EXHIBIT 10.50
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is dated as of April 16, 1998, by
and among Fountain View, Inc., a Delaware corporation (the "Borrower"), and the
other parties executing this Agreement under the heading "Debtors" (the Borrower
and such other parties, along with any parties who execute and deliver to the
Agent an agreement attached hereto as Schedule D, being hereinafter referred to
collectively as the "Debtors" and individually as a "Debtor"), each with its
mailing address as set forth on its signature page hereto, and Bank of Montreal,
a chartered bank of Canada acting through its Chicago branch ("BOM"), with its
mailing address at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, acting as
agent hereunder for the Lenders and Letter of Credit Issuers hereinafter
identified and defined (BOM acting as such agent and any successor or successors
to BOM acting in such capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. The Borrower and BOM, individually and as agent, have entered into a
Credit Agreement dated as of April 16, 1998 (such Credit Agreement as the same
may be amended, modified or restated from time to time being hereinafter
referred to as the "Credit Agreement"), pursuant to which BOM and such other
banks, financial institutions and letter of credit issuers from time to time
party to the Credit Agreement (BOM, in its individual capacity, and such other
banks and financial institutions being hereinafter referred to collectively as
the "Lenders" and individually as a "Lender" and such letter of credit issuers
being hereinafter referred to collectively as the "Letter of Credit Issuers" and
individually as a "Letter of Credit Issuer") have agreed, subject to certain
terms and conditions, to extend credit and make certain other financial
accommodations available to the Borrower (the Agent, the Lenders and the Letter
of Credit Issuers being hereinafter referred to collectively as the "Secured
Creditors" and individually as a "Secured Creditor").
B. The Borrower may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement, or their affiliates, for the purpose of
hedging or otherwise protecting the Borrower against changes in interest rates
(the liability of the Borrower in respect of such agreements with such Lenders
and their affiliates being hereinafter referred to as the "Hedging Liability").
C. As a condition to extending credit to the Borrower under the Credit
Agreement, the Secured Creditors have required, among other things, that each
Debtor grant to the Agent for the benefit of the Secured Creditors a lien on and
security interest in the personal property of such Debtor described herein
subject to the terms and conditions hereof.
D. The Borrower owns, directly or indirectly, equity interests in each
other Debtor and the Borrower provides each other Debtor with financial,
management, administrative, and technical support which enables such Debtor to
conduct its business in an orderly and efficient manner in the ordinary course.
E. Each Debtor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Secured Creditors to the
Borrower.
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Secured Creditors of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Terms defined in Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as such terms have
in the Credit Agreement. The term "Debtor" and "Debtors" as used herein shall
mean and include the Debtors collectively and also each individually, with all
grants, representations, warranties and covenants of and by the Debtors, or any
of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; provided,
however, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
Section 2. Grant of Security Interest in the Collateral; Obligations
Secured. (a) Each Debtor hereby grants to the Agent for the benefit of the
Secured Creditors a lien on and security interest in, and right of set-off
against, and acknowledges and agrees that the Agent has and shall continue to
have for the benefit of the Secured Creditors a continuing lien on and security
interest in, and right of set-off against, any and all right, title and interest
of each Debtor, whether now owned or existing or hereafter created, acquired or
arising, in and to the following:
(i) Receivables. All Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which such Debtor now has or hereafter acquires any rights (the term
"Receivables" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of such Debtor to payment for goods sold or leased
or for services rendered, whether or not earned by performance, and all
other forms of obligations owing to such Debtor, and all of such Debtor's
rights to any merchandise or other goods (including without limitation any
returned or repossessed goods and the right of stoppage in transit) which
is represented by, arises from or is related to any of the foregoing);
(ii) General Intangibles. All General Intangibles, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "General
Intangibles" means and includes all general intangibles, all patents,
patent applications, patent licenses, trademarks, trademark registrations,
trademark licenses, trade styles, trade names, copyrights, copyright
registrations, copyright licenses and other licenses and similar
intangibles, all customer, client and supplier lists (in whatever form
maintained), all rights in leases and other agreements relating to real or
personal property, all causes of action and tax refunds of every kind and
nature, all privileges, franchises, immunities,
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licenses, permits and similar intangibles, and all other personal property
(including things in action) not otherwise covered by this Agreement);
(iii) Inventory. All Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "Inventory" means and
includes all inventory and other goods which are held for sale or lease or
are to be furnished under contracts of service or consumed in such Debtor's
business, all goods which are raw materials, work-in-process, finished
goods, materials or supplies of every kind and nature, in each case used or
usable in connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or repossessed goods);
(iv) Equipment. All Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights (the term "Equipment" means and includes all
equipment and other machinery, tools, fixtures, trade fixtures, furniture,
furnishings, office equipment, vehicles (including vehicles subject to a
certificate of title law) and all other goods now or hereafter used or
usable in connection with such Debtor's business, together with all parts,
accessories and attachments relating to any of the foregoing);
(v) Investment Property. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "Investment
Property" means and includes all investment property and all other
securities (whether certificated or uncertificated), security entitlements,
securities accounts, commodity contracts, and commodity accounts, including
all substitutions and additions thereto, all dividends, distributions and
sums distributable or payable from, upon, or in respect of such property,
and all rights and privileges incident to such property);
(vi) Deposits and Property in Possession. All deposit accounts
(whether general, specific, matured or unmatured and in whatever currency
denominated) of such Debtor maintained with any of the Secured Creditors
and all sums now or hereafter on deposit therein or payable thereon, and
any and all other property and interests in property which now is or may
from time to time hereafter come into the possession, custody or control of
any of the Secured Creditors, or any agent of any of them, in any way and
for any purpose (whether for safekeeping, custody, pledge, transmission,
collection or otherwise);
(vii) Records. All supporting evidence and documents relating to any of
the above-described property, including, without limitation, computer
programs, disks, tapes and related electronic data processing media, and
all rights of such Debtor to retrieve the same from third parties, written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice
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copies, delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like, together with all books of account,
ledgers and cabinets in which the same are reflected or maintained, all
whether now existing or hereafter arising;
(viii) Accessions and Additions. All accessions and additions to and
substitutions and replacements of any and all of the foregoing, whether now
existing or hereafter arising; and
(ix) Proceeds and Products. All proceeds and products of the foregoing
and all insurance of the foregoing and proceeds thereof, whether now
existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral";
provided, however, that in no event will any of the Collateral described above
be deemed to include any interests in any leases or licenses to use real or
personal property under which a Debtor is lessee or licensee and a Person other
than a Debtor or an Affiliate of a Debtor is lessor or licensor, to the extent
the granting of a security interest or lien therein is prohibited by the
agreement(s) pursuant to which such property is leased or licensed and such
prohibition has not been or is not waived or the consent of the applicable party
has not been or is not obtained; provided further, that if and when the
prohibition which prevents the granting of a security interest in any such
Property is removed, terminated or otherwise becomes unenforceable as a matter
of law, the Agent will be deemed to have, and at all times to have had, a
security interest in such Property, and the Collateral will be deemed to
include, and at all times to have included, such Property. All terms which are
used herein which are defined in the Uniform Commercial Code of the State of
Illinois ("UCC") shall have the same meanings herein as such terms are defined
in the UCC, unless this Agreement shall otherwise specifically provide.
(b) This Agreement is made and given to secure, and shall secure, the
prompt payment and performance when due of (i) any and all indebtedness,
obligations and liabilities of the Debtors, and of any of them individually, to
the Secured Creditors, and to any of them individually, under or in connection
with or evidenced by the Credit Agreement, the Notes of the Borrower heretofore
or hereafter issued under the Credit Agreement and the obligations of the
Borrower to reimburse the Secured Creditors for the amount of all drawings on
all Letters of Credit issued pursuant to the Credit Agreement, and all other
obligations of the Borrower under any and all applications for Letters of
Credit, and any and all liability of the Debtors, and of any of them
individually, arising under or in connection with or otherwise evidenced by
agreements with any one or more of the Secured Creditors or their affiliates
with respect to any Hedging Liability, and any and all liability of the Debtors,
and of any of them individually, arising under any guaranty issued by it
relating to the foregoing or any part thereof, in each case whether now existing
or hereafter arising (and whether arising before or after the filing of a
petition in bankruptcy and including all interest accrued after the petition
date), due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired and (ii) any and all expenses and charges,
legal or otherwise, suffered or incurred by the Secured Creditors, and any of
them
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individually, in collecting or enforcing any of such indebtedness,
obligations and liabilities or in realizing on or protecting or preserving any
security therefor, including, without limitation, the lien and security interest
granted hereby (all of the indebtedness, obligations, liabilities, expenses and
charges described above being hereinafter referred to as the "Obligations").
Notwithstanding anything in this Agreement to the contrary, the right of
recovery against any Debtor (other than the Borrower to which this limitation
shall not apply) under this Agreement shall not exceed $1.00 less than the
amount which would render such Debtor's obligations under this Agreement void or
voidable under applicable law, including fraudulent conveyance law.
Section 3. Covenants, Agreements, Representations and Warranties. The
Debtors hereby covenant and agree with, and represent and warrant to, the
Secured Creditors that:
(a) Each Debtor is duly organized, validly existing and in good standing
under the laws of the state of its incorporation or organization, is the
sole and lawful owner of the Collateral granted by it hereunder and has the
power and authority to enter into this Agreement and to perform each and
all of the matters and things herein provided for. Each Debtor's Federal
tax identification number is set forth under its name under Column 1 on
Schedule A.
(b) Each Debtor's respective chief executive office is at the location
listed under Column 2 on Schedule A attached hereto opposite such Debtor's
name; and such Debtor has no other executive offices or places of business
other than those listed under Column 3 on Schedule A attached hereto
opposite such Debtor's name. The Collateral owned or leased by each Debtor
is and shall remain in such Debtor's possession or control at the locations
listed under Columns 2 and 3 on Schedule A attached hereto opposite such
Debtor's name (collectively for each Debtor, the "Permitted Collateral
Locations"), except as to any Collateral sold or otherwise disposed of in
accordance with this Agreement and Section 8.10 of the Credit Agreement. If
for any reason any Collateral is at any time kept or located at a location
other than a Permitted Collateral Location, the Agent shall nevertheless
have and retain a lien on and security interest therein. No Debtor shall
move its chief executive office or maintain a place of business at a
location other than those specified under Columns 2 or 3 on Schedule A or
permit any Collateral to be located at a location other than a Permitted
Collateral Location, in each case without first providing the Agent at
least 30 days prior written notice of the Debtor's intent to do so;
provided that each Debtor shall at all times maintain its chief executive
office, places of business, and Permitted Collateral Locations in the
United States of America and, with respect to any new chief executive
office or place of business or location of Collateral, such Debtor shall
have taken all action reasonably requested by the Agent to maintain the
lien and security interest of the Agent in the Collateral at all times
fully perfected and in full force and effect.
(c) The Collateral and every part thereof is and shall be free and clear
of all security interests, liens (including, without limitation,
mechanics', laborers' and statutory liens), attachments, levies and
encumbrances of every kind, nature and
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description and whether voluntary or involuntary, except for the lien and
security interest of the Agent therein and other Liens permitted by Section
8.8 of the Credit Agreement (herein, the "Permitted Liens"). Each Debtor
shall warrant and defend the Collateral against any claims and demands of
all persons at any time claiming the same or any interest in the Collateral
adverse to any of the Secured Creditors.
(d) Each Debtor will promptly pay when due all taxes, assessments and
governmental charges and levies upon or against it or its Collateral, in
each case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in good
faith by appropriate proceedings which prevent attachment of any Lien
resulting therefrom to, foreclosure on or other realization upon any
Collateral and preclude interference with the operation of its business in
the ordinary course and such Debtor shall have established adequate
reserves therefor.
(e) Each Debtor agrees it will not waste or destroy the Collateral or any
part thereof and will not be negligent in the care or use of any
Collateral. Each Debtor agrees it will not use, manufacture, sell or
distribute any Collateral in violation of any statute, ordinance or other
governmental requirement. Each Debtor will perform in all material respects
its obligations under any contract or other agreement constituting part of
the Collateral, it being understood and agreed that the Secured Creditors
have no responsibility to perform such obligations.
(f) Subject to Sections 4(d), 5(a), 6(b), 6(c), and 7(c) hereof and the
terms of the Credit Agreement (including, without limitation, Section 8.10
thereof), each Debtor agrees it will not, without the Agent's prior written
consent, sell, assign, mortgage, lease or otherwise dispose of the
Collateral or any interest therein.
(g) Each Debtor will insure its Collateral which is insurable against
such risks and hazards as other companies similarly situated insure
against, and including in any event loss or damage by fire, theft,
burglary, pilferage, and loss in transit, in amounts and under policies
containing loss payable clauses to the Agent as its interest may appear
(and, if the Agent requests, naming the Agent as additional insureds
therein) by insurers reasonably acceptable to the Agent. All premiums on
such insurance shall be paid by the Debtors and the policies of such
insurance (or certificates therefor) delivered to the Agent. All insurance
required hereby shall provide that any loss shall be payable
notwithstanding any act or negligence of the relevant Debtor, shall provide
that no cancellation thereof shall be effective until at least 30 days
after receipt by the relevant Debtor and the Agent of written notice
thereof, and shall be reasonably satisfactory to the Agent in all other
respects. In case of any material loss, damage to or destruction of the
Collateral or any part thereof, the relevant Debtor shall promptly give
written notice thereof to the Secured Creditors generally describing the
nature and extent of such damage or destruction. In case of any loss,
damage to or destruction of the Collateral or any part thereof, the
relevant Debtor, whether or not the insurance proceeds, if any, received on
account of such damage or destruction shall be sufficient for that purpose,
at such Debtor's cost and expense, will promptly
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repair or replace the Collateral so lost, damaged or destroyed, except to
the extent such Collateral is not necessary to the conduct of such Debtor's
business in the ordinary course. In the event any Debtor shall receive any
proceeds of such insurance, such Debtor will immediately pay over such
proceeds to the Agent; provided that, in the absence of any Default or
Event of Default such Debtors shall be entitled to retain such insurance
proceeds to the extent such proceeds are used for such repair or
replacement in accordance with Section 1.9(b) of the Credit Agreement. Each
Debtor hereby authorizes the Agent, at the Agent's option, to adjust,
compromise and settle any losses under any insurance afforded at any time
after the occurrence and during the continuation of any Event of Default,
and such Debtor does hereby irrevocably constitute the Agent, its officers,
agents and attorneys, as such Debtor's attorneys-in-fact, with full power
and authority after the occurrence and during the continuation of any Event
of Default to effect such adjustment, compromise and/or settlement and to
endorse any drafts drawn by an insurer of the Collateral or any part
thereof and to do everything necessary to carry out such purposes and to
receive and receipt for any unearned premiums due under policies of such
insurance. Unless the Agent elects to adjust, compromise or settle losses
as aforesaid, any adjustment, compromise and/or settlement of any losses
under any insurance shall be made by the relevant Debtor subject to final
approval of the Agent (regardless of whether or not an Event of Default
shall have occurred) in the case of losses exceeding $500,000. Net
insurance proceeds received by the Agent under the provisions hereof or
under any policy or policies of insurance covering the Collateral or any
part thereof pursuant to the terms hereof shall be applied to the reduction
of, or otherwise held as security for, the Obligations (whether or not then
due); provided, however, that the Agent agrees to release such insurance
proceeds to the relevant Debtor for replacement or restoration of the
portion of the Collateral lost, damaged or destroyed if, but only if, (i)
at the time of release no Default or Event of Default exists hereunder,
(ii) written application for such release is received from such Debtor
within 30 days of receipt of, or in the event received by the Agent notice
of Agent's receipt of, such proceeds and (iii) the Agent has received
evidence reasonably satisfactory to it that the Collateral lost, damaged or
destroyed has been or will be replaced or restored in accordance with
Section 1.9(b) of the Credit Agreement. All insurance proceeds shall be
subject to the lien and security interest of the Agent hereunder.
(h) Each Debtor will at all times allow the Secured Creditors and their
respective representatives free access to and right of inspection of the
Collateral at such reasonable times and intervals as the Agent or any other
Secured Creditor may designate.
(i) If any Collateral is in the possession or control of any agents or
processors of a Debtor and the Agent so requests, such Debtor agrees to
notify such agents or processors in writing of the Agent's security
interest therein and instruct them to hold all such Collateral for the
Agent's account and subject to the Agent's instructions. Each Debtor will,
upon the request of the Agent, authorize and instruct all bailees and any
other parties, if any, at any time processing, labeling, packaging,
holding, storing, shipping or transferring all or any part of the
Collateral to permit
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the Secured Creditors and their respective representatives to examine and
inspect any of the Collateral then in such party's possession and to verify
from such party's own books and records any information concerning the
Collateral or any part thereof which the Secured Creditors or their
respective representatives may seek to verify. As to any premises not owned
by a Debtor wherein any of the Collateral is located, if any, such Debtor
shall, upon the Agent's request, cause each party having any right, title
or interest in, or lien on, any of such premises to enter into an agreement
(any such agreement to contain a legal description of such premises)
whereby such party disclaims any right, title and interest in, and lien on,
the Collateral, allowing the removal of such Collateral by the Agent or its
agents or representatives and otherwise in form and substance reasonably
acceptable to the Agent.
(j) Upon the Agent's request, each Debtor agrees from time to time to
deliver to the any Secured Creditor such evidence of the existence,
identity and location of its Collateral and of its availability as
collateral security pursuant hereto (including, without limitation,
schedules describing all Receivables created or acquired by such Debtor,
copies of customer invoices or the equivalent and original shipping or
delivery receipts for all merchandise and other goods sold or leased or
services rendered by it, together with such Debtor's warranty of the
genuineness thereof, and reports stating the book value of its Inventory
and Equipment by major category and location), in each case as such Secured
Creditor may reasonably request. The Agent shall have the right to verify
all or any part of the Collateral in any manner, and through any medium,
which the Agent considers appropriate and reasonable, and each Debtor
agrees to furnish all assistance and information, and perform any acts,
which the Agent may require in connection therewith.
(k) Each Debtor will comply in all material respects with the terms and
conditions of any and all leases, easements, right-of-way agreements and
other agreements binding upon such Debtor or affecting the Collateral, in
each case which cover the premises wherein the Collateral is located, and
any orders, ordinances, laws or statutes of any city, state or other
governmental entity, department or agency having jurisdiction with respect
to such premises or the conduct of business thereon.
(l) No Debtor has invoiced Receivables or otherwise transacted business,
and does not invoice Receivables or otherwise transact business, under any
trade names other than its name set forth on its signature page to this
Agreement or as otherwise set forth on Schedule B hereto. Each Debtor
agrees it will not change its name or transact business under any other
trade name, in each case without first giving the Agent at least 30 days
prior written notice of its intent to do so.
(m) Each Debtor agrees to execute and deliver to the Agent such further
agreements, assignments, instruments and documents, and to do all such
other things, as the Agent may reasonably deem necessary or appropriate to
assure the Agent its lien and security interest hereunder, including
without limitation, (i) executing such financing statement or other
instruments and documents as the Agent may from time to time reasonably
require to comply with the UCC, and (ii) executing such patent,
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trademark, and copyright agreements as the Agent may from time to time
reasonably require to comply with the filing requirements of the United
States Patent and Trademark Office and the United States Copyright Office.
Each Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for filing
as a financing statement by the Agent without prior notice thereof to such
Debtor wherever the Agent deems necessary or desirable to perfect or
protect the security interest granted hereby. In the event for any reason
the law of any jurisdiction other than Illinois becomes or is applicable to
the Collateral or any part thereof, or to any of the Obligations, each
Debtor agrees to execute and deliver all such instruments and documents and
to do all such other things as the Agent deems necessary or appropriate to
preserve, protect and enforce the security interest of the Agent under the
law of such other jurisdiction.
(n) On failure of a Debtor to perform any of the covenants and agreements
herein contained, the Agent may, at its option, perform the same and in so
doing may expend such sums as the Agent deems advisable in the performance
thereof, including, without limitation, the payment of any insurance
premiums, the payment of any taxes, liens and encumbrances, expenditures
made in defending against any adverse claims, and all other expenditures
which the Agent may be compelled to make by operation of law or which the
Agent may make by agreement or otherwise for the protection of the security
hereof. All such sums and amounts so expended shall be repayable by such
Debtor immediately upon demand, shall constitute additional Obligations
secured hereunder, and shall bear interest from the date said amounts are
expended at the rate per annum (computed on the basis of a year of 360
days, for the actual number of days elapsed) determined by adding 2% to the
Base Rate from time to time in effect plus the Applicable Margin for
Revolving Loans, with any change in such rate per annum as so determined by
reason of a change in such Base Rate to be effective on the date of such
change in said Base Rate (such rate per annum as so determined being
hereinafter referred to as the "Default Rate"). No such performance of any
covenant or agreement by the Agent on behalf of a Debtor, and no such
advancement or expenditure therefor, shall relieve any Debtor of any
default under the terms of this Agreement or in any way obligate any
Secured Creditor to take any further or future action with respect thereto.
The Agent in making any payment hereby authorized may do so according to
any xxxx, statement or estimate procured from the appropriate public office
or holder of the claim to be discharged without inquiry into the accuracy
of such xxxx, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien or title or claim. The Agent in
performing any act hereunder shall be the sole judge of whether the
relevant Debtor is required to perform the same under the terms of this
Agreement. The Agent is hereby authorized to charge any depository or other
account of any Debtor maintained with any Secured Creditor for the amount
of such sums and amounts so expended.
Section 4. Special Provisions Re: Receivables. (a) As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
and all of its Receivables that all warranties of such Debtor set forth in this
Agreement are true and correct with respect to
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each such Receivable; that each of its Receivable and all papers and documents
relating thereto are genuine and in all respects what they purport to be; that
each of its Receivable is valid and existing and, if such Receivable is an
account, arises out of a bona fide sale of goods sold and delivered by such
Debtor to, or in the process of being delivered to, or out of and for services
theretofore actually rendered by such Debtor to, the account debtor named
therein; and that no surety bond was required or given in connection with such
Receivable or the contracts or purchase orders out of which the same arose.
(b) To the extent any Receivables or other item of Collateral is
evidenced by an instrument, each Debtor shall cause such instrument to be
pledged and delivered to the Agent; provided, however, that, prior to the
existence of a Default or Event of Default and thereafter until otherwise
required by the Agent or the Secured Creditors, a Debtor shall not be required
to deliver any such instrument if and only so long as the aggregate unpaid
principal balance of all such instruments held by the Debtors and not delivered
to the Agent under the Collateral Documents is less than $500,000 at any one
time outstanding.
(c) If any Receivable arises out of a contract with the United States of
America or any of its departments, agencies or instrumentalities, the relevant
Debtor agrees to, at the request of the Agent or the Secured Creditors, execute
whatever instruments and documents are required by the Agent in order that such
Receivable shall be assigned to the Agent and that proper notice of such
assignment shall be given under the federal Assignment of Claims Act (or any
successor statute) or any similar statute relating to the assignment of such
Receivables.
(d) Unless and until an Event of Default hereunder occurs and is
continuing, any merchandise or other goods which are returned by a customer or
account debtor or otherwise recovered may be resold by the relevant Debtor in
the ordinary course of its business as presently conducted in accordance with
Section 6(b) hereof; upon the occurrence and during the continuation of any
Event of Default hereunder, such merchandise and other goods shall be set aside
at the request of the Agent and held by such Debtor as trustee for the Secured
Creditors and shall remain part of the Collateral. Unless and until an Event of
Default hereunder occurs and is continuing, the relevant Debtor may settle and
adjust disputes and claims with its customers and account debtors, handle
returns and recoveries and grant discounts, credits and allowances in the
ordinary course of its business as presently conducted for amounts and on terms
which such Debtor in good faith considers advisable. Upon the occurrence and
during the continuation of any Event of Default hereunder, unless the Agent
requests otherwise, each Debtor shall notify the Agent promptly of all returns
and recoveries and, on the Agent's request, deliver any such merchandise or
other goods to the Agent. Upon the occurrence and during the continuation of
any Event of Default hereunder, at the Agent's request, each Debtor shall also
notify the Agent promptly of all disputes and claims and settle or adjust them
at no expense to the Secured Creditors hereunder, but no discount, credit or
allowance other than on normal trade terms in the ordinary course of business as
presently conducted shall be granted to any customer or account debtor and no
returns of merchandise or other goods shall be accepted by any Debtor without
the Agent's consent. The Agent may, at all times upon the occurrence and during
the continuation of
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any Event of Default hereunder, settle or adjust disputes and claims directly
with customers or account debtors for amounts and upon terms which the Agent
considers advisable.
Section 5. Collection of Receivables. (a) Except as otherwise
provided in this Agreement, each Debtor shall make collection of all of its
Receivables and may use the same to carry on its business in accordance with
sound business practice and otherwise subject to the terms hereof.
(b) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Agent has exercised any or all of
its rights under other provisions of this Section 5, in the event the Agent
requests any Debtor to do so:
(i) all instruments and chattel paper at any time constituting
part of the Receivables (including any postdated checks) shall, upon
receipt by such Debtor, be immediately endorsed to and deposited with
Agent; and/or
(ii) such Debtor shall instruct all of its customers and account
debtors to remit all payments in respect of its Receivables to a lockbox or
lockboxes under the sole custody and control of Agent and which are
maintained at post offices selected by the Agent.
(c) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Agent has exercised any or all of
its rights under other provisions of this Section 5, the Agent or its designee
may notify the relevant Debtor's customers and account debtors at any time that
Receivables have been assigned to the Agent or of the Agent's security interest
therein, and either in its own name, or such Debtor's name, or both, demand,
collect (including, without limitation, through a lockbox analogous to that
described in Section 5(b)(ii) hereof), receive, receipt for, xxx for, compound
and give acquittance for any or all amounts due or to become due on Receivables,
and in the Agent's discretion file any claim or take any other action or
proceeding which the Agent may deem necessary or appropriate to protect and
realize upon the security interest of the Agent in the Receivables.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Sections
5(b) or 5(c) hereof during the existence of any Default or Event of Default may
be handled and administered by the Agent in and through a remittance account or
accounts maintained at the Agent or by the Agent at a commercial bank or banks
selected by the Agent (collectively the "Depositary Banks" and individually a
"Depositary Bank"), and each Debtor acknowledges that the maintenance of such
remittance accounts by the Agent is solely for the Agent's convenience and that
the Debtors do not have any right, title or interest in such remittance accounts
or any amounts at any time standing to the credit thereof. The Agent may apply
all or any part of any proceeds of Receivables or other Collateral received by
it during the existence of any Default or Event of Default from any source to
the payment of the Obligations (whether or not then due and payable), such
applications to be made in such amounts, in such manner and order and at such
intervals as the Agent may from time to time in its discretion determine.
-11-
The Agent need not apply or give credit for any item included in proceeds of
Receivables or other Collateral until the Depositary Bank has received final
payment therefor at its office in cash or final solvent credits current at the
site of deposit acceptable to the Agent and the Depositary Bank as such.
However, if the Agent does permit credit to be given for any item prior to a
Depositary Bank receiving final payment therefor and such Depositary Bank fails
to receive such final payment or an item is charged back to the Agent or any
Depositary Bank for any reason, the Agent may at its election in either instance
charge the amount of such item back against any such remittance accounts or any
depository account of any Debtor maintained with any Secured Creditor, together
with interest thereon at the Default Rate. Concurrently with each transmission
of any proceeds of Receivables or other Collateral to any such remittance
account, upon the Agent's request, the relevant Debtor shall furnish the Agent
with a report in such form as Agent shall reasonably require identifying the
particular Receivable or such other Collateral from which the same arises or
relates. Each Debtor hereby indemnifies the Secured Creditors from and against
all liabilities, damages, losses, actions, claims, judgments, and all reasonable
costs, expenses, charges and attorneys' fees suffered or incurred by any Secured
Creditor because of the maintenance of the foregoing arrangements; provided,
however, that no Debtor shall be required to indemnify any Secured Creditor for
any of the foregoing to the extent they arise solely from the gross negligence
or willful misconduct of the person seeking to be indemnified. The Secured
Creditors shall have no liability or responsibility to any Debtor for the Agent
or any other Depositary Bank accepting any check, draft or other order for
payment of money bearing the legend "payment in full" or words of similar import
or any other restrictive legend or endorsement whatsoever or be responsible for
determining the correctness of any remittance.
Section 6. Special Provisions Re: Inventory and Equipment. (a) Each
Debtor shall at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable condition and keep and preserve its Equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and, without limiting the foregoing, make all necessary and proper repairs,
replacements and additions to its Equipment so that the efficiency thereof shall
be fully preserved and maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell the Inventory in the ordinary course of its business, but a sale in the
ordinary course of business shall not under any circumstance include any
transfer or sale in satisfaction, partial or complete, of a debt owing by such
Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell (x)
obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by such Debtor free of any lien, charge or encumbrance other than the security
interest granted hereby and (y) Equipment to the extent permitted by Section
8.10 of the Credit Agreement.
-12-
(d) As of the time any Inventory or Equipment of a Debtor becomes subject
to the security interest provided for hereby and at all times thereafter, such
Debtor shall be deemed to have warranted as to any and all of such Inventory and
Equipment that all warranties of such Debtor set forth in this Agreement are
true and correct with respect to such Inventory and Equipment; that all of such
Inventory and Equipment is located at a location set forth pursuant to Section
3(b) hereof. Each Debtor warrants and agrees that none of its Inventory is or
will be consigned to any other person or entity without the Agent's prior
written consent.
(e) Upon the Agent's or the Secured Creditors' request, each Debtor shall
at its own cost and expense cause the lien of the Agent in and to any portion of
its Collateral subject to a certificate of title law to be duly noted on such
certificate of title or to be otherwise filed in such manner as is prescribed by
law in order to perfect such lien and will cause all such certificates of title
and evidences of lien to be deposited with the Agent.
(f) Except for Equipment from time to time located on the real estate
described on Schedule C attached hereto or as otherwise hereafter disclosed to
the Secured Creditors in writing, none of the Equipment is or will be attached
to real estate in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the relevant Debtor to the
Agent.
Section 7. Special Provisions Re: Investment Property. (a) Unless and
until an Event of Default has occurred and is continuing and thereafter until
notified to the contrary by the Agent pursuant to Section 9(d) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to its Investment Property or any part
thereof, for all purposes not inconsistent with the terms of this
Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of its Investment Property.
(b) Certificates for all securities now or at any time constituting
Investment Property and part of the Collateral hereunder shall be promptly
delivered by the relevant Debtor to the Agent duly endorsed in blank for
transfer or accompanied by an appropriate assignment or assignments or an
appropriate undated stock power or powers, in every case sufficient to transfer
title thereto, including, without limitation, all stock received in respect of a
stock dividend or resulting from a split-up, revision or reclassification of the
Investment Property or any part thereof or received in addition to, in
substitution of or in exchange for the Investment Property or any part thereof
as a result of a merger, consolidation or otherwise. With respect to any
Investment Property held by a securities intermediary, commodity intermediary,
or other financial intermediary of any kind, the relevant Debtor shall execute
and deliver, and shall cause any such intermediary to execute and deliver, an
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agreement among such Debtor, the Agent, and such intermediary in form and
substance satisfactory to the Agent which provides, among other things, for the
intermediary's agreement that it will comply with such entitlement orders, and
apply any value distributed on account of any Investment Property maintained in
an account with such intermediary, as directed by the Agent without further
consent by such Debtor. The Agent may, at any time after the occurrence and
during the continuation of an Event of Default at any time when the Obligations
are, or have been declared to be, due and payable in full, cause to be
transferred into its name or the name of its nominee or nominees any and all of
the Investment Property hereunder.
(c) Unless and until an Event of Default has occurred and is continuing,
each Debtor may sell or otherwise dispose of any of its Investment Property to
the extent permitted by the Credit Agreement, provided that except to the extent
permitted by Section 8.11 of the Credit Agreement, no Debtor shall sell or
otherwise dispose of any capital stock or other equity interest in any direct or
indirect Subsidiary without the prior written consent of the Agent. During the
existence of any Event of Default, no Debtor shall sell all or any part of the
Investment Property without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
its Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
Section 8. Power of Attorney. In addition to any other powers of
attorney contained herein, each Debtor hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as such Debtor's attorney-in-
fact, with full power during the existence of any Default or Event of Default to
sign such Debtor's name on verifications of accounts and other Collateral; to
send requests for verification of Collateral to such Debtor's customers, account
debtors and other obligors; to endorse such Debtor's name on any checks, notes,
acceptances, money orders, drafts and any other forms of payment or security
that may come into the Agent's possession; to endorse the Collateral in blank or
to the order of the Agent or its nominee; to sign such Debtor's name on any
invoice or xxxx of lading relating to any Collateral, on claims to enforce
collection of any Collateral, on notices to and drafts against customers and
account debtors and other obligors, on schedules and assignments of Collateral,
on notices of assignment and on public records; to notify the post office
authorities to change the address for delivery of such Debtor's mail to an
address designated by the Agent; to receive, open and dispose of all mail
addressed to such Debtor; and to do all things necessary to carry out this
Agreement. Each Debtor hereby ratifies and approves all acts of any such
attorney and agrees that neither the Agent nor any such attorney will be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law other than such person's gross negligence or willful misconduct. The Agent
may
-14-
file one or more financing statements disclosing its security interest in
any or all of the Collateral without any Debtor's signature appearing thereon,
and each Debtor also hereby grants the Agent a power of attorney to execute any
such financing statements, or amendments and supplements to financing
statements, on behalf of such Debtor without notice thereof to any Debtor. The
foregoing powers of attorney, being coupled with an interest, are irrevocable
until the Obligations have been fully paid and satisfied and the commitments of
the Lenders to extend credit to or for the account of the Borrower under the
Credit Agreement have expired or otherwise terminated.
Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law, all of which each Debtor
hereby waives to the extent permitted by applicable law, at any time or times,
sell and deliver any or all Collateral held by or for it at public or private
sale, at any securities exchange or broker's board or at any Secured Creditor's
office or elsewhere, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion. Upon the
occurrence and during the continuation of any Event of Default, in addition to
any other right or remedies set forth herein or by applicable law, the Agent may
by written demand direct any securities intermediary, commodities intermediary,
or other financial intermediary at any time holding any Investment Property, or
any issuer thereof, to deliver such Collateral, or any part thereof, to the
Agent and/or liquidate such Collateral, or any part thereof, and deliver the
proceeds thereof to the Agent. In the exercise of any such remedies, the Agent
may sell the Collateral as a unit even though the sales price thereof may be in
excess of the amount remaining unpaid on the Obligations. Also, if less than
all the Collateral is sold, the Agent shall have no duty to marshal or apportion
the part of the Collateral so sold as between the Debtors, or any of them, but
may sell and deliver any or all of the Collateral without regard to which of the
Debtors are the owners thereof. In addition to all other sums due any Secured
Creditor hereunder, each Debtor shall pay the Secured Creditors all costs and
expenses incurred by the Secured Creditors, including reasonable attorneys' fees
and court costs, in obtaining, liquidating or enforcing payment of Collateral or
the Obligations or in the prosecution or defense of any action or proceeding by
or against any Secured Creditor or any Debtor concerning any matter arising out
of or connected with this Agreement or the Collateral or the Obligations,
including, without limitation, any of the foregoing arising in, arising under or
related to a case under the United States Bankruptcy Code (or any successor
statute). Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Debtors in accordance
with Section 13(b) hereof at least 10 days before the time of sale or other
event giving rise to the requirement of such notice; provided, however, no
notification need be given to a Debtor if such Debtor has signed, after an Event
of Default hereunder has occurred, a statement
-15-
renouncing any right to notification of sale or other intended disposition. The
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. Any Secured Creditor may be
the purchaser at any such sale. Each Debtor hereby waives all of its rights of
redemption from any such sale. The Agent may postpone or cause the postponement
of the sale of all or any portion of the Collateral by announcement at the time
and place of such sale, and such sale may, without further notice, be made at
the time and place to which the sale was postponed or the Agent may further
postpone such sale by announcement made at such time and place. In the event any
of the Collateral shall constitute restricted securities within the meaning of
any applicable securities laws, any disposition thereof in compliance with such
laws shall not render the disposition commercially unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent shall have
the right, in addition to all other rights provided herein or by law, to take
physical possession of any and all of the Collateral and anything found therein,
the right for that purpose to enter without legal process any premises where the
Collateral may be found (provided such entry be done lawfully), and the right to
maintain such possession on the relevant Debtor's premises (each Debtor hereby
agreeing, to the extent it may lawfully do so, to lease such premises without
cost or expense to the Agent or its designee if the Agent so requests) or to
remove the Collateral or any part thereof to such other places as the Agent may
desire. Upon the occurrence and during the continuation of any Event of Default
hereunder, the Agent shall have the right to exercise any and all rights with
respect to deposit accounts of each Debtor maintained with any Secured Creditor,
including, without limitation, the right to collect, withdraw and receive all
amounts due or to become due or payable under each such deposit account. Upon
the occurrence and during the continuation of any Event of Default hereunder,
each Debtor shall, upon the Agent's demand, assemble the Collateral and make it
available to the Agent at a place designated by the Agent. If the Agent
exercises its right to take possession of the Collateral, each Debtor shall also
at its expense perform any and all other steps requested by the Agent to
preserve and protect the security interest hereby granted in the Collateral,
such as placing and maintaining signs indicating the security interest of the
Agent, appointing overseers for the Collateral and maintaining Collateral
records.
(d) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default at any time when the Obligations
are, or have been declared to be, due and payable in full, all rights of a
Debtor to exercise the voting and/or consensual powers which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the
distributions which it is entitled to receive and retain pursuant to Section
7(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become
vested in the Agent, which, in addition to all other rights provided herein or
by law, shall then be entitled solely and exclusively to exercise all voting and
other consensual powers pertaining to the Investment Property and/or to receive
and retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options pertaining
to any Investment
-16-
Property as if the Agent were the absolute owner thereof including, without
limitation, the rights to exchange, at its discretion, any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the respective issuer thereof or upon
the exercise by or on behalf of any such issuer or the Agent of any right,
privilege or option pertaining to any Investment Property and, in connection
therewith, to deposit and deliver any and all of the Investment Property with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Agent may determine.
(e) Without in any way limiting the foregoing, each Debtor hereby grants
to the Secured Creditors a royalty-free irrevocable license and right to use all
of such Debtor's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles, and
similar intangibles in connection with any foreclosure or other realization by
the Agent or the Secured Creditors on all or any part of the Collateral to the
extent permitted by law. The license and right granted the Secured Creditors
hereby shall be without any royalty or fee or charge whatsoever.
(f) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Debtor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. Neither any Secured Creditor, nor any party acting
as attorney for any Secured Creditor, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct. The rights and remedies of the
Secured Creditors under this Agreement shall be cumulative and not exclusive of
any other right or remedy which any Secured Creditor may have.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Debtors shall remain liable to the Secured Creditors for
any deficiency. Any surplus remaining after the full payment and satisfaction
of the Obligations shall be returned to the Borrower, as agent for the Debtors,
or to whomsoever the Agent reasonably determines is lawfully entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and the commitments of the Lenders to extend credit to or for the
account of the Borrower under the Credit Agreement have expired or otherwise
terminated. Upon such termination of this Agreement, the Agent shall, upon the
request and at the expense of the Debtors, forthwith release its security
interest hereunder.
-17-
Section 12. The Agent. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 11 of the Credit Agreement, all of which
provisions of said Section 11 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the other Secured Creditors or any
other holders of the Obligations concerning the perfection of the liens and
security interests granted hereunder or in the value of any of the Collateral.
Section 13. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Debtor, its
successors and assigns and shall inure, together with the rights and remedies of
the Secured Creditors hereunder, to the benefit of the Secured Creditors and
their successors and permitted assigns; provided, however, that no Debtor may
assign its rights or delegate its duties hereunder without the Agent's prior
written consent. Without limiting the generality of the foregoing, and subject
to the provisions of the Credit Agreement, any Lender may assign or otherwise
transfer any indebtedness held by it secured by this Agreement to any other
person, and such other person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to the Borrower in accordance
with Section 12.8 of the Credit Agreement, or if to any Secured Creditor, when
given to such party in accordance with Section 12.8 of the Credit Agreement.
(c) No Lender or Letter of Credit Issuer shall have the right to
institute any suit, action or proceeding in equity or at law for the foreclosure
or other realization upon any Collateral subject to this Agreement or for the
execution of any trust or power hereof or for the appointment of a receiver, or
for the enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Lenders or Letter of Credit
Issuers shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien and security interest of this Agreement by its or their
action or to enforce any right hereunder, and that all proceedings at law or in
equity shall be instituted, had and maintained by the Agent in the manner herein
provided for the benefit of the Secured Creditors.
(d) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision, but only as to such jurisdictions where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provisions hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect. Without limiting the generality of the
foregoing, in the event that this Agreement shall be deemed to be invalid or
otherwise
-18-
unenforceable with respect to any Debtor, such invalidity or unenforceability
shall not affect the validity of this Agreement with respect to the other
Debtors.
(e) The lien and security interest herein created and provided for stand
as direct and primary security for the Obligations of the Borrower arising under
or otherwise relating to the Credit Agreement as well as for any of the other
Obligations secured hereby. No application of any sums received by the Secured
Creditors in respect of the Collateral or any disposition thereof to the
reduction of the Obligations or any part thereof shall in any manner entitle any
Debtor to any right, title or interest in or to the Obligations or any
collateral or security therefor, whether by subrogation or otherwise, unless and
until all Obligations have been fully paid and satisfied and all agreements of
the Secured Creditors to extend credit to or for the account of the Borrower
under the Credit Agreement have expired or otherwise terminated. Each Debtor
acknowledges that the lien and security interest hereby created and provided are
absolute and unconditional and shall not in any manner be affected or impaired
by any acts of omissions whatsoever of any Secured Creditor or any other holder
of any Obligations, and without limiting the generality of the foregoing, the
lien and security interest hereof shall not be impaired by any acceptance by the
Secured Creditors or any other holder of any Obligations of any other security
for or guarantors upon any of the Obligations or by any failure, neglect or
omission on the part of any Secured Creditor or any other holder of any
Obligations to realize upon or protect any of the Obligations or any collateral
or security therefor (including, without limitation, impairment of collateral or
failure to perfect security interest in collateral). The lien and security
interest hereof shall not in any manner be impaired or affected by (and the
Secured Creditors, without notice to anyone, are hereby authorized to make from
time to time) any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the Obligations or of any collateral or
security therefor, or of any guaranty thereof, or of any instrument or agreement
setting forth the terms and conditions pertaining to any of the foregoing. The
Secured Creditors may at their discretion at any time grant credit to the
Borrower without notice to the other Debtors in such amounts and on such terms
as the Secured Creditors may elect (all of such to constitute additional
Obligations hereby secured) without in any manner impairing the lien and
security interest created and provided for herein. In order to realize hereon
and to exercise the rights granted the Secured Creditors hereunder and under
applicable law, there shall be no obligation on the part of any Secured Creditor
or any other holder of any Obligations at any time to first resort for payment
to the Borrower or to any other Debtor or to any guaranty of the Obligations or
any portion thereof or to resort to any other collateral, security, property,
liens or any other rights or remedies whatsoever, and the Secured Creditors
shall have the right to enforce this Agreement against any Debtor or any of its
Collateral irrespective of whether or not other proceedings or steps seeking
resort to or realization upon or from any of the foregoing are pending.
(f) In the event the Secured Creditors shall at any time in their
discretion permit a substitution of Debtors hereunder or a party shall wish to
become a Debtor hereunder, such substituted or additional Debtor shall, upon
executing an agreement in the form attached hereto as Schedule D, become a party
hereto and be bound by all the terms and conditions
-19-
hereof to the same extent as though such Debtor had originally executed this
Agreement and, in the case of a substitution, in lieu of the Debtor being
replaced. Any such agreement shall contain information as to such Debtor
necessary to update Schedules A, B and C hereto with respect to it. No such
substitution shall be effective absent the written consent of Agent nor shall it
in any manner affect the obligations of the other Debtors hereunder.
(g) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(h) Each Debtor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in Xxxx County, Illinois for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Debtor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
form. Each Debtor and, by accepting the benefits of this Agreement, each
Secured Creditor hereby irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
(i) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same agreement.
[Signature Pages to Follow]
-20-
In Witness Whereof, each Debtor has caused this Agreement to be duly
executed and delivered as of the date first above written.
"Debtors"
Fountain View, Inc.
Fountain View Holdings, Inc.
Locomotion Holdings, Inc.
Fountain View Management, Inc.
Sycamore Park Convalescent Hospital
AIB Corp.
Elmcrest Convalescent Hospital
Brier Oak Convalescent, Inc.
BIA Hotel Corp.
Rio Hondo Nursing Center
Fountainview Convalescent Hospital
Alexandria Convalescent Hospital, Inc.
I.'N O., Inc.
Summit Care Corporation
Summit Care-California, Inc.
Summit Care-Texas No. 2, Inc.
Summit Care-Texas No. 3, Inc.
Summit Care Pharmacy, Inc.
Skilled Care Network
Summit Care Texas Equity, Inc.
Summit Care Management Texas, Inc.
SNF Pharmacy, Inc.
FV-SCC Acquisition4 Corp.
By /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Address:
00000 Xxxx Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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Locomotion Therapy, Inc.
On-Track Therapy Center, Inc.
By /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
Address:
00000 Xxxx Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Summit Care Texas, L.P.
By: Summit Care Management Texas, Inc.,
in its capacity as general partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, President
By: Summit Care Texas Equity, Inc.,
in its capacity as limited partner
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx, President
-22-
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
Bank of Montreal, as Agent
By /s/ Xxxx X. Xxxxxxx
--------------------------------
Name Xxxx X. Xxxxxxx
--------------------------
Title Managing Director
--------------------------
Address:
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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SCHEDULE A
LOCATIONS
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
Fountain View, Inc. 00000 X. Xxxxxxx Xxxx., Xxxx
Xxx XX #00-0000000 #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
Fountain View Holdings, Inc. 00000 X. Xxxxxxx Xxxx., Xxxx
Xxx XX #00-0000000 #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
Locomotion Holdings, Inc. 00000 X. Xxxxxxx Xxxx., Xxxx
Xxx XX #00-0000000 #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
Locomotion Therapy, Inc. 000 Xxxxxxx Xxxx Xx., #000 Xxxx
Xxx XX #00-0000000 Xxxxxx, Xxxxxxxxxx 00000
Fountain View Management, 00000 X. Xxxxxxx Xxxx., None
Inc. #680
Tax ID #00-0000000 Xxx Xxxxxxx, Xxxxxxxxxx
00000
Sycamore Park Convalescent 0000 X. Xxxxxxxx Xx. Xxxx
Xxxxxxxx Xxx Xxxxxxx, Xxxxxxxxxx
Tax ID #00-0000000 90865
AIB Corp. 000 X. XxXxxx Xxxx
Xxx XX #00-0000000 Xxx Xxxxxxx, Xxxxxxxxxx
00000
Elmcrest Convalescent 3111 Santa Xxxxx 0000 X. Xxxxxxx Xxxx.
Xxxxxxxx Xx Xxxxx, Xxxxxxxxxx 00000 Montebello, California
Tax ID #00-0000000 00000
Xxxxx Xxx Xxxxxxxxxxxx, Inc. 0000 Xxxxxx Xxxx. Xxxx
Xxx XX #00-0000000 Xxx Xxxxxxx, Xxxxxxxxxx
00000
BIA Hotel Corp. 000 X. XxXxxx Xxxx
Xxx XX #00-0000000 Xxx Xxxxxxx, Xxxxxxxxxx
00000
Rio Hondo Nursing Center 000 X. Xxxxxxx Xxxx. None
Tax ID #00-0000000 Xxxxxxxxxx, Xxxxxxxxxx
00000
Fountainview Convalescent 0000 Xxxxxxxx Xxx. Xxxx
Xxxxxxxx Xxx Xxxxxxx, Xxxxxxxxxx
Tax ID #00-0000000 90029
Alexandria Convalescent 0000 X. Xxxxxxxxxx Xxx. None
Hospital, Inc. Los Angeles, California
Tax ID #00-0000000 90027
I.'n O., Inc. 000 Xxxxxxx Xxxx Xx., #000 Xxxx
Xxx XX #00-0000000 Xxxxxx, Xxxxxxxxxx 00000
On-Track Therapy Center, 0000 X. Xxxxxx Xx., #000 None
Inc. Xxxxxx, Xxxxxxxxxx 00000
Tax ID #000000000
Summit Care Corporation 0000 X. Xxxxxxxx Xxxx. 00000 Xxx Xxxxx Xx.
Xxx XX #00-0000000 Xxxxxxx, Xxxxxxxxxx 00000 Xxxxx Xxxxx,
Xxxxxxxxxx 00000
00000 Xxx Xxxxxx Xx.,
#000
Xxx Xxxxxxx, Xxxxx
00000
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
Summit Care-California, Inc. 0000 X. Xxxxxxxx Xxxx. None
Tax ID #00-0000000 Xxxxxxx, Xxxxxxxxxx 00000
Summit Care-Texas Xx. 0, 0000 X. Xxxxxxxx Xxxx. Xxxx
Inc. Xxxxxxx, Xxxxxxxxxx 00000
Tax ID #00-0000000
Summit Care-Texas Xx. 0, 0000 X. Xxxxxxxx Xxxx. Xxxx
Inc. Xxxxxxx, Xxxxxxxxxx 00000
Tax ID #00-0000000
Summit Care Pharmacy, Inc. 00000 Xxx Xxxxx Xx. 222 X. Xxxxxxxxxx
Tax ID #00-0000000 Xxxxx Xxxxx, Xxxxxxxxxx Xx., #000
92887 Xxxxxxxx, Xxxxxxxxxx
00000
Summit Care Texas Equity, 0000 X. Xxxxxxxx Xxxx. None
Inc. Xxxxxxx, Xxxxxxxxxx 00000
Tax ID #00-0000000
Summit Care Management 00000 Xxx Xxxxxx Xx., #000 Xxxx
Xxxxx, Inc. Xxx Xxxxxxx, Xxxxx 00000
Tax ID #00-0000000
Summit Care Texas, L.P. 00000 Xxx Xxxxxx Xx., #000 Xxxx
Xxx XX #00-0000000 Xxx Xxxxxxx, Xxxxx 00000
FV-SCC Acquisition Corp. 00000 X. Xxxxxxx Xxxx., Xxxx
Xxx XX #00-0000000 #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
Skilled Care Network 00000 X. Xxxxxxx Xxxx., None
(to be dissolved) #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
SNF Pharmacy, Inc. 00000 X. Xxxxxxx Xxxx., None
(to be dissolved) #680
Xxx Xxxxxxx, Xxxxxxxxxx
00000
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SCHEDULE B
TRADE NAMES
Trade Names of
Name of Debtor Such Debtor
Fountain View, Inc. None
Fountain View Holdings, Inc. None
Locomotion Holdings, Inc. None
Locomotion Therapy, Inc. None
Fountain View Management, Inc. None
Sycamore Park Convalescent Hospital None
AIB Corp. d/b/a Xxxxxxx Park Convalescent
Hospital
Elmcrest Convalescent Hospital d/b/a Montebello Convalescent
Hospital
Brier Oak Convalescent, Inc. d/b/a Brier Oak Terrace Care Center
BIA Hotel Corp. d/b/a Xxxxxxx Park Retirement Hotel
Rio Hondo Nursing Center d/b/a Rio Hondo Convalescent
Hospital
Fountainview Convalescent Hospital None
Alexandria Convalescent Hospital, Inc. None
I.'n O., Inc. None
On-Track Therapy Center, Inc. None
Summit Care Corporation Xxxxxx Retirement Center
Earlwood Care Center
Fountain Care Center
Fountain Assisted Living
/Retirement Center
Trade Names of
Name of Debtor Such Debtor
Devonshire Care Center
Spring Assisted Living/Retirement
Center
Valley Health Care Center
Xxxxx Xxxxx Care Center
Phoenix Living Center
Summit Care-California, Inc. Anaheim Terrace Care Center
Ashton Court Care Center
Bay Crest Care Center
Carehouse Convalescent Center
Hemet Assisted Living/Retirement Center
Palm Grove Care Center
Royalwood Care Center
Xxxxxx Care Center
Woodland Care Center
Willow Creek Care Center
Summit Care-Texas No. 2, Inc. None
Summit Care-Texas No. 3, Inc. The Woodlands Health Care Center
Summit Care Pharmacy, Inc. Skilled Care Pharmacy, Xxxxx Xxxxx &
Skilled Care Pharmacy, Monrovia, CA
Skilled Care Network Skilled Care Network
Summit Care Texas Equity, Inc. Summit Care Texas, L.P. (99% Partner)
Summit Care Management Texas, Inc. Summit Care Texas, L.P. (1% Partner)
Summit Care Texas, L.P. Briarcliff Nursing & Rehabilitation
Center
-2-
Trade Names of
Name of Debtor Such Debtor
Cityview Care Center
Colonial Manor Care Center
Colonial Manor - Tyler
Comanche Trail Nursing Center
Coronado Care Center
Xxxxxxxxx Valley Nursing Center
Heritage Oaks Nursing & Rehabilitation
Center
Live Oak Nursing Center
Lubbock Hospitality House
Monument Hill Nursing Center
Oak Crest Nursing Center
Oak Manor Nursing Center
Oakland Manor Nursing Center
Southern Manor Nursing Center
Southwood Care Center
The Xxxxxxxxx-Xxxxxxxx
The Xxxxxxxxx-Longview
The Xxxxxxxxx-Xxxxx
Town & Country Manor
West Side Care Center
SNF Pharmacy, Inc. None
FV-SCC Acquisition Corp. None
-3-
SCHEDULE C
REAL ESTATE LEGAL DESCRIPTIONS
The Debtors' only fixtures rest upon property subject to the Lien of the
Mortgages granted, or to be granted, to the Agent pursuant to Section 4.4 of the
Credit Agreement.
SCHEDULE D
ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT
This Agreement dated as of this _____ day of ______________, ____ from [NEW
DEBTOR], a __________ corporation (the "New Debtor"), to Bank of Montreal
("BOM"), as agent for the Secured Creditors (defined in the Security Agreement
hereinafter identified and defined) (BOM acting as such agent and any successor
or successors to BOM in such capacity being hereinafter referred to as the
"Agent");
WITNESSETH THAT:
Whereas, Fountain View, Inc. (the "Borrower") and certain other parties
have executed and delivered to the Agent that certain Security Agreement dated
as of April 16, 1998 (such Security Agreement, as the same may from time to time
be amended, modified, or restated, including supplements thereto which add
additional parties as Debtors thereunder, being hereinafter referred to as the
"Security Agreement") pursuant to which such parties (the "Existing Debtors")
have granted to the Agent for the benefit of the Secured Creditors a lien on and
security interest in each such Existing Debtor's Collateral (as such term is
defined in the Security Agreement) to secure the Obligations (as such term is
defined in the Security Agreement); and
Whereas, the Borrower provides the New Debtor with substantial financial,
managerial, administrative, and technical support and the New Debtor will
directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Secured Creditors to the
Borrower;
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Secured Creditors from time to time, the New Debtor hereby agrees as
follows:
1. The New Debtor acknowledges and agrees that it shall become a "Debtor"
party to the Security Agreement effective upon the date the New Debtor's
execution of this Agreement and the delivery of this Agreement to the Agent, and
that upon such execution and delivery, all references in the Security Agreement
to the terms "Debtor" or "Debtors" shall be deemed to include the New Debtor.
Without limiting the generality of the foregoing, the New Debtor hereby repeats
and reaffirms all grants (including the grant of a lien and security interest),
covenants, agreements, representations and contained in the Security Agreement
as amended hereby, each and all of which are and shall remain applicable to the
Collateral from time to time owned by the New Debtor or in which the New Debtor
from time to time has any rights. Without limiting the foregoing, in order to
secure payment of the Obligations, whether now existing or hereafter arising,
the New Debtor does hereby grant to the Agent for the benefit of itself and the
other Secured Creditors, and hereby agrees that the Agent has and shall continue
to have for the benefit of itself and the other Secured Creditors a continuing
lien on and security interest in, among
other things, all of the New Debtor's Collateral (as such term is defined in the
Security Agreement), including, without limitation, all of the New Debtor's
Receivables, General Intangibles, Inventory, Equipment, Investment Property, and
all of the other Collateral described in Section 2 of the Security Agreement,
each and all of such granting clauses being incorporated herein by reference
with the same force and effect as if set forth in their entirety except that all
references in such clauses to the Existing Debtors or any of them shall be
deemed to include references to the New Debtor. Nothing contained herein shall
in any manner impair the priority of the liens and security interests heretofore
granted in favor of the Agent under the Security Agreement.
2. Schedules A (Locations), B (Trade Names) and C (Real Estate) to the
Security Agreement shall be supplemented by the information stated below with
respect to the New Debtor:
Supplement to Schedule A
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
___________________________ __________________________ _____________________
___________________________ __________________________ _____________________
Supplement to Schedule B
Trade Names of
Name of Debtor Such Debtor
____________________________________ _________________________________
Supplement to Schedule C
Real Estate Legal Descriptions
__________________________________
__________________________________
3. The New Debtor hereby acknowledges and agrees that the Obligations are
secured by all of the Collateral according to, and otherwise on and subject to,
the terms and conditions of the Security Agreement to the same extent and with
the same force and effect
-2-
as if the New Debtor had originally been one of the Existing Debtors under the
Security Agreement and had originally executed the same as such an Existing
Debtor.
4. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Debtor" or "Debtors" and any provision of
the Security Agreement providing meaning to such term shall be deemed a
reference to the Existing Debtors and the New Debtor. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
5. The New Debtor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may deem
necessary or proper to carry out more effectively the purposes of this
Agreement.
6. No reference to this Agreement need be made in the Security Agreement
or in any other document or instrument making reference to the Security
Agreement, any reference to the Security Agreement in any of such to be deemed a
reference to the Security Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[NEW DEBTOR]
By_____________________________
Name________________________
Title_______________________
Accepted and agreed to as of the date first above written.
Bank of Montreal, as Agent
By_____________________________
Name________________________
Title_______________________
-3-
