
the Obligations (whether or not then due and payable), such applications to be
made in such amounts, in such manner and order and at such intervals as the
Agent may from time to time in its discretion determine, but not less often than
once each week. The Agent need not apply or give credit for any item included in
proceeds of Receivables or other Collateral until the Depositary Bank has
received final payment therefor at its office in cash or final solvent credits
current at the site of deposit acceptable to the Agent and the Depositary Bank
as such. However, if the Agent does permit credit to be given for any item prior
to a Depositary Bank receiving final payment therefor and such Depositary Bank
fails to receive such final payment or an item is charged back to the Agent or
any Depositary Bank for any reason, the Agent may at its election in either
instance charge the amount of such item back against any such remittance
accounts or any depository account of any Debtor maintained with any Secured
Creditor, together with interest thereon at the Default Rate. Concurrently with
each transmission of any proceeds of Receivables or other Collateral to any such
remittance account, upon the Agent's request, the relevant Debtor shall furnish
the Agent with a report in such form as Agent shall reasonably require
identifying the particular Receivable or such other Collateral from which the
same arises or relates. Unless and until a Default or an Event of Default shall
have occurred and be continuing, the Agent will release proceeds of Collateral
which the Agent has not applied to the Obligations as provided above from the
remittance account from time to time promptly after receipt thereof. Each Debtor
hereby indemnifies the Secured Creditors from and against all liabilities,
damages, losses, actions, claims, judgments, and all reasonable costs, expenses,
charges and attorneys' fees suffered or incurred by any Secured Creditor because
of the maintenance of the foregoing arrangements; provided, however, that no
Debtor shall be required to indemnify any Secured Creditor for any of the
foregoing to the extent they arise solely from the gross negligence or willful
misconduct of the person seeking to be indemnified. The Secured Creditors shall
have no liability or responsibility to any Debtor for the Agent or any other
Depositary Bank accepting any check, draft or other order for payment of money
bearing the legend "payment in full" or words of similar import or any other
restrictive legend or endorsement whatsoever or be responsible for determining
the correctness of any remittance.
Section 7. Special Provisions Re: Inventory and Equipment. (a) Each
Debtor shall at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable
-12-
condition and keep and preserve its Equipment in good repair, working order and
condition, ordinary wear and tear excepted, and, without limiting the foregoing,
make all necessary and proper repairs, replacements and additions to its
Equipment so that the efficiency thereof shall be fully preserved and
maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume,
sell and lease the Inventory in the ordinary course of its business, provided
that any transfer or sale of Inventory in satisfaction, partial or complete, of
a debt owing by such Debtor shall be made for fair market value.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell Equipment
to the extent permitted by Section 8.10 of the Credit Agreement.
(d) As of the time any Inventory or Equipment of a Debtor becomes
subject to the security interest provided for hereby and at all times
thereafter, such Debtor shall be deemed to have warranted as to any and all of
such Inventory and Equipment that all warranties of such Debtor set forth in
this Agreement are true and correct with respect to such Inventory and
Equipment; that all of such Inventory and Equipment is located at a location set
forth pursuant to Section 3(b) hereof, other than any Inventory with an
aggregate fair market value not to exceed $2,000,000 at any time which is
temporarily located in warehouses not owned by a Debtor. Each Debtor warrants
and agrees that none of its Inventory is or will be consigned to any other
person or entity without the Agent's prior written consent.
(e) Upon the Agent's request, each Debtor shall at its own cost and
expense cause the lien of the Agent in and to any portion of its Collateral
subject to a certificate of title law to be duly noted on such certificate of
title or to be otherwise filed in such manner as is prescribed by law in order
to perfect such lien and will cause all such certificates of title and evidences
of lien to be deposited with the Agent.
(f) Except for Equipment from time to time located on the real estate
described on Schedule D attached hereto or as otherwise hereafter disclosed to
the Secured Creditors in writing, none of the Equipment is or will be attached
to real estate in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the relevant Debtor to the
Agent.
Section 8. Special Provisions Re: Investment Property and Deposits. (a)
Unless and until an Event of Default has occurred and is continuing and
thereafter until notified to the contrary by the Agent pursuant to Section 10(d)
hereof:
(i) each Debtor shall be entitled to exercise all voting
and/or consensual powers pertaining to its Investment Property or any
part thereof, for all purposes not inconsistent with the terms of this
Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
-13-
(ii) each Debtor shall be entitled to receive and retain all
cash dividends paid upon or in respect of its Investment Property.
(b) All Investment Property maintained by each Debtor (including all
securities, certificated or uncertificated, securities accounts, and commodity
accounts) as of the date hereof is listed and identified on Schedule E attached
hereto and made a part hereof. Each Debtor shall promptly notify the Agent of
any other Investment Property acquired or maintained by such Debtor after the
date hereof, and shall submit to the Agent a supplement to Schedule E to reflect
such additional rights (provided any Debtor's failure to do so shall not impair
the Agent's security interest therein). Certificates for all certificated
securities now or at any time constituting Investment Property and part of the
Collateral hereunder shall be promptly delivered by the relevant Debtor to the
Agent duly endorsed in blank for transfer or accompanied by an appropriate
assignment or assignments or an appropriate undated stock power or powers, in
every case sufficient to transfer title thereto, including, without limitation,
all stock received in respect of a stock dividend or resulting from a split-up,
revision or reclassification of the Investment Property or any part thereof or
received in addition to, in substitution of or in exchange for the Investment
Property or any part thereof as a result of a merger, consolidation or
otherwise. With respect to any uncertificated securities or any Investment
Property held by a securities intermediary, commodity intermediary, or other
financial intermediary of any kind, at the Agent's request, the relevant Debtor
shall execute and deliver, and shall cause any such issuer or intermediary to
execute and deliver, an agreement among such Debtor, the Agent, and such issuer
or intermediary in form and substance satisfactory to the Agent which provides,
among other things, for the issuer's or intermediary's agreement that it will
comply with such entitlement orders, and apply any value distributed on account
of any Investment Property, as directed by the Agent without further consent by
such Debtor. The Agent may, at any time after the occurrence and during the
continuation of an Event of Default at any time when the Obligations are, or
have been declared to be, due and payable in full, cause to be transferred into
its name or the name of its nominee or nominees any and all of the Investment
Property hereunder.
(c) Unless and until a Default or an Event of Default has occurred and
is continuing, the Debtors may sell or otherwise dispose of any of its
Investment Property to the extent permitted by the Credit Agreement, provided
that, except to the extent permitted by the Credit Agreement, no Debtor shall
sell or otherwise dispose of any capital stock or other equity interest in any
direct or indirect Subsidiary without the prior written consent of the Agent.
After the occurrence and during the continuation of any Default or Event of
Default, no Debtor shall sell all or any part of the Investment Property without
the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
its Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
-14-
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement in favor of the Agent, the terms of such separate security agreement
shall govern and control unless otherwise agreed to in writing by the Agent.
(f) All Deposit Accounts maintained by each Debtor on the date hereof
are listed and identified (by account number and depository institution) on
Schedule E attached hereto and made a part hereof. Each Debtor shall promptly
notify the Agent of any other Deposit Account opened or maintained by such
Debtor after the date hereof, and shall submit to the Agent a supplement to
Schedule E to reflect such additional accounts (provided such Debtor's failure
to do so shall not impair the Agent's security interest therein). With respect
to any Deposit Account maintained by a depository institution other than the
Agent, and as a condition to the establishment and maintenance of any such
Deposit Account, except as otherwise permitted by the Credit Agreement, such
Debtor, the depository institution, and the Agent shall execute and deliver an
account control agreement in form and substance satisfactory to the Agent which
provides, among other things, for the depository institution's agreement that it
will comply with instructions originated by the Agent directing the disposition
of the funds in the Deposit Account without further consent by such Debtor.
Section 9. Power of Attorney. In addition to any other powers of
attorney contained herein, each Debtor hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as such Debtor's
attorney-in-fact, with full power during the existence of any Default or Event
of Default to sign such Debtor's name on verifications of Receivables and other
Collateral; to send requests for verification of Collateral to such Debtor's
customers, account debtors and other obligors; to endorse such Debtor's name on
any checks, notes, acceptances, money orders, drafts and any other forms of
payment or security that may come into the Agent's possession; to endorse the
Collateral in blank or to the order of the Agent or its nominee; to sign such
Debtor's name on any invoice or ▇▇▇▇ of lading relating to any Collateral, on
claims to enforce collection of any Collateral, on notices to and drafts against
customers and account debtors and other obligors, on schedules and assignments
of Collateral, on notices of assignment and on public records; to notify the
post office authorities to change the address for delivery of such Debtor's mail
to an address designated by the Agent; to receive, open and dispose of all mail
addressed to such Debtor; and to do all things necessary to carry out this
Agreement. Each Debtor hereby ratifies and approves all acts of any such
attorney and agrees that neither the Agent nor any such attorney will be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law other than such person's gross negligence or willful misconduct. The Agent
may file one or more financing statements and/or effective financing statements
disclosing its security interest in any or all of the Collateral without any
Debtor's signature appearing thereon, and each Debtor also hereby grants the
Agent a power of attorney to execute any such financing statements and/or
effective financing statements, or amendments and supplements to financing
statements and/or effective financing statements to perfect and preserve the
security interests granted or purported to be granted hereby, on behalf of such
Debtor without notice thereof to any Debtor. The foregoing powers of attorney,
being coupled with an interest, are irrevocable until the Obligations have been
fully paid and satisfied and the commitments of the Lenders to extend credit to
or for the account of the Borrower under the Credit Agreement have expired or
otherwise terminated; provided, however, that the Agent agrees, as a covenant to
the
-15-
Debtors, not to exercise the powers of attorney set forth in this Section unless
an Event of Default exists.
Section 10. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC in all
relevant jurisdictions, and further the Agent may, without demand and, to the
extent permitted by applicable law, without advertisement, notice, hearing or
process of law, all of which each Debtor hereby waives to the extent permitted
by applicable law, at any time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, at any securities exchange or
broker's board or at any Secured Creditor's office or elsewhere, for cash, upon
credit or otherwise, at such prices and upon such terms as the Agent deems
advisable, in its sole discretion. Upon the occurrence and during the
continuation of any Event of Default, in addition to any other right or remedies
set forth herein or by applicable law, the Agent may by written demand direct
any securities intermediary, commodities intermediary, or other financial
intermediary at any time holding any Investment Property, or any issuer thereof,
to deliver such Collateral, or any part thereof, to the Agent and/or liquidate
such Collateral, or any part thereof, and deliver the proceeds thereof to the
Agent. In the exercise of any such remedies, the Agent may sell the Collateral
as a unit even though the sales price thereof may be in excess of the amount
remaining unpaid on the Obligations. Also, if less than all the Collateral is
sold, the Agent shall have no duty to marshal or apportion the part of the
Collateral so sold as between the Debtors, or any of them, but may sell and
deliver any or all of the Collateral without regard to which of the Debtors are
the owners thereof. In addition to all other sums due any Secured Creditor
hereunder, each Debtor shall pay the Secured Creditors all costs and expenses
incurred by the Secured Creditors, including reasonable attorneys' fees and
court costs, in obtaining, liquidating or enforcing payment of Collateral or the
Obligations or in the prosecution or defense of any action or proceeding by or
against any Secured Creditor or any Debtor concerning any matter arising out of
or connected with this Agreement or the Collateral or the Obligations,
including, without limitation, any of the foregoing arising in, arising under or
related to a case under the United States Bankruptcy Code (or any successor
statute). Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Debtors in accordance
with Section 15(b) hereof at least 10 days before the time of sale or other
event giving rise to the requirement of such notice; provided, however, no
notification need be given to a Debtor if such Debtor has signed, after an Event
of Default hereunder has occurred, a statement renouncing any right to
notification of sale or other intended disposition. The Agent shall not be
obligated to make any sale or other disposition of the Collateral regardless of
notice having been given. Any Secured Creditor may be the purchaser at any such
sale. Each Debtor hereby waives all of its rights of redemption from any such
sale to the extent permitted by applicable law. The Agent may postpone or cause
the postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may, without
further notice, be made at the time and place to which the sale was postponed or
the Agent may further postpone such sale by announcement made at such time and
place. The Agent has no obligation to prepare the Collateral for sale. The Agent
may sell or
-16-
otherwise dispose of the Collateral without giving any warranties as to the
Collateral or any part thereof, including disclaimers of any warranties of title
or the like, and each Debtor acknowledges and agrees that the absence of such
warranties shall not render the disposition commercially unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent shall have
the right, in addition to all other rights provided herein or by law, to take
physical possession of any and all of the Collateral and anything found therein,
the right for that purpose to enter without legal process any premises where the
Collateral may be found (provided such entry be done lawfully), and the right to
maintain such possession on the relevant Debtor's premises (each Debtor hereby
agreeing, to the extent it may lawfully do so, to lease such premises without
cost or expense to the Agent or its designee if the Agent so requests) or to
remove the Collateral or any part thereof to such other places as the Agent may
desire. Upon the occurrence and during the continuation of any Event of Default
hereunder, the Agent shall have the right to exercise any and all rights with
respect to all Deposit Accounts of each Debtor, including, without limitation,
the right to direct the disposition of the funds in each Deposit Account and to
collect, withdraw and receive all amounts due or to become due or payable under
each such Deposit Account. Upon the occurrence and during the continuation of
any Event of Default hereunder, each Debtor shall, upon the Agent's demand,
promptly assemble the Collateral and make it available to the Agent at a place
reasonably designated by the Agent. If the Agent exercises its right to take
possession of the Collateral, each Debtor shall also at its expense perform any
and all other steps requested by the Agent to preserve and protect the security
interest hereby granted in the Collateral, such as placing and maintaining signs
indicating the security interest of the Agent, appointing overseers for the
Collateral and maintaining Collateral records.
(d) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default, all rights of a Debtor to
exercise the voting and/or consensual powers which it is entitled to exercise
pursuant to Section 8(a)(i) hereof and/or to receive and retain the
distributions which it is entitled to receive and retain pursuant to Section
8(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become
vested in the Agent, which, in addition to all other rights provided herein or
by law, shall then be entitled solely and exclusively to exercise all voting and
other consensual powers pertaining to the Investment Property (including,
without limitation, the right to deliver notice of control with respect to any
Investment Property held in a securities account or commodity account and
deliver all entitlement orders with respect thereto) and/or to receive and
retain the distributions which such Debtor would otherwise have been authorized
to retain pursuant to Section 8(a)(ii) hereof and shall then be entitled solely
and exclusively to exercise any and all rights of conversion, exchange or
subscription or any other rights, privileges or options pertaining to any
Investment Property as if the Agent were the absolute owner thereof including,
without limitation, the rights to exchange, at its discretion, any and all of
the Investment Property upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the respective issuer thereof or upon
the exercise by or on behalf of any such issuer or the Agent of any right,
privilege or option pertaining to any Investment Property and, in connection
therewith, to deposit and deliver any and all of the Investment Property with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Agent may determine.
-17-
In the event the Agent in good faith believes any of the Collateral constitutes
restricted securities within the meaning of any applicable securities laws, any
disposition thereof in compliance with such laws shall not render the
disposition commercially unreasonable.
(e) Without in any way limiting the foregoing, each Debtor hereby
grants to the Secured Creditors a royalty-free irrevocable license and right to
use all of such Debtor's patents, patent applications, patent licenses,
trademarks, trademark applications, trademark licenses, trade names, and similar
intangibles in connection with any foreclosure or other realization by the Agent
or the Secured Creditors on all or any part of the Collateral to the extent
permitted by law. The license and right granted the Secured Creditors hereby
shall be without any royalty or fee or charge whatsoever.
(f) The powers conferred upon the Secured Creditors hereunder are
solely to protect their interest in the Collateral and shall not impose on them
any duty to exercise such powers. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession or control if such Collateral is accorded treatment substantially
equivalent to that which the Agent accords its own property, consisting of
similar type assets, it being understood, however, that the Agent shall have no
responsibility for ascertaining or taking any action with respect to calls,
conversions, exchanges, maturities, tenders, or other matters relating to any
such Collateral, whether or not the Agent has or is deemed to have knowledge of
such matters. This Agreement constitutes an assignment of rights only and not an
assignment of any duties or obligations of the Debtors, or any of them, in any
way related to the Collateral, and the Agent shall have no duty or obligation to
discharge any such duty or obligation. The Agent shall have no responsibility
for taking any necessary steps to preserve rights against any parties with
respect to any Collateral or initiating any action to protect the Collateral
against the possibility of a decline in market value. Neither any Secured
Creditor nor any party acting as attorney for any Secured Creditor shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law other than their gross negligence or willful misconduct.
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Debtor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. Neither any Secured Creditor, nor any party acting
as attorney for any Secured Creditor, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct. The rights and remedies of the
Secured Creditors under this Agreement shall be cumulative and not exclusive of
any other right or remedy which any Secured Creditor may have. For purposes of
this Agreement, an Event of Default shall be construed as continuing after its
occurrence until the same is waived in writing by the Agent.
Section 11. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Debtors shall remain liable to the Secured Creditors for
any deficiency.
-18-
Any surplus remaining after the full payment and satisfaction of the Obligations
shall be returned to the Borrower, as agent for the Debtors, or to whomsoever
the Agent reasonably determines is lawfully entitled thereto.
Section 12. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and the commitments of the Lenders to extend credit to or for the
account of the Borrower under the Credit Agreement have expired or otherwise
terminated. Upon such termination of this Agreement, the Agent shall, upon the
request and at the expense of the Debtors, forthwith release its security
interest hereunder.
Section 13. The Agent. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges, and
immunities provided in the Credit Agreement, all of which provisions of said
Credit Agreement (including, without limitation, Section 11 thereof) are
incorporated by reference herein with the same force and effect as if set forth
herein in their entirety. The Agent hereby disclaims any representation or
warranty to the other Secured Creditors or any other holders of the Obligations
concerning the perfection of the liens and security interests granted hereunder
or in the value of any of the Collateral.
Section 14. Primary Security; Obligations Absolute. The lien and
security interest herein created and provided for stand as direct and primary
security for the Obligations of the Borrower as well as for any of the other
Obligations secured hereby. No application of any sums received by the Secured
Creditors in respect of the Collateral or any disposition thereof to the
reduction of the Obligations or any part thereof shall in any manner entitle any
Debtor to any right, title or interest in or to the Obligations or any
collateral or security therefor, whether by subrogation or otherwise, unless and
until all Obligations have been fully paid and satisfied and all agreements of
the Secured Creditors to extend credit to or for the account of each Debtor have
expired or otherwise have been terminated. Each Debtor acknowledges that the
lien and security interest hereby created and provided are absolute and
unconditional and shall not in any manner be affected or impaired by any acts of
omissions whatsoever of any Secured Creditor or any other holder of any
Obligations, and without limiting the generality of the foregoing, the lien and
security interest hereof shall not be impaired by any acceptance by the Secured
Creditors or any other holder of any Obligations of any other security for or
guarantors upon any of the Obligations or by any failure, neglect or omission on
the part of any Secured Creditor or any other holder of any Obligations to
realize upon or protect any of the Obligations or any collateral or security
therefor. The lien and security interest hereof shall not in any manner be
impaired or affected by (and the Secured Creditors, without notice to anyone,
are hereby authorized to make from time to time) any sale, pledge, surrender,
compromise, settlement, release, renewal, extension, indulgence, alteration,
substitution, exchange, change in, modification or disposition of any of the
Obligations or of any collateral or security therefor, or of any guaranty
thereof, or of any instrument or agreement setting forth the terms and
conditions pertaining to any of the foregoing. The Secured Creditors may at
their discretion at any time grant credit to any Debtor without notice to the
other Debtors in such amounts and on such terms as the Secured Creditors may
elect (all of such to constitute additional Obligations hereby secured) without
in any manner impairing the lien and security interest created and provided for
herein. In order to realize hereon and to exercise the rights granted the
Secured Creditors hereunder and under applicable law,
-19-
there shall be no obligation on the part of any Secured Creditor or any other
holder of any Obligations at any time to first resort for payment to any one or
more Debtors or to any guaranty of the Obligations or any portion thereof or to
resort to any other collateral, security, property, liens or any other rights or
remedies whatsoever, and the Secured Creditors shall have the right to enforce
this Agreement against any Debtor or any of its Collateral irrespective of
whether or not other proceedings or steps seeking resort to or realization upon
or from any of the foregoing are pending.
Section 15. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and security
interest in the Collateral and shall be binding upon each Debtor, its successors
and assigns and shall inure, together with the rights and remedies of the
Secured Creditors hereunder, to the benefit of the Secured Creditors and their
successors and permitted assigns; provided, however, that no Debtor may assign
its rights or delegate its duties hereunder without the Agent's prior written
consent. Without limiting the generality of the foregoing, and subject to the
provisions of the Credit Agreement, any Lender may assign or otherwise transfer
any indebtedness held by it secured by this Agreement to any other person, and
such other person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise.
(b) All notices and other communications provided for hereunder shall
be given in the manner provided in and otherwise in accordance with the terms of
Section 13.8 of the Credit Agreement, provided that any notice to a Debtor other
than the Borrower shall be sent in care of the Borrower in the same manner as
notices to the Borrower under the Credit Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure or other realization upon any
Collateral subject to this Agreement or for the execution of any trust or power
hereof or for the appointment of a receiver, or for the enforcement of any other
remedy under or upon this Agreement; it being understood and intended that no
one or more of the Lenders shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien and security interest of this Agreement by
its or their action or to enforce any right hereunder, and that all proceedings
at law or in equity shall be instituted, had and maintained by the Agent in the
manner herein provided for the benefit of the Secured Creditors.
(d) In the event and to the extent that any provision hereof shall be
deemed to be invalid or unenforceable by reason of the operation of any law or
by reason of the interpretation placed thereon by any court, this Agreement
shall to such extent be construed as not containing such provision, but only as
to such locations where such law or interpretation is operative, and the
invalidity or unenforceability of such provision shall not affect the validity
of any remaining provisions hereof, and any and all other provisions hereof
which are otherwise lawful and valid shall remain in full force and effect.
Without limiting the generality of the foregoing, in the event that this
Agreement shall be deemed to be invalid or otherwise unenforceable with respect
to any Debtor, such invalidity or unenforceability shall not affect the validity
of this Agreement with respect to the other Debtors.
-20-
(e) In the event the Secured Creditors shall at any time in their
discretion permit a substitution of Debtors hereunder or a party shall wish to
become a Debtor hereunder, such substituted or additional Debtor shall, upon
executing an agreement in the form attached hereto as Schedule F, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Debtor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Debtor being replaced. Any such agreement shall
contain information as to such Debtor necessary to update Schedule A, B, C, D,
and E hereto with respect to it. No such substitution shall be effective absent
the written consent of the Agent nor shall it in any manner affect the
obligations of the other Debtors hereunder.
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument. Each
Debtor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
(g) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(h) Each Debtor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in the City of Chicago, Illinois, for purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Debtor irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient form. EACH DEBTOR AND, BY ACCEPTING THE BENEFITS OF THIS AGREEMENT,
EACH SECURED CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
(i) Termination; Release. At such time as the Commitments are
terminated, all Letters of Credit have expired or have been cash collateralized
and the principal and interest on the Notes and all other Obligations of the
Parent, the Borrower or any Subsidiary under the Credit Agreement and the other
Loan Documents, including without limitation all Hedging Liability, shall have
been paid in full, this Agreement shall terminate (except for provisions that by
their terms survive such termination). Upon such termination, the Agent, at the
expense of the Debtors, shall take such actions as are appropriate and
reasonably requested by the Debtors in connection therewith to evidence such
termination. Upon any disposition of Collateral by any Debtor permitted under
the Credit Agreement, such Collateral shall be sold or otherwise disposed of
free and clear of the Lien created by the Collateral Documents and the
obligations of this Agreement and the Agent, at the expense of the Debtors,
shall take such actions as are appropriate and reasonably requested by the
Debtors in connection therewith.
-21-
[SIGNATURE PAGES TO FOLLOW]
-22-
IN WITNESS WHEREOF, each Debtor has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
"DEBTORS"
FLORISTS' TRANSWORLD DELIVERY, INC.
By
Name
--------------------------------------------------
Title
-------------------------------------------------
IOS BRANDS CORPORATION
By
Name
--------------------------------------------------
Title
-------------------------------------------------
VALUE NETWORK SERVICE, INC.
By
Name
--------------------------------------------------
Title
-------------------------------------------------
FTD HOLDINGS, INCORPORATED
By
Name
--------------------------------------------------
Title
-------------------------------------------------
By
Name
--------------------------------------------------
Title
-------------------------------------------------
FTD INTERNATIONAL CORPORATION
By
Name
--------------------------------------------------
Title
-------------------------------------------------
-23-
RENAISSANCE GREETING CARDS, INC.
By
Name
--------------------------------------------------
Title
-------------------------------------------------
Accepted and agreed to in Chicago, Illinois, as of the date first above
written.
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as Agent
By
Name
--------------------------------------------------
Title
-------------------------------------------------
-24-
SCHEDULE A TO SECURITY AGREEMENT
LOCATIONS
ADDITIONAL PLACES OF
BUSINESS AND
NAME OF DEBTOR CHIEF EXECUTIVE OFFICE COLLATERAL LOCATIONS
-------------- ---------------------- --------------------
IOS Brands Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ None
(Delaware 2328319) ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Florists' Transworld ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ None
Delivery, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(Michigan 195-978)
Value Network Service, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ None
(Delaware 3070831) ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FTD Holdings, Incorporated ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
(▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇) ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FTD International Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ None
(Delaware 3160529) ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Renaissance Greeting Cards, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 10 Renaissance Way
Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Maine 19930532D)
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE B TO
SECURITY AGREEMENT
OTHER NAMES
A. PRIOR LEGAL NAMES
Name of Debtor
IOS Brands Corporation FTD Corporation
Florists' Transworld Delivery, Inc. No change in the last five years
Value Network Service, Inc. No change in the last five years
FTD Holdings, Incorporated No change in the last five years
FTD International Corporation No change in the last five years
Renaissance Greeting Cards, Inc. No change in last five years
B. TRADE NAMES
[Please see Schedule C for additional Trade Names, if any]
IOS Brands Corporation IOS
Florists' Transworld Delivery, Inc. FTD
Value Network Service, Inc. VNS
FTD Holdings, Incorporated None
FTD International Corporation None
Renaissance Greeting Cards, Inc. Renaissance
-2-
SCHEDULE C TO
SECURITY AGREEMENT
INTELLECTUAL PROPERTY RIGHTS
NAME OF DEBTOR
IOS Brands Corporation See attached.
Florists' Transworld Delivery, See attached.
Inc.
Value Network Service, Inc. See attached.
FTD Holdings, Incorporated See attached.
FTD International Corporation See attached.
Renaissance Greeting Cards, Inc. See attached.
-3-
SCHEDULE D TO
SECURITY AGREEMENT
REAL ESTATE LEGAL DESCRIPTIONS
Debtor
Florists' Transworld Delivery, Inc.
Legal Description
File No.: CC201388
LOTS 1 AND 2 IN ESCHEM SUBDIVISION OF LOT 7 IN THE WOODCREEK BUSINESS PARK,
BEING A SUBDIVISION OF LOT 7 IN WOODCREEK BUSINESS PARK RESUBDIVISION OF LOTS 1
THROUGH 14 AND VACATED EDGEBROOK PLACE, ALL IN WOODCREEK BUSINESS PARK, BEING A
SUBDIVISION OF PARTS OF SECTIONS 25 AND 36, TOWNSHIP 39 NORTH, RANGE 10, EAST OF
THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF SAID ESCHEM SUBDIVISION
OF LOT 7 IN THE WOODCREEK BUSINESS PARK, RECORDED OCTOBER 22, 1985 AS DOCUMENT
R85-91342 AND CERTIFICATE OF CORRECTION RECORDED DECEMBER 2, 1985 AS DOCUMENT
R85-105018, IN DUPAGE COUNTY,
ILLINOIS.
-4-
SCHEDULE E TO
SECURITY AGREEMENT
INVESTMENT PROPERTY AND DEPOSITS
A. INVESTMENT PROPERTY
Name of Debtor
IOS Brands Corporation None
Florists' Transworld Delivery, Inc. Holds a 33% interest in Interflora, Inc.
Holds Banc One account #51-152961 which owns:
10 shares of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc
10 shares of 1 800 ▇▇▇▇▇▇▇.▇▇▇
10 shares of Peapod Inc.
10 shares of Sun Cut Floral Network Inc.
10 shares of USA Floral Prods Inc.
Value Network Service, Inc. None
FTD Holdings, Incorporated None
FTD International Corporation None
Renaissance Greeting Cards, Inc. None
B. DEPOSITS
Name of Debtor
IOS Brands Corporation None
Florists' Transworld Delivery, Inc. Michigan National Bank #6800002799
Michigan National Bank #6800002807
▇▇▇▇▇▇ Insight Funds #25611
Bank One #▇▇▇▇▇▇▇
Bank One #0000180143
Bank One #0000415306
Firstar Bank #1005036817
Firstar Bank #3500720739
Firstar Bank #3500720663
Bank of Montreal #▇▇▇▇▇▇▇▇▇▇
Toronto Dominion #2930514801
-5-
Value Network Service, Inc. Bank One #▇▇▇▇▇▇▇
Key Bank #359681037628
Key Bank #359681037636
Key Bank #440993502184
Key Bank #440993502192
Michigan National Bank #6856295552
Bank of Montreal #▇▇▇▇▇▇▇▇▇▇▇
FTD Holdings, Incorporated None
FTD International Corporation None
Renaissance Greeting Cards, Inc. Fleet Bank #▇▇▇▇▇▇▇▇▇▇, #9439937546, #9354137128
First National Bank of Bar Harbor #▇▇▇▇▇▇▇▇
-6-
SCHEDULE F
ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT
THIS ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT (this "Agreement")
dated as of this _____ day of _____________, 20__ from [NEW DEBTOR], a
_______________ CORPORATION/LIMITED LIABILITY COMPANY/PARTNERSHIP (the "New
Debtor"), to ▇▇▇▇▇▇ Trust and Savings Bank ("HTSB"), as agent for the Secured
Creditors (defined in the Security Agreement hereinafter identified and defined)
(HTSB acting as such agent and any successor or successors to HTSB in such
capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. Florists' Transworld Delivery, Inc. (the "Borrower") and certain
other parties have executed and delivered to the Agent that certain Security
Agreement dated as of September 27, 2001 (such Security Agreement, as the same
may from time to time be amended, modified, or restated, including supplements
thereto which add additional parties as Debtors thereunder, being hereinafter
referred to as the "Security Agreement"), pursuant to which such parties (the
"Existing Debtors") have granted to the Agent for the benefit of the Secured
Creditors a lien on and security interest in each such Existing Debtor's
Collateral (as such term is defined in the Security Agreement) to secure the
Obligations (as such term is defined in the Security Agreement).
B. The Borrower provides the New Debtor with substantial financial,
managerial, administrative, and technical support and the New Debtor will
directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Secured Creditors to the
Borrower.
NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances
made or to be made, or credit accommodations given or to be given, to the
Borrower by the Secured Creditors from time to time, the New Debtor hereby
agrees as follows:
1. The New Debtor acknowledges and agrees that it shall become a
"Debtor" party to the Security Agreement effective upon the date the New
Debtor's execution of this Agreement and the delivery of this Agreement to the
Agent, and that upon such execution and delivery, all references in the Security
Agreement to the terms "Debtor" or "Debtors" shall be deemed to include the New
Debtor. Without limiting the generality of the foregoing, the New Debtor hereby
repeats and reaffirms all grants (including the grant of a lien and security
interest), covenants, agreements, representations and warranties contained in
the Security Agreement as amended hereby, each and all of which are and shall
remain applicable to the Collateral from time to time owned by the New Debtor or
in which the New Debtor from time to time has any rights. Without limiting the
foregoing, in order to secure payment of the Obligations, whether now existing
or hereafter arising, the New Debtor does hereby grant to the Agent for the
benefit of itself and the other Secured Creditors, and hereby agrees that the
Agent has and shall continue to have for the benefit of itself and the other
Secured Creditors a continuing lien on and security
interest in, among other things, all of the New Debtor's Collateral (as such
term is defined in the Security Agreement), including, without limitation, all
of the New Debtor's Receivables, General Intangibles, Inventory, Equipment,
Investment Property, and all of the other Collateral described in Section 2 of
the Security Agreement, each and all of such granting clauses being incorporated
herein by reference with the same force and effect as if set forth in their
entirety except that all references in such clauses to the Existing Debtors or
any of them shall be deemed to include references to the New Debtor. Nothing
contained herein shall in any manner impair the priority of the liens and
security interests heretofore granted in favor of the Agent under the Security
Agreement.
2. Schedules A (Locations), Schedule B (Other Names), Schedule C
(Intellectual Property Rights), Schedule D (Real Estate), and Schedule E
(Investment Property and Deposits) to the Security Agreement shall be
supplemented by the information stated below with respect to the New Debtor:
SUPPLEMENT TO SCHEDULE A
NAME OF DEBTOR (AND STATE OF ADDITIONAL PLACES OF BUSINESS AND
ORGANIZATION AND ORGANIZATIONAL CHIEF EXECUTIVE OFFICE (AND NAME OF COLLATERAL LOCATIONS (AND NAME OF
REGISTRATION NUMBER) RECORD OWNER OF SUCH LOCATION) RECORD OWNER OF SUCH LOCATIONS)
---------------------- ------------------------- -----------------------
---------------------- ------------------------- -----------------------
SUPPLEMENT TO SCHEDULE B
NAME OF DEBTOR PRIOR LEGAL NAMES AND TRADE NAMES OF
SUCH DEBTOR
------------------------------------ -------------------------------
SUPPLEMENT TO SCHEDULE C
INTELLECTUAL PROPERTY RIGHTS
----------------------------------
----------------------------------
-2-
SUPPLEMENT TO SCHEDULE D
REAL ESTATE LEGAL DESCRIPTIONS
----------------------------------
----------------------------------
SUPPLEMENT TO SCHEDULE E
INVESTMENT PROPERTY AND DEPOSITS
-------------------------
-------------------------
3. The New Debtor hereby acknowledges and agrees that the Obligations
are secured by all of the Collateral according to, and otherwise on and subject
to, the terms and conditions of the Security Agreement to the same extent and
with the same force and effect as if the New Debtor had originally been one of
the Existing Debtors under the Security Agreement and had originally executed
the same as such an Existing Debtor.
4. All capitalized terms used in this Agreement without definition
shall have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Debtor" or "Debtors" and any provision of
the Security Agreement providing meaning to such term shall be deemed a
reference to the Existing Debtors and the New Debtor. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
5. The New Debtor agrees to execute and deliver such further
instruments and documents and do such further acts and things as the Agent may
deem necessary or proper to carry out more effectively the purposes of this
Agreement.
6. No reference to this Agreement need be made in the Security
Agreement or in any other document or instrument making reference to the
Security Agreement, any reference to the Security Agreement in any of such to be
deemed a reference to the Security Agreement as modified hereby.
-3-
7. This Agreement shall be governed by and construed in accordance
with the State of Illinois (without regard to principles of conflicts of law).
[INSERT NAME OF NEW DEBTOR]
By
Name
--------------------------------------------------
Title
-------------------------------------------------
Accepted and agreed to as of the date first above written.
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as Agent
By
Name
--------------------------------------------------
Title
-------------------------------------------------
-4-