EXHIBIT 10.10
Amendment to Security Agreement
and Acknowledgment of Security Interests
Amendment to Security Agreement and Acknowledgment of Security
Interests (herein, this "AGREEMENT") dated as of July 17, 1998 between
FAMILY BOOKSTORES COMPANY, INC., a corporation incorporated under the laws
of Michigan (the "DEBTOR") and BANK OF SCOTLAND, as agent for the financial
institutions (the "BANKs") from time to time party to the Loan Agreement
referred to below (said agent, in such capacity, the "SECURED PARTY").
WHEREAS the Debtor and the Secured Party are parties to a General
Security Agreement (Floating Lien) dated as of October 31, 1994, as
amended, supplemented and otherwise modified prior to the date hereof (said
agreement, as so amended supplemented and otherwise modified, as amended by
this Agreement and as from time to time hereafter amended, extended,
restated, supplemented, renewed or otherwise modified, the "SECURITY
AGREEMENT");
WHEREAS the Debtor and the Secured Party are parties to a Loan
Agreement, as heretofore amended, extended, restated, renewed and modified
(herein, as so amended, extended, restated, renewed and modified and as
from time to time hereafter amended, extended, restated, renewed or
modified, the "LOAN AGREEMENT") dated as of October 31, 1994, pursuant to
which the Banks have made certain loans to the Debtor and, pursuant to an
Amended and Restated Loan Agreement (which, when it becomes effective, will
amend and restate the Loan Agreement) dated as of October 31, 1994 (the
"RESTATED LOAN AGREEMENT"), have agreed, subject to the terms and
conditions set forth therein, to extend further loans to the Debtor in
accordance with the terms thereof;
WHEREAS the Debtor and Secured Party are parties to an Intellectual
Property Mortgage Agreement dated as of October 31, 1994 and to an
Intellectual Property Mortgage Agreement dated as of June 1, 1998 (said two
agreements, as from time to time amended, restated, renewed or modified,
the "IPMS"), and to certain other Security Documents (including, without
limitation, a Cash Collateral Agreement and a Deposit Letter, each as
defined in the Loan Agreement) as defined in the Loan Agreement (the
"SECURITY DOCUMENTS");
WHEREAS, it is a condition to the effectiveness of the Restated Loan
Agreement and to the financial accommodations by the Banks to the Debtor
contemplated therein that the Debtor enter into this Agreement;
NOW THEREFORE, FOR VALUE RECEIVED, IT IS AGREED:
1. AMENDMENTS. The Security Agreement is hereby amended as follows:
A. DEFINITIONS. All the terms used herein which are defined in
the Security Agreement (including, to the extent any such terms are to be
amended by this Agreement, as if such terms were already amended by this
Agreement, unless the context shall indicate otherwise) shall have the same
meaning when used herein unless otherwise defined herein. All references
to Sections in this Agreement shall be deemed references to Sections in the
Security Agreement unless otherwise specified.
B. EFFECT OF AMENDMENT. As used in the Security Agreement and
all other instruments and documents executed in connection with any of the
foregoing, on and subsequent to the Amendment Effective Date (as
hereinafter defined), any reference to the Security Agreement shall mean
the Security Agreement as amended hereby.
C. DEFINED TERMS. (a) The definition of "Collateral" in
Section 1 of the Security Agreement is hereby amended by adding the
following subparagraph as subparagraph (iv) to such definition and by
renumbering the existing subparagraph (iv) to such definition as
subparagraph (v) thereto:
"(iv) (A) each promissory note indicated on Annex I hereto
(all such promissory notes, the "PLEDGED DEBT");
(B) all interest on the Pledged Debt;
(C) all collateral, liens and security interests
securing the obligations of any issuer of any of
Pledged Debt in connection with such Pledged Debt; and
(D) all rights of the Debtor with respect to the
Pledged Debt; and"
(b) The definition of "Collateral" in Section 1 of the Security
Agreement is hereby further amended by deleting the numeral "(iii)" in
subparagraph (v) (formerly subparagraph (iv)) thereto and replacing said
numeral with the numeral "(iv)".
2. SECTION 3. Section 3 of the Security Agreement is hereby amended
by adding the following at the end thereof as subsections (p) and (q)
thereof:
"(p) The Debtor will not subordinate its right to receive any
payment in respect of, or any of its other rights in connection with, any
Pledged Debt to that of any other Person or obligation, or directly or
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indirectly amend, modify, surrender, compromise, accept prepayment or waive
any of its rights under any of the Pledged Debt (or agree to any of the
foregoing) or take any action to enforce same without the prior written
consent of Secured Party.
(q) If any Event of Default should have occurred and be
continuing, any principal, interest or other sums paid to Debtor upon or
with respect to the Pledged Debt shall be received by the Debtor on behalf
of and in trust for the Secured Party and shall be paid over promptly to
the Secured Party, to be held as collateral security for the Secured
Obligations."
3. ACKNOWLEDGMENTS.
(a) Debtor acknowledges and agrees that (i) the instruments
evidencing the Pledged Debt were and have been delivered to Secured Party
as security for the Secured Obligations pursuant to the Pledge Agreement
(the "PLEDGE AGREEMENT") dated as of November 14, 1994, as modified and
amended through the date hereof between the Pledgors party thereto
(including, without limitation, Debtor) and Bank of Scotland, as agent for
certain Banks referred to therein, and that from and after the Amendment
Effective Date, the Pledged Debt will continue to be held by the Secured
Party as security for the Secured Obligations pursuant to the Security
Agreement; and (ii)notwithstanding any termination (if any) of the Pledge
Agreement on or after the date hereof, or that the Pledged Debt is now held
as security under the Security Agreement, the Pledged Debt has been and
will remain continuously pledged to the Secured Party as security for the
Secured Obligations.
(b) Debtor acknowledges and agrees that (x) references in the
definition of "Secured Obligations" in the Security Agreement to the
"Loans" and the "Notes" include, without limitation, reference to Loans and
Notes, in each case, as defined in the Loan Agreement immediately prior to
the Effective Date under the Restated Loan Agreement as well as to Loans
and Notes as defined in the Restated Loan Agreement and (y) references in
the definition of "Secured Obligations" in the Security Agreement to all
other obligations of Debtor under the Loan Agreement, the other Loan
Documents and any other agreement or instrument executed by Debtor in
connection therewith include, without limitation, reference to all other
obligations of Debtor under (A) the Loan Agreement and the other Loan
Documents and other agreements and instruments executed by Debtor in
connection therewith, in each case, at any time prior to the Effective Date
under the Restated Agreement as well as to the obligations of Debtor under
the Restated Agreement, and obligations of Debtor under Loan Documents as
defined in the Restated Loan Agreement and to the other agreements and
instruments executed by the Debtor in connection with the Restated Loan
Agreement and/or any Loan Documents delivered in connection therewith.
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(c) In furtherance and not in limitation of the foregoing,
Debtor acknowledges and agrees that (i) all Collateral (including, without
limitation, the Pledged Debt (as defined in the Pledge Agreement and,
pursuant to this Agreement, as defined in the Security Agreement) secures
and continues to secure the Secured Obligations, (ii) the Security
Agreement, each IPM, the Cash Collateral Agreement, each subordination
agreement, and each other Security Document remain in full force and effect
with respect to the Restated Loan Agreement and the obligations of the
Debtor thereunder and under the other Loan Documents as fully as each
applied to the Loan Agreement and the obligations of the Borrower
thereunder and under the other Loan Documents immediately prior to the
execution, delivery and effectiveness of the Restated Loan Agreement, (iii)
neither this Agreement nor the execution, delivery or effectiveness of the
Restated Loan Agreement shall extinguish the obligations for the payment of
money outstanding under the Loan Agreement (whether before or after the
Effective Date under Restated Loan Agreement) or discharge or release the
lien or priority of any security therefore, (iv)nothing herein contained
shall be construed as a substitution or novation of the obligations
outstanding under the Loan Agreement (whether before or after the Effective
Date under Restated Loan Agreement) or instruments securing the same;(v)
nothing in this Agreement, the Loan Agreement, the Restated Loan Agreement
or any other document contemplated hereby or thereby shall be construed as
a release or other discharge of the Debtor under any Loan Documents from
any of its obligations and liabilities as a "Borrower", or "Debtor" or
"Pledgor" under the Loan Agreement or any other Loan Document.
4. AMENDMENT. Exhibit I hereto ("Pledged Debt") is hereby added as
Annex I to the Security Agreement.
5. RELEASE OF PLEDGED SHARES. Effective on the Amendment Effective
Date, (i) subject to the proviso at the end of this sentence, the Secured
Party hereby releases (without representation or warranty of any kind
except that Secured Party has not encumbered said shares) (A) its lien on
and security interest in (x) the shares of stock of Debtor constituting
Pledged Shares under the Pledge Agreement dated as of November 14, 1994
between Pledgors party thereto and the Secured Party in its capacity as
Pledgee thereunder (the "1994 PLEDGE AGREEMENT") and (y) the shares of
stock of Debtor pledged to the Secured Party under any other pledge
agreement as security for the obligations of Debtor under the Loan
Agreement (the "OTHER PLEDGE AGREEMENTS"); and (B) any other right, title
or interest of the Secured Party to the shares of stock of Debtor described
in clause (x) and (y) above, including, without limitation, any dividend on
or proceeds of such shares, and (ii) subject to the proviso at the end of
this sentence, Secured Party hereby (x) releases each Holder under any Non-
Pledged Shares Agreement (as defined in the Existing Loan Agreement) from
the restrictions imposed by such agreement on the XXX Shares referred to
therein; (y) releases each such Holder from its obligation to deliver to
the Secured Party any such XXX Shares; and (z) agrees within 30 days after
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the Amendment Effective Date to deliver to Warner, Norcross & Xxxx, LLP any
Transmittal Letter referred to in any such Non-Pledged Shares Agreement
delivered to the Secured Party by any Holder or cancel said Transmittal
Letter; PROVIDED, that the foregoing releases and agreements do not extend
to any shares of stock or XXX Shares issued by the Debtor which secure any
Shareholder Notes or other obligations to Debtor, or to any Transmittal
Letter delivered in connection therewith. In furtherance of the foregoing,
Secured Party agrees that effective on the Amendment Effective Date, the
shares of stock referred to in clause (i) above which are not excluded from
the scope of such clause (i) by the proviso to the preceding sentence shall
no longer constitute "Pledged Securities" as such term is used in the 1994
Pledge Agreement or any Other Pledge Agreement.
6. EFFECTIVENESS. This Agreement shall become effective as of the
Effective Date under the Restated Loan Agreement (such date, the AMENDMENT
EFFECTIVE DATE")
7. LIMITED NATURE OF AMENDMENTS. The amendments set forth herein
are limited precisely as written and shall not be deemed to (a) be a
consent to any waiver of, or modification of, any other term or condition
of the Security Agreement or any of the documents referred to therein or
(b) prejudice any right or rights which the Banks or the Agent may now have
or may have in the future under or in connection with the Security
Agreement or any of the documents referred to therein. Except as expressly
amended hereby, the terms and provisions of the Security Agreement shall
remain in full force and effect.
8. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE VALIDITY THEREOF
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED WHOLLY WITHIN THE STATE OF NEW
YORK (REGARDLESS OF THE PLACE WHERE THIS AGREEMENT IS EXECUTED).
9. COUNTERPARTS. The Agreement may be executed in any number of
counterparts by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument.
Telecopied signatures hereto shall be of the same force and effect as an
original of a manually signed copy.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective duly authorized officers
as of the date first above written.
FAMILY BOOKSTORES COMPANY, INC., BANK OF SCOTLAND, as Secured
as Borrower, and as Pledgor, Party, individually and as
Debtor and in all of its other Agent
capacities under the Security
Documents
By____________________________ By___________________________
Name: Name:
Title: Title:
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EXHIBIT I to Amendment
to Security
Agreement and Acknowledgment
of Security Interests
ANNEX I
Pledged Debt
ISSUER NAME OF SECURITY PRINCIPAL AMOUNT
------ ---------------- ----------------
Xxxxx Xxx Xxxxxx Promissory Note $60,000
Xxxxxxx X. Xxxxxx Promissory Note $80,000
Xxxxxx X. Xxxxxxxx Promissory Note $225,000
Xxxxx X. Xxxxxx Promissory Note $50,000
Xxxxxxx X. Xxxx Promissory Note $50,000
Xxxxxx X. Xxxxxxxx Promissory Note $37,500
Xxxxxxx X. Xxxxxx Promissory Note $7,500
Xxxxxxx Xxxxxxx Promissory Note $11,000
Xxxxxxx Xxxxxx Promissory Note $7,000
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