Exhibit 10.59
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of October 1, 2001,
by and between, on the one hand, THE PRINCETON REVIEW, INC., a Delaware
corporation, having an office at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, PRINCETON
REVIEW MANAGEMENT, L.L.C., a Delaware limited liability company, having an
office at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, PRINCETON REVIEW OPERATIONS,
L.L.C., a Delaware limited liability company, having an office at 0000 Xxxxxxxx,
Xxx Xxxx, XX 00000, PRINCETON REVIEW PRODUCTS, L.L.C., a Delaware limited
liability company, having an office at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, THE
PRINCETON REVIEW CANADA, INC., a Canadian corporation, having an office at 0000
Xxxxxxxx, Xxx Xxxx, XX 00000 (each of the foregoing being a "Grantor" and
collectively, "Grantors"); and, on the other hand, COMDISCO, INC., a Delaware
corporation ("Comdisco"), having an office at 0000 Xxxxx Xxxxx Xxxx, Xxxxxxxx,
XX 00000:
1. Capitalized Terms. Capitalized terms used without definition in this
Agreement shall have the meanings assigned to them in the "Loan Agreement" (as
defined below).
2. Grant of Security Interest. For valuable consideration, receipt whereof
is acknowledged, each Grantor hereby grants to Comdisco a continuing security
interest in and lien upon all of the personal property of Grantor, including
without limitation, the following described property of such Grantor, whether
now in existence or hereafter created or acquired and wheresoever situated, as
well as in the cash and non-cash proceeds thereof, including, without
limitation, insurance proceeds (all such property being hereinafter collectively
referred to as the ("Collateral")):
(a) all Receivables of such Grantor;
(b) all Equipment of such Grantor;
(c) all Fixtures of such Grantor;
(d) all General Intangibles of such Grantor;
(e) all Intellectual Property of such Grantor;
(f) all Inventory of such Grantor;
(g) all Investment Property of such Grantor;
(h) all Deposit Accounts of such Grantor;
(i) all Cash of such Grantor;
(j) all other Goods and tangible and intangible personal property of
such Grantor, whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, such Grantor and wherever located; and
(k) all Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and products of each
of the foregoing.
(l) Comdisco agrees that the security interest granted and the lien
created hereby only, shall be subordinate to the security interest and lien
of any Senior Lender, as defined in the Loan Agreement.
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(m) Notwithstanding the foregoing, the Collateral shall not include
any personal property of such Grantor to the extent that the granting of a
security interest therein as of the date hereof requires the consent of a
third party that has not been obtained. Each Grantor agrees to use
reasonable best efforts to obtain any third party consent referred to in
the preceding sentence as may be requested by Comdisco.
The security interest granted hereby is to secure the payment and performance of
all liabilities and obligations of such Grantor to Comdisco of every kind and
description, whether direct or indirect, joint or several, absolute or
contingent, secured or unsecured, due or to become due, now existing or
hereafter arising, including, without limitation: (i) all liabilities and
obligations now or hereafter owing by such Grantor to Comdisco under any
agreements now or hereafter executed by Grantor in favor of Comdisco, including,
without limitation, that certain Guaranty of Loans of even date herewith (the
"Guaranty") by which each Grantor guarantees the payment of any liabilities and
obligations to Comdisco of Princeton Review Publishing, L.L.C. ("Borrower"),
including, without limitation, the liabilities and obligations of Borrower to
Comdisco under that certain Amended and Restated Loan and Security Agreement of
even date herewith between Comdisco and Borrower (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Loan
Agreement"); and (ii) all liabilities and obligations now or thereafter owing by
such Grantor to Comdisco under this Agreement. All such liabilities and
obligations are hereinafter jointly referred to as the "Indebtedness".
3. Representations, Covenants and Warranties of Grantors. Each Grantor
hereby represents, covenants, warrants, and agrees to and with Comdisco as
follows:
(a) Grantor is an entity as described herein, duly organized, validly
existing and in good standing under the laws of the state of incorporation
or organization and has its chief executive office and principal place of
business at the address shown on the first page hereof.
(b) Grantor is and will remain solvent in the sense that the fair
saleable value of all of its assets does, and will at all times, exceed the
total amount of its liabilities, including contingent liabilities, and
Grantor does pay and will pay its debts as they mature.
(c) All risk of loss of the Collateral hereunder shall be upon
Grantor.
(d) Grantor shall keep the Collateral free and clear from any and all
security interests, unpaid charges, attachments, levies, and liens of every
kind, except for (i) the lien and security interest granted hereunder to
Comdisco, (ii) liens with respect to Grantor of the type defined under the
Loan Agreement with respect to Borrower as "Permitted Liens".
(e) Grantor shall not change its name, its principal place of business
or its chief executive office, shall not use, keep or maintain the
Collateral other than at its principal place of business as shown above,
and shall neither move any item or items of the Collateral with an
aggregate value in excess of $25,000 to Alabama, Florida or Mississippi
until January 1, 2002 (except for that portion of the Collateral consisting
of motor vehicles) nor dispose of any of the Collateral except for
Inventory in the ordinary course of business, except upon at least thirty
(30) days prior written notice to Comdisco and after the delivery to
Comdisco of financing statements in form satisfactory to Comdisco to
perfect or continue the perfection of Comdisco's lien and security interest
hereunder.
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(f) Grantor shall keep and maintain all tangible items of Collateral
in saleable condition, and Grantor agrees that the Collateral may be
inspected and examined by Comdisco or its agents at any reasonable time,
upon reasonable notice, and that Comdisco shall have the right to inspect,
audit, examine, check, or make copies of, or extracts from, the books,
files, accounts, and all other records of Grantor pertaining to Grantor's
business or any of the Collateral.
(g) Grantor shall preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation
and shall comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, the noncompliance
with which would materially and adversely affect its properties, business
or credit.
(h) So long as there are any Secured Obligations outstanding, Grantor
shall cause to be carried and maintained commercial general liability
insurance, on an occurrence form, against risks customarily insured against
in Grantor's line of business. Such risks shall include the risks of bodily
injury, including death, property damage, personal injury, advertising
injury, and contractual liability per the terms of the indemnification
agreement found herein. Grantor must maintain a minimum of $3,500,000 of
commercial general liability insurance for each occurrence. So long as
there are any Secured Obligations outstanding, Grantor shall also cause to
be carried and maintained insurance upon the Collateral, insuring against
all risks of physical loss or damage howsoever caused, including the perils
of fire, windstorm, flood, and in an amount not less than the full
replacement cost of the Collateral. Grantor shall deliver to Comdisco
certificates of insurance, which evidence Grantor's compliance with its
insurance obligations in this Section and the obligations contained in this
Section within thirty (30) days of the date of this Agreement. Grantor's
insurance certificate shall state Comdisco is an additional insured for
commercial general liability, and an additional insured and a loss payee
for all risk property damage insurance. Attached to the certificates of
insurance will be additional insured endorsements for liability and
lender's loss payable endorsements for all risk property damage insurance.
Grantor will use reasonable best efforts to ensure that the certificates of
insurance will state that the coverage evidenced is primary and
non-contributory to any insurance or self-insurance of Comdisco, and will
further state that a waiver of subrogation in favor of Comdisco has been
agreed to. All certificates of insurance will provide for a minimum of
thirty (30) days advance written notice to Comdisco of cancellation or any
other change adverse to Comdisco's interests. Any failure of Comdisco to
scrutinize such insurance certificates for compliance is not a waiver of
any of Comdisco's rights, all of which are reserved. Grantor shall and does
hereby indemnify and hold Comdisco, its officers, directors, employees,
agents, attorneys, representatives and stockholders harmless from and
against any and all claims, costs, expenses, damages and liabilities
(including such claims, costs, expenses, damages and liabilities based on
liability in tort, including strict liability in tort), including
reasonable attorneys' fees and disbursements and other costs of
investigation or defense (including those incurred upon any appeal), that
may be instituted or asserted against or incurred by Comdisco or any such
Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents or the
administration of such credit, or in connection with or arising out of the
transactions contemplated hereunder and thereunder, or any actions or
failures to act in connection therewith, or arising out of the disposition
or utilization of the Collateral, excluding in all cases claims resulting
solely from Comdisco's gross negligence or willful misconduct.
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(i) Grantor has never carried on business, traded as, been known as,
used or incorporated under any name other than the name appearing on the
first page of this Agreement.
(j) Grantor shall provide to Comdisco such financial information
concerning Grantor as Comdisco may from time to time request, including,
without limitation, monthly, quarterly and annual financial statements,
which shall in each case be certified to Comdisco by the chief financial
officer of Grantor.
(k) Grantor shall not enter into or be a party to any Merger Event (as
defined below) without the prior written consent of Comdisco, which consent
shall be at Comdisco's sole discretion but not unreasonably withheld.
Notwithstanding the foregoing, so long as no Event of Default has occurred
and is continuing, Comdisco shall provide its consent within ten (10) days
after a request therefore from Grantor; provided that (a) the assets
acquired in such Merger (i) be provided as Collateral (including assets of
any subsidiary of Grantor) and (ii) be free and clear of Liens (other than
Permitted Liens), (b) any parent, subsidiary or affiliate of Grantor
guarantee the Obligations, or (c) documents be delivered, including
certificates, lien search results, financing statements and opinions, or
other actions be taken so as to give Comdisco reasonable confidence that it
obtains a duly perfected security interest in the Collateral subject only
to Permitted Liens. If the Merger Event falls under category (c) of the
definition of Merger Event, the foregoing prohibition and obligations in
this Section 8.8 shall apply only if the ratio of Permitted Indebtedness
(which does not include Future Indebtedness that is subordinate to payment
to Comdisco) to TPR's Net Worth is greater than .5 : 1 and the acquisition
target has a negative EBITDA under GAAP for the two (2) quarters prior to
such Merger Event; provided, that the acquisition target's EBITDA shall be
adjusted to not reflect the proprietors of the acquisition target's
salaries. For the purposes of this Agreement, "Merger Event" means any
(a)(i) reorganization, consolidation or merger (or similar transaction or
series of related transactions) of Grantor or any subsidiary of Grantor
with or into any other Person, or (ii) sale or exchange of outstanding
shares in which the holders of Grantor's outstanding shares immediately
before consummation of such transaction or series of related transactions
do not, immediately after consummation of such transaction or series of
related transactions, retain shares representing eighty percent (80%) of
the voting power of the surviving entity of such transaction or series of
related transactions (or the parent of such surviving entity if such
surviving entity is wholly owned by such parent), in each case without
regard to whether Grantor is the surviving entity, (b) sale of all or
substantially all of the assets of Grantor, or (c) acquisition by Grantor
of all or substantially all of the capital stock or assets of another
Person. Notwithstanding the foregoing, a Merger Event shall not mean the
consolidation or merger of Grantor with and into TPR or a wholly-owned
subsidiary of TPR if such transaction does not adversely affect Comdisco's
rights under the Loan Documents.
(l) Grantor shall not, without the prior written consent of Comdisco
(which consent shall not be unreasonably withheld) (a) declare or pay any
cash dividend or make a distribution on, or repurchase or redeem, any class
of stock, other than pursuant to employee repurchase plans upon an
employee's death or termination of employment, during the eighteen (18)
months following the date of this Agreement or (b) transfer, sell, lease,
lend or in any other manner not in the normal course of business convey any
equitable, beneficial or legal interest in any material portion of the
assets of Grantor. The prohibition set forth in this Section 3(l) shall not
apply to (i) transfers which would constitute Permitted Liens under clause
(f) of the definition of Permitted Liens; (ii)
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transfers of worn-out or obsolete equipment, (iii) a single loan to an
employee of Grantor in the amount of $500,000 or (iv) single transactions
of not more than $200,000.
(m) There are no actions, suits or proceedings now pending or, to
Grantor's knowledge, threatened against Grantor or affecting any of
Grantor's properties, the adverse result of which would in any material
respect affect the property, financial condition or operations of Grantor,
and Grantor shall promptly notify Comdisco of the commencement of any
action, suit or proceeding against Grantor.
(n) Grantor will execute, or cause to be executed, and deliver to
Comdisco any and all instruments or documents necessary or desirable to
give effect to this Agreement or to perfect Comdisco's security interest in
any Collateral, including specifically all financing statements, motor
vehicle titles with Comdisco's lien noted thereon, landlord waivers,
mortgagee waivers and subordination agreements and the delivery to Comdisco
of stock certificates evidencing any securities owned by Grantor, and
Grantor shall reimburse Comdisco for the cost of filing or recording any
such documents in all public offices deemed necessary by Comdisco.
4. Events of Default. It is understood and agreed that an event of default
shall be deemed to have occurred under this Agreement, and Comdisco shall be
entitled to take such actions as are elsewhere provided herein, in the event
that: (a) any Grantor fails to pay any of the Indebtedness to Comdisco when due
(whether due on demand, at stated maturity, by acceleration or otherwise) and
such failure continues for more than one business day after Comdisco giving
written notice thereof; or (b) any representation, warranty or covenant made by
any Grantor herein or in any other existing or future agreement with Comdisco
shall prove to have been false or misleading in any material respect when made
or furnished or is breached, violated, or not complied with; or (c) an Event of
Default under the Loan Agreement has occurred; or (d) any bankruptcy petition
with respect to any Grantor shall hereafter be filed by or against such Grantor;
or (e) any receiver, trustee or other custodian shall be appointed for any
Grantor or any of its properties. Notwithstanding the foregoing, in the event
that Grantor has not consented to (d) or (e), then it shall not be an event of
default hereunder until sixty (60) days have expired without such events or
actions being dismissed or stayed.
5. Rights and Remedies Upon Default. Upon and after the occurrence of any
one or more of the events of default specified in Section 4 hereof, all of the
Indebtedness shall, without any notice to or demand upon Grantor of any kind,
become immediately due and payable, and Comdisco shall thereupon have any and
all rights and remedies afforded to a secured party under the UCC, together with
every right and remedy available to Comdisco under any other applicable law,
including, the right to release, hold, sell, lease, liquidate, collect, realize
upon, or otherwise dispose of all or any part of the Collateral and the right to
occupy, utilize, process and commingle the Collateral. All of Comdisco's rights
and remedies shall be cumulative and not exclusive and may be exercised
concurrently or seriatim, and are in addition to and not in lieu of any other
rights of Comdisco at law, in equity, under statute or under any other agreement
with Grantor. Upon the occurrence and during the continuance of any event of
default, Comdisco may, at any time or from time to time, apply, collect,
liquidate, sell in one or more sales, lease or otherwise dispose of, any or all
of the Collateral, in its then condition or following any commercially
reasonable preparation or processing, in such order as Comdisco may elect.
6. Waivers. In addition to the other waivers contained herein and in any
other agreement between any Grantor and Comdisco, each Grantor hereby expressly
waives, to the extent permitted by law, demand, protest, notice of protest,
notice of default or dishonor, notice
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of payments and nonpayments, or of any default, release, compromise, settlement,
extension or renewal of all commercial paper, instruments or guaranties at any
time held by Comdisco on which Grantor may in any way be liable, and notice of
any action taken by Comdisco unless expressly required by this Agreement or by
law.
7. Indulgences Not Waivers. Neither the failure nor any delay on the part
of Comdisco to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof or give rise to any estoppel, nor be construed as an
agreement to modify the terms of this Agreement, nor shall any single or partial
exercise by Comdisco of any right, remedy, power or privilege preclude any other
or further exercise by Comdisco of the same or of any other right, remedy,
power, or privilege; nor shall any waiver by Comdisco of any right, remedy,
power or privilege with respect to any occurrence be construed as a waiver of
such right, remedy, power or privilege with respect to any other occurrence. No
waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent specifically
stated in such writing.
8. Termination. When all Secured Obligations, as defined in the Loan
Agreement, shall have been paid in full, this Agreement shall terminate, and
Comdisco shall forthwith cause to be assigned, transferred and delivered any
remaining Collateral and money received in respect thereof, to or on the order
of Grantors. Comdisco shall also execute and deliver to the Grantors upon such
termination such Uniform Commercial Code termination statements, and such other
documentation as shall be reasonably requested by Grantors to effect the
termination and release of the Collateral.
9. Notices. Except as otherwise provided herein, any notice, demand,
request, consent, approval, declaration, service of process or other
communication (including the delivery of Financial Statements) that is required,
contemplated, or permitted under this Agreement or with respect to the subject
matter hereof shall be in writing, and shall be deemed to have been validly
served, given, delivered, and received upon the earlier of: (i) the first
business day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) If to a Grantor: 0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx, President
T: (000) 000-0000
Fax (000) 000-0000
(b) If to Comdisco: Comdisco, Inc./Comdisco Ventures
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Legal Department
Fax (000) 000-0000
With a copy to:
Comdisco Ventures
000 Xxxxxxxx Xxxxxx, Xxxxx 000X
Xxxx Xxxx, XX 00000
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Attn: Xxxxxx Xxxxx
Fax (000) 000-0000
T (000) 000-0000
or to such other address as each party may designate for itself by like notice.
10. Governing Law. This Agreement and the Guaranty have been delivered to
Comdisco in the State of Illinois, and shall have been accepted by Comdisco in
the State of Illinois. Payment to Comdisco by any Grantor of the Secured
Obligations is due in the State of Illinois. This Agreement and the Guaranty
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Illinois, excluding conflict of laws principles that would cause
the application of laws of any other jurisdiction.
11. Entire Agreement. This Agreement constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, and the express terms hereof control
and supersede any course of performance and/or usage of the trade inconsistent
with any of the terms hereof. Neither this Agreement nor any portion or
provision hereof may be changed, altered, waived, modified, supplemented,
discharged, canceled, terminated, or amended orally or in any manner other than
by an agreement in writing signed by the parties hereto.
12. Paragraph Headings. The paragraph headings in this Agreement are for
convenience of reference only; they form no part of this Agreement and shall not
affect its interpretation.
13. Severability. The provisions of this Agreement are independent of and
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
14. Successors and Assigns. The rights, remedies, powers, and privileges of
Comdisco hereunder shall inure to the benefit of the successors and assigns of
Comdisco, and the duties and obligations of each Grantor hereunder shall bind
the heirs, executors, administrators, successors and assigns of such Grantor.
15. Consent To Jurisdiction And Venue. All judicial proceedings arising in
or under or related to this Agreement or the Guaranty may be brought in any
state or federal court of competent jurisdiction located in the State of
Illinois. By execution and delivery of this Agreement, each party hereto
generally and unconditionally: (a) consents to personal jurisdiction in Xxxx
County, State of Illinois; (b) waives any objection as to jurisdiction or venue
in Xxxx County, State of Illinois; (c) agrees not to assert any defense based on
lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Service of process on any party hereto in any action arising out of
or relating to this Agreement or the Guaranty shall be effective if given in
accordance with the requirements for notice set forth in Section 9, and shall be
deemed effective and received as set forth in Section 9. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of either party to bring proceedings in the courts of any other
jurisdiction.
16. Mutual Waiver Of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced
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and expert person and the parties wish applicable state and federal laws to
apply (rather than arbitration rules), the parties desire that their disputes be
resolved by a judge applying such applicable laws. EACH GRANTOR AND COMDISCO
SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF
ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM
(COLLECTIVELY, "CLAIMS") ASSERTED BY ANY GRANTOR AGAINST COMDISCO OR ITS
ASSIGNEE OR BY COMDISCO OR ITS ASSIGNEE AGAINST ANY GRANTOR. This waiver extends
to all such Claims, including Claims that involve Persons other than any Grantor
and Comdisco; Claims that arise out of or are in any way connected to the
relationship between Grantor and Comdisco; and any Claims for damages, breach of
contract, specific performance, or any equitable or legal relief of any kind,
arising out of this Agreement and the Guaranty.
17. WAIVERS. EACH GRANTOR ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO COMDISCO'S ENTERING INTO THIS AGREEMENT AND THAT COMDISCO
IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH GRANTOR. EACH
GRANTOR WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
18. Miscellaneous. Time is of the essence of this Agreement. Comdisco may
assign, or sell participations in, its right, title and interest herein, in any
of the Indebtedness, in the Collateral, and in any agreements or instruments now
or hereafter evidencing or securing any agreements or instruments now or
hereafter evidencing or securing any of the Indebtedness at any time or times
without notice to or the consent of any Grantor.
19. Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument, and facsimile signatures shall be
deemed originals.
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IN WITNESS WHEREOF, each Grantor and Comdisco have duly executed and
delivered this Security Agreement as of the day and year first above written.
GRANTORS: THE PRINCETON REVIEW, INC.
Signature: /s/ Xxxx Xxxxxxx
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Print Name: Xxxx Xxxxxxx
Title: President
PRINCETON REVIEW MANAGEMENT, L.L.C.
Signature: /s/ Xxxx Xxxxxxx
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Print Name: Xxxx Xxxxxxx
Title: President
PRINCETON REVIEW OPERATIONS, L.L.C.
Signature: /s/ Xxxx Xxxxxxx
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Print Name: Xxxx Xxxxxxx
Title: President
PRINCETON REVIEW PRODUCTS, L.L.C.
Signature: /s/ Xxxx Xxxxxxx
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Print Name: Xxxx Xxxxxxx
Title: President
THE PRINCETON REVIEW CANADA, INC.
Signature: /s/ Xxxx Xxxxxxx
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Print Name: Xxxx Xxxxxxx
Title: President
[SIGNATURES CONTINUING ON NEXT PAGE]
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Accepted in Rosemont, Illinois:
LENDER: COMDISCO, INC.
Signature: /s/ Xxxxxx Xxxxx
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Print Name: Xxxxxx Xxxxx
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Title: Managing Director
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