EXHIBIT 10.2
Execution Copy
X'XXXXXXXX INDUSTRIES, INC.,
X'XXXXXXXX FURNITURE FACTORY OUTLET, INC.,
AND
X'XXXXXXXX INDUSTRIES - VIRGINIA, INC.
(referred to herein individually as "GRANTOR" and collectively as "GRANTORS")
and
general electric capital corporation,
as Agent
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SECURITY AGREEMENT
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of September 29, 2003 (this "Agreement"), by and among X'XXXXXXXX INDUSTRIES,
INC., a Delaware corporation ("OSI"), X'XXXXXXXX FURNITURE FACTORY OUTLET, INC., a Missouri corporation ("OSF"),
X'XXXXXXXX INDUSTRIES - VIRGINIA, INC., a Virginia corporation ("OSV" and together with OSI and OSF, each
referred to herein individually as a "Borrower and collectively as "Borrowers" each referred to herein
individually as a "Grantor" and collectively as "Grantors") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation, in its capacity as Agent (in such capacity, "Agent") for itself and Lenders from time to time party
to the Credit Agreement as defined below ("Lenders").
WHEREAS:
(A) Pursuant to that certain Credit Agreement dated as of the date hereof (including all annexes, exhibits
and schedules thereto, and as from time to time amended, restated, supplemented or otherwise modified,
the "Credit Agreement") by and among Grantors, Agent and Lenders, the Lenders have agreed to make
available to Borrowers, upon the terms and conditions thereof, a certain revolving credit facility;
(B) Borrowers wish to borrow certain Loans and cause certain Letters of Credit to be issued (as such terms
are defined in the Credit Agreement); and
(C) in order to induce Agent and Lenders to make the Loans and to incur the Letter of Credit Obligations (as
defined in the Credit Agreement) to be made and incurred by Lenders as provided for in the Credit
Agreement, each Grantor has agreed to grant a continuing Lien on the Collateral (as hereinafter defined)
to secure the Obligations.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS
(a) All capitalized terms used but not otherwise defined herein have the meanings given to them in the
Credit Agreement or in Annex A thereto. All other terms contained in this Agreement, unless
the context indicates otherwise, have the meanings provided for by the Code to the extent the
same are used or defined therein.
(b) "Indenture Requirement" means any covenant or agreement, contained in the Senior Notes Indenture or any
"Note Security Document" as defined therein, as to Trustee First Lien Collateral, performance
by a Grantor with which would preclude performance by such Grantor as to such Trustee First
Lien Collateral with a covenant under this Agreement.
(c) "Uniform Commercial Code jurisdiction" means any jurisdiction that has adopted all or substantially all
of Article 9 as contained in the 2000 Official Text of the Uniform Commercial Code, as
recommended by the National Conference of Commissioners on Uniform State Laws and the American
Law Institute, together with any subsequent amendments or modifications to the Official Text.
2. GRANT OF LIEN
(a) To secure the prompt and complete payment, performance and observance of all of the Obligations and all
obligations, liabilities, and indebtedness of Grantors arising under this Agreement, each
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to
Agent, for itself and the benefit of Lenders, a Lien upon all of its right, title and interest
in, to and under all personal property and other assets, whether now owned by or owing to, or
hereafter acquired by or arising in favor of such Grantor (including under any trade names,
styles or derivations thereof), and whether owned or consigned by or to, or leased from or to,
such Grantor, and regardless of where located (all of which being hereinafter collectively
referred to as the "Collateral"), including:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all General Intangibles (including trademarks, patents, copyrights, other intellectual property and
licenses thereof, payment intangibles and Software);
(v) all Goods (including Inventory, Equipment and Fixtures);
(vi) all Instruments;
(vii) all Investment Property;
(viii) all Deposit Accounts (as defined in the Code) of such Grantor, including all blocked accounts and all
other bank accounts and all deposits therein;
(ix) all money, cash or Cash Equivalents of such Grantor;
(x) all Supporting Obligations (as defined in the Code) and Letter-of-Credit Rights (as defined in the Code)
of such Grantor;
(xi) all Intercompany Notes; and
(xii) to the extent not otherwise included, all Proceeds, tort claims, insurance claims and other rights to
payments not otherwise included in the foregoing and products of the foregoing and all
accessions to, substitutions and replacements for, and income, benefits, rents and
profits of, each of the foregoing and, to the extent related to any of the foregoing,
all books, correspondence, credit files, records, invoices, and other papers
(including without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Grantor or any computer
bureau or service company from time to time acting for such Grantor);
provided, that the Collateral shall not include Excluded Assets.
(b) In addition, to secure the prompt and complete payment, performance and observance of the Obligations
and all obligations, liabilities and indebtedness of Grantors arising under this Agreement, and
in order to induce Agent and Lenders as aforesaid, each Grantor hereby grants to Agent, for
itself and the benefit of Lenders, a right of setoff against the property of such Grantor held
by Agent or any Lender, consisting of property described above in Section 2(a) now or hereafter
in the possession or custody of or in transit to Agent or any Lender, for any purpose,
including safekeeping, collection or pledge, for the account of such Grantor, or as to which
such Grantor may have any right or power.
3. AGENT'S AND LENDERS' RIGHTS: LIMITATIONS ON AGENT'S AND LENDERS' OBLIGATIONS
(a) It is expressly agreed by each Grantor that, anything herein or in any other Loan Document to the
contrary notwithstanding, each Grantor shall remain liable under each of its respective
Contractual Obligations, including all Licenses, to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. Neither Agent nor any Lender shall
have any obligation or liability under any Contractual Obligation by reason of or arising out
of this Agreement or any other Loan Document or the granting herein of a Lien thereon or the
receipt by Agent or any Lender of any payment relating to any Contractual Obligation pursuant
hereto. Neither Agent nor any Lender shall be required or obligated in any manner to perform
or fulfill any of the obligations of any Grantor under or pursuant to any Contractual
Obligation, or to make any payment, or to make any inquiry as to the nature or the sufficiency
of any payment received by it or the sufficiency of any performance by any party under any
Contractual Obligation, or to present or file any claims, or to take any action to collect or
enforce any performance or the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(b) Agent may at any time after an Event of Default has occurred and is continuing (or if any rights of
set-off (other than set-offs against an Account arising under the Contract giving rise to the
same Account) or contra accounts may be asserted with respect to the following), without prior
notice to any Grantor, notify each Grantor's Account Debtors and all other Persons obligated on
any of the Collateral that Agent has a security interest therein, and that payments shall be
made directly to Agent, for itself and the benefit of Lenders. Upon the request of Agent, each
Grantor shall so notify its Account Debtors and other Persons obligated on the Collateral.
Once any such notice has been given to any Account Debtor or other Person obligated on the
Collateral, none of the Grantors shall give any contrary instructions to such Account Debtor or
other Person without Agent's prior written consent.
(c) Agent may at any time in Agent's own name, in the name of a nominee of Agent or in the name of any
Grantor communicate (by mail, telephone, facsimile or otherwise) with Account Debtors, parties
to Contractual Obligations and obligors in respect of Instruments to verify with such Persons,
to Agent's satisfaction, the existence, amount, terms of, and any other matter relating to,
Accounts, Instruments, Chattel Paper and/or payment intangibles. If an Event of Default shall
have occurred and be continuing, each Grantor, at its own expense, shall cause the independent
certified public accountants then engaged by such Grantor to prepare and deliver to Agent and
each Lender at any time and from time to time promptly upon Agent's request the following
reports with respect to such Grantor: (i) a reconciliation of all Accounts; (ii) an aging of
all Accounts; (iii) trial balances; and (iv) a test verification of such Accounts as Agent may
request. Each Grantor, at its own expense, shall deliver to Agent the results of each physical
verification, if any, which such Grantor may in its discretion have made, or caused any other
Person to have made on its behalf, of all or any portion of its Inventory.
4. REPRESENTATIONS AND WARRANTIES
Each Grantor, jointly and severally, represents and warrants that:
(a) Each Grantor has rights in and the power to transfer each item of the Collateral upon which it purports
to xxxxx x Xxxx hereunder free and clear of any and all Liens other than Permitted Encumbrances.
(b) No effective security agreement, financing statement, equivalent security or Lien instrument or
continuation statement covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed (i) by any Grantor in favor of Agent
pursuant to this Agreement or the other Loan Documents, (ii) in connection with any other
Permitted Encumbrances and (iii) by any Grantor in favor of the Senior Notes Trustee on behalf
of itself and the holders of the Senior Notes in accordance with the intercreditor provisions
of the Senior Notes Indenture and the Intercreditor Agreement.
(c) This Agreement is effective to create a valid and continuing Lien on and, upon the filing of the
appropriate financing statements in the filing offices listed on Schedule I hereto or the
entering into of three-party control agreements, as applicable, a perfected Lien in favor of
Agent, for itself and the benefit of Lenders, on the Collateral with respect to which a Lien
may be perfected by filing pursuant to the Code. Such Lien is prior to all other Liens, except
(i) Permitted Encumbrances that would be prior to Liens in favor of Agent for the benefit of
Agent and Lenders as a matter of law and (ii) to the extent that the security interest in
Collateral has been subordinated to the prior Lien of the Trustee First Lien Collateral, and is
enforceable as such as against any and all creditors of and purchasers from any Grantor (other
than purchasers and lessees of Inventory in the ordinary course of business and non-exclusive
licensees of General Intangibles in the ordinary course of business). All action by each of
the Grantors necessary or desirable to protect and perfect such Lien on each item of the
Collateral has been duly taken.
(d) Schedule II hereto lists all Instruments, Documents, Letter of Credit Rights and Chattel Paper
(including any Intercompany Notes) of each Grantor. All actions by each Grantor necessary or
desirable to protect and perfect the Lien of Agent on each item set forth on Schedule II
(including the delivery of all originals thereof to Agent and the legending of all Chattel
Paper as required by Section 5(b) hereof) have been duly taken. The Lien of Agent, for the
benefit of Agent and Lenders, on the Collateral listed on Schedule II hereto is prior to all
other Liens, except (i) Permitted Encumbrances that would be prior to the Liens in favor of
Agent as a matter of law and (ii) to the extent that the security interest in Collateral has
been subordinated to the prior Lien of the Trustee First Lien Collateral, and is enforceable as
such against any and all creditors of and purchasers from each Grantor.
(e) Each Grantor's name as it appears in official filings in the state of its incorporation or other
organization, all prior names of each Grantor, as they appeared from time to time in official
filings in the state of its incorporation or other organization, the type of entity of each
Grantor (including corporation, partnership, limited partnership or limited liability company),
organizational identification number issued by each Grantor's state of incorporation or
organization or a statement that no such number has been issued, each Grantor's state of
organization or incorporation, the mailing address of each Grantor as of the date hereof, the
location of each Grantor's chief executive office, principal place of business, other offices,
all warehouses and premises where Collateral is stored or located, and the locations of each
Grantor's books and records concerning the Collateral are set forth on Schedule IIIA, Schedule
IIIB and Schedule IIIC, respectively, hereto. Each Grantor is a registered organization and
has only one state of incorporation.
(f) With respect to the Accounts (i) they represent bona fide sales of Inventory or rendering of services to
Account Debtors in the ordinary course of each Grantor's business and are not evidenced by a
judgment, Instrument or Chattel Paper; (ii) except as disclosed to Agent or as to which there
would not be a Material Adverse Effect, there are no set-offs, claims or disputes existing or
asserted with respect thereto and none of the Grantors has made any agreement with any of its
Account Debtors for any extension of time for the payment thereof, any compromise or settlement
for less than the full amount thereof, any release of any of its Account Debtors from liability
therefor, or any deduction therefrom except a discount or allowance allowed by any Grantor in
the ordinary course of its business for prompt payment and disclosed to Agent; (iii) to each
Grantor's knowledge, there are no facts, events or occurrences which in any way impair the
validity or enforceability thereof or could reasonably be expected to reduce the amount payable
thereunder to the extent that there would be a Material Adverse Effect as shown on such
Grantor's books and records and any invoices, statements or other collateral report delivered
to Agent and Lenders with respect thereto; (iv) none of the Grantors has received any notice of
proceedings or actions which are threatened or pending against any of its Account Debtors which
might result in any adverse change in such Account Debtor's financial condition and which would
have a Material Adverse Effect on any of the Grantors; (v) none of the Grantors has knowledge
that any of its Account Debtors is unable generally to pay its debts as they become due, which
inability would result in a Material Adverse Effect on Grantors; and (vi) they constitute the
legally valid and binding obligation of the applicable Account Debtors. Further, with respect
to the Accounts (x) the amounts shown on all invoices, statements or other collateral reports
which may be delivered to Agent with respect thereto are actually owing to such Grantor as
indicated thereon and are not in any way contingent, except for such contingencies as may exist
under trade custom and practice; (y) no payments have been or shall be made thereon except
payments immediately delivered to the applicable blocked accounts or Agent as required pursuant
to the terms of Annex C to the Credit Agreement; and (z) to each Grantor's knowledge, all of
its Account Debtors have the capacity to contract.
(g) With respect to any Inventory, (i) such Inventory is located at one of the applicable Grantor's
locations set forth on Schedule IIIA, Schedule IIIB or Schedule IIIC hereto, as applicable,
(ii) no Inventory is now, or shall at any time or times hereafter be stored at any other
location without prior notice to Agent, and the applicable Grantor will concurrently therewith
obtain, to the extent required by the Credit Agreement, bailee, landlord and mortgagee
agreements, (iii) each Grantor has good, indefeasible and merchantable title to its Inventory
and such Inventory is not subject to any Lien or security interest or document whatsoever
except for the Lien granted to Agent, for the benefit of Agent and Lenders, and except for
Permitted Encumbrances, (iv) except as specifically disclosed to Agent, such Inventory is of
good and merchantable quality, free from any defects, (v) such Inventory is not subject to any
licensing, patent, royalty, trademark, trade name or copyright agreements with any third
parties that would require any consent of any third party upon sale or other disposition of
that Inventory or the payment of any monies to any third party upon such sale or other
disposition, and (vi) the completion of manufacture, sale or other disposition of such
Inventory by Agent following an Event of Default shall not require the consent of any Person
and shall not constitute a breach or default under any contract or agreement to which any
Grantor is a party or to which such property is subject.
(h) Schedule IVA sets forth under the name of each Grantor a complete and correct list of all Patents,
Trademarks and Copyrights owned by such Grantor on the date hereof; and all registrations
listed in Schedule IVA are valid and in full force and effect. None of the Grantors has any
interest in, or title to, any Patent, Trademark or Copyright except as set forth in Schedule
IVA hereto. This Agreement is effective to create a valid and continuing Lien on and, upon
filing of appropriate financing statements in the filing offices listed on Schedule I hereto
and filing of the Patent Security Agreements and the Trademark Security Agreements with the
United State Patent and Trademark Office, perfected Liens in favor of Agent on each Grantor' s
Patents and Trademarks and such perfected Liens are enforceable as such as against any and all
creditors of and purchasers from any Grantor. Upon filing of the Patent Security Agreements
and the Trademark Security Agreements with the United States Patent and Trademark Office and
the filing of appropriate financing statements listed on Schedule I hereto, all action
necessary or desirable to protect and perfect Agent's Lien on each Grantor's Patents or
Trademarks shall have been duly taken.
Schedule IVB sets forth a complete and correct list of all licenses and other user agreements
pursuant to which any Grantor manufactures or sells Inventory, included in the Intellectual
Property on the date hereof.
(i) All titled motor vehicles owned by each Grantor are listed under the name of such Grantor on Schedule V
hereto, by make, model, model year and vehicle identification number ("VIN"). Each Grantor
shall provide notice to Agent of, and shall deliver to Agent, motor vehicle title certificates
for all motor vehicles owned by such Grantor from time to time that are covered by a
certificate of title, and shall cause such title certificates to be filed (with Agent's lien
noted thereon) in the appropriate state motor vehicle filing office.
5. COVENANTS
Without limiting any Grantor's covenants and agreements contained in the Credit Agreement and other Loan
Documents, each Grantor covenants and agrees with Agent, for the benefit of Agent and Lenders, that from
and after the date of this Agreement and until the Termination Date:
(a) Further Assurances; Pledge of Instruments; Chattel Paper.
(i) At any time and from time to time, upon the written request of Agent and at the sole expense of such
Grantor, such Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Agent may deem
desirable to obtain the full benefits of this Agreement and of the rights and powers
herein granted, including (A) securing all consents and approvals necessary or
appropriate for the assignment to or for the benefit of Agent of any Contractual
Obligation, including any License, held by such Grantor and to enforce the security
interests granted hereunder; and (B) filing any financing or continuation statements
under the Code with respect to the Liens granted hereunder or under any other Loan
Document as to those jurisdictions that are not Uniform Commercial Code jurisdictions.
(ii) Unless Agent shall otherwise consent in writing (which consent may be revoked), except to the extent of
any Indenture Requirement with respect thereto, such Grantor shall deliver to Agent
all Collateral consisting of negotiable Documents, certificated securities, Chattel
Paper and Instruments (including Intercompany Notes) (in each case, accompanied by
stock powers, allonges or other instruments of transfer executed in blank) promptly
after such Credit Party receives the same. Upon acquiring any negotiable Documents,
certificated securities, Chattel Paper or Instruments (including any Intercompany
Notes), such Grantor will provide prompt written notice thereof to Agent.
(iii) Such Grantor shall, in accordance with the terms of the Credit Agreement, obtain waivers or
subordinations of Liens from landlords, bailees and mortgagees, and such Grantor shall
in all instances obtain signed acknowledgements of Agent's Liens from bailees having
possession of such Grantor's Goods that they hold for the benefit of Agent.
(iv) To the extent required by Agent, such Grantor shall obtain authenticated control letters in form and
substance satisfactory to Agent from each issuer of uncertificated securities,
securities intermediary, or commodities intermediary issuing or holding any financial
assets or commodities to or for such Grantor. Agent shall not terminate such
Grantor's access to any such financial assets or commodities except during the
continuation of an Event of Default.
(v) As required by Section 6 of this Agreement, and in accordance with Section 2.10 of the Credit Agreement,
such Grantor shall obtain a blocked account, lockbox or similar agreement with each
bank or financial institution holding a Deposit Account for such Grantor.
(vi) If such Grantor is or becomes the beneficiary of a letter of credit, except to the extent of any
Indenture Requirement with respect thereto, such Grantor shall promptly, and in any
event within five (5) Business Days after becoming a beneficiary, notify Agent thereof
and enter into a tri-party agreement with Agent and the issuer and/or confirmation
bank with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to
Agent and directing all payments thereunder to the Agent's account identified in
Section 1.4 of the Credit Agreement, all in form and substance reasonably satisfactory
to Agent.
(vii) Except to the extent of any Indenture Requirement with respect thereto, such Grantor shall take all
steps necessary to grant Agent control of all electronic Chattel Paper in accordance
with the Code and all "transferable records" as defined in each of the Uniform
Electronic Transactions Act and the Electronic Signatures in Global and National
Commerce Act.
(viii) Such Grantor hereby irrevocably authorizes Agent at any time and from time to time to file in any filing
office in any Uniform Commercial Code jurisdiction any initial financing statements
and amendments thereto that (a) indicate the Collateral (i) as all assets or personal
property of such Grantor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9 of
the Code or such jurisdiction, or (ii) as being of an equal or lesser scope or with
greater detail, and (b) contain any other information required by part 5 of Article 9
of the Code for the sufficiency or filing office acceptance of any financing statement
or amendment, including (i) whether such Grantor is an organization, the type of
organization and any organization identification number issued to such Grantor, and
(ii) in the case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient description of
real property to which the Collateral relates. Such Grantor agrees to furnish any
such information to Agent promptly upon request. Such Grantor also hereby ratifies
its authorization for Agent to have filed in any Uniform Commercial Code jurisdiction
any initial financing statements or amendments thereto if filed prior to the date
hereof.
(ix) Such Grantor shall promptly, and in any event within five (5) Business Days after the same is acquired
by it, notify Agent of any Commercial Tort Claim (as defined in the Code) acquired by
it and unless otherwise consented by Agent (which consent may be revoked), such
Grantor shall enter into a supplement to this Agreement, granting to Agent a Lien in
such commercial tort claim.
(b) Maintenance of Records. Such Grantor shall keep and maintain, at its own cost and expense, satisfactory
and complete records of the Collateral, including a record of any and all payments received and
any and all credits granted with respect to the Collateral and all other dealings with the
Collateral. Such Grantor shall xxxx its books and records pertaining to the Collateral to
evidence this Agreement and the Liens granted hereby. If any Grantor retains possession of any
Chattel Paper or Instruments (including Intercompany Notes) with Agent's consent, such Chattel
Paper and Instruments (including Intercompany Notes) shall be marked with the following
legend: "This writing and the obligations evidenced or secured hereby are subject to the
security interest of General Electric Capital Corporation, as Agent, for the benefit of Agent
and certain Lenders."
(c) Covenants Regarding Patent, Trademark and Copyright Collateral.
(i) Such Grantor shall notify Agent immediately if it knows or has reason to know that any application or
registration relating to any Patent, Trademark or Copyright (now or hereafter
existing) may become abandoned or dedicated, or of any adverse determination or
development (including the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain the
same.
(ii) In no event shall such Grantor, either directly or through any agent, employee, licensee or designee,
file an application for the registration of any Patent, Trademark or Copyright with
the United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency without giving Agent prior written notice thereof, and,
upon request of Agent, such Grantor shall execute and deliver any and all Patent
Security Agreements, Copyright Security Agreements or Trademark Security Agreements as
Agent may request to evidence Agent's Lien on such Patent, Trademark or Copyright, and
the General Intangibles of such Grantor relating thereto or represented thereby.
(iii) Such Grantor shall take all actions necessary or requested by Agent to maintain and pursue (and not
abandon) each application, to obtain the relevant registration and to maintain the
registration of each of the Patents, Trademarks and Copyrights (now or hereafter
existing), including the filing of applications for renewal, affidavits of use,
affidavits of noncontestability and opposition and interference and cancellation
proceedings, unless such Grantor shall determine that such Patent, Trademark or
Copyright is not material to the conduct of its business.
(iv) In the event that any of the Patent, Trademark or Copyright Collateral is infringed upon, or
misappropriated or diluted by a third party, each Grantor shall comply with Section
5(a)(ix) of this Agreement. Such Grantor shall, unless it shall reasonably determine
that such infringement, misappropriation or dilution of Patent, Trademark or Copyright
Collateral is in no way material to the conduct of its business or operations,
promptly xxx for infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and shall take such other
actions as Agent shall deem appropriate under the circumstances to protect such
Patent, Trademark or Copyright Collateral.
(d) Indemnification. In any suit, proceeding or action brought by Agent or any Lender relating to any
Collateral for any sum owing with respect thereto or to enforce any rights or claims with
respect thereto, such Grantor will save, indemnify and keep Agent and Lenders harmless from and
against all expense (including reasonable attorneys' fees and expenses), loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever of its Account Debtors or other Person obligated on the Collateral, arising out of a
breach by such Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to, or in favor of, such obligor or its successors
from such Grantor, except in the case of Agent or any Lender, to the extent such expense, loss,
or damage is attributable solely to the gross negligence or willful misconduct of Agent or such
Lender as finally determined by a court of competent jurisdiction. All such obligations of each
Grantor shall be and remain enforceable against and only against such Grantor and shall not be
enforceable against Agent or any Lender.
(e) Compliance with Terms of Accounts, etc. In all material respects, such Grantor will perform and comply
with all obligations in respect of the Collateral and all other agreements to which it is a
party or by which it is bound relating to the Collateral.
(f) Limitation on Liens on Collateral. Such Grantor will not create, permit or suffer to exist, and will
defend the Collateral against, and take such other action as is necessary to remove, any Lien
on any of the Collateral except Permitted Encumbrances, and will defend the right, title and
interest of Agent and Lenders in and to any of such Grantor's rights under the Collateral
against the claims and demands of all Persons whomsoever, except claims pursuant to the
Permitted Encumbrances.
(g) Limitations on Disposition. Such Grantor will not sell, license, lease, transfer or otherwise dispose
of any of the Collateral, or attempt or contract to do so except as permitted by this Agreement
or the Credit Agreement.
(h) Further Identification of Collateral. Subject to the requirements of the Credit Agreement, such Grantor
will, if so requested by Agent, furnish to Agent, as often as Agent requests, statements and
schedules further identifying and describing the Collateral and such other reports in
connection with the Collateral as Agent may request, all in such detail as Agent may specify.
Grantor shall promptly notify Agent in writing upon acquiring any interest hereafter in
property that is of a type where a security interest or Lien must be or may be registered,
recorded or filed under, or notice thereof given under, any federal statute or regulation and
that is not already covered by this Agreement.
(i) Omitted.
(j) Omitted.
(k) No Reincorporation. Without limiting the prohibitions on mergers involving any Grantor as contained in
the Credit Agreement, none of the Grantors shall reincorporate or reorganize itself under the
laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized
as of the date hereof without the prior written consent of Agent.
(l) Terminations; Amendments Not Authorized. Such Grantor acknowledges that it is not authorized to file
any financing statement in respect of the Liens created hereunder or amendment or termination
statement with respect to any financing statement in respect of the Liens created hereunder
without the prior written consent of Agent and agrees that it will not do so without the prior
written consent of Agent, subject to such Grantor's rights under Section 9-509(d)(2) of the
Code.
(m) Authorized Terminations. Agent will promptly deliver to such Grantor for filing or authorize such
Grantor to prepare and file termination statements and releases in accordance with Section 9.20
of the Credit Agreement.
6. BANK ACCOUNTS; COLLECTION OF ACCOUNTS AND PAYMENTS
Within the time periods specified in the Credit Agreement, each Grantor shall enter into a bank agency
and control agreement ("Bank Agency and Control Agreement"), in a form specified by Agent, with each
financial institution with which each Grantor maintains from time to time any Deposit Account; provided
that Grantors will be allowed to maintain up to ten (10) Deposit Accounts, each with a maximum daily
balance of $25,000, without entering into a Bank Agency and Control Agreement. No Grantor shall
establish any Deposit Account with any financial institution unless prior thereto Agent and such Grantor
shall have entered into a Bank Agency and Control Agreement satisfactory to Agent with such financial
institution.
To the extent requested by the Agent, each Grantor shall establish a lockbox account ("Lockbox Account")
and blocked accounts (collectively, "Blocked Accounts") in such Grantor's name with such banks as are
reasonably acceptable to Agent ("Collecting Banks"), subject to a Bank Agency and Control Agreement
pursuant to which all Account Debtors shall directly remit all payments on Accounts and in which each
Grantor will immediately deposit all cash payments constituting proceeds of Collateral in the identical
form in which such payment was made, whether by cash or check. In addition, Agent, for the benefit of
Agent and Lenders, may establish one or more depository accounts at each Collecting Bank or at a
centrally located bank in the name of Agent or any one or more Grantors as customer (collectively, the
"Concentration Accounts"). From and after receipt by any Collecting Bank of written notice from Agent to
such Collecting Bank that an Event of Default has occurred and is continuing, all amounts held or
deposited from time to time in the Blocked Accounts held by such Collecting Bank shall be transferred on
a daily basis to Agent (as Agent may direct) or any of the Concentration Accounts; provided, that
whether or not an Event of Default is continuing all accounts credited to the Lockbox Account shall be
transferred to Agent's account on a daily basis. Subject to the foregoing, each Grantor hereby agrees
that all payments received by Agent or any Lender whether by cash, check, wire transfer or any other
instrument, made to such Blocked Accounts, Lockbox Account or Concentration Accounts or otherwise
received by Agent or any Lender and whether on the Accounts or as proceeds of other Collateral or
otherwise will be the sole and exclusive property of Lenders. Each Grantor, and any of its Affiliates,
employees, agents and other Persons acting for or in concert with such Grantor shall, acting as trustee
for Agent and Lenders, receive, as the sole and exclusive property of Lenders, any moneys, checks,
notes, drafts or other payments relating to and/or constituting proceeds of Accounts or other Collateral
which come into the possession or under the control of such Grantor or any Affiliates, employees, agent,
or other Persons acting for or in concert with such Grantor, and immediately upon receipt thereof, such
Grantor or such Persons shall deposit the same or cause the same to be deposited in kind, in a Blocked
Account or other account subject to a Bank Agency and Control Agreement.
If at any time a Collecting Bank is obligated to transfer to Agent or any Concentration Account all
amounts held or deposited in the Blocked Accounts held by such Collecting Bank, no Grantor shall, and no
Grantor shall permit any Subsidiary to, accumulate or maintain cash in any disbursement or payroll
account, as of any date, in an amount in excess of checks outstanding against such account as of such
date and amounts necessary to meet minimum balance requirements.
Each Grantor shall close each of its deposit accounts (and promptly establish replacement deposit
accounts with a financial institution which has executed, or is willing to execute, a Bank Agency and
Control Agreement) maintained with any financial institution which is the subject of a notice from Agent
that the creditworthiness of such financial institution or any of its affiliates is no longer acceptable
to Agent, or that the operating performance, funds transfer or availability procedures or performance
with respect to any Bank Agency and Control Agreement of such financial institution is no longer
acceptable in Agent's reasonable judgment.
7. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT
On the Closing Date each Grantor shall execute and deliver to Agent a power of attorney (the "Power of
Attorney") substantially in the form attached hereto as Exhibit A. The power of attorney granted
pursuant to the Power of Attorney is a power coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Agent, for the benefit of Agent and Lenders, under the Power
of Attorney are solely to protect Agent's interests (for the benefit of Agent and Lenders) in the
Collateral and shall not impose any duty upon Agent or any Lender to exercise any such powers. Agent
agrees that (a) except for the powers granted in clause (h) of the Power of Attorney, it shall not
exercise any power or authority granted under the Power of Attorney unless an Event of Default has
occurred and is continuing, and (b) Agent shall account for any moneys received by Agent in respect of
any foreclosure on or disposition of Collateral pursuant to the Power of Attorney provided that none of
Agent nor any Lender shall have any duty as to any Collateral, and Agent and Lenders shall be
accountable only for amounts they actually receive as a result of the exercise of such powers. NONE OF
AGENT, LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES
SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR
OTHERWISE, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE, EXEMPLARY,
INDIRECT OR CONSEQUENTIAL DAMAGES.
8. REMEDIES: RIGHTS UPON DEFAULT
(a) In addition to all other rights and remedies granted to it under this Agreement, the Credit Agreement,
the other Loan Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, if any Event of Default shall have occurred and be
continuing, Agent may exercise all rights and remedies of a secured party under the Code.
Without limiting the generality of the foregoing, each Grantor expressly agrees that in any
such event Agent, without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private sale) to or upon
any Grantor or any other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code and other applicable law),
may forthwith (personally or through its agents) enter upon the premises where any Collateral
is located through self-help, without judicial process, without first obtaining a final
judgment or giving any Grantor or any other Person notice and opportunity for a hearing on
Agent's claim or action and may take possession of, collect, receive, assemble, process,
appropriate, remove and realize upon the Collateral, or any part thereof, and may forthwith
sell, lease, license, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or
more parcels at a public or private sale or sales, at any exchange at such prices as it may
deem acceptable, for cash or on credit or for future delivery without assumption of any credit
risk. Agent or any Lender shall have the right upon any such public sale or sales and, to the
extent permitted by law, upon any such private sale or sales, to purchase for the benefit of
Agent and Lenders, the whole or any part of said Collateral so sold, free of any right or
equity of redemption, which equity of redemption each Grantor hereby releases. Such sales may
be adjourned and continued from time to time with or without notice. Agent shall have the
right to conduct such sales on each Grantor's premises or elsewhere and shall have the right to
use each Grantor's premises without charge for such time or times as Agent deems necessary or
advisable.
If any Event of Default shall have occurred and be continuing, each Grantor further agrees, at
Agent's request, to assemble the Collateral and make it available to Agent at a place or places
designated by Agent which are reasonably convenient to Agent and such Grantor, whether at such
Grantor's premises or elsewhere. Without limiting the foregoing, Agent shall also have the
right to require that each Grantor store and keep any Collateral pending further action by
Agent, and while Collateral is so stored or kept, provide such guards and maintenance services
as shall be necessary to protect the same and to preserve and maintain Collateral in good
condition. Until Agent is able to effect a sale, lease, license or other disposition of
Collateral, Agent shall have the right to hold or use Collateral, or any part thereof, to the
extent that it deems appropriate for the purpose of preserving Collateral or its value or for
any other purpose deemed appropriate by Agent. Agent shall not have any obligation to any
Grantor to maintain or preserve the rights of any Grantor as against third parties with respect
to Collateral while Collateral is in the possession of Agent. Agent may, if it so elects, seek
the appointment of a receiver or keeper to take possession of Collateral and to enforce any of
Agent's remedies (for the benefit of Agent and Lenders), with respect to such appointment
without prior notice or hearing as to such appointment. Agent shall apply the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale to the Obligations
as provided in the Credit Agreement, and only after so paying over such net proceeds, and after
the payment by Agent of any other amount required by any provision of law, need Agent account
for the surplus, if any, to any Grantor. To the maximum extent permitted by applicable law,
each Grantor waives all claims, damages, and demands against Agent or any Lender arising out of
the repossession, retention or sale of the Collateral except such as arise solely out of the
gross negligence or willful misconduct of Agent or such Lender as finally determined by a court
of competent jurisdiction. Each Grantor agrees that ten (10) days prior notice by Agent of the
time and place of any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Notwithstanding any such notice of sale, Agent shall
not be obligated to make any sale of Collateral. In connection with any sale, lease, license
or other disposition of Collateral, Agent may disclaim any warranties that might arise in
connection therewith and Agent shall have no obligation to provide any warranties at such
time. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Obligations, including any attorneys'
fees or other expenses incurred by Agent or any Lender to collect such deficiency.
(b) Except as otherwise specifically provided herein, each Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(c) To the extent that applicable law imposes duties on Agent to exercise remedies in a commercially
reasonable manner, each Grantor acknowledges and agrees that it is not commercially
unreasonable for Agent (i) to fail to incur expenses reasonably deemed significant by Agent to
prepare Collateral for disposition or otherwise to complete raw material or work in process
into finished goods or other finished products for disposition, (ii) if not required by other
law, to fail to obtain governmental or third party consents for the collection or disposition
of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies
against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of collection agencies
and other collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is of a specialized
nature, (vi) to contact other Persons, whether or not in the same business as any Grantor, for
expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet
sites that provide for the auction of assets of the types included in the Collateral or that
have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to
dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition
warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure Agent against risks of loss, collection or disposition of Collateral or
to provide to Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this
Section 8(c) is to provide non-exhaustive indications of what actions or omissions by Agent
would be commercially reasonable in Agent's exercise of remedies against the Collateral and
that other actions or omissions by Agent shall not be deemed commercially unreasonable solely
on account of not being indicated in this Section 8(c). Without limitation upon the foregoing,
nothing contained in this Section 8(c) shall be construed to grant any rights to any Grantor or
to impose any duties on Agent that would not have been granted or imposed by this Agreement or
by applicable law in the absence of this Section 8(c).
(d) Neither Agent nor any Lender shall be required to make any demand upon, or pursue or exhaust any of
their rights or remedies against, any Grantor, any other obligor, guarantor, pledgor or any
other Person with respect to the payment of the Obligations or to pursue or exhaust any of
their rights or remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. Neither Agent nor any Lender shall be required to marshal the Collateral or
any guarantee of the Obligations or to resort to the Collateral or any such guarantee in any
particular order, and all of its and their rights hereunder or under any other Loan Document
shall be cumulative. To the extent it may lawfully do so, each Grantor absolutely and
irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert
against Agent or any Lender, any valuation, stay, appraisement, extension, redemption or
similar laws and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any Collateral made
under the judgment, order or decree of any court, or privately under the power of sale
conferred by this Agreement, or otherwise.
9. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL
For the purpose of enabling Agent to exercise rights and remedies under Section 8 hereof (including,
without limiting the terms of Section 8 hereof, in order to take possession of, hold, preserve, process,
assemble, prepare for sale, market for sale, sell or otherwise dispose of Collateral) at such time as
Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to
Agent, for the benefit of Agent and Lenders, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items may be recorded or
stored and to all computer software and programs used for the compilation or printout thereof and an
irrevocable license (exercisable without payment of rent or other compensation to such Grantor) to use
and occupy all real estate owned or leased by such Grantor; provided, however, that if and to the extent
that the grant of license to Agent would result in a violation of any agreements relating to the
Intellectual Property or the real estate or cause any such agreement to be void or voidable, the license
granted hereunder shall be deemed limited to only such license or rights as Grantors may be authorized
to give without consent under such agreements without breaching or voiding such agreements.
10. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL
Agent and each Lender shall use reasonable care with respect to the Collateral in its possession or
under its control. Neither Agent nor any Lender shall have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of Agent or such Lender,
or any income thereon or as to the preservation of rights against prior parties or any other rights
pertaining thereto. Agent shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or omission of any
warehousemen, carrier, forwarding agency, consignee or other agent or bailee selected by Agent in good
faith.
11. REINSTATEMENT
This Agreement shall remain in full force and effect and continue to be effective should any petition be
filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent
or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any Grantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent
conveyance," or otherwise, all as though such payment or performance had not been made. In the event
that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.
12. SURETYSHIP WAIVERS BY GRANTOR; OBLIGATIONS ABSOLUTE
(a) Except as expressly provided herein, each Grantor waives demand, notice, protest, notice of acceptance
of this Agreement, notice of loans made, credit extended, collateral received or delivered or
other action taken in reliance hereon and all other demands and notices of any description
thereof, all in such manner and at such time or times as Agent may deem advisable. Agent shall
have no duty as to the collection or protection of the Collateral or any income thereon, nor as
to the preservation of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof.
(b) All rights of Agent hereunder, the Security Interests and all obligations of each Grantor hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability
of the Credit Agreement, any other Loan Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any
exchange, release or non-perfection of any Lien on other collateral, or any release or
amendment or waiver of or consent under or departure from or any acceptance of partial payment
thereon and or settlement, compromise or adjustment of any Obligation or of any guarantee,
securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, such Grantor in respect
of the Obligations or this Agreement.
13. EXPENSES AND ATTORNEY'S FEES
Without limiting any Grantor's obligations under the Credit Agreement or the other Loan Documents,
Grantors agree, jointly and severally, to promptly pay all fees, costs and expenses (including
reasonable attorneys' fees and expenses and allocated costs of internal legal staff) incurred in
connection with (a) protecting, storing, warehousing, appraising, insuring, handling, maintaining and
shipping the Collateral, (b) creating, perfecting, maintaining and enforcing Agent's Liens and (c)
collecting, enforcing, retaking, holding, preparing for disposition, processing and disposing of
Collateral.
14. NOTICES
Any notice or other communication required shall be in writing addressed to the respective party as set
forth below and may be personally served, telecopied, sent by overnight courier service or U.S. mail and
shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by
fax, on the date of transmission if transmitted on a Business Day before 4:00 p.m. New York Time; (c) if
delivered by overnight courier, one (1) Business Day after delivery to the courier properly addressed;
or (d) if delivered by U.S. mail, four (4) Business Days after deposit with postage prepaid and properly
addressed.
Notices shall be addressed as follows:
If to any Grantor: c/o X'XXXXXXXX INDUSTRIES, INC.
0000 Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attn: President, Chief Executive Officer and General Counsel
Fax: (000) 000-0000
With a copy to: XXXXXXXX & XXXXX LLP
Citigroup Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxx, Xxxxxxxx X. Xxxxxx
Fax: (000) 000-0000
If to Agent or GE Capital: GENERAL ELECTRIC CAPITAL CORPORATION
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: X'Xxxxxxxx Account Officer
Fax: (000) 000-0000
With a copy to: GENERAL ELECTRIC CAPITAL CORPORATION
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attn: Corporate Counsel
Corporate Financial Services - Global Sponsor Finance
Fax: (000) 000-0000
and
GENERAL ELECTRIC CAPITAL CORPORATION
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Corporate Counsel
Corporate Financial Services - Global Sponsor Finance
Fax: (000) 000-0000
15. SEVERABILITY
The invalidity, illegality, or unenforceability in any jurisdiction of any provision under the Loan
Documents shall not affect or impair the remaining provisions in the Loan Documents.
16. NO WAIVER; CUMULATIVE REMEDIES
Neither Agent nor any Lender shall by any act, delay, omission or otherwise be deemed to have waived any
of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by Agent and
then only to the extent therein set forth. A waiver by Agent of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which Agent would otherwise have had
on any future occasion. No failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder
provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights
and remedies provided by law. None of the terms or provisions of this Agreement may be waived, altered,
modified or amended except by an instrument in writing, duly executed by Agent and each Grantor.
17. LIMITATION BY LAW
All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall not render this Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under
the provisions of any applicable law.
18. TERMINATION OF THIS AGREEMENT
Subject to Section 11 hereof, this Agreement shall terminate upon the Termination Date. Following the
termination of this agreement, Agent shall, upon reasonable request, and at the sole cost and expense of
Grantors, execute such termination statements and other releases (in form and substance reasonably
satisfactory to Agent) with respect to security granted hereunder, and Agent shall at such time transfer
any Instrument or Chattel Paper or other item of Collateral delivered to the Agent hereunder to the
Grantors, without recourse and without representation of warranty.
19. SUCCESSORS AND ASSIGNS
This Agreement and all obligations of each Grantor hereunder shall be binding upon the successors and
permitted assigns of such Grantor (including any debtor-in-possession on behalf of such Grantor) and
shall, together with the rights and remedies of Agent, for the benefit of Agent and Lenders, hereunder,
inure to the benefit of Agent and Lenders, all future holders of any instrument evidencing any of the
Obligations and their respective successors and permitted assigns except that Grantors may not assign
any of their rights or obligations hereunder without the written consent of all Lenders which assignment
without such consent shall be void. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the Obligations or any portion
thereof or interest therein shall in any manner impair the Lien granted to Agent, for the benefit of
Agent and Lenders, hereunder.
20. COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original, but all of which counterparts together shall constitute but
one in the same instrument. This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto.
21. GOVERNING LAW
(a) THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES WHICH SHALL BE DEEMED NOT TO INCLUDE SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW.
(b) EACH GRANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK
COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL
BE LITIGATED IN SUCH COURTS. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION
OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE UPON SUCH GRANTOR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED
TO SUCH GRANTOR, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
22. WAIVER OF JURY TRIAL
EACH GRANTOR HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS. EACH GRANTOR ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, AND THAT AGENT HAS RELIED ON
THE WAIVER IN ENTERING INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS AND WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH GRANTOR WARRANTS AND REPRESENTS THAT SUCH
GRANTOR HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT SUCH GRANTOR
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
23. HEADINGS
Section and subsection headings are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purposes or be given substantive effect.
24. NO STRICT CONSTRUCTION
The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as
if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this Agreement.
25. ADVICE OF COUNSEL
Each of the parties represents to each other party hereto that it has discussed this Agreement and,
specifically, the provisions of Section 21 and Section 22, with its counsel.
26. BENEFIT OF LENDERS
All Liens granted or contemplated hereby shall be for the benefit of Agent and Lenders, and all proceeds
or payments realized from Collateral in accordance herewith shall be applied to the Obligations in
accordance with the terms of the Credit Agreement.
27. INTERCREDITOR AGREEMENT
The security interest of Agent in favor of Lenders granted hereunder and the rights of such parties in
respect thereof shall be subject to the terms of the Intercreditor Agreement and Article 10 of the
Senior Notes Indenture.
28. PERFORMANCE BY GRANTORS
Notwithstanding anything to the contrary, no Grantor shall be required to perform any covenant or
agreement of this Security Agreement as to Trustee First Lien Collateral to the extent of any Indenture
Requirement as to such Trustee First Lien Collateral and so long as such Indenture Requirement continues.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO PENHALL SECURITY AGREEMENT]
-
SIGNATURE PAGE TO X'XXXXXXXX SECURITY AGREEMENT
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by its duly
authorized officer as of the date first set forth above.
X'XXXXXXXX INDUSTRIES, INC.,
as a Grantor
By:
Name: _____________________________
Title: _____________________________
X'XXXXXXXX FURNITURE FACTORY OUTLET, INC.,
as a Grantor
By:
Name: _____________________________
Title: _____________________________
X'XXXXXXXX INDUSTRIES - VIRGINIA, INC.,
as a Grantor
By:
Name: _____________________________
Title: _____________________________
GENERAL ELECTRIC CAPITAL CORPORATION, as Agent
By:
Name: _____________________________
Title: _____________________________
Sched I-1
SCHEDULE I
to
SECURITY AGREEMENT
FILING JURISDICTIONS
X'Xxxxxxxx Industries, Inc.
X'Xxxxxxxx Furniture Factory Outlet, Inc.
X'Xxxxxxxx Industries - Virginia, Inc.
Sched II-1
SCHEDULE II
to
SECURITY AGREEMENT
INSTRUMENTS
CHATTEL PAPER
AND
LETTER OF CREDIT RIGHTS
Sched IIIA-1
SCHEDULE IIIA
to
SECURITY AGREEMENT
SCHEDULE OF OFFICES, LOCATIONS
OF COLLATERAL AND RECORDS CONCERNING
X'XXXXXXXX INDUSTRIES, INC.'S COLLATERAL
I. Grantor's official name: X'Xxxxxxxx Industries, Inc.
II. Type of entity (e.g. corporation, partnership, business trust, limited partnership, limited liability
company): a corporation
III. Organizational identification number issued by Grantor's state of incorporation or organization or a
statement that no such number has been issued:
IV. State or Incorporation or Organization of Grantor: Delaware
V. Chief Executive Office and principal place of business of Grantor:
0000 Xxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
VI. Corporate Offices of Grantor:
VII. Warehouses:
VIII. Other Premises at which Collateral is Stored or Located:
IX. Locations of Records Concerning Collateral:
Sched IIIB-1
SCHEDULE IIIB
to
SECURITY AGREEMENT
SCHEDULE OF OFFICES, LOCATIONS
OF COLLATERAL AND RECORDS CONCERNING
X'XXXXXXXX FURNITURE FACTORY OUTLET, INC.'S COLLATERAL
I. Grantor's official name: X'Xxxxxxxx Furniture Factory Outlet, Inc.
II. Type of entity (e.g. corporation, partnership, business trust, limited partnership, limited liability
company): a corporation
III. Organizational identification number issued by Grantor's state of incorporation or organization or a
statement that no such number has been issued:
IV. State or Incorporation or Organization of Grantor: Missouri
V. Chief Executive Office and principal place of business of Grantor:
VI. Corporate Offices of Grantor:
VII. Warehouses:
VIII. Other Premises at which Collateral is Stored or Located:
IX. Locations of Records Concerning Collateral:
Sched IIID-1
SCHEDULE IIIC
to
SECURITY AGREEMENT
SCHEDULE OF OFFICES, LOCATIONS
OF COLLATERAL AND RECORDS CONCERNING
X'XXXXXXXX INDUSTRIES - VIRGINIA, INC.'S COLLATERAL
I. Grantor's official name: X'Xxxxxxxx Industries - Virginia, Inc.
II. Type of entity (e.g. corporation, partnership, business trust, limited partnership, limited liability
company): a corporation
III. Organizational identification number issued by Grantor's state of incorporation or organization or a
statement that no such number has been issued:
IV. State or Incorporation or Organization: Xxxxxxxx
X. Chief Executive Office and principal place of business of Grantor:
VI. Corporate Offices of Grantor:
VII. Warehouses:
VIII. Other Premises at which Collateral is Stored or Located:
IX. Locations of Records Concerning Collateral:
Sched IVA-1
SCHEDULE IVA
to
SECURITY AGREEMENT
PATENTS, TRADEMARKS AND COPYRIGHTS
X'Xxxxxxxx Industries, Inc. X'Xxxxxxxx Furniture Factory Outlet, X'Xxxxxxxx Industries - Virginia,
Inc. Inc.
Sched IVB-1
SCHEDULE IVB
to
SECURITY AGREEMENT
LICENSES
Sched VI-1
SCHEDULE V
to
SECURITY AGREEMENT
MOTOR VEHICLES
X'Xxxxxxxx Industries, Inc.
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X'Xxxxxxxx Furniture Factory Outlet, Inc.:
X'Xxxxxxxx Industries - Virginia, Inc.:
A-2
EXHIBIT A
POWER OF ATTORNEY
This Power of Attorney is executed and delivered by each of X'Xxxxxxxx Industries, Inc., X'Xxxxxxxx
Furniture Factory Outlet, Inc., X'Xxxxxxxx Industries - Virginia, Inc. and X'Xxxxxxxx Industries Holdings, Inc.
(referred to herein individually as "Grantor" and collectively as "Grantors") to General Electric Capital
Corporation, a Delaware corporation (hereinafter referred to as "Attorney"), as Agent for the benefit of Agent
and Lenders, under a Credit Agreement and a Security Agreement, both dated as of September 29, 2003, and other
related documents (the "Loan Documents"). No person to whom this Power of Attorney is presented, as authority
for Attorney to take any action or actions contemplated hereby, shall be required to inquire into or seek
confirmation from any Grantor as to the authority of Attorney to take any action described below, or as to the
existence of or fulfillment of any condition to this Power of Attorney, which is intended to grant to Attorney
unconditionally the authority to take and perform the actions contemplated herein, and each Grantor irrevocably
waives any right to commence any suit or action, in law or equity, against any person or entity which acts in
reliance upon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted
hereby is coupled with an interest, and may not be revoked or canceled by any Grantor without Attorney's written
consent.
Each Grantor hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents
designated by Attorney), with full power of substitution, as such Grantor's true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in
its own name, from time to time in Attorney's discretion, to take any and all appropriate action and to execute
and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes
of the Loan Documents upon the occurrence and during the continuance of an Event of Default as defined and
described in the Loan Documents. Without limiting the generality of the foregoing, each Grantor hereby grants to
Attorney the power and right, on behalf of such Grantor, without notice to or assent by any Grantor, and at any
time, to do the following upon the occurrence and during the continuance of an Event of Default: (a) change the
mailing address of such Grantor, open a post office box on behalf of such Grantor, open mail for such Grantor,
and ask, demand, collect, give acquittances and receipts for, take possession of, endorse any invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, and notices in connection with any property of such Grantor; (b) effect any repairs to any asset
of such Grantor, or continue or obtain any insurance and pay all or any part of the premiums therefor and costs
thereof, and make, settle and adjust all claims under such policies of insurance, and make all determinations and
decisions with respect to such policies; (c) pay or discharge any taxes, liens, security interests, or other
encumbrances levied or placed on or threatened against such Grantor or its property; (d) defend any suit, action
or proceeding brought against such Grantor if such Grantor does not defend such suit, action or proceeding or if
Attorney believes that such Grantor is not pursuing such defense in a manner that will maximize the recovery to
Attorney, and settle, compromise or adjust any suit, action, or proceeding described above and, in connection
therewith, give such discharges or releases as Attorney may deem appropriate; (e) file or prosecute any claim,
litigation, suit or proceeding in any court of competent jurisdiction or before any arbitrator, or take any other
action otherwise deemed appropriate by Attorney for the purpose of collecting any and all such moneys due to such
Grantor whenever payable and to enforce any other right in respect of such Grantor's property; (f) cause the
certified public accountants then engaged by such Grantor to prepare and deliver to Attorney at any time and from
time to time, promptly upon Attorney's request, the following reports: (1) a reconciliation of all accounts, (2)
an aging of all accounts, (3) trial balances, (4) test verifications of such accounts as Attorney may request,
and (5) the results of each physical verification of inventory; (g) communicate in its own name with any party to
any Contract with regard to the assignment of the right, title and interest of such Grantor in and under the
Contracts and other matters relating thereto; (h) to file such financing statements with respect to the Security
Agreement, with or without such Grantor's signature, or to file a photocopy of the Security Agreement in
substitution for a financing statement, as Agent may deem appropriate and to execute in such Grantor's name such
financing statements and amendments thereto and continuation statements which may require such Grantor's
signature; (i) execute, in connection with any sale provided for in any Loan Document, any endorsements,
assignments or other instruments of conveyance or transfer with respect to any collateral subject to the Loan
Documents and to otherwise direct such sale or resale; (j) exercise the rights of such Grantor with respect to
the obligation of all account debtors to make payment or otherwise render performance to such Grantor; (k)
exercise the rights of such Grantor to, and take any and all actions that Attorney deems appropriate to realize
the benefit of, any intellectual property; and (l) assert any claims such Grantor may have, from time to time,
against any other party to any contract to which such Grantor is a party and to otherwise exercise any right or
remedy of such Grantor thereunder, all as though Attorney were the absolute owner of the property of such Grantor
for all purposes, and to do, at Attorney's option and such Grantor's expense, at any time or from time to time,
all acts and other things that Attorney reasonably deems necessary to perfect, preserve, or realize upon such
Grantor's property or assets and Attorney's Liens thereon, all as fully and effectively as such Grantor might
do. Each Grantor hereby ratifies, to the extent permitted by law, all that said Attorney shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney is executed by each Grantor pursuant to the authority of its
board of directors on this _____ day of September, 2003.
X'XXXXXXXX INDUSTRIES, INC.
By:
Name:
Title:
X'XXXXXXXX FURNITURE FACTORY OUTLET, INC.,
By:
Name:
Title:
X'XXXXXXXX INDUSTRIES - VIRGINIA, INC.,
By:
Name:
Title:
X'XXXXXXXX INDUSTRIES HOLDINGS, INC.,
By:
Name:
Title:
NOTARY PUBLIC CERTIFICATE
On this _____ day of ______________, 2003, Xxxxxxx X. Xxxxx who is personally known to me appeared
before me in his/her capacity as the Senior Vice President and Chief Financial Officer of X'Xxxxxxxx Industries,
Inc. and executed on behalf of X'Xxxxxxxx Industries, Inc. the Power of Attorney in favor of General Electric
Capital Corporation to which this Certificate is attached.
Notary Public
NOTARY PUBLIC CERTIFICATE
On this _____ day of ______________, 2003, Xxxxxxx X. Xxxxx who is personally known to me appeared
before me in his/her capacity as the Senior Vice President and Chief Financial Officer of X'Xxxxxxxx Furniture
Factory Outlet, Inc. and executed on behalf of X'Xxxxxxxx Furniture Factory Outlet, Inc. the Power of Attorney in
favor of General Electric Capital Corporation to which this Certificate is attached.
Notary Public
NOTARY PUBLIC CERTIFICATE
On this _____ day of ______________, 2003, Xxxxxxx X. Xxxxx who is personally known to me appeared
before me in his/her capacity as the Senior Vice President and Chief Financial Officer of X'Xxxxxxxx Industries -
Virginia, Inc. and executed on behalf of X'Xxxxxxxx Industries - Virginia, Inc. the Power of Attorney in favor of
General Electric Capital Corporation to which this Certificate is attached.
Notary Public
NOTARY PUBLIC CERTIFICATE
On this _____ day of ______________, 2003, Xxxxxxx X. Xxxxx who is personally known to me appeared
before me in his/her capacity as the Senior Vice President and Chief Financial Officer of X'Xxxxxxxx Industries
Holdings, Inc. and executed on behalf of X'Xxxxxxxx Industries Holdings, Inc. the Power of Attorney in favor of
General Electric Capital Corporation to which this Certificate is attached.
Notary Public
TABLE OF CONTENTS
(continued)
Page
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NYB 1430810.5
TABLE OF CONTENTS
Page
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1. DEFINED TERMS...........................................................................................2
2. GRANT OF LIEN...........................................................................................3
3. AGENT'S AND LENDERS' RIGHTS: LIMITATIONS ON AGENT'S AND LENDERS' OBLIGATIONS...........................4
4. REPRESENTATIONS AND WARRANTIES..........................................................................5
5. COVENANTS...............................................................................................7
6. BANK ACCOUNTS; COLLECTION OF ACCOUNTS AND PAYMENTS.....................................................11
7. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT................................................................13
8. REMEDIES: RIGHTS UPON DEFAULT.........................................................................13
9. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL...............................................15
10. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.......................................16
11. REINSTATEMENT..........................................................................................16
12. SURETYSHIP WAIVERS BY GRANTOR; OBLIGTIONS ABSOLUTE.....................................................16
13. EXPENSES AND ATTORNEY'S FEES...........................................................................17
14. NOTICES................................................................................................17
15. SEVERABILITY...........................................................................................18
16. NO WAIVER; CUMULATIVE REMEDIES.........................................................................18
17. LIMITATION BY LAW......................................................................................18
18. TERMINATION OF THIS AGREEMENT..........................................................................19
19. SUCCESSORS AND ASSIGNS.................................................................................19
20. COUNTERPARTS...........................................................................................19
21. GOVERNING LAW..........................................................................................19
22. WAIVER OF JURY TRIAL...................................................................................20
23. HEADINGS...............................................................................................20
24. NO STRICT CONSTRUCTION.................................................................................20
25. ADVICE OF COUNSEL......................................................................................21
26. BENEFIT OF LENDERS.....................................................................................21
27. INTERCREDITOR AGREEMENT................................................................................21
28. PERFORMANCE BY GRANTORS................................................................................21
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