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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of
May 31, 1996, by and among AFGL INTERNATIONAL, INC., a Nevada
corporation (the "Borrower"), AFGL, INC., a Delaware corporation
("AFGL"), FURASH & COMPANY, INC., a Maryland corporation
("Furash"), WHITNEY PARTNERS, INC., a Delaware corporation
("Whitney Partners"), HEADWAY PERSONNEL, INC., a Delaware
corporation ("HPI"), HEADWAY CORPORATE STAFFING SERVICES, INC., a
Delaware corporation ("HCSS"), CORPORATE STAFFING ALTERNATIVES,
INC., a New York corporation ("CSA"), CERTIFIED TECHNICAL
STAFFING, INC., a New York corporation ("CTS"), and IRENE COHEN
TEMPS, INC., a New York corporation ("Irene Cohen"; AFGL, Furash,
Whitney Partners, HPI, HCSS, CSA, CTS and Irene Cohen, and
together with all other parties that may from time to time become
parties hereto, individually, as a "Subsidiary" and,
collectively, as the "Subsidiaries"), and INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation
("ING"), as Agent (in such capacity, the "Agent") for itself and
the other lenders (ING and such other lenders, collectively, the
"Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
W I T N E S S E T H:
RECITALS.
A. Pursuant to a Credit Agreement, dated as of even
date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), by and among
the Borrower, the Lenders and the Agent, the Lenders will extend
certain Loans to the Borrower, as more specifically described in
the Credit Agreement; and
B. Pursuant to a Subsidiary Guaranty, dated as of
even date herewith (together with all amendments and other
modifications, if any, from time to time hereafter made thereto,
the "Subsidiary Guaranty"), by the Subsidiaries in favor of the
Agent and the Lenders, the Subsidiaries have guaranteed, jointly
and severally, all of the Obligations of the Borrower under the
Credit Agreement, subject to the terms of the Subsidiary
Guaranty; and
C. In order to induce the Lenders and the Agent to
enter into the Credit Agreement, and as a condition to the making
of the Loans thereunder, each of the Borrower and the
Subsidiaries (collectively, the "Grantors") has agreed to grant a
continuing security interest in and to the "Collateral" (as
hereinafter defined) to secure the "Secured Obligations" (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions. Terms defined in the Credit
Agreement and not otherwise defined herein, when used in this
Agreement including its preamble and Recitals, shall have the
respective meanings provided in the Credit Agreement. The
following additional terms (whether or not underscored), when
used in this Agreement, shall have the following meanings:
"Accounts" means all "accounts" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, and, in any
event, shall mean and include, without limitation, (a) all
accounts receivable, contract rights, book debts, notes, drafts
and other obligations or indebtedness owing to such Person
arising from the sale or lease of goods or other property by it
or the performance of services by it (including, without
limitation, any such obligation which might be characterized as
an account, contract right or general intangible under the
Uniform Commercial Code in effect in any jurisdiction), (b) all
of such Person's rights in, to and under all purchase and sales
orders for goods, services or other property, and all of such
Person's rights to any goods, services or other property
represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission,
replevin, reclamation and rights to stoppage in transit), (c) all
monies due to or to become due to such Person under all contracts
for the sale, lease or exchange of goods or other property or the
performance of services by it (whether or not yet earned by
performance on the part of such Person) and (d) all collateral
security and guarantees of any kind given by such Person with
respect to any of the foregoing, in each case whether now in
existence or hereafter arising or acquired.
"Chattel Paper" means any "chattel paper" (as defined
in the UCC) now or hereafter owned or acquired by a Person or in
which a Person now or hereafter has or acquires any rights.
"Collateral" means, collectively, all of the Grantors':
(i) Accounts;
(ii) Inventory;
(iii) Chattel Paper;
(iv) Documents;
(v) Equipment;
(vi) Instruments;
(vii) General Intangibles;
(viii) All Collateral Accounts;
(ix) All other goods and personal property, whether
tangible or intangible;
(x) All books and records pertaining to any of
the Collateral (including, without limitation, customer lists,
credit files, computer programs, printouts and other computer
materials and records); and
(xi) All products and Proceeds of all or any of the
Collateral described in clauses (i) through (x) hereof.
"Collateral Account" means any cash collateral account
established by a Grantor for the benefit of, and under the
exclusive dominion and control of, the Agent, together with all
cash deposited therein from time to time and any investments made
with such cash.
"Documents" means all "documents" (as defined in the
UCC) or other receipts covering, evidencing or representing
goods, now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires rights.
"Equipment" means all "equipment" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires rights, and, in any
event, shall mean and include, without limitation, all machinery,
equipment, furnishings, fixtures, vehicles and computers and
other electronic data processing and other office equipment and
any and all additions, substitutions and replacements of any of
the foregoing, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"General Intangibles" means all "general intangibles"
(as defined in the UCC), now or hereafter owned or acquired by a
Person or in which a Person now or hereafter has or acquires any
rights, and, in any event, shall mean and include, without
limitation, all obligations or indebtedness owing to a Person
(other than Accounts) from whatever source arising, including,
without limitation, rights to indemnification (including, without
limitation, rights to indemnification under the Acquisition
Agreement) and all other rights arising under the Acquisition
Agreement, and all rights, title and interest which a Person may
now or hereafter have in or under all contracts (in addition to
contracts described in the definition of Accounts), causes of
action, franchises, tax refund claims, customer lists,
Intellectual Property, license royalties, goodwill, trade
secrets, proprietary or confidential information, data bases,
business records, data, skill, expertise, experience, processes,
models, drawings, materials and records, permits and licenses,
warranties, manuals, software and all other intangible property
of every kind and nature.
"Instruments" means all "instruments" or "letters of
credit" (each as defined in the UCC), including, without
limitation, instruments and letters of credit evidencing,
representing, arising from or existing in respect of, relating
to, securing or otherwise supporting the payment of, any of the
Accounts, including (but not limited to) promissory notes,
drafts, bills of exchange and trade acceptances, now or hereafter
owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights.
"Intellectual Property" means, collectively, (a) all
systems software and applications software, including, but not
limited to, source code, object code, screen displays and
formats, program structure, sequence and organization, and
audiovisual elements, all formulas, processes, ideas and know-how
embodied in any of the foregoing, and all documentation and
program materials, user manuals, operations manuals, flowcharts,
programer's notes, outlines and specifications created in
connection with any of the foregoing, whether or not patentable
or copyrightable, (b) concepts, discoveries, improvements and
ideas, (c) Patents, patent rights and patent applications,
copyrights and copyright applications, Trademarks, including,
without limitation, the names Whitney Group, Viva and On-Line and
all derivations thereof, and (d) Patent Licenses, Trademark
Licenses, copyright licenses and other licenses to use any of the
items described in the foregoing clauses (a), (b), (c) and (d) or
any other items of a Person necessary for the conduct of its busi
ness.
"Inventory" means all "inventory" (as defined in the
UCC), now or hereafter owned or acquired by a Person or in which
a Person now or hereafter has or acquires any rights, wherever
located, and, in any event, shall mean and include, without
limitation, all raw materials, inventory and other materials and
supplies, work-in-process, finished goods, and any products made
or processed therefrom and all substances, if any, commingled
therewith or added thereto.
"Patent License" means any written agreement now or
hereafter in existence granting to any Grantor any right to
practice any invention on which a Patent is in existence.
"Patents" means all of the following: (i) all letters
patent of the United States or any other country, all
registrations and recordings thereof, and all applications for
letters patent of the United States or any other country,
including, without limitation registrations, recordings and
applications in the United States Patent and Trademark Office or
in any similar office or agency of the Untied States, any State
thereof or any other country or any political subdivision
thereof, and (ii) all reissues, continuations, continuations-in-
part or extensions thereof.
"Perfection Certificate" means a certificate dated as
of even date herewith, setting forth the corporate names, chief
executive office or principal places of business in each State
and other current locations of the Grantors and such other
information as the Agent deems pertinent to the perfection of
security interests, completed and supplemented with the schedules
and attachments contemplated thereby to the satisfaction of the
Agent, and duly executed by the chief operating officer of each
of such Persons.
"Permitted Liens" means the Security Interests and the
Liens on the Collateral permitted to be created, to be assumed or
to exist pursuant to Section 6.2.3 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other
profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including,
without limitation all claims of a Person against third parties
for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of
insurance in respect of, any Collateral, and any condemnation or
requisition payments with respect to any Collateral and the fol
lowing types of property acquired with cash proceeds: Accounts,
Inventory, General Intangibles, Chattel Paper, Documents,
Instruments and Equipment.
"Secured Obligations" means all Obligations, including,
without limitation, (a) with respect to the Borrower, (i) all
principal of and interest (including, without limitation, any
interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency
or reorganization of any Grantor) on the Loans under, any Note
issued pursuant to, and any other amount due from the Borrower
under, the Credit Agreement and the other Loan Documents, and
(ii) all other obligations (monetary or otherwise) to be
performed by the Borrower under the Credit Agreement or any other
Loan Document; (b) with respect to any Grantor that is a party to
the Subsidiary Guaranty, all amounts payable and all obligations
(monetary or otherwise) to be performed by such Grantor under the
Subsidiary Guaranty, including, without limitation, the
"Guaranteed Obligations" (as such term is defined in the
Subsidiary Guaranty); and (c) all renewals or extensions of any
of the foregoing.
"Security Interests" means the security interests
granted pursuant to Section 3, as well as all other security
interests created or assigned as additional security for the
Secured Obligations pursuant to the provisions of this Agreement,
the Credit Agreement or any other Security Documents.
"Trademark License" means any written agreement now or
hereafter in existence granting to a Person any right to use any
Trademark, including, without limitation, the agreements de
scribed in Schedule I to each of the Borrower Trademark
Assignment and the Subsidiary Trademark Assignment.
"Trademarks" means all of the following: (i) all
trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks,
logos, other source or business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, whether now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, (ii) all applications in connection therewith,
including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision
thereof, including, without limitation, those described in
Schedule I to each of the Borrower Trademark Assignment and the
Subsidiary Trademark Assignment, and (iii) all reissues,
extensions or renewals thereof.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of New York.
SECTION 2. Representations and Warranties. Each
Grantor represents and warrants as follows:
(a) Such Grantor has good and marketable title to all
of its interest in the Collateral, free and clear of any Liens
other than the Permitted Liens.
(b) Such Grantor has not performed any act or acts
that could prevent or hinder the Agent from enforcing any of the
terms of this Agreement. Other than financing statements or
other similar or equivalent documents or instruments with respect
to Permitted Liens, no financing statement, mortgage, security
agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of
record in any jurisdiction. No Collateral is in the possession
of a Person (other than such Grantor) asserting any claim thereto
or security interest therein, except that the Agent or its
designee may have possession of Collateral as contemplated
hereby.
(c) All of the information set forth in the Perfection
Certificate is true and correct as of the date hereof.
(d) (i) When the UCC financing statements in
appropriate form are filed in
the offices specified in the Perfection Certificate, the
Security Interests shall constitute valid and perfected
security interests in the Collateral, prior to all other
Liens and rights of others therein except for the other
Permitted Liens, to the extent that a security interest
therein may be perfected by filing pursuant to the UCC.
(ii) When the Borrower Trademark Assignment and
the Subsidiary Trademark Assignment are filed with the
United States Patent and Trademark Office, the Security
Interests shall constitute valid and perfected security
interests in all right, title and interest of such Grantor
in all Trademarks of such Grantor, prior to all other Liens
and rights of others therein except for the other Permitted
Liens, to the extent that a security interest in such
Trademarks may be perfected by a filing in such office.
(e) The Inventory and Equipment are insured in
accordance with the requirements of the Credit Agreement.
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment
and performance of its Secured Obligations in accordance with the
terms thereof, each Grantor hereby grants, pledges, assigns,
hypothecates, sets over and conveys to the Agent, for its benefit
and the ratable benefit of the Lenders, a continuing security
interest in and to all of the Collateral now or hereafter owned
or acquired by such Grantor or in which such Grantor now has or
hereafter has or acquires any rights, and wherever located.
(b) The Security Interests are granted as security
only and shall not subject the Agent or any Lender to, or
transfer to the Agent or any Lender, or in any way affect or
modify, any obligation or liability of any Grantor with respect
to any of the Collateral or any transaction in connection
therewith.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) No Grantor will change the location, or
establish a new location, of its chief executive office or
principal place of business in any state unless it shall
have (A) given the Agent thirty (30) days prior notice
thereof, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith and (C)
to the extent requested by the Agent, delivered an opinion
of counsel with respect thereto in accordance with Section
4(a)(viii). No Grantor shall change the locations, or
establish new locations, where it keeps or holds any
Collateral or any records relating thereto from the
applicable locations described in the Perfection
Certificate, unless such Grantor shall have (A) given the
Agent fifteen (15) days prior notice of such change of
location, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith, (C) to
the extent requested by the Agent, delivered an opinion of
counsel with respect thereto in accordance with Section
4(a)(viii) and (D) complied with any other requirement in
this Agreement or any other Loan Document relating to the
location of any Collateral. No Grantor shall in any event
change the location, or establish a new location, of any Col
lateral if such change would cause the Security Interests in
such Collateral to lapse or cease to be perfected first
priority Security Interests.
(ii) No Grantor will change its name,
identity or corporate structure in any manner unless it
shall have (A) given the Agent thirty (30) days prior notice
thereof, (B) executed and delivered to the Agent all
financing statements and financing statement amendments
which the Agent may request in connection therewith and (C)
to the extent requested by the Agent, delivered an opinion
of counsel with respect thereto in accordance with Section
4(a)(viii).
(iii) The Grantors will, from time to time, at
its expense, execute, deliver, file and record any
statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without
limitation, any filings with the United States Patent and
Trademark Office, copyright or Patent filings and any
filings of financing or continuation statements under the
UCC) that from time to time may be necessary, or that the
Agent may request, in order to create, preserve, upgrade in
rank (to the extent required hereby), perfect, confirm or
validate the Security Interests or to enable the Agent and
the Lenders to obtain the full benefits of this Agreement,
or to enable the Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of
the Collateral. To the extent permitted by law, each
Grantor hereby authorizes the Agent to execute and file
financing statements, financing statement amendments or
continuation statements without such Grantor's signature
appearing thereon. Each Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a
financing statement. The Grantors shall, jointly and
severally, pay all costs of, or incidental to, any recording
or filing of any financing statements, financing statement
amendments or continuation statements concerning the Col
lateral.
(iv) If any Collateral exceeding in value
$5,000 in the aggregate is at any time in the possession or
control of any warehouseman, bailee or any of the agents or
processors of any Grantor, such Grantor shall notify in
writing such warehouseman, bailee, agent or processor of the
Security Interests created hereby, shall obtain such
warehouseman's, bailee's, agent's or processor's agreement
in writing to hold all such Collateral for the Agent's
account subject to the Agent's instructions, and shall cause
such warehousemen, bailee, agent or processor to issue and
deliver to the Agent warehouse receipts, bills of lading or
any similar documents relating to such Collateral in the
Agent's name and in form and substance acceptable to the
Agent.
(v) Each Grantor will immediately
deliver and pledge each Instrument to the Agent,
appropriately endorsed to the Agent.
(vi) No Grantor will (A) sell, transfer,
lease, exchange, assign or otherwise dispose of, or grant
any option, warrant or other right with respect to, any
Collateral except that, subject to the rights of the Agent
and the Lenders hereunder if an Event of Default shall have
occurred and be continuing, the Grantors may dispose of
assets if such disposition is permitted by Section 6.2.11 of
the Credit Agreement, whereupon, in the case of such a
disposition, sale or exchange, the Security Interests
created hereby in such item (but not in any Proceeds arising
from such disposition, sale or exchange) shall cease im
mediately without any further action on the part of the
Agent; or (B) create, incur or suffer to exist any Lien with
respect to any Collateral, except for the Permitted Liens.
(vii) Each Grantor will, promptly upon
request, provide to the Agent all information and evidence
it may reasonably request concerning the Collateral, and in
particular the Accounts, to enable the Agent to enforce the
provisions of this Agreement.
(viii) Prior to each date on which any Grantor
proposes to take any action contemplated by Section 4(a)(i)
or Section 4(a)(ii), if requested by the Agent, such Grantor
shall, at its cost and expense, cause to be delivered to the
Agent and the Lenders an opinion of counsel, satisfactory to
the Agent, to the effect that all financing statements and
amendments or supplements thereto, continuation statements
and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and
priority thereof against all creditors of and purchasers
from such Grantor have been filed in each filing office
necessary for such purposes and that all filing fees and
taxes, if any, payable in connection with such filings have
been paid in full.
(b) Accounts, Etc.
(i) Each Grantor shall use all
reasonable efforts consistent with prudent business practice
to cause to be collected from its Account Debtors, as and
when due, any and all amounts owing under or on account of
each Account (including, without limitation, Accounts which
are delinquent, such Accounts to be collected in accordance
with lawful collection procedures) and apply forthwith upon
receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. The costs and expenses
(including, without limitation, attorney's fees) of
collection of Accounts incurred by the Grantors or the
Agent, shall be borne by the Grantors, jointly and
severally.
(ii) Upon the occurrence and during the
continuance of any Event of Default, upon request of the
Agent, each Grantor will promptly notify (and each Grantor
hereby authorizes the Agent so to notify) each Account
Debtor in respect of any Account or Instrument that such
Collateral has been assigned to the Agent hereunder, and
that any payments due or to become due in respect of such
Collateral are to be made directly to the Agent or its des
ignee.
(iii) Each Grantor will perform and comply
with all of its material obligations in respect of Accounts,
Instruments and General Intangibles.
(c) Equipment, Etc. The Grantors shall,
immediately upon the Agent's request, deliver to the Agent, for
the benefit of itself and the Lenders, any and all certificates
of title, and applications therefor, if any, of any Equipment now
or hereafter owned by the Grantors, and shall cause the Agent,
for its benefit and the benefit of the Lenders, to be named as
lienholder on any such certificate of title and applications.
The Grantors shall promptly inform the Agent of any material
additions to or deletions from the Equipment and shall not permit
any such items to become a fixture to real estate or an accession
to other personal property owned by a Person other than a
Grantor.
(d) Patents, Trademarks, Etc. The Grantors shall
notify the Agent promptly (i) of its acquisition after the
Closing Date of any copyright, patent, patent license, Trademark
or Trademark License being used in its business and (ii) if it
knows, or has reason to know, that any application or
registration relating to any patent or Trademark owned by or
licensed to the Grantors and being used in its business is
reasonably likely to become abandoned or dedicated, or of any
adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court) regarding any Grantor's ownership
of any patent, copyright or Trademark being used in its business,
its right to register the same, or to keep and maintain the same.
In the event that any copyright, patent, patent license,
Trademark or Trademark License being used in its business is
infringed, misappropriated or diluted by a third party, the
Grantors shall notify the Agent promptly after they learn thereof
and shall, unless the Grantors shall reasonably determine that
any such action would be of immaterial economic value, promptly
sue for infringement, misappropriation or dilution and to recover
any and all damages for such infringement, misappropriation or
dilution, and take such other actions as the Grantors shall
reasonably deem appropriate under the circumstances to protect
such copyright, patent, patent license, Trademark or Trademark
License. If any Grantor, either itself or through any agent,
employee or licensee, shall file an application for the
registration of any copyright, patent or Trademark with the
United States Patent and Trademark Office or any similar office
or agency in any other country or political subdivision thereof,
it shall inform the Agent thereof not less than thirty (30) days
prior thereto, and, upon issuance of any such copyright, patent
or Trademark, such Grantor shall execute and deliver any and all
agreements, instruments, documents and papers the Agent may
request to evidence the Security Interests in such copyright,
patent or Trademark and the goodwill and general intangibles of
the Grantors relating thereto or represented thereby. The
Borrower hereby constitutes the Agent its attorney-in-fact to
execute and file all such writings for the foregoing purposes,
all acts of such attorney being hereby ratified and confirmed,
and such power, being coupled with an interest, shall be
irrevocable until the Commitments have terminated and the Secured
Obligations are paid in full and satisfied.
SECTION 5. Reporting and Recordkeeping. Each Grantor
covenants and agrees with the Agent and the Lenders that from and
after the date of this Agreement and until the Commitments have
terminated and the Secured Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Such Grantor
will keep and maintain at its own cost and expense records of the
Collateral, complete in all material respects, including, without
limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings
with the Collateral. Such Grantor will mark its books and
records pertaining to the Collateral to evidence this Agreement
and the Security Interests. All Chattel Paper will be marked
with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest
of Internationale Nederlanden (U.S.) Capital Corporation, as
Agent". For the Agent's and the Lenders' further security, such
Grantor agrees that the Agent and the Lenders shall have a
security interest in all of such Grantor's books and records
pertaining to the Collateral and, upon the occurrence and during
the continuation of any Default or Event of Default, such Grantor
shall deliver and turn over full and complete copies of any such
books and records to the Agent or to its representatives at any
time on demand of the Agent. Subject to any government security
limitations, such Grantor shall permit the Agent and each Lender
or any of their respective representatives, during normal
business hours, to visit all of its offices, to discuss its
financial matters with its officers and independent public
accounts and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate
records.
(b) Special Provisions Regarding Maintenance of
Records and Reporting.
(i) Such Grantor shall keep complete and
accurate records of its Accounts. In addition to any
requirements set forth in the Credit Agreement at the
request of the Agent, such Grantor shall deliver to the
Agent a true copy of all documents, including, without
limitation, repayment histories, present status reports,
relating to the Accounts and such other matters and
information relating to the status of then existing Accounts
as the Agent shall reasonably request.
(ii) Such Grantor shall maintain itemized
records, accurate in all material respects, itemizing and
describing the kind, type, quality, quantity, location and
book value of its Inventory, and if requested by the Agent
shall furnish the Agent a current schedule containing the
foregoing.
(iii) Such Grantor will promptly upon, but in
no event later than five (5) Business Days after:
(A) such Grantor's learning thereof,
inform the Agent, in writing, of any material
delay in the Grantor's performance of any of its
material obligations to any Account Debtor and of
any assertion of any material claims, offsets or
counterclaims by any Account Debtor and of any
allowances, credits and/or other monies granted by
such Grantor to any Account Debtor, in each case
involving amounts in excess of $20,000 for any
single Account or Account Debtor or in excess of
$100,000 in the aggregate for all Accounts and
Account Debtors; and
(B) such Grantor's receipt or learning
thereof, furnish to and inform the Agent of all
material adverse information relating to the
financial condition of any Account Debtor with
respect to Accounts exceeding $20,000 individually
or $100,000 in the aggregate; and
(iv) Such Grantor will promptly notify the
Agent in writing if any Account, the face value of which
exceeds $100,000, arises out of a contract with the United
States of America, or any department, agency, subdivision or
instrumentality thereof, or of any state (or department,
agency, subdivision or instrumentality thereof) where such
state has a state assignment of claims act or other law
comparable to the Federal Assignment of Claims Act, and will
take any action required or requested by the Agent upon the
occurrence of an Event of Default to give notice of the
Agent's security interest in such Accounts under the provi
sions of the Federal Assignment of Claims Act or any compa
rable law or act enacted by any state or local governmental
authority.
(c) Further Identification of Collateral. Such
Grantor will furnish to the Agent, as often as the Agent
reasonably requests, statements and schedules further identifying
and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
(d) Notices. In addition to the notices required by
Section 5(b) hereof, such Grantor will notify the Agent promptly,
in writing and in reasonable detail, (i) of any material Lien or
claim made or asserted against any of the Collateral, (ii) of any
material adverse change in the composition of the Collateral, and
(iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral
or on the validity, perfection or priority of the Security
Interests.
SECTION 6. General Authority. Each Grantor hereby
irrevocably appoints the Agent its true and lawful attorney, with
full power of substitution, in the name of such Grantor, the
Agent, the Lenders or otherwise, for the sole use and benefit of
the Agent and the Lenders, but at such Grantor's expense, to
exercise, at any time from time to time all or any of the
following powers:
(i) to file the financing statements,
financing statement amendments and continuation statements
referred to in Section 4(a)(iii),
(ii) to demand, sue for, collect,
receive and give acquittance for any and all monies due or
to become due with respect to any Collateral or by virtue
thereof,
(iii) to settle, compromise, compound,
prosecute or defend any action or proceeding with respect to
any Collateral,
(iv) to sell, transfer, assign or otherwise
deal in or with the Collateral or the proceeds or avails
thereof, as fully and effectually as if the Agent were the
absolute owner thereof, and
(v) to extend the time of payment of any or
all thereof and to make any allowance and other adjustments
with reference to the Collateral;
provided that the Agent shall not take any of the actions
described in this Section 6 except those described in clause (i)
above unless an Event of Default shall have occurred and be
continuing.
SECTION 7. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is
continuing, the Agent may exercise on behalf of the Lenders
without further notice, all rights and remedies under this
Agreement, the Credit Agreement, the Subsidiary Guaranty or any
other Loan Document, all rights and remedies that are available
to a secured creditor under the UCC, and all rights and remedies
that are otherwise available at law or in equity, at any time, in
any order and in any combination, including without limitation,
the collection of any and all Secured Obligations, and, in
addition, the Agent may (i) withdraw all cash, if any, in the
Collateral Account and investments made with amounts on deposit
in the Collateral Account, and apply such monies, investments and
other cash, if any, then held by it as Collateral as specified in
Section 9 and (ii) sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future
delivery, and upon such terms as the Agent shall deem
commercially reasonable. The Agent shall give each Grantor not
less than ten (10) days' prior written notice of the time and
place of any sale or other intended disposition of any of such
Grantor's Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type custom
arily sold on a recognized market. The Grantors agree that any
such notice constitutes "reasonable notification" within the
meaning of Section 9-504(3) of the UCC (to the extent such
Section is applicable).
The Agent or any Lender may be the purchaser of any or all
of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market
or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under ap
plicable law, at any private sale) and thereafter hold the same,
absolutely, free from any right or claim of whatsoever kind. The
Grantors will execute and deliver such documents and take such
other action as the Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any
such sale the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold to
it absolutely, free from any claim or right of any kind, in
cluding any equity or right of redemption of the Grantors. To
the extent permitted by law, each Grantor hereby specifically
waives all rights of redemption, stay or appraisal which it has
or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale shall (1) in case of a public sale,
state the time and place fixed for such sale, and (2) in the case
of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places
as the Agent may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Agent may determine. The Agent shall
not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling
price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of
a court or courts of competent jurisdiction. The Grantors shall
remain liable, jointly and severally, for any deficiency.
(b) For the purpose of enforcing any and all rights
and remedies under this Agreement, the Agent may (i) require the
Grantors to, and the Grantors agree that they will, at their
expense and upon the request of the Agent, forthwith assemble all
or any part of the Collateral as directed by the Agent and make
it available at a place designated by the Agent which is, in the
Agent's opinion, convenient to the Agent and the Grantors,
whether at the premises of a Grantor or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without
process of law and without breach of the peace, any premise where
any of the Collateral is or may be located and, without charge or
liability to the Agent, seize and remove such Collateral from
such premises, (iii) have access to and use the Grantors' books
and records, computers and software relating to the Collateral
and (iv) prior to the disposition of the Collateral, store or
transfer such Collateral without charge in or by means of any
storage or transportation facility owned or leased by the
Grantors, process, repair or recondition such Collateral or
otherwise prepare it for disposition in any manner and to the ex
tent the Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any trademark,
trade name, copyright, Patent or technical process used by the
Grantors.
(c) Without limiting the generality of the foregoing,
if any Event of Default has occurred and is continuing:
(i) the Agent may license, or sublicense,
whether general, special or otherwise, and whether on an
exclusive or nonexclusive basis, any Patents or Trademarks
included in the Collateral throughout the world for such
term or terms, on such conditions and in such manner as the
Agent shall in its sole discretion determine, except to the
extent restricted by any license agreements to which such
Patents or Trademarks are subject, as in effect on the
Closing Date;
(ii) the Agent may (without assuming any
obligations or liability thereunder), at any time and from
time to time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and
remedies of the Grantors in, to and under any Patent
Licenses or Trademark Licenses and take or refrain from
taking any action under any thereof, and each Grantor hereby
releases the Agent and each of the Lenders from, and agrees
to hold the Agent and each of the Lenders free and harmless
from and against any claims arising out of, any lawful
action so taken or omitted to be taken with respect thereto;
and
(iii) upon request by the Agent, the Grantors
will execute and deliver to the Agent powers of attorney, in
form and substance satisfactory to the Agent, for the
implementation of any lease, assignment, license,
sublicense, grant of option, sale or other disposition of a
Patent or Trademark. In the event of any such disposition
pursuant to this Section, the Grantors shall supply their
know-how and expertise relating to the manufacture and sale
of the products bearing Trademarks or the products or
services made or rendered in connection with Patents, and
its customer lists and other records relating to such
Patents or Trademarks and to the distribution of said
products, to the Agent.
SECTION 8. Limitation on Duty of Agent in Respect of
Collateral. Beyond reasonable care in the custody thereof, the
Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee
or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto. The Agent
shall be deemed to have exercised reasonable care in the custody
of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own
property, and the Agent shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission
of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by the Agent in good faith.
SECTION 9. Application of Proceeds. Upon the
occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any
part of the Collateral of any Grantor shall be applied by the
Agent, in the following order of priorities:
first, to payment of the out-of-pocket expenses of
such sale or other realization, including compensation
to agents and counsel for the Agent, and all
out-of-pocket expenses, liabilities and advances
incurred or made by the Agent in connection therewith,
and any other unreimbursed expenses for which the Agent
or any Lender is entitled to be reimbursed pursuant to
Section 9.3 of the Credit Agreement, or Section 12
hereof or any corresponding provision of any of the
other Loan Documents;
second, to the ratable payment of accrued but
unpaid interest (including post-petition interest) and
fees constituting Secured Obligations of such Grantor;
third, to the ratable payment of unpaid principal
of the Secured Obligations of such Grantor;
fourth, to the ratable payment of all other
Secured Obligations of such Grantor, until all such
Secured Obligations shall have been paid in full; and
finally, to such Grantor or its successors or
assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
The Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
SECTION 10. Concerning the Agent. The provisions of
Article 8 of the Credit Agreement shall inure to the benefit of
the Agent in respect of this Agreement and shall be binding upon
the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and
immunities of the Agent therein set forth:
(a) The Agent is authorized to take all such action as
is provided to be taken by it as Agent hereunder or otherwise
permitted under the Credit Agreement and all other action
reasonably incidental thereto. As to any matters not expressly
provided for herein, the Agent may request instructions from the
Lenders and shall act or refrain from acting in accordance with
written instructions from the Required Lenders or, in the absence
of such instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for
the validity, perfection, priority or enforceability of the
Security Interests, whether impaired by operation of law or by
reason of any action or omission to act on its part. The Agent
shall have no duty to ascertain or inquire as to the performance
or observance of any of the terms of this Agreement by the
Grantors.
SECTION 11. Appointment of Co-Agents. At any time or
times, in order to comply with any legal requirement in any
jurisdiction, the Agent may appoint another bank or trust company
or one or more other Persons, either to act as co-agent or co-
agents, jointly with the Agent, or to act as separate agent or
agents on behalf of the Agent and the Lenders with such power and
authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment
(which may, in the discretion of the Agent, include provisions
for the protection of such co-agent or separate agent similar to
the provisions of Section 11).
SECTION 12. Expenses. In the event that any Grantor
fails to comply with the provisions of the Credit Agreement, this
Agreement or any other Loan Document, such that the value of any
Collateral or the validity, perfection, rank or value of the
Security Interests are thereby diminished or potentially
diminished or put at risk, the Agent if requested by the Required
Lenders may, but shall not be required to, effect such compliance
on behalf of such Grantor, and the Grantors shall reimburse the
Agent, jointly and severally, for the costs thereof on demand.
All insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and
shipping the Collateral, any and all excise, stamp, intangibles,
transfer, property, sales, and use taxes imposed by any state,
federal, or local authority or any other Governmental Authority
on any of the Collateral, or in respect of periodic appraisals
and inspections of the Collateral to the extent the same may be
reasonably requested by the Required Lenders from time to time,
or in respect of the sale or other disposition thereof, shall be
borne and paid by the Grantors; and if the Grantors fail promptly
to pay any portion thereof when due, the Agent or any Lender may,
at its option, but shall not be required to, pay the same and
charge the Grantors' accounts therefor, and the Grantors agree to
reimburse the Agent or such Lender therefor on demand. All sums
so paid or incurred by the Agent or any Lender for any of the
foregoing and any and all other sums for which the Grantors may
become liable hereunder and all costs and expenses (including
attorneys' fees, legal expenses and court costs) incurred by the
Agent or any Lender in enforcing or protecting the Security
Interests or any of their rights or remedies thereon shall be
payable by the Grantors, jointly and severally, on demand and
shall bear interest (after as well as before judgment) until paid
at the highest rate then in effect under the Credit Agreement
with respect to the Obligations.
SECTION 13. Termination of Security Interests; Release
of Collateral. Upon the performance of and repayment in full of
all Secured Obligations and the termination of the Commitments,
the Security Interests shall terminate and all rights to the
Collateral shall revert to the Grantors. At any time and from
time to time prior to such termination of the Security Interests,
the Agent may release any of the Collateral with the prior
written consent of the Required Lenders; provided, however, that
the Security Interest of the Agent in any Collateral constituting
an asset of which the Grantors may dispose under Section 6.2.11
of the Credit Agreement shall automatically terminate and be
released upon such disposition by the Grantors without the
necessity of any further action or consent by the Agent or any
Lender. Upon any such termination of the Security Interests or
release of Collateral, the Agent will, at the expense of the
Grantors, promptly execute and deliver to the Grantors such docu
ments as the Grantors shall reasonably request, including but not
limited to UCC-3 termination statements, to evidence the termi
nation of the Security Interests or the release of such
Collateral, as the case may be.
SECTION 14. Notices. All notices hereunder shall be
in writing or by telecopy and shall be sufficiently given to the
Agent, the Lenders or the Grantors if addressed or delivered to
them at, in the case of the Borrower, the Agent and the Lenders,
their respective addresses or telecopier numbers specified in
Section 9.2 of the Credit Agreement (in each case with copies
addressed as provided in Section 9.2 of the Credit Agreement),
and, in the case of the Subsidiaries, their respective addresses
or telecopier numbers specified in Section 15 of the Subsidiary
Guaranty (in each case with copies addressed as provided in
Section 15 of the Subsidiary Guaranty), or at such other address
as any party may designate to any other party by written notice.
All such notices and communications shall be deemed to have been
duly given: at the time delivered, if delivered by hand; when
received, if deposited in the mail, postage prepaid; when
transmission is verified, if sent via fax; and on the next
Business Day, if timely delivered by an air courier guaranteeing
overnight delivery.
SECTION 15. Waivers, Non-Exclusive Remedies. No
failure on the part of the Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right
under the Credit Agreement, this Agreement or any other Loan
Document shall operate as a waiver thereof; nor shall any single
or partial exercise by the Agent or any Lender of any right under
the Credit Agreement, this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement, the Credit
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law. This Agreement
is a Loan Document executed pursuant to the Credit Agreement.
SECTION 16. Successors and Assigns. This Agreement is
for the benefit of the Agent and the Lenders and their permitted
successors and assigns, and in the event of an assignment of all
or any of the Secured Obligations, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be
binding on the Grantors and their successors and assigns;
provided, however, that no Grantor may assign any of its rights
or obligations hereunder without the prior written consent of the
Agent and the Lenders.
SECTION 17. Changes in Writing. Neither this
Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by
the affected Grantors and the Agent with the consent of the
Required Lenders.
SECTION 18. Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT PERFECTION (AND THE
EFFECT OF PERFECTION AND NONPERFECTION) AND CERTAIN REMEDIES MAY
BE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK.
SECTION 19. Severability. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the
fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the
Lenders in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECTION 20. Supplement. In the event that any
Subsidiary of the Borrower is required, under the terms of the
Credit Agreement or otherwise, to grant a security interest in
Collateral, such Subsidiary shall become a Grantor hereunder and
shall be bound by all of the terms and conditions hereof, upon
the delivery to the Agent of an executed counterpart of a
Supplement to this Security Agreement in the form of Exhibit A
attached hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed under seal by their respective
authorized officers as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By: ______________________________
Name:
Title:
AFGL, INC.
By: ______________________________
Name:
Title:
FURASH & COMPANY, INC.
By: ______________________________
Name:
Title:
WHITNEY PARTNERS, INC.
By: ______________________________
Name:
Title:
HEADWAY CORPORATE STAFFING
SERVICES, INC.
By: ______________________________
Name:
Title:
CORPORATE STAFFING ALTERNATIVES,
INC.
By: ______________________________
Name:
Title:
CERTIFIED TECHNICAL STAFFING, INC.
By: ______________________________
Name:
Title:
IRENE COHEN TEMPS, INC.
By: ______________________________
Name:
Title:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By: __________________________________
Name:
Title:
EXHIBIT A
to
Security Agreement
SUPPLEMENT TO SECURITY AGREEMENT
THIS SUPPLEMENT TO SECURITY AGREEMENT (this
"Supplement"), dated as of _____________ __, ____, is executed by
[_________________], [__________] (the "Supplementing Party"), in
favor of INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation ("ING"), as Agent (in such capacity, the
"Agent") for itself and the other lenders (ING and such other
lenders, collectively, the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
Terms used herein but not defined herein shall have the meaning
defined for those terms in the Security Agreement (as defined
below).
W I T N E S S E T H:
RECITALS.
A. AFGL International, Inc., a Nevada corporation
(the "Borrower"), the Lenders and the Agent have entered into a
Credit Agreement, dated as of May __, 1996 (as amended, restated,
supplemented, extended or otherwise modified from time to time,
the "Credit Agreement");
B. Certain Subsidiaries of the Borrower have executed
a Subsidiary Guaranty, dated as of May 31, 1996, in favor of the
Agent and the Lenders (as amended, restated, supplemented,
extended or otherwise modified from time to time, the
"Subsidiary Guaranty");
C. In order to induce the Lenders and the Agent to
enter into the Credit Agreement, and as a condition to the making
of the Loans thereunder, each of the Borrower and such
Subsidiaries, together with the Agent, have entered into a
Security Agreement, dated as of May 31, 1996, (as amended,
restated, supplemented, extended or otherwise modified from time
to time, the "Security Agreement");
D. The Supplementing Party has become a Subsidiary of
the Borrower and as such is required to become a party to the
Subsidiary Guaranty pursuant to the Credit Agreement and Section
9.14 of the Subsidiary Guaranty; and
E. Pursuant to the Credit Agreement and Section 20 of
the Security Agreement, the Supplementing Party also is required
to execute and deliver to the Agent this Supplement in order to
secure its obligations under the Subsidiary Guaranty, and the
Supplementing Party desires to execute and deliver this Supple
ment to satisfy such requirement and condition; and
NOW, THEREFORE, in consideration of the premises the
Supplementing Party hereby agrees as follows:
SECTION 1. Additional Security Interests. As
security for the payment and performance of the "Secured
Obligations" (as such term is defined in the Security Agreement),
the Supplementing Party hereby grants to the Agent for its
benefit and the benefit of the Lenders a continuing security
interest in and to all Collateral now or hereafter owned or
acquired by the Supplementing Party or in which such
Supplementing Party now has or hereafter has or acquires any
rights, and wherever located.
SECTION 2. Representations and Warranties. The
Supplementing Party, with respect to itself, hereby restates
each representation and warranty set forth in Section 2 of the
Security Agreement as of the date hereof.
SECTION 3. Binding Effect. This Supplement shall
become effective when it shall have been executed by the
Supplementing Party and thereafter shall be binding upon the
Supplementing Party and shall inure to the benefit of the Agent
and the Lenders. Upon the effectiveness of this Supplement, this
Supplement shall be deemed to be a part of and shall be subject
to all the terms and conditions of the Security Agreement. The
Supplementing Party shall not have the right to assign its rights
hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 4. Governing Law; Terms. THIS SUPPLEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
PERFECTION (AND THE EFFECT OF PERFECTION AND NONPERFECTION) AND
CERTAIN REMEDIES MAY BE GOVERNED BY THE LAWS OF ANY JURISDICTION
OTHER THAN NEW YORK.
SECTION 5. Execution in Counterparts. This Supple
ment may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Supplementing Party has caused
this Supplement to be duly executed and delivered under seal by
its duly authorized officer as of the date first above written.
"Supplementing Party"
______________________________
By:
Name:
Title:
Acknowledged and Agreed to:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, as Agent
By: ______________________________
Name:
Title: