Exhibit 10.35
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “Security Agreement”), made and entered into as of
the 17th day of February, 2010, by                     , a                     
corporation (the “Debtor”), and RBS BUSINESS CAPITAL, a division of RBS Asset
Finance, Inc., a New York corporation (the “Secured Party”).
WITNESSETH:
WHEREAS, the Debtor has requested the Secured Party to enter into a certain
Credit Agreement of even date herewith, by and among the Secured Party, the
Debtor and certain affiliated borrowing entities, (the “Co-Borrowers”) (as may
be further amended, modified or supplemented from time to time, the “Credit
Agreement”) providing the Debtor with Revolving Credit Loans in an aggregate
amount outstanding at any time not to exceed $35,000,000.00; and
WHEREAS, as an inducement to the Secured Party to enter into the Credit
Agreement, and as a condition thereto, the Debtor has agreed to enter into this
Security Agreement to grant the Secured Party the security interests
contemplated in this Security Agreement as security for the prompt and full
payment and performance of the indebtedness and obligations of the Debtor and
the Co-Borrowers under the Credit Agreement and the other Loan Documents (as
defined in the Credit Agreement), and such other indebtedness and obligations as
more fully set forth herein; and
WHEREAS, it is a condition precedent to the making of the Revolving Credit
Loans, that the Debtor grants the Secured Party the security interests
contemplated in this Security Agreement; and
WHEREAS, the Secured Party is not willing to enter into the Credit Agreement
unless and until the Debtor enters into this Security Agreement upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and intending to be legally bound hereby, the Debtor and the
Secured Party hereby covenant and agree as follows:
ARTICLE I. DEFINITIONS
Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein as therein defined, and the following terms shall have the following
meanings (such meanings being equally applicable to both the singular and plural
forms of the terms defined):
“Accounts” shall mean any “account,” as such term is defined in the UCC, now
owned or hereafter acquired by the Debtor and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
payment obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to the Debtor (whether held in the name of the Debtor or any
division thereof or in any applicable trade name or trade style) whether arising
out of property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of or out of services rendered or to be rendered by the
Debtor or from any

 

 

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other transaction, whether or not the same involves the sale of goods or
services by the Debtor (including, without limitation, any such obligation that
might be characterized as an account or contract right under the UCC), and all
of the Debtor’s rights in, to and under all purchase orders or receipts now
owned or hereafter acquired by it for goods or services sold or rendered by the
Debtor (or by any Person from whom the Debtor acquired such rights), and all of
the Debtor’s rights to any goods represented by any of the foregoing (including,
without limitation, unpaid seller’s rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
and choses in action and causes of action (whether arising in contract, tort or
otherwise and whether or not currently in litigation) and all other debts,
obligations and liabilities in whatever form owing to the Debtor, documents of
title, warehouse receipts, leases, investment accounts, deposit accounts, Cash,
contract rights, insurance policies, dividends, distributions, judgments,
covenants, licenses, franchises, warranties, indemnities, partnership and joint
venture interests, and other rights, including all rights to the payment of
moneys due or to become due to the Debtor, under all contracts for the sale,
lease, license or assignment of goods or the performance of services or both by
the Debtor (whether or not yet earned by performance on the part of the Debtor
or in connection with any other transaction), now in existence or hereafter
occurring, including, without limitation, the right to receive the Proceeds of
said purchase orders and contracts, and all collateral security and guarantees
of any kind given by any Person with respect to any of the foregoing.
“Cash” shall mean cash or cash equivalents now owned or hereafter acquired by
the Debtor.
“Chattel Paper” shall mean any “chattel paper”, “Tangible Chattel Paper” and
“Electronic Chattel Paper” as such terms are defined in the UCC, now owned or
hereafter acquired by the Debtor, or in which the Debtor now has or hereafter
acquires any rights.
“Commercial Tort Claims shall mean any “commercial tort claim”, as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor, or in which
the Debtor now has or hereafter acquires any rights.
“Contracts” shall mean all contracts, undertakings, or other agreements (other
than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which the Debtor may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account and any agreement
relating to the terms of payment or the terms of performance of such Account.

 

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“Copyrights” shall mean all of the following now or hereafter acquired by the
Debtor: (i) all copyrights, registrations and applications therefor, (ii) all
renewals and extensions thereof, (iii) all income, royalties, damages and
payments now and hereafter due or payable or both with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (iv) all rights to sue for past,
present and future infringements or misappropriations thereof, and (v) all other
rights corresponding thereto throughout the world.
“Deposit Accounts” shall mean any “deposit account” as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor or in which the Debtor
now has or hereafter acquires any rights.
“Documents” shall mean any “documents,” as such term is defined in the UCC, now
owned or hereafter acquired by the Debtor or in which the Debtor now has or
hereafter acquires any rights.
“Equipment” shall mean any “equipment,” as such term is defined in the UCC, now
owned or hereafter acquired by Debtor and, in any event, shall include, without
limitation, all machinery, equipment, furnishings, fixtures, vehicles and
computers and other electronic data-processing and other office equipment now
owned or hereafter acquired by Debtor and any and all additions, substitutions
and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
“Fixtures” shall mean any “fixtures” as such term is defined in the UCC, now
owned or hereafter acquired by Debtor.
“General Intangibles” shall mean any “general intangibles,” as such term is
defined in the UCC, now owned or hereafter acquired by the Debtor and, in any
event, shall include, without limitation, all right, title and interest that the
Debtor may now or hereafter have in or under any Contract, in or to any
partnerships, joint ventures and similar entities and rights to distribution of
income therefrom, all tax refunds, tax refund claims, customer lists, Payment
Intangibles, Copyrights, Trademarks, Trademark licenses, Patents, Patent
licenses, rights in intellectual property, permits, Trade Secrets, proprietary
or confidential information, inventions (whether patented or patentable or not)
and technical information, procedures, designs, knowledge, know-how, software,
computer programs, computer records and discs, computer data, data bases, data,
skill, expertise, experience, processes, models, drawings, materials and
records, now owned or hereafter acquired by the Debtor, and the goodwill and
rights of indemnification related thereto and associated therewith.
“Goods” shall mean any “goods”, as such term is defined in the UCC, now owned or
hereafter acquired by the Debtor, wherever located.

 

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“Instruments” shall mean any “instrument,” as such term is defined the UCC, now
owned or hereafter acquired by the Debtor or in which the Debtor now has or
hereafter acquires any rights, including promissory notes, but not including
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
“Inventory” shall mean any “inventory,” as such term is defined in the UCC, now
owned or hereafter acquired by the Debtor and, in any event, shall include,
without limitation, all inventory, merchandise, goods and other personal
property now owned or hereafter acquired by the Debtor that are held for sale or
lease or are furnished or are to be furnished under a contract of service or
that constitute raw materials, work in process or materials used or consumed or
to be used or consumed in the Debtor’s business, or the processing, packaging,
delivery or shipping of the same, and all finished goods.
“Investment Property” shall mean any “investment property,” as such term is
defined in the UCC, now owned or hereafter acquired by Debtor and, in any event,
shall include, without limitation, all securities, securities accounts and
security entitlements.
“Letter of Credit Rights” shall mean any “letter of credit right” as such term
is defined in the UCC, now owned or hereafter acquired by the Debtor, or in
which the Debtor now has or hereafter acquires any rights.
“Patents” shall mean all of the following now or hereafter owned by the Debtor,
if any: (i) all patents and patent applications, (ii) all inventions and
improvements described and claimed therein, (iii) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof, (iv) all
income, royalties, damages and payments now and hereafter due and/or payable to
the Debtor with respect thereto, including, without limitation, damages and
payments for past or future infringements or misappropriations thereof, (v) all
rights to sue for past, present and future infringements or misappropriations
thereof and (vi) all other rights corresponding thereto throughout the world.
“Payment Intangible” means any “payment intangible” as such term is defined in
the UCC, now owned or hereafter acquired by the Debtor, or in which the Debtor
now has or hereafter acquires any rights.
“Person” shall mean any individual, corporation, joint venture, general or
limited partnership, limited liability company, trust, association,
unincorporated organization or other business entity.

 

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“Proceeds” shall mean “proceeds,” as such term is defined in the UCC and, in any
event, shall include, without limitation, (i) any and all proceeds of any
insurance, indemnity or warranty payable to the Debtor from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to the Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority), (iii) any claim of the Debtor against third parties (A) for past,
present or future infringement of any Patent or Patent license or (B) for past,
present or future infringement or dilution of any Trademark or Trademark license
or for injury to the goodwill associated with any Trademark, Trademark
registration or Trademark licensed under any Trademark license and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
“Secured Obligations” shall mean (i) all indebtedness and obligations of the
Debtor and the Co-Borrowers to the Secured Party under the Credit Agreement and
the other Loan Documents (including this Security Agreement), now existing or
hereafter incurred, and (ii) the payment of amounts that would become due from
the Debtor and the Co-Borrowers to the Secured Party but for the operation of
the automatic stay provisions of Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a).
“Supporting Obligation” means any “supporting obligation” as such term is
defined in the UCC.
“Trademarks” shall mean all of the following, now owned or hereafter acquired by
the Debtor: (i) all trademarks (including service marks and trade names, whether
registered or at common law), registrations and applications therefor, and the
entire product lines and goodwill of the Debtor’s business connected therewith
and symbolized thereby, (ii) all renewals thereof, (iii) all income, royalties,
damages and payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (iv) all rights to sue for past,
present and future infringements or misappropriations thereof and (v) all other
rights corresponding thereto throughout the world.
“Trade Secrets” shall mean all of the following, now owned or hereafter acquired
by the Debtor: (i) trade secrets, (ii) income, royalties, damages and payments
now and hereafter due and/or payable to the Debtor with respect to trade
secrets, including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (iii) rights to sue for past,
present and future infringements or misappropriations of trade secrets, and
(iv) all other rights corresponding to trade secrets throughout the world.

 

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“UCC” shall mean the Uniform Commercial Code as enacted in New York State and as
amended, supplemented or superseded from time to time (the “UCC”); provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the Secured Party’s security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than New York State, the term “UCC” shall mean
the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.
ARTICLE II. SECURITY INTEREST
(a) As security for the prompt and full payment and performance of the Secured
Obligations, the Debtor hereby assigns and pledges, and hereby creates and
grants, to the Secured Party, a continuing lien on and security interest in and
to all of the following items and types of properties, now owned or hereafter
arising or acquired by the Debtor, wheresoever located, and all right, title and
interest of the Debtor therein (collectively, the “Collateral”):
(i) All Accounts, Chattel Paper (including Tangible Chattel Paper and Electronic
Chattel Paper), Documents, Instruments, Commercial Tort Claims and Contracts;
(ii) All Inventory;
(iii) All Equipment and Fixtures;
(iv) All General Intangibles (including Payment Intangibles), Trademarks,
Patents, Copyrights and Trade Secrets;
(v) All Cash, Deposit Accounts, Letter of Credit Rights, Supporting Obligations
and Investment Property;
(vi) All other Goods and personal property of the Debtor, whether tangible or
intangible, now owned or hereafter acquired by the Debtor, wheresoever located;
and
(vii) All Proceeds and products relating to each of the foregoing.
(b) The Collateral includes all of the items described above in paragraphs
(i) through (vii), whether now owned or hereafter at any time arising or
acquired by the Debtor and wherever located, and includes all replacements,
additions, accessions, substitutions, repairs, guaranties and securities
therefor, Proceeds and products relating thereto or therefrom, and all
documents, records (including but not limited to, manual records, computer runs,
print outs, tapes, disks, software, programs, source codes and other computer
prepared information and equipment of any kind), ledger sheets and files of the
Debtor relating thereto. Proceeds hereunder include any insurance now or
hereafter payable by reason of loss or damage to any item of Collateral or any
Proceeds thereof, and all unearned refund premiums and dividends which may
become payable under such policies of insurance and loss payments under such
policies, which shall reduce the unearned premiums.

 

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ARTICLE III. REPRESENTATIONS AND WARRANTIES
Except as may otherwise be represented or warranted in the Credit Agreement, the
Debtor represents and warrants to the Secured Party that:
(i) The Debtor is (or to the extent that this Security Agreement states that the
Collateral is to be acquired after the date hereof, will be) the sole owner of
the Collateral except to the extent the Collateral is leased or licensed by the
Debtor pursuant to leases or licenses with other Persons entered into in the
ordinary course of business; the liens and security interests granted hereby to
the Secured Party in the Collateral which can be perfected by the filing of UCC
financing statements will be perfected liens and security interests upon the
filing of such financing statements having priority over all other Liens except
Liens permitted pursuant to the Credit Agreement, and there are no other Liens
in such Collateral or any portion thereof except Liens permitted pursuant to the
Credit Agreement; and no financing statement, mortgage or deed of trust covering
the Collateral or any portion thereof exists or is on file in any public office
except those related to a Lien permitted pursuant to the Credit Agreement;
(ii) Schedule One attached hereto (the “Disclosure Schedule”) contains a
complete list of, among other items, (A) the current and former corporate and
fictitious names utilized by the Debtor, (B) the chief executive office of the
Debtor, (C) the office where the Debtor keeps its records concerning the
Collateral, (D) each place of business of the Debtor, (E) as to Inventory, a
complete list of each location where Inventory is located, and (F) as to
Equipment, a complete list of each location where Equipment is located. All
information contained in the Disclosure Schedule is true, complete and correct
and the Debtor hereby acknowledges and agrees that the Secured Party and its
legal counsel may fully rely upon the information contained therein as
representations and warranties of the Debtor, the falsity of which may
constitute a Default (as hereinafter defined);
(iii) Except as otherwise disclosed to the Secured Party, the Debtor has
exclusive possession and control of all its Inventory and Equipment, and the
Debtor has not and will not allow any of its contractors, processors or
suppliers to have possession or control of any Inventory and Equipment;
(iv) Except as required by the Loan Documents, no consent, authorization,
approval, or other action by and no notice to or filing with, any Official Body
is required for (A) the grant by the Debtor of the Liens granted hereby or for
the execution, delivery or performance of this Security Agreement by the Debtor,
(B) the perfection or maintenance of the Liens created hereby which may be
perfected by the filing of financing statements, or (C) the exercise by the
Secured Party of any of its rights and remedies hereunder, except for the filing
of financing statements necessary to perfect or continue the perfection of the
security interests granted by this Security Agreement;

 

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(v) This Security Agreement creates a valid security interest in the Collateral,
and the filing of the financing statements in the jurisdictions listed in the
Disclosure Schedule perfects and establishes the first priority of those
security interests (except for Liens permitted pursuant to the Credit Agreement)
in such Collateral which can be perfected by the filing of financing statements;
(vi) Neither the execution and delivery of this Security Agreement by the
Debtor, the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof will (A) result in a breach of any of the terms
or provisions of, or constitute a default under, or constitute an event which,
with notice or lapse of time or both will result in a breach of or constitute a
default under, any agreement, indenture, mortgage, deed of trust, equipment
lease, instrument or other document to which the Debtor is a party, or
(B) conflict with any Law, except to the extent that any such breach, default,
event or conflict would not have a material adverse effect on the business,
operations or financial condition of the Debtor; and
(vii) The Debtor is incorporated in Delaware under the Delaware General
Corporation Law.
ARTICLE IV. COVENANTS OF THE DEBTOR
The Debtor covenants and agrees to perform each of the covenants set forth below
in this Article IV unless specifically provided for otherwise in the Credit
Agreement or the Secured Party shall otherwise give its prior written consent.
(i) The Debtor will defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein;
(ii) The Debtor will not change the location of its chief executive office or
the office where it keeps its records concerning Accounts from the locations set
forth in the Disclosure Schedule except with thirty (30) days’ prior written
notice to the Secured Party, nor will the Debtor move, or permit to be moved,
the Collateral or any portion thereof to any location other than those set forth
in the Disclosure Schedule other than sales of Inventory in the ordinary course
of business;
(iii) The Debtor will not voluntarily or involuntarily change its name, identity
or corporate structure;

 

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(iv) The Debtor will, promptly upon request by the Secured Party, procure or
execute and deliver any document (including, without limitation, mortgagee or
landlord waivers with respect to any and all Inventory which is a part of the
Collateral), give any notices, execute and file any financing statements,
mortgages or other documents, all in form and substance satisfactory to the
Secured Party, mark any Chattel Paper, deliver any Chattel Paper or Instruments
to the Secured Party and take any other actions which are necessary or, in the
reasonable judgment of the Secured Party, desirable to perfect or continue the
perfection and priority of the Secured Party’s liens on and security interests
in the Collateral, to protect the Collateral against the rights, claims or
interests of any Person other than the Secured Party or to effect the purposes
of this Security Agreement, and will pay all reasonable costs and expenses
incurred in connection therewith;
(v) The Debtor will not in any way hypothecate or create or permit to exist any
Lien on or other interest in the Collateral except Liens permitted pursuant to
the Credit Agreement and those created by this Security Agreement, nor will the
Debtor sell, transfer, assign, exchange or otherwise dispose of the Collateral
except sales of Inventory in the ordinary course of business. If the Proceeds of
any such sale are notes, Instruments or Chattel Paper, such Proceeds shall be
promptly delivered to the Secured Party to be held as part of the Collateral. If
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged
or otherwise disposed of in violation of these provisions, the lien and security
interest of the Secured Party shall continue in such Collateral or part thereof
notwithstanding such sale, transfer, assignment, exchange or other disposition,
and the Debtor will hold the Proceeds thereof in a separate account for the
Secured Party’s benefit. The Debtor will, at the Secured Party’s request,
transfer such Proceeds to the Secured Party in kind;
(vi) The Debtor will not enter into, modify or amend any existing or future
contracts or agreements relating to the sale or disposition of the Collateral or
any part thereof except those made in the ordinary course of business. Upon the
Secured Party’s request, the Debtor will provide the Secured Party with copies
of all existing and hereafter created contracts and agreements and of all
amendments and modifications thereto;
(vii) The Debtor will not grant any extension of the time of payment of any
Accounts, or compromise, compound or settle the same for less than the full
amount thereof, release, in whole or in part, any Person liable for the payment
thereof, or allow any credit or discount whatsoever thereon, except extensions,
credits, discounts, compromises, settlements or releases granted or made in the
ordinary course of business and involving Accounts having a value of less than
$250,000;
(viii) The Debtor will pay and discharge all taxes, assessments and governmental
charges or levies against the Collateral prior to delinquency thereof except
taxes, assessments or charges subject to good faith dispute for which the Debtor
has created adequate reserves on its books and will keep the Collateral free of
all unpaid charges whatsoever where the failure to make any of such payments
could result in a material adverse effect on the business, operations or
financial condition of the Debtor;

 

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(ix) The Debtor will at all times be in substantial compliance with all Laws
pertaining to the use or ownership of the Collateral;
(x) The Debtor will keep accurate and correct records of the Inventory,
itemizing and describing the kind, type and quantity of Inventory, the Debtor’s
cost therefor and (where applicable) the current price list for such Inventory;
(xi) The Debtor will cause the Collateral to be kept insured at its own expense
under one or more policies with such companies, in such amounts, and against
such risks and liabilities as is ordinarily maintained by companies engaged in
the same or similar businesses and similarly situated and as are satisfactory to
the Secured Party in its sole discretion. Such policies shall include loss
payable endorsements or such other mortgagee indemnity clauses in favor of the
Secured Party as the Secured Party shall direct, and shall name the Secured
Party as an additional insured. No such policy shall be subject to reduction or
cancellation without thirty (30) days’ prior written notice to the Secured Party
and an original of such policy shall be delivered to the Secured Party. If the
Debtor fails to effect and keep in full force and effect such insurance, or
fails to pay the premiums when due, the Secured Party may, but shall not be
obligated to, do so for the account of the Debtor and add the cost to the
Secured Obligations. The proceeds of any casualty insurance in respect of any
casualty loss of any of the Collateral shall (i) so long as no Default shall
have occurred and be continuing and to the extent that the amount of such
proceeds is less than $500,000, be disbursed to the Debtor for direct
application by the Debtor solely to the repair of damaged Collateral or
replacement of destroyed Collateral with Collateral of the same or similar type
and function, provided such replacement collateral is made subject to the lien
and security interest created by this Security Agreement and constitutes a
perfected first priority lien on and security interest (except Liens permitted
pursuant to the Credit Agreement) in such Collateral, and (ii) in all other
circumstances be disbursed directly to the Secured Party. The Secured Party may,
in its sole and absolute discretion, turn over to the Debtor the proceeds of any
such insurance collected by it on the condition that the Debtor apply such
proceeds either (A) to the repair of damaged Collateral, or the replacement of
destroyed Collateral with Collateral of the same or similar type and function
and of at least equivalent value (in the sole judgment of the Secured Party),
provided such replacement Collateral is made subject to the lien and security
interest created by this Security Agreement and constitutes a perfected first
priority lien on and security interest (except Liens permitted pursuant to the
Credit Agreement) in such Collateral, or (B) applied by the Secured Party to the
payment of the Secured Obligations. Any balance of insurance proceeds remaining
in the possession of the Secured Party after payment in full of the Secured
Obligations shall be paid over to the Debtor;

 

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(xii) The Debtor will, upon the Secured Party’s request, deliver to the Secured
Party copies of records and schedules which show the status, condition and
location of all its Inventory and Equipment. The Secured Party shall have the
right to review and verify such records, schedules, notices and financial
information, and the Debtor will reimburse the Secured Party for all costs
incurred thereby;
(xiii) If any Accounts, other than Unassigned US Accounts, arise out of a
contract with the United States or any department, agency, or instrumentality
thereof, the Debtor will immediately notify the Secured Party thereof in writing
and execute any instruments and take any steps required by the Secured Party in
order that all monies due and to become due under such contracts shall be
assigned to the Secured Party and notice thereof given to the U. S. Government
under the Federal Assignment of Claims Act;
(xiv) If any Accounts shall be evidenced by promissory notes, trade acceptances,
or other instruments for the payment of money, the Debtor will immediately
deliver the same to the Secured Party, appropriately endorsed to the order of
the Secured Party, and the Debtor hereby waives presentment, demand, notice of
dishonor, protest and notice of protest and all other notices with respect
thereto;
(xv) The Debtor shall, at any time and from time to time, take such steps as the
Secured Party may require for the Secured Party, to obtain an acknowledgment, in
form and substance satisfactory to the Secured Party, of any third party having
possession of any of the Collateral that the third party holds such Collateral
for the benefit of the Secured Party, or to obtain “control” (as described in
the UCC) of any Investment Property, Deposit Accounts, Letter of Credit Rights
or Electronic Chattel Paper, with any agreements establishing control to be in
form and substance satisfactory to the Secured Party;
(xvi) The Debtor hereby authorizes the Secured Party, its agents and employees,
to execute, deliver and file UCC financing statements, in form and substance
satisfactory to the Secured Party, to assure the protection, perfection and
enforcement of the Liens in the Collateral in favor of the Secured Party, and
the Debtor will pay all filing fees and taxes related thereto. The Debtor
further agrees that a carbon, photographic, facsimile or other reproduction of
such financing statements or this Security Agreement shall be sufficient as a
financing statement and may be filed as such;
(xvii) As provided in the Credit Agreement, the Debtor will permit the Secured
Party to enter into and upon any premises where any of the Collateral or records
with respect thereto are located for the purpose of inspecting the same, making
copies of records, observing the use of any part of the Collateral, or otherwise
protecting its security interest in the Collateral;

 

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(xviii) The Secured Party shall have the right at any time to make any payments
and do any other acts the Secured Party may deem reasonably necessary to protect
its security interest in the Collateral, including, without limitation, the
right to pay, purchase, contest or compromise any Lien which is prior to or
superior to the liens and security interests granted hereunder, and appear in
and defend any action or proceeding purporting to affect its security interest
in the Collateral, and in exercising any such powers or authority, the right to
pay all reasonable costs and expenses incurred in connection therewith,
including reasonable attorneys’ fees. The Debtor hereby agrees to reimburse the
Secured Party for all such payments made and expenses incurred, which amounts
shall be secured under this Security Agreement, and agree they shall be bound by
any payment made or act taken by the Secured Party hereunder. The Secured Party
shall have no obligation to make any of the foregoing payments or perform any of
the foregoing acts; and
(xix) After the occurrence of an Event of Default the Debtor hereby grants to
the Secured Party for a term to commence on the date of this Security Agreement
and continuing thereafter until all of the Secured Obligations are fully paid
and discharged, the right to use all premises or places of business which the
Debtor presently owns, leases or otherwise occupies or may hereafter own, lease
or otherwise occupy and where any Collateral may be located, at a total rental
for the entire period of $1.00. The Secured Party agrees not to exercise the
foregoing right granted unless and until the Secured Party determines to
exercise its rights against the Collateral pursuant to the Credit Agreement.
ARTICLE V. COLLECTIONS
Section 5.01. Deposit and Collection Accounts. The Debtor shall (i) cause all
checks, drafts, Cash, payments, Proceeds, other remittances and the like in
payment or on account of any Inventory and any other Collateral (collectively,
“Remittances”) to be deposited directly by the Debtor in, at the Secured Party’s
direction, blocked or other accounts (collectively, the “Deposit Accounts”) at a
bank or banks selected by the Debtor and approved by the Secured Party, and
(ii) cause all funds in the Deposit Accounts to be transferred to a collections
account opened, maintained and designated by the Secured Party (the “Collections
Account”), such transfer to be done by electronic transfer on the same day on
which such funds were deposited in such Deposit Accounts or the next succeeding
Business Day thereafter. The Secured Party shall have sole dominion and control
over all Remittances and other items deposited in the Collections Account, and
such Remittances and items may be withdrawn only by the Secured Party, it being
the intention of the parties hereto that the Debtor shall have no control over
or withdrawal rights in respect of the Collections Account. The Secured Party
may credit (conditional upon final collection) all Remittances received against
the principal or interest of the Secured Obligations, provided, however, for
purposes of computing interest, any items

 

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requiring clearance or payment shall not be considered to have been credited
against the Secured Obligations until one (1) Business Day after receipt by the
Secured Party of any such items. The order and method of such application shall
be in the sole discretion of the Secured Party and any portion of such funds
which the Secured Party elects not to so apply, or any funds remaining in the
Collections Account after all outstanding Secured Obligations have been paid in
full after such application, shall be paid over promptly from time to time by
the Secured Party to the Debtor. In the event the Debtor receives any
Remittances, the Debtor shall receive such Remittances in trust for the Secured
Party and shall immediately deliver such Remittances to the Secured Party in the
same form received except for the endorsement of the Debtor where necessary to
permit collection of any Remittances, which endorsement the Debtor hereby agrees
to make; until delivered to the Secured Party, such Remittances shall not be
commingled with the Debtor’s other funds. Upon request of the Secured Party, the
Debtor shall notify and direct each of its account debtors to make all
Remittances directly to the Collections Account.
Section 5.02. Authority of Secured Party. The Debtor hereby irrevocably
constitutes and appoints the Secured Party and any agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the name of the Debtor or in its own name to
take any and all action and to execute any and all documents and instruments
which the Secured Party, at any time and from time to time after the occurrence
of a Default, deems necessary or desirable to accomplish the purposes of this
Security Agreement and, without limiting the generality of the foregoing, the
Debtor hereby gives the Secured Party the power and right on behalf of the
Debtor and in its own name to do any of the following at any time and from time
to time after the occurrence of a Default (as hereinafter defined), without
notice to or the consent of the Debtor:
(i) to execute, deliver, file and record any such financing statements in the
name of the Debtor at any time and, as applicable, under the rules of the UCC;
(ii) to demand, sue for, collect, or receive in the name of the Debtor or in its
own name, any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral and, in connection therewith, endorse
checks, notes, drafts, acceptances, money orders, documents of title, or any
other instruments for the payment of money under the Collateral or any policy of
insurance;
(iii) to pay or discharge taxes, Liens, security interests, or other
encumbrances levied or placed on or threatened against the Collateral;
(iv) to send requests for verification to account debtors and other obligors;
(v) to notify post office authorities to change the address for delivery of mail
of the Debtor to an address designated by the Secured Party and to receive, open
and dispose of mail addressed to the Debtor;

 

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(vi) to endorse any draft or check which may be payable to the Debtor in order
to collect the proceeds of insurance pursuant to subsection (x) of Article IV of
this Security Agreement; and
(vii) (A) to direct the account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all monies due
and to become due thereunder directly to the Secured Party or as the Secured
Party shall direct; (B) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time in respect
of or arising out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts, drafts
against the Debtor, assignments, proxies, stock powers, verifications and
notices in connection with an account and other documents relating to the
Collateral; (D) to commence and prosecute any suit, action, or proceeding at law
or in equity in any court of competent jurisdiction to collect the Collateral or
any part thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action, or proceeding brought against the Debtor with
respect to any Collateral; (F) to settle, compromise or adjust any suit, action,
or proceeding described above and, in connection therewith, to give such
discharges or releases as the Secured Party may deem appropriate; (G) to
exchange any of the Collateral for other property upon any merger,
consolidation, reorganization, recapitalization, or other readjustment of the
issue thereof and, in connection therewith, deposit any of the Collateral with
any committee, depositary, transfer agent, registrar, or other designated agency
upon such terms as the Secured Party may determine; (H) to add or release any
guarantor, endorser, surety, or other party to any of the Collateral; (I) to
renew, extend, or otherwise change the terms and conditions of any of the
Collateral; (J) to insure, and to make, settle, compromise, or adjust claims
under any insurance policy covering any of the Collateral; and (K) to sell,
transfer, pledge, make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though the Secured Party were the
absolute owner thereof for all purpose, and to do, at the Secured Party’s option
and the Debtor’s expense, at any time, or from time to time, all acts and things
which the Secured Party deems necessary to protect, preserve, or realize upon
the Collateral and the Secured Party’s security interest therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable so long as this Security Agreement remains in effect. This power of
attorney shall not be deemed to revoke any other power of attorney granted by
the Debtor nor shall any subsequent power granted by the Debtor revoke this
power unless there is a specific reference to this power and such revocation is
permitted under this Security Agreement. The Secured Party shall be under no
duty to exercise or withhold the exercise of any of the rights, power,
privileges, and options expressly or implicitly granted to the Secured Party in
this Security Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Secured Party shall not be liable for any act or omission
or error of judgment or any notice of act or law in its individual capacity or
in its capacity as attorney-in-fact except acts or omissions resulting from its
willful misconduct or gross negligence. This power of attorney is conferred on
the Secured Party to protect, preserve, and realize upon its lien and security
interest in the Collateral. The Secured Party shall not be responsible for any
decline in the value of the Collateral, be required to take any steps to
preserve rights against prior parties or to protect, preserve, or maintain any
security interest given to secure the Collateral.

 

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ARTICLE VI. DEFAULTS AND REMEDIES
Section 6.01. Defaults. The occurrence of any one or more of the following
events or conditions shall constitute a default under this Security Agreement (a
“Default”):
(i) The occurrence of an Event of Default under the Credit Agreement or any
other Loan Document.
(ii) The Debtor fails to perform any obligation or covenant required to be
performed by it in accordance with the terms and conditions of this Security
Agreement, after the expiration of any applicable grace period.
Section 6.02. Remedies. Upon the occurrence of a Default, the Secured Party may,
at its option, without notice to or demand upon the Debtor, do any one or more
of the following:
(i) Declare all of the Secured Obligations immediately due and payable.
(ii) Exercise any or all of the rights and remedies provided for by the UCC of
the state or states having jurisdiction with respect to all or any portion of
the Collateral from time to time, specifically including, without limitation,
the right to recover reasonable attorneys’ fees and other expenses incurred by
the Secured Party in the enforcement of this Security Agreement or in connection
with the Debtor’s redemption of the Collateral.
(iii) Require the Debtor to assemble the Collateral or any part thereof and make
it available at one or more places as the Secured Party may designate, and to
deliver possession of the Collateral or any part thereof to the Secured Party,
who shall have full right to enter upon any or all of the Debtor’s premises and
property to exercise the Secured Party’s rights hereunder.
(iv) Use, manage, operate and control the Collateral and the Debtor’s business
and property to preserve the Collateral or its value, including, without
limitation, the right to take possession of all of the Debtor’s premises and
property, to exclude the Debtor and any third parties, whether or not claiming
under a the Debtor, from such premises and property, to make repairs,
replacements, alterations, additions and improvements to the Collateral and to
dispose of all or any portion of the Collateral in the ordinary course of the
Debtor’s business.

 

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(v) Use, in connection with any assembly, use or disposition of the Collateral,
any Trademark, Trade Secret, trade name, trade style, copyright, Patent or
technical knowledge or process used or utilized by the Debtor.
(vi) Enforce one or more remedies hereunder, successively or concurrently, and
such action shall not operate to estop or prevent the Secured Party from
pursuing any other or further remedy which it may have, and any repossession or
retaking or sale of the Collateral pursuant to the terms hereof shall not
operate to release the Debtor until full and final payment of any deficiency has
been made in cash. The Debtor shall reimburse the Secured Party upon demand for,
or the Secured Party may apply any Proceeds of the Collateral to, the costs and
expenses (including reasonable attorneys’ fees, transfer taxes and any other
charges) incurred by the Secured Party in connection with any sale, disposition
or retention of any Collateral hereunder.
(vii) In connection with any public sale under the applicable UCC, the Secured
Party shall give the Debtor at least ten (10) days’ prior written notice of the
time and place of any public sale of the Collateral which shall be deemed to be
reasonable notice of such sale. In connection with any private sale under the
applicable UCC, the Secured Party shall give the Debtor at least ten (10) days’
prior written notice of the time after which any private sale or other intended
disposition thereof is to be made, which shall be deemed to be reasonable notice
of such sale or other disposition. Such notice may be mailed to the Debtor at
the address set forth in the Credit Agreement for delivery of notices, provided
that such notice shall be deemed to be given as and when described in
Section 10.05 of the Credit Agreement. Further, in the event of any public sale
hereunder, the Secured Party shall exhibit the Collateral for a reasonable
period of time not later than three (3) Business Days before such sale is to
take place, and, if practicable, shall exhibit the Collateral at the time and
place of such sale; provided, however, that the Secured Party shall have no
obligation to exhibit any part of the Collateral at or prior to the sale
thereof, if, at the time of default, such Collateral is in the Debtor’s
possession or under its control, and if the Secured Party sends the Debtor a
written demand for possession thereof under clause (iii) of Section 6.02 and the
Debtor fails to comply with such demand at least three (3) Business Days prior
to the date set for sale of such Collateral.
(viii) Proceed by an action or actions at law or in equity to recover the
Secured Obligations or to foreclose under this Security Agreement and sell the
Collateral, or any portion thereof, pursuant to a judgment or decree of a court
or courts of competent jurisdiction.
(ix) In the event the Secured Party recovers possession of all or any part of
the Collateral pursuant to a writ of possession or other judicial process,
whether prejudgment or otherwise, the Secured Party may thereafter retain, sell
or otherwise dispose of such collateral in accordance with this Security
Agreement or the applicable UCC, and following such retention, sale or other
disposition, the Secured Party may voluntarily dismiss without prejudice the
judicial action in which such writ of possession or other judicial process was
issued. The Debtor hereby consents to the voluntary dismissal by the Secured
Party of such judicial action, and the Debtor further consents to the
exoneration of any bond which the Secured Party filed in such action.

 

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ARTICLE VII. MISCELLANEOUS PROVISIONS
Section 7.01. Notices. Any notice or consent required or permitted by this
Security Agreement shall be in writing and shall be delivered in the manner and
to the addresses specified in the Credit Agreement for delivery of notice.
Section 7.02. Headings. The various headings in this Security Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provision hereof.
Section 7.03. Governing Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of New York without giving
effect to its conflict of laws principles.
Section 7.04. Amendments. This Security Agreement or any provision hereof may be
changed, waived, or terminated only by a statement in writing signed by the
party against which such change, waiver or termination is sought to be enforced.
Section 7.05. No Waiver. No delay in enforcing or failure to enforce any right
under this Security Agreement shall constitute a waiver by the Secured Party of
such right. No waiver by the Secured Party of any default hereunder shall be
effective unless in writing, nor shall any waiver operate as a waiver of any
other default or of the same default on a future occasion.
Section 7.06. Time of the Essence. Time is of the essence in each provision of
this Security Agreement of which time is an element.
Section 7.07. Binding Agreement. All rights of the Secured Party hereunder shall
inure to the benefit of its successors and assigns. The Debtor shall not assign
any of its interest under this Security Agreement without the prior written
consent of the Secured Party. Any purported assignment inconsistent with this
provision shall, at the option of the Secured Party, be null and void.
Section 7.08. Entire Security Agreement. This Security Agreement and the other
Loan Documents are intended by the parties as a final expression of their
agreement and is intended as a complete and exclusive statement of the terms and
conditions thereof. Acceptance of or acquiescence in a course of performance
rendered under this Security Agreement shall not be relevant to determine the
meaning of this Security Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.

 

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Section 7.09. Attorneys’ Fees. In any action or proceeding brought to enforce
any provision of this Security Agreement, or to seek damages for a breach of any
provision hereof, or where any provision hereof is asserted as a defense, the
Debtor shall pay the Secured Party’s reasonable attorneys’ fees in addition to
any other remedy available under this Security Agreement.
Section 7.10. Severability. If any provision of this Security Agreement should
be found to be invalid or unenforceable, all of the other provisions shall
nonetheless remain in full force and effect to the maximum extent permitted by
law.
Section 7.11. Survival of Provisions. All representations, warranties and
covenants of the Debtor contained herein shall survive the execution and
delivery of this Security Agreement, and terminate only upon full and final
payment and performance of the Secured Obligations.
Section 7.12. Set-off. The Secured Party shall have the right, at any time after
the occurrence of a Default, to set off any indebtedness or obligation of the
Debtor to the Secured Party against any indebtedness or obligation of the
Secured Party to the Debtor, without notice to or demand upon the Debtor and
whether or not any such indebtedness or obligations are liquidated or mature at
the time of such offset. The Secured Party’s right of offset hereunder shall be
in addition to and not in limitation of any other rights or remedies which may
exist in favor of the Secured Party.
Section 7.13. Authority of the Secured Party. The Secured Party shall have and
be entitled to exercise all powers hereunder which are specifically delegated to
the Secured Party by the terms hereof, together with such powers as are
reasonably incident thereto. The Secured Party may perform any of its duties
hereunder or in connection with the Collateral by or through agents or employees
and shall be entitled to retain counsel to act in reliance upon the advice of
counsel concerning all such matters. Neither the Secured Party nor any director,
officer, employee, attorney or agent of the Secured Party shall be liable to the
Debtor for any action taken or omitted to be taken by it or them hereunder,
except for its or their own gross negligence or willful misconduct; nor shall
the Secured Party be responsible for the validity, effectiveness or sufficiency
hereof or of any document or security furnished pursuant hereto. The Secured
Party shall be entitled to rely on any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons. The Debtor agrees to indemnify and hold harmless the
Secured Party and/or any such other person from and against any and all costs,
expenses (including reasonable attorneys’ fees), claims or liability incurred by
the Secured Party or such other persons hereunder, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Secured Party or such other person.
Section 7.14. Counterparts. This Security Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same agreement.

 

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Section 7.15. Termination of Security Agreement. This Security Agreement shall
continue in force so long as any portion of the Secured Obligations remain
unpaid. If the Secured Party receives any payment or payments on account of the
Secured Obligations which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver, or any other party under
the Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended, or any other
state or federal law, common law or equitable doctrine, then to the extent of
any sum not finally retained by the Secured Party, the Debtor’s obligations to
the Secured Party shall be reinstated and this Security Agreement, and any
security therefore, shall remain in full force and effect (or be reinstated)
until payment shall have been made to the Secured Party, notwithstanding
termination of this Security Agreement or the cancellation of any note,
instrument or agreement evidencing the Secured Obligations, and such payment
shall be due on demand by the Secured Party. If any proceeding seeking such
repayment is pending or, in the Secured Party’s sole judgment, threatened, this
Security Agreement and any security therefor shall remain in full force and
effect notwithstanding that the Debtor may not be obligated to the Secured
Party.
Section 7.16. Sealed Document. This Security Agreement is intended as a document
under seal.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

              ATTEST:   DEBTOR
 
           
/s/ Peter F. Comerford
 
Secretary
  By:   /s/ Philip A. Fain
 
Philip A. Fain, Officer    
 
                RBS BUSINESS CAPITAL, a division of
RBS Asset Finance, Inc.
 
           
 
  By:   /s/ Ronald L. Tassone
 
Ronald L. Tassone, Senior Vice President    

 

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