Exhibit
10.20


 


AMENDED
AND RESTATED SECURITY AGREEMENT


 


This Amended and Restated Security Agreement (the “Agreement”)
is dated as of September 27, 2002, by and among FTD, Inc. (f/k/a
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 3113 Woodcreek Drive, Downers Grove,
Illinois 60515, and Harris Trust
and Savings Bank, an Illinois banking corporation (“HTSB”), with its mailing
address at 111 West Monroe Street, Chicago, Illinois 60603, 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 (other than FTD.COM Inc. and Renaissance Greeting
Cards, Inc.), 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 “Obligations” and
“Hedging Liability” (each as defined in the Credit Agreement) are currently
secured by, among other things, that certain Security Agreement dated as of
September 27, 2001, between the Debtors (other than FTD.COM Inc.) and the
Agent, and the personal property of the Debtors described therein (the “Prior
Security Agreement”).


 


C.             The Borrower has
requested that the Agent and the Lenders enter into an Amended and Restated
Credit Agreement of even date herewith (such Amended and Restated 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”) and, as a condition thereto, the Secured Creditors have
required, among other things, that the Debtors reaffirm their grant to the
Agent for the benefit of the Secured Creditors of a security interest in the
personal property described herein subject to the terms and conditions hereof
and,


 

















 


in connection therewith, that the Prior Security Agreement be amended
and restated in its entirety to read as set forth in this Agreement.


 


D.            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.


 


E.              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.


 


F.              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.


 


G.             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);


 


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(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;


 


(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;


 


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(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.


 


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


 


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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 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


 


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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.


 


(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


 


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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
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


 


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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 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


 


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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 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


 


9

















 


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 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 bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, 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.


 


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(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.


 


(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.


 


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(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, sue for,
compound and give acquittance for any or 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


 


12

















 


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
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


 


13

















 


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


 


(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


 


14

















 


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.


 


(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


 


15

















 


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 bill 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 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


 


16

















 


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 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


 


17

















 


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 theabsolute 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.  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


 


18

















 


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. 
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


 


19

















 


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, 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.


 


20

















 


(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.


 


(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)                   Upon the
execution and delivery of this Agreement by the Debtors party hereto and the
Agent, this Agreement shall amend, restate and supersede all provisions of the
Prior Security Agreement as of such date. 
The Debtors hereby agree that, notwithstanding the execution and
delivery of this Agreement, the liens and security interests created and
provided for under the Prior Security Agreement continue in effect under and
pursuant to the terms of this Agreement for the benefit of all of the
Obligations.  Nothing herein contained
shall in any manner affect or impair the priority of the liens and security
interests created and provided for by the Prior Security Agreement as to the
indebtedness and obligations which would otherwise be secured


 


21

















 


thereby prior to giving effect to this Agreement, and nothing in this
Agreement shall constitute a novation of any of the Obligations.


 


h)                       Each Debtor hereby warrants and
acknowledges that value has been given; that the security interest created
herein in existing Collateral attached pursuant to the Prior Security
Agreement; and that it intends the security interest created herein in
after-acquired Collateral to attach at the same time as such Debtor acquires
rights therein.


 


(i)                       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.


 


(j)                       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.


 


(k)                    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.


 


[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

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
	
   

  	
   

  
	
   

  	
  FTD, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
	
   

  	
   

  
	
   

  	
  Value Network Service, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
	
   

  	
   

  
	
   

  	
  FTD Holdings, Incorporated

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ JON R. BURNEY

  
	
   

  	
   

  	
  Title

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
  FTD International
  Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
					



 


23

















 


	
   

  	
  Renaissance Greeting Cards,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FTD.COM Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ CARRIE A. WOLFE

  
	
   

  	
   

  	
  Title

  	
  CFO, Treasurer

  
					



 


Accepted and agreed to in Chicago, Illinois, as of the
date first above written.


 


	
   

  	
  Harris Trust and Savings
  Bank, as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  Name

  	
  /S/ KIRBY M. LAW

  
	
   

  	
   

  	
  Title

  	
  VICE PRESIDENT

  
					



 


24

















 


SCHEDULE A TO SECURITY AGREEMENT


 


LOCATIONS


 


	
  NAME OF
  DEBTOR

  	
   

  	
  CHIEF EXECUTIVE OFFICE

  	
   

  	
  ADDITIONAL PLACES OF

  BUSINESS AND

  COLLATERAL LOCATIONS

  
	
  FTD, Inc.

  (Delaware 2328319)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Florists’ Transworld Delivery, Inc.

  (Michigan 195-978)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value Network Service, Inc.

  (Delaware 3070831)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD Holdings, Incorporated

  (Delaware 2291883)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD International Corporation

  (Delaware 3160529)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Renaissance Greeting Cards, Inc.

  (Maine 19930532D)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  10 Renaissance Way

  Sanford, ME 04073

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  993 Bar Harbor Road

  Trenton, ME 04605

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD.COM, Inc

  (Delaware 3020976)

  	
   

  	
  3113 Woodcreek Drive

  Downers Grove, Illinois  60515

  	
   

  	
  None

  



 

















 


SCHEDULE B TO SECURITY AGREEMENT


 


OTHER
NAMES


 


A.  PRIOR LEGAL NAMES


 


	
  Name of
  Debtor

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FTD, Inc.

  	
   

  	
  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

  



 


 


FTD.COM


 


B.  TRADE NAMES


 


[Please see Schedule C
for additional Trade Names, if any]


 


	
  FTD, Inc.

  	
   

  	
  FTD

  
	
   

  	
   

  	
   

  
	
  Florists’ Transworld Delivery, Inc.

  	
   

  	
  FTD

  
	
   

  	
   

  	
   

  
	
  Value Network Service, Inc.

  	
   

  	
  VNS

  
	
   

  	
   

  	
   

  
	
  FTD Holdings, Incorporated

  	
   

  	
  None

  
	
   

  	
   

  	
   

  
	
  FTD International Corporation

  	
   

  	
  None

  
	
   

  	
   

  	
   

  
	
  Renaissance Greeting Cards, Inc.

  	
   

  	
  Renaissance

  
	
   

  	
   

  	
   

  
	
  FTD.COM Inc.

  	
   

  	
  FTD.COM

  



 


2

















 


SCHEDULE C TO SECURITY AGREEMENT


 


INTELLECTUAL
PROPERTY RIGHTS


 




	
  NAME OF DEBTOR

  	
   

  	
   

  
	
  FTD, Inc.

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  Florists’ Transworld Delivery, Inc.

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  Value Network Service, Inc.

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  FTD Holdings, Incorporated

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  FTD International Corporation

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  Renaissance Greeting Cards, Inc.

  	
   

  	
  See attached.

  
	
   

  	
   

  	
   

  
	
  FTD.COM 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

  	
   

  	
   

  	
   

  	
   

  
	
  FTD, Inc.

  	
   

  	
   

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Florists’ Transworld Delivery, Inc.

  	
   

  	
   

  	
   

  	
  Holds a 33 1/3% interest in Interflora, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value Network Service, Inc.

  	
   

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD Holdings, Incorporated

  	
   

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD International Corporation

  	
   

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Renaissance Greeting Cards, Inc.

  	
   

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD.COM Inc.

  	
   

  	
  None

  	
   

  	
   

  



 


B. 
DEPOSITS


 


	
  Name of
  Debtor

  	
   

  	
   

  	
   

  	
   

  
	
  FTD, Inc.

  	
   

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Florists’ Transworld Delivery, Inc.

  	
   

  	
   

  	
   

  	
  Standard Federal Bank #6800002799

  
	
   

  	
   

  	
   

  	
   

  	
  Standard Federal Bank #6800002807

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Insight Funds #9045741

  
	
   

  	
   

  	
   

  	
   

  	
  Bank One #0000180143

  
	
   

  	
   

  	
   

  	
   

  	
  Bank One #0000415306

  
	
   

  	
   

  	
   

  	
   

  	
  U.S. Bank #1005036817

  
	
   

  	
   

  	
   

  	
   

  	
  U.S. Bank #3500720739

  
	
   

  	
   

  	
   

  	
   

  	
  U.S. Bank #3500720663

  
	
   

  	
   

  	
   

  	
   

  	
  Bank of Montreal #0001258238

  
	
   

  	
   

  	
   

  	
   

  	
  Toronto Dominion #2930514801

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Bank #2597235

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Bank #2539799

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Value Network Service, Inc.

  	
   

  	
   

  	
   

  	
  Bank One #1031277

  
	
   

  	
   

  	
   

  	
   

  	
  Key Bank #359681037628

  
	
   

  	
   

  	
   

  	
   

  	
  Key Bank #440993502184

  
	
   

  	
   

  	
   

  	
   

  	
  Key Bank #440993502192

  
	
   

  	
   

  	
   

  	
   

  	
  Standard Federal Bank #6856295552

  



 


5

















 


	
   

  	
   

  	
   

  	
   

  	
  Bank of Montreal #00181042778

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD Holdings, Incorporated

  	
   

  	
   

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD International Corporation

  	
   

  	
   

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Renaissance Greeting Cards, Inc.

  	
   

  	
   

  	
   

  	
  Fleet Bank #9353740662, #9439937546, #9354137128

  
	
   

  	
   

  	
   

  	
   

  	
  First National Bank of Bar Harbor #85135659

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FTD.COM Inc.

  	
   

  	
   

  	
   

  	
  Harris Bank #2539716

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Bank #3560703

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Bank #2539740

  
	
   

  	
   

  	
   

  	
   

  	
  Harris Bank #01110031180553

  



 


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 Harris
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 Amended and Restated Security
Agreement dated as of September 27, 2002 (such Amended and Restated 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 ORGANIZATION

  AND ORGANIZATIONAL

  REGISTRATION NUMBER)

  	
   

  	
  CHIEF EXECUTIVE OFFICE (AND

  NAME OF RECORD OWNER OF

  SUCH LOCATION)

  	
   

  	
  ADDITIONAL PLACES OF

  BUSINESS AND COLLATERAL

  LOCATIONS (AND NAME OF

  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.


 


	
   

  	
  Harris Trust and Savings
  Bank, as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  
						



 


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