SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February ____, 1999 (herein, as the
same from time to time may be amended, restated, supplemented, or otherwise
modified from time to time, called this "AGREEMENT"), is by and among THE ROACH
ORGANIZATION, INC., a Delaware corporation ("ROACH"), TRO LEARNING (CANADA),
INC., a Canadian corporation ("TRO CANADA"; Roach and TRO Canada are hereinafter
referred to individually as a "DEBTOR" and collectively as "DEBTORS"), and FIRST
SOURCE FINANCIAL LLP, an Illinois registered limited liability partnership
(together with its successors and assigns, "LENDER").
BACKGROUND:
1. Debtors and Lender are parties to a certain Secured Credit Agreement
of even date herewith (herein, as the same from time to time may be amended,
restated, supplemented or otherwise modified from time to time, called the
"SECURED CREDIT AGREEMENT"), pursuant to which Lender has agreed to make certain
Loans and other extensions of credit to Debtors.
2. It is a condition precedent to the making of the initial Loans under
the Secured Credit Agreement that this Agreement be executed and delivered.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. (a) When used herein, the following terms shall
have the following meanings:
ACCOUNT OF ANY PERSON shall mean all "Accounts" (as such term is defined in
the Uniform Commercial Code), of such Person including, without limitation, any
right of such Debtor to payment for goods sold or leased or for services
rendered which is not evidenced by an Instrument or Chattel Paper of any Person,
whether or not it has been earned by performance.
ACCOUNT DEBTOR shall mean the Person who is obligated on or under any
Account, Chattel Paper or, if appropriate, any of the General Intangibles of any
Person.
BENEFITS - see SECTION 16.
CANADIAN DEPOSITARY ACCOUNT BANK shall mean each bank and other entity
serving in the capacity of agent for Lender under any Canadian Depositary
Account Agreement (including any successor Canadian Depositary Account
Agreement). Initially the Canadian Depositary Account Bank shall mean The
Toronto-Dominion Bank.
CERTIFICATED SECURITY shall have the meaning assigned to such term in the
Uniform
Commercial Code.
CHATTEL PAPER shall have the meaning assigned to such term in the Uniform
Commercial Code.
COLLATERAL shall mean all property or rights in which a Security Interest
is granted hereunder.
COMMITMENT shall have the meaning assigned to such term in the Secured
Credit Agreement.
COMPUTER HARDWARE AND SOFTWARE COLLATERAL of any Person shall mean (i) all
computer and other electronic data processing hardware, integrated computer
systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, generators, power equalizers,
accessories and all peripheral devices and other related computer hardware of
such Person, whether now owned, licensed or leased or hereafter acquired by such
Person; (ii) all software programs (including source code and object code and
all related applications and data files) of such Person, whether now owned,
licensed or leased or hereafter acquired by such Person, designed for use on the
computers and electronic data processing hardware described in CLAUSE (i) above;
(iii) all firmware associated therewith, whether now owned, licensed or leased
or hereafter acquired by such Person; (iv) all documentation (including flow
charts, logic diagrams, manuals, guides and specifications) for such hardware,
software and firmware described in the preceding CLAUSES (i), (ii) and (iii),
whether now owned, licensed or leased or hereafter acquired by such Person; and
(v) all rights with respect to all of the foregoing, including, without
limitation, any and all copyrights, licenses, options, warranties, service
contracts, program services, test rights, maintenance rights, support rights,
improvement rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
COPYRIGHT COLLATERAL of any Person shall mean all copyrights and all
semiconductor chip product mask works of such Person, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world, including, without limitation, all of such Person's right, title and
interest in and to all copyrights and mask works registered in the United States
Copyright Office or anywhere else in the world and also including, without
limitation, the copyrights and mask works of such Person referred to in ITEM A
of SCHEDULE III attached hereto, and all applications for registration thereof,
whether pending or in preparation, all copyright and mask work licenses of such
Person, including each copyright and mask work license referred to in ITEM B of
SCHEDULE III attached hereto, the right to sue for past, present and future
infringements of any thereof, all rights corresponding thereto throughout the
world, all extensions and renewals of any thereof and all proceeds of the
foregoing, including, without limitation, licenses, royalties, income, payments,
claims, damages and proceeds of suit.
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DEFAULT shall mean any Unmatured Event of Default or any Event of Default.
DEPOSIT ACCOUNTS shall have the meaning assigned to such term in the
Uniform Commercial Code.
DEPOSITARY ACCOUNT AGREEMENTS shall have the meaning assigned to such term
in the Secured Credit Agreement.
DEPOSITARY ACCOUNT BANKS shall mean, collectively, the Canadian Depositary
Account Bank and the Domestic Depositary Account Bank.
DOCUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
DOMESTIC DEPOSITARY ACCOUNT BANK shall mean each bank and other entity
serving in the capacity of agent for Lender under any Domestic Depositary
Account Agreement (including any successor Domestic Depositary Account
Agreement). Initially the Domestic Depositary Account Bank shall mean Harris
Trust and Savings Bank, an Illinois banking corporation.
EQUIPMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
FIXTURE shall have the meaning assigned to such term in the Uniform
Commercial Code.
GENERAL INTANGIBLES shall have the meaning assigned to such term in the
Uniform Commercial Code and shall include, without limitation, goodwill.
GOODS shall have the meaning assigned to such term in the Uniform
Commercial Code.
INSTRUMENT shall have the meaning assigned to such term in the Uniform
Commercial Code.
INTANGIBLE COLLATERAL of any Person shall mean all Collateral of such
Person other than Goods.
INTELLECTUAL PROPERTY COLLATERAL of any Person shall mean, collectively,
the Computer Hardware and Software Collateral, the Copyright Collateral, the
Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral, in
each case of such Person.
INVENTORY of any Person shall mean all "Inventory" (as such term is defined
in the Uniform Commercial Code), of such Person including, without limitation,
all goods, merchandise and other personal property furnished under any contract
of service or intended for sale or lease, including, without limitation, all raw
materials, work in process, finished goods
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and materials and supplies, of any kind, nature or description, that are used or
consumed by such Person's business, or are or might be used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise and other personal property, and all returned or repossessed
goods now or at any time or times hereafter in the possession or under the
control of any such Person or Lender.
INVESTMENT PROPERTY shall have the meaning assigned to such term in the
Uniform Commercial Code.
LANDLORD'S CONSENT shall mean a declaration and agreement substantially in
the form of EXHIBIT A hereto (and in form and substance satisfactory to Lender)
executed and delivered by the appropriate Persons pursuant to SECTION 4(d).
NOTES shall have the meaning assigned to such term in the Secured Credit
Agreement.
PATENT COLLATERAL of any Person shall mean:
(a) all letters patent and applications for letters patent of such
Person throughout the world, including all patent applications of such
Person in preparation for filing anywhere in the world and including each
patent and patent application of such Person referred to in ITEM A of
SCHEDULE II attached hereto;
(b) all patent licenses of such Person, including each patent license
of such Person referred to in ITEM B of SCHEDULE II attached hereto;
(c) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
CLAUSES (a) and (b); and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
of such Person to sue third parties for past, present or future
infringements of any patent or patent application, including any patent or
patent application of such Person referred to in ITEM A of SCHEDULE II
attached hereto, and for breach or enforcement of any patent license of
such Person, including any patent license referred to in ITEM B of SCHEDULE
II attached hereto, and all rights corresponding thereto throughout the
world.
RESTRICTED ACCOUNTS shall have the meaning assigned to such term in the
Secured Credit Agreement.
SECURITY shall have the meaning assigned to such term in the Uniform
Commercial Code.
SECURITY INTEREST shall mean any mortgage, lien, pledge, encumbrance,
charge or other security interest of any kind, whether arising under a security
agreement, mortgage, deed of
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trust, chattel mortgage, assignment, pledge, financing or similar statement or
notice or as a matter of law, judicial process or otherwise. As used herein
with respect to the rights granted by any Person to Lender hereunder in such
Collateral, "SECURITY INTEREST" means a security interest under the Uniform
Commercial Code.
TRADEMARK COLLATERAL of any Person shall mean:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service marks,
certification marks, collective marks, logos, other sources of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature of such Person
(each of the foregoing items in this CLAUSE (a) being called a "TRADEMARK"
of such Person), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State thereof or
any foreign country, including those referred to in ITEM A of SCHEDULE I
attached hereto;
(b) all Trademark licenses of such Person, including each Trademark
license of such Person referred to in ITEM B of SCHEDULE I attached hereto;
(c) all reissues, extensions or renewals of any of the items
described in CLAUSES (a) and (b);
(d) all of the goodwill of the business connected with the use of,
and symbolized by the items described in, CLAUSES (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by such Person against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license of such Person referred to in ITEM A and ITEM B of
SCHEDULE I attached hereto, or for any injury to the goodwill associated
with the use of any such Trademark or for breach or enforcement of any
Trademark license.
TRADE SECRETS COLLATERAL of any Person shall mean common law and statutory
trade secrets and all other confidential and proprietary information and all
know-how obtained by or used in or contemplated at any time for use in the
business of such Person (each of the foregoing being called a "TRADE SECRET" of
such Person), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying, incorporating
or referring in any way to such Trade Secret, all Trade Secret licenses of such
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Person, including each Trade Secret license referred to in SCHEDULE IV attached
hereto, and including the right to sue for and to enjoin and to collect damages
for the actual or threatened misappropriation of any Trade Secret and for the
breach or enforcement of any such Trade secret license.
UNCERTIFICATED SECURITY shall have the meaning assigned to such term in the
Uniform Commercial Code.
UNIFORM COMMERCIAL CODE shall mean the Uniform Commercial Code as in effect
in the State of Illinois on the date of this Agreement.
UNMATURED EVENT OF DEFAULT shall mean any event or condition which if it
continues uncured will, with the passage of time or giving of notice, or both,
become an Event of Default.
UNMATURED INSOLVENCY DEFAULT shall mean an Unmatured Event of Default
arising under section 13.1(e) of the Secured Credit Agreement.
(b) Unless otherwise defined herein, capitalized terms used herein and
defined in the Secured Credit Agreement shall have the same meanings when used
herein. Terms not otherwise defined herein or in the Secured Credit Agreement
shall have the meanings, if any, ascribed to them under the Uniform Commercial
Code.
SECTION 2. GRANT OF SECURITY INTEREST. As collateral security for the
prompt and complete payment, performance and observance of all Liabilities, each
Debtor hereby mortgages, pledges and grants to Lender a continuing Security
Interest and lien under the Uniform Commercial Code and all other applicable
laws in and on, as the case may be, all of the following property of such Debtor
(the "COLLATERAL") wherever located, whether now or hereafter existing, owned,
licensed, leased, consigned, arising or acquired:
(i) Accounts of such Debtor;
(ii) Goods (including, without limitation, all of such Debtor's
Equipment, Fixtures and Inventory);
(iii) General Intangibles, including, without limitation,
(A) all tax refunds,
(B) all Intellectual Property Collateral of such Debtor,
(C) rights arising out of leases, licenses and contracts which
are not Accounts of such Debtor, and
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(D) all of such Debtor's goodwill;
(iv) Chattel Paper, Documents, Instruments, Investment Property,
Certificated Securities and Uncertificated Securities;
(v) money and property now or at any time in the possession or under
the control of, or in transit to, Lender or any Depositary Account
Bank, any Debtor or any bailee, agent or custodian of Lender, any
Depositary Account Bank or any Debtor;
(vi) right, title and interest (if any) in and to such Debtor's
Restricted Account and all other accounts of such Debtor maintained
by any Depositary Account Bank, and any Deposit Accounts and any
other accounts maintained by such Debtor, all funds on deposit
therein, all investments arising out of such funds, all claims
thereunder or in connection therewith, and all cash, securities,
rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of such
accounts, such funds or such investments;
(vii) insurance policies, including claims or rights to payment
thereunder; and
(viii) Liens, guaranties and other rights and privileges pertaining to any
of the Collateral of such Debtor;
together with: (ix) all books, ledgers, books of account, records, writings,
data bases, information and other property of such Debtor relating to, used or
useful in connection with, evidencing, embodying, incorporating or referring to,
any of the foregoing; and (x) all proceeds, products, rents, issues, profits and
returns of and from any of the foregoing.
SECTION 3. DEBTORS TO REMAIN LIABLE. Each Debtor hereby expressly agrees
that, anything herein to the contrary notwithstanding, such Debtor shall remain
liable under each contract, agreement, interest or obligation assigned by such
Debtor to Lender hereunder to observe and perform all of the conditions and
obligations to be observed and performed by such Debtor thereunder, all in
accordance with and pursuant to the terms and provisions thereof. The exercise
by Lender of any of the rights assigned hereunder shall not release any Debtor
from any of its duties or obligations under any such contract, agreement,
interest or obligation. Lender shall not have any duty, responsibility,
obligation or liability under any such contract, agreement, interest or
obligation by reason of or arising out of the assignment thereof to Lender or
the granting to Lender of a Security Interest therein or the receipt by Lender
of any payment relating to any such contract, agreement, interest or obligation
pursuant hereto, nor shall Lender be required or obligated in any manner to
perform or fulfill any of the obligations of such Debtor thereunder or pursuant
thereto, or to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by Lender or the sufficiency of any
performance of any party under any such contract, agreement, interest or
obligation, or to present or file any claim,
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or to take any action to collect or enforce any performance or the payment of
any amounts which may have been assigned to Lender, in which Lender may have
been granted a Security Interest or to which Lender may be entitled at any time
or times.
SECTION 4. REPRESENTATIONS AND WARRANTIES AND AGREEMENTS. Each Debtor
represents and warrants to, and covenants and agree with, Lender that:
(a) No Uniform Commercial Code financing statement (other than any which
may have been filed on behalf of Lender or in connection with a Permitted Lien
or which has been, or in connection with execution and delivery hereof is being,
terminated) covering any of the Collateral of any Debtor is on file in any
public office.
(b) Such Debtor has and will have a valid leasehold interest in all leased
Collateral of such Debtor which is material to the operation of such or any
other Debtor's business, and, except as otherwise noted in Schedule 10.29 of the
Secured Credit Agreement, good and marketable title to all its other material
Collateral, real and personal, of any nature whatsoever (which, with respect to
licenses, means that such Debtor is the lawful owner of its rights under
licenses, except as provided in Section 10.14 of the Secured Credit Agreement),
free of all Security Interests whatsoever, other than the Security Interest
created hereby and the Permitted Liens, with full power and authority to execute
this Agreement, to perform such Debtor's obligations hereunder, and to subject
the Collateral of such Debtor to the assignment and Security Interest created
hereby.
(c) All of such Debtor's books and records are now located at the premises
shown on SCHEDULE V hereto as the location of such Debtor's chief executive
office, and all of such Debtor's Equipment, Inventory and other Goods are
located at the location of such Debtor's chief executive office or at one or
more of the other premises shown on SCHEDULE V hereto or at one or more of the
premises shown on SCHEDULE VI hereto;
(d) Such Debtor shall provide Lender with a Landlord's Consent executed by
the landlord under all leases covering the premises shown on SCHEDULE V hereto.
(e) All information with respect to the Collateral of such Debtor and the
Account Debtors set forth in any schedule, certificate or other writing at any
time heretofore or hereafter furnished by or on behalf of any Debtor to Lender,
and all other information heretofore or hereafter furnished by or on behalf of
any Debtor to Lender, is and will be true, correct and complete in all material
respects as of the date furnished and does not and will not omit any material
fact necessary to make the statements not misleading.
(f) Such Debtor will at all times maintain its chief executive office as
identified in SCHEDULE V hereto in the contiguous continental United States and
such Debtor shall take such action from time to time as is required so that a
creditor of such Debtor would reasonably expect the chief executive office, as
identified on SCHEDULE V or as relocated by such Debtor with notice
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to Lender as provided in the Secured Credit Agreement, to be its chief executive
office for purposes of Article 9 of the Uniform Commercial Code.
(g) With respect to any Intellectual Property Collateral of such Debtor
the loss, impairment or infringement of which simply or in the aggregate could
reasonably be expected to have a Material Adverse Effect:
(i) such Intellectual Property Collateral is subsisting and has
not been adjudged invalid or unenforceable, in whole or in part,
(ii) such Intellectual Property Collateral is valid and
enforceable,
(iii) such Debtor has made all filings and recordations necessary in
the exercise of reasonable and prudent business judgment to protect its
interest in such Intellectual Property Collateral, including, without
limitation, recordations of all of its interest in such Patent Collateral
and Trademark Collateral of such Debtor in the United States Patent and
Trademark Office and in corresponding offices in Canada and its claims to
such Copyright Collateral of such Debtor in the United States Copyright
Office and in corresponding offices in Canada,
(iv) such Debtor is the owner of the entire and unencumbered right,
title and interest in and to such Intellectual Property Collateral except
for Permitted Liens, and no claim has been made that the use of such
Intellectual Property Collateral does or may violate the asserted rights of
any third party, and
(v) such Debtor has performed and will continue to perform all
acts and has paid and will continue to pay all required fees and taxes to
maintain each and every item of such Intellectual Property Collateral in
full force and effect in the United States and Canada, as applicable.
Such Debtor owns directly, or is entitled to use by license or otherwise, all
Intellectual Property Collateral of any Person used in, necessary for or
material to the conduct of such Debtor's businesses. No litigation is pending
or, to the best knowledge of any Debtor, threatened which contains allegations
respecting the validity, enforceability, infringement or ownership of any of the
Intellectual Property Collateral of such or any other Debtor.
(h) None of the Collateral of such Debtor (other than Intangible
Collateral) has, within the four (4) months preceding the date of this
Agreement, been located at any place other than such Debtor's own premises at
the addresses shown with respect to such Debtor on the signature page hereto or
at one or more of the premises of such Debtor listed on SCHEDULES V and VI
hereto.
(i) SCHEDULE VIII to the Secured Credit Agreement lists all trade names by
which
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such Debtor is now known or was previously known.
SECTION 5. PROCESSING, SALE, COLLECTIONS, ETC.
(a) Until notice to Debtors from Lender to the contrary, given at any time
after the occurrence and during continuance of any Event of Default or Unmatured
Insolvency Default, each Debtor (i) may, in the ordinary course of its business,
at its own expense, sell, lease or furnish under contracts of service any of the
Inventory normally held by such Debtor for such purpose, and use and consume, in
the ordinary course of its business, any raw materials, work in process or
materials normally held by such Debtor for such purpose (but no such sale or use
shall limit or impair Lender's Security Interest in any proceeds thereof,
including, without limitation, any Account of such Debtor), (ii) will, at its
own expense, endeavor to collect, as and when due, all amounts due with respect
to any of its Intangible Collateral, including the taking of such action with
respect to such collection as Lender may reasonably request or, in the absence
of such request, as such Debtor may deem advisable, and (iii) may grant, subject
to the next sentence hereof, to any Person obligated on any of Intangible
Collateral, any rebate, refund or allowance to which such Person may be lawfully
entitled, and may accept, in connection therewith, the return of goods, the sale
or lease of which shall have given rise to such Intangible Collateral. Lender,
however, may at any time after an Event of Default or an Unmatured Event of
Default, (1) notify any Person obligated on any of the Intangible Collateral of
any Debtor to make payment to Lender of any amounts due or to become due
thereunder; (2) enforce collection of any of any such Debtor's Intangible
Collateral by suit or otherwise; (3) surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder or evidenced
thereby; and (4) notify any Debtor (and upon receipt of such notice such Debtor
agrees to notify, at its sole expense, any parties obligated on any of its
Collateral) to make pament to Lender of any amount due or to become due under
the Collateral of such Debtor.
(b) Subject to the terms of the Secured Credit Agreement, each Debtor
will, forthwith upon receipt, transmit and deliver to Lender or any Depositary
Account Bank, in the form received, all cash, checks, drafts and other
instruments or writings for the payment of money (properly endorsed, where
required, so that such items may be collected by Lender or any Depositary
Account Bank) which may be received by such Debtor at any time in full or
partial payment, or other proceeds of any Collateral of such Debtor. Except as
Lender may otherwise consent in writing, any such items which may be so received
by any Debtor will not be commingled by such Debtor with any of its other funds
or property, but, until delivery to Lender or any Depositary Account Bank, will
be held separate and apart from such other funds and property and in trust for
Lender or any Depositary Account Bank.
(c) Lender and any Depositary Account Bank each is authorized to endorse,
in the name of any Debtor, any item, howsoever received by Lender or any
Depositary Account Bank representing any payment on or other proceeds of any of
such Debtor's Collateral.
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SECTION 6. AGREEMENTS OF DEBTORS. Each Debtor shall:
(a) Keep all its Inventory and other Goods, unless Lender shall otherwise
consent in writing, at one or more of its own premises (as shown on SCHEDULE V
hereto) or at one or more of its premises listed on SCHEDULE VI hereto;
PROVIDED, HOWEVER, that (i) so long as no Event of Default or Unmatured
Insolvency Default shall have occurred and be continuing, and subject to SECTION
6(j), such Debtor may designate additional or replacement premises (such
premises shall be located in the contiguous continental United States) for
inclusion on SCHEDULE V hereto upon delivery to Agent of (A) 30 days' prior
written notice and (B) all documents, and completion of all action, required by
Lender to maintain the Security Interest in favor of Lender in such Debtor's
Collateral, free and clear of any other Security Interest whatsoever except for
Permitted Liens and (ii) in the case of any public warehouse facility or
distribution center listed on SCHEDULE VI hereto from time to time (A) such
Debtor's Inventory and other Goods shall be kept separate from Goods of those
Persons (other than such Debtor) using such premises and shall be clearly and
conspicuously designated as being such Debtor's sole property (for example, by
posting signs or by affixing such Debtor's name on its Inventory and other
Goods) and (B) such Debtor shall cause the owner of such premises to (1) sign
and deliver to Lender a Bailee Waiver in the form of EXHIBIT B hereto and (2)
place the following language prominently on the face of any bill of lading,
warehouse receipt or other document of title issued relating to Inventory or
Goods of such Debtor: "THE PROPERTY DESCRIBED HEREIN IS SUBJECT TO THE SECURITY
INTEREST OF FIRST SOURCE FINANCIAL LLP."
(b) Immediately notify Lender of (i) the occurrence of any event causing
loss in value of any of such Debtor's Goods in excess, in the aggregate during
any of Debtors' fiscal years, of $100,000 combined for all Debtors, and (ii) the
amount of such loss.
(c) Furnish Lender such information concerning such Debtor, such Debtor's
Collateral and the Account Debtors as Lender may from time to time reasonably
request.
(d) Defend such Debtor's title to its Collateral against all Persons and
against all claims and demands whatsoever.
(e) Do all acts reasonably necessary to maintain, preserve and protect all
its Collateral, keep all its Collateral in good condition and repair (ordinary
wear and tear excepted), and prevent any waste or unusual or unreasonable
depreciation thereof.
(f) Permit Lender and designees of Lender, from time to time, to inspect
its Collateral, and to inspect, audit and make copies of and extracts from all
records and all other papers in the possession of such Debtor and will, upon
request of Lender, deliver to Lender all of such records and papers which
pertain to its Collateral and Account Debtors.
(g) Upon request of Lender, stamp on its records concerning its Collateral
(excluding its Inventory) (and/or enter into its computer records concerning its
Collateral including but not
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limited to its Inventory) a notation, in form satisfactory to Lender, of the
Security Interest created hereby.
(h) Except for the sale or lease of its Inventory in the ordinary course
of its business and except as otherwise permitted by the Secured Credit
Agreement, not sell, lease, assign, license, sublicense, abandon or otherwise
transfer, or create or permit to exist, any Security Interest (other than
Permitted Liens) on any of its Collateral to or in favor of any Person other
than Lender.
(i) At all times keep all of its Inventory and Equipment insured against
loss, damage, theft and other risks in the manner required by Section 11.4 of
the Secured Credit Agreement (whether or not the Secured Credit Agreement shall
be in effect) and, if Lender so requests, deposit with Lender certified copies
of the relevant policies and certificates of insurance.
(j) Furnish or cause to be furnished to Lender, in accordance with Section
9.7 of the Secured Credit Agreement, notice in writing as soon as possible and
in any event no later than 30 days prior to the occurrence from time to time of
(i) any change in the location of such Debtor's chief executive office and (ii)
any change in the name of such Debtor or the name under or by which it conducts
its business, and take all action required by Lender to maintain and preserve
the Security Interest in favor of Lender in such Debtor's Collateral, free and
clear of any other Security Interest whatsoever except for Permitted Liens.
(k) Reimburse Lender for all expenses, including reasonable attorneys'
fees and legal expenses and expenses of any repairs to realty or other property
(unless and to the extent that the damage giving rise to such repairs is caused
by the willful misconduct or gross negligence of the Lender) to which any of its
Collateral may be affixed or be a part, incurred by Lender in seeking to collect
or enforce any rights under or with respect to its Collateral, in seeking to
collect the Notes and all other Liabilities, and in enforcing its rights
hereunder, together with interest thereon from the date incurred until
reimbursed by such Debtor at the Default Rate.
(l) Not sell, assign or license to any third party any of its right, title
or interest in any of its Intellectual Property Collateral and General
Intangibles other than in such Debtor's ordinary course of business.
(m) Not, unless such Debtor shall either (i) reasonably and in good faith
determine (and notice of such determination shall have been delivered to Lender)
that any of its Patent Collateral is of negligible economic value to such
Debtor, or (ii) have a valid business purpose to do otherwise, do any act, or
omit to do any act, whereby any of such Debtor's Patent Collateral may lapse or
become abandoned or dedicated to the public or unenforceable.
(n) Not, and shall not permit any of its licensees to, unless such Debtor
shall either (i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to Lender) that any of its Trademark
Collateral is of negligible economic value to such
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Debtor or (ii) have a valid business purpose to do otherwise,
(A) fail to continue to use any of its Trademark Collateral in
order to maintain all of its Trademark Collateral in full force free from
any claim of abandonment for non-use,
(B) fail to maintain as in the past the quality of products and
services offered under all of its respective Trademark Collateral,
(C) fail to employ all of its Trademark Collateral registered with
any Federal or State or foreign authority with an appropriate notice of
such registration,
(D) adopt or use any trademark which is confusingly similar or a
colorable imitation of any of its Trademark Collateral except in compliance
with applicable law,
(E) use any of its Trademark Collateral registered with any
Federal or State or foreign authority except for the uses for which
registration or application for registration of such Trademark Collateral
has been made except in compliance with applicable law, or
(F) do or permit any act or knowingly omit to do any act whereby
any of its Trademark Collateral may lapse or become invalid or
unenforceable.
(o) Not, unless such Debtor shall either (i) reasonably and in good faith
determine (and notice of such determination shall have been delivered to Lender)
that any of its Copyright Collateral or any of its Trade Secrets Collateral is
of negligible economic value to such Debtor or (ii) have a valid business
purpose to do otherwise, do or permit any act or knowingly omit to do any act
whereby any of its Copyright Collateral or any of its Trade Secrets Collateral
may lapse or become invalid or unenforceable or placed in the public domain
except upon expiration of the end of an unrenewable term of a registration
thereof.
(p) Notify Lender immediately if it knows, or has reason to know, that any
application or registration relating to any material item of its Intellectual
Property Collateral may become abandoned or dedicated to the public or placed in
the public domain or invalid or unenforceable, or of any adverse determination
or development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any foreign counterpart thereof or any
court) regarding such Debtor's ownership of any of its Intellectual Property
Collateral, its right to register the same or to keep and maintain and enforce
the same.
(q) Not, nor shall any of such Debtor's agents, employees, designees or
licensees, file an application for the registration of any of its Intellectual
Property Collateral with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, unless such Debtor promptly
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informs Lender, and, upon request of Lender, executes and delivers any and all
agreements, instruments, documents and papers as Lender may request to evidence
Lender's Security Interest in such Intellectual Property Collateral and the
goodwill and general intangibles of such Debtor relating thereto or represented
thereby.
(r) Take all necessary steps, including in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency in Canada or any political subdivision thereof, to
maintain and pursue any application (and to obtain the relevant registration)
filed with respect to, and to maintain any registration of, its Intellectual
Property Collateral as each Debtor deems appropriate in its reasonable business
judgment, including the filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and the payment of fees and taxes (except to the extent that
dedication, abandonment or invalidation is permitted under the foregoing CLAUSE
(m), (n) or (o)).
(s) Contemporaneously herewith, execute and deliver to Lender an Agreement
(Patent), upon Lenders request, an Agreement (Trademark) and an Agreement
(Copyright) in the forms of EXHIBITS C, D and E hereto, respectively, and shall
execute and deliver to Lender any other document required to acknowledge or
register or perfect Lender's interest in any part of its Intellectual Property
Collateral.
(t) At its sole expense, (i) without any request by Lender, immediately
deliver or cause to be delivered to Lender, in due form for transfer (i.e.,
endorsed in blank or accompanied by duly executed undated blank stock or bond
powers), all Securities, Chattel Paper, Instruments, Investment Property and
Documents, if any, of such Debtor at any time representing all or any of its
Collateral, (ii) upon request of Lender cause Lender's Security Interest
hereunder and under the other Collateral Documents to be at all times duly noted
on any certificate of title issuable with respect to any of its Collateral and
forthwith deliver or cause to be delivered to Lender each such certificate of
title to the extent not covered by a Permitted Lien, and (iii) execute and
deliver, or cause to be executed and delivered, to Lender, in due form for
filing or recording (and pay the cost of filing or recording the same in all
public offices deemed necessary or advisable by Lender) such assignments
(including, without limitation, assignments of life insurance, if such Debtor
elects or is otherwise required to obtain such insurance), security agreements,
mortgages, deeds of trust, pledge agreements, consents, waivers, financing
statements, stock or bond powers and other documents, and do such other acts and
things, all as may from time to time be necessary or desirable, to the
satisfaction of Lender, to establish and maintain in favor of Lender, a valid
perfected lien on and Security Interest in all assets of such Debtor now or
hereafter existing or acquired (free of all other liens, claims and rights of
third parties whatsoever other than Permitted Liens) to secure prompt and
complete payment, performance and observance of the Liabilities.
(u) At the request of Lender after the occurrence and during the
continuance of an Event of Default, transfer all or any part of its Collateral
(including, with respect to any of its
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Trademarks, the goodwill associated therewith) into the name of Lender or its
nominee, with or without disclosing that such Collateral is subject to the
Security Interest hereunder.
(v) At all times comply with the requirements of all applicable laws
(including, without limitation, the provisions of the Fair Labor Standards Act),
rules, regulations and orders of every governmental authority, non-compliances
with which simply or in the aggregate could reasonably be expected to,
materially and adversely affect the value of such Debtor's Collateral or the
worth of such Debtor's Collateral as collateral security, taken as a whole.
SECTION 7. RENEWALS, AMENDMENTS AND OTHER SECURITY; PARTIAL RELEASES.
(a) Lender may from time to time, whether before or after any of the
Liabilities shall become due and payable, without notice to any Debtor, take any
or all of the following actions (provided that actions taken under clause (v)
may be taken only after the occurrence and during the continuance of an Event of
Default): (i) retain or obtain a Security Interest in any property to secure
payment and performance of any of the Liabilities, (ii) retain or obtain the
primary or secondary liability of any Person, in addition to any Debtor, with
respect to any of the Liabilities, (iii) create, extend or renew for any period
(whether or not longer than the original period) or alter or exchange any of the
Liabilities or release or compromise any obligation of any nature of any Person
with respect thereto, (iv) release or fail to perfect its Security Interest in,
or surrender, release or permit any substitution or exchange for, all or any
part of any property securing any of the Liabilities, or create, extend or renew
for any period (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any Person with
respect to any such property, and (v) resort to the Collateral of any Debtor or
all Debtors for payment of any of the Liabilities whether or not Lender (1)
shall have resorted to any other property securing payment and performance of
the Liabilities or (2) shall have proceeded against any other Person primarily
or secondarily liable on any of the Liabilities (all of the actions referred to
in preceding CLAUSES (1) and (2) hereby being expressly waived by each Debtor).
(b) No release from the Security Interest created by this Agreement of any
part of the Collateral of any Debtor by Lender shall in any way alter, vary or
diminish the force or effect of or Security Interest created by this Agreement
against the balance or remainder of such or any other Debtor's Collateral.
SECTION 8. GRANT OF LICENSE TO USE INTANGIBLES. In addition to SECTION
6(u) hereof and solely for the purpose of enabling Lender to exercise rights and
remedies hereunder, each Debtor hereby grants to Lender, after the occurrence
and during the continuance of an Event of Default, an irrevocable, nonexclusive
license (exercisable without payment of royalty or other compensation to such
Debtor) to use, assign, license or sublicense any General Intangibles, now owned
or hereafter acquired by such Debtor, and wherever the same may be located,
including in such license reasonable access as to all media in which any of the
licensed items may be recorded or stored and to all computer programs used for
the compilation or printout thereof.
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SECTION 9. INFORMATION. Lender and any of the officers, employees, agents
or auditors of Lender shall have the right at reasonable intervals after the
date hereof to make reasonable inquiries by mail, telephone, telegraph or
otherwise to any Person with respect to validity and amount or any other matter
(including, without limitation, the assertion by Account Debtors of claims,
offsets and counterclaims) concerning any of any such Debtor's Collateral.
SECTION 10. EVENT OF DEFAULT.
(a) (i) Whenever an Event of Default or Unmatured Insolvency Default
shall exist or be occurring, Lender may exercise from time to time any rights
and remedies available to Lender hereunder, under the Secured Credit Agreement
and under the Uniform Commercial Code or otherwise available to Lender under
applicable law. Each Debtor hereby expressly waives, to the fullest extent
permitted by applicable law, any and all notices, advertisements, hearings, or
process of law in connection with the exercise by Lender of any of its rights
and remedies after an Event of Default or Unmatured Insolvency Default occurs.
(ii) Each Debtor agrees, upon the occurrence of an Event of Default or
Unmatured Insolvency Default and upon the request of Lender, to assemble, at
such Debtor's expense, all of its Collateral at any location requested by
Lender.
(iii) To the fullest extent permitted by applicable law, each Debtor
hereby waives the right to object to the manner or sufficiency of advertising,
refurbishing of its Collateral, or solicitation of bids in connection with any
sales or other disposition of its Collateral. Any sale by Lender may be made at
any broker's board or public or private sale, with or without notice or
advertisement, for cash or credit, and for present or future delivery. At any
such public or private sale or other disposition of any Debtor's Collateral,
Lender may, to the fullest extent permissible under applicable law, purchase the
whole or any part of such Collateral sold, or may sell or dispose of such
Collateral to any other Person, free from any and all claims of any Debtor or of
any other Person claiming by, through, or under any Debtor. Each Debtor hereby
expressly waives and releases, to the fullest extent permitted by applicable
law, any right of redemption on the part of such Debtor. If any notification of
intended disposition of any Debtor's Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if mailed
at least five (5) days before such disposition, postage prepaid, addressed to
such Debtor at the address of such Debtor set forth in the Secured Credit
Agreement. Any proceeds of any Debtor's Collateral, or of the disposition by
Lender of any Debtor's Collateral (including, without limitation, Benefits to
the extent provided in SECTION 16 hereof), may be applied by Lender to the
payment of expenses in connection with such Collateral, including reasonable
attorneys' fees and legal expenses, and any balance of such proceeds may be
applied by Lender toward the payment of such of the Liabilities, and in such
order of application, as Lender may from time to time elect.
(b) Without limiting any other provision of this Agreement, whenever an
Event of
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Default or Unmatured Insolvency Default shall be existing, Lender, with or
without process of law, may enter upon any premises where any Debtor's
Collateral or any part thereof may be, and take possession of all or any part
thereof; and Lender may, without Lender being responsible except as provided
under applicable law for loss or damage, hold, store, keep idle, lease, operate
or otherwise use or permit the use of such Collateral or any part thereof for
such time and upon such terms as Lender may deem to be reasonable, and may
demand, collect and retain all earnings and all other sums due and to become due
in respect of such Collateral from any Person whomsoever, accounting only for
net earnings, if any, arising from use or from the sale thereof after charging
against all receipts from use or from the sale thereof all reasonable costs and
expenses of, and damages or losses by reason of, such use or sale.
(c) Each Debtor hereby agrees to pay any and all costs and expenses
incurred by Lender in retaking, holding, preparing for sale, selling and the
like with regard to the Collateral of such and any other Debtor, including,
without limitation, attorneys' fees incurred by Lender in connection therewith.
(d) Each Debtor agrees that in any sale of any of its Collateral,
Lender is authorized to comply with any limitation or restriction in connection
with such sale as counsel may advise Lender is necessary in order to avoid any
violation of applicable law (including, without limitation, compliance with such
procedures as may restrict the number of prospective bidders or purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to Persons
who will represent and agree that they are purchasing for their own account or
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental or regulatory authority or official, and each
Debtor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall Lender be liable or accountable to any Debtor for any discount allowed
by reason of the fact that such Collateral was sold in compliance with any such
limitation or restriction.
(e) The proceeds of any sale of any Debtor's Collateral sold pursuant
to the terms of this SECTION 10 and any cash held as Collateral of any Debtor
hereunder shall be applied by Lender as follows:
FIRST: to payment of all of the reasonable costs and expenses of
Lender, including (i) the expenses of such sale, (ii) the out-of-pocket
costs and expenses of Lender and the fees and out-of-pocket expenses of
counsel employed by Lender, (iii) the payment of all advances made by
Lender for the account of such Debtor and (iv) the payment of all costs and
expenses incurred by Lender in connection with the administration and
enforcement of this Agreement, to the extent that such advances, costs and
expenses shall not have been reimbursed to Lender;
SECOND: to the payment in full of the Liabilities in such order as
Lender may
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determine from time to time in its sole discretion; and
THIRD: the balance, if any, of such proceeds shall be paid to such
Debtor, its successors and assigns, or as a court of competent jurisdiction
may direct.
(f) If sufficient sums are not realized upon any disposition of
Debtor's Collateral to pay all Liabilities and any expenses of such disposition,
including, without limitation, attorneys' fees, Debtors hereby jointly and
severally promise to pay immediately any resulting deficiency.
(g) No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, but every such right or remedy shall be cumulative
and shall be in addition to every other right or remedy herein conferred, or
conferred upon Lender by any other agreement or instrument or security, or now
or hereafter existing at law or in equity or by statute.
SECTION 11. AUTHORITY OF LENDER. (a) Lender shall have, and be entitled
to exercise, all such powers hereunder as are specifically delegated to Lender
by the terms hereof, together with such powers as are incidental thereto.
Lender may execute any of its duties hereunder by or through agents or employees
and shall be entitled to retain counsel and to act in reliance upon the advice
of such counsel concerning all matters pertaining to its duties hereunder.
Neither Lender, nor any director, officer or employee of Lender, shall be liable
for any action taken or omitted to be taken by Lender hereunder or in connection
herewith. Each Debtor agrees to reimburse Lender, on demand, for all costs and
expenses incurred by Lender in connection with the administration and
enforcement of this Agreement (including costs and expenses incurred by any
agent employed by Lender) and agrees to indemnify (which indemnification shall
survive any termination of this Agreement) and hold harmless Lender (and any
such agent) from and against any and all liability incurred by Lender (or such
agent) hereunder or in connection herewith except to the extent of any gross
negligence or wilful misconduct on the part of Lender.
(b) Lender may from time to time, without notice to any Debtor, at its
option, perform any obligation to be performed by any Debtor hereunder, under
the Secured Credit Agreement or the Related Documents which shall not have been
performed and take any other action which, in its sole discretion, Lender deems
necessary or desirable for the maintenance or preservation of any Collateral of
any Debtor or all Debtors' or Lender's Security Interest in any of such
Collateral. All moneys advanced by Lender in connection with the foregoing
shall, whether or not there are then outstanding any Loans made under the
Secured Credit Agreement, bear interest at the Default Rate (or such lower
maximum rate as shall be legal under applicable law), and shall be jointly and
severally repayable together with such interest by such Debtor to Lender, upon
the demand of Lender, and shall be secured hereby prior to any other
indebtedness or obligation secured hereby, but the making of any such advance by
Lender shall not relieve such Debtor of any default hereunder or thereunder.
SECTION 12. TERMINATION. Subject to SECTION 15(n) hereof, this Agreement
shall terminate when the Commitments shall be terminated and all the Liabilities
have been
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indefeasibly fully paid and performed, at which time Lender shall reassign and
redeliver (or cause to be reassigned and redelivered) to each Debtor, or to such
Person or Persons as each Debtor shall designate, against receipt, such of its
Collateral (if any) as shall not have been sold or otherwise applied by Lender
pursuant to the terms hereof and still shall be held by it hereunder, together
with appropriate instruments of termination, reassignment and release.
SECTION 13. PROTECTION OF INTELLECTUAL PROPERTY COLLATERAL. (a) Each
Debtor shall have the duty to protect, preserve and maintain all rights in each
of the items of its Intellectual Property Collateral, including, without
limitation, the duty to prosecute and/or defend against any and all suits
concerning validity, infringement, enforceability, ownership or dilution or
other aspects of such Intellectual Property Collateral, as well as the duty to
register all of its material Copyrights with the United States Copyright Office
as Debtor deems appropriate in its reasonable business judgment and to make
publications of all copyrighted materials with an appropriate copyright notice.
Any expenses incurred in protecting, preserving and maintaining the Intellectual
Property Collateral of any Debtor shall be borne by such Debtor. To the maximum
extent permitted by law, after the occurrence of and during the continuance of
an Event of Default, Lender shall have the right, without taking title to any
Debtor's Intellectual Property Collateral, to bring suit, in Lender's name or in
such Debtor's name or in both such names, as determined by Lender, to enforce
any or all of such Intellectual Property Collateral or Lender's Security
Interest therein, in which event such Debtor shall, at the request of Lender, do
any and all lawful acts and execute any and all proper documents required by
Lender in aid of such enforcement. All costs, expenses and other moneys
advanced by Lender in connection with the foregoing shall be treated as an
advance under SECTION 11(b) hereof, but the making of any such advance by Lender
shall not relieve any such Debtor of any default hereunder. All monetary
recoveries from any such suits instituted by Lender shall be retained by and
owned solely by Lender. In addition, Debtors shall indemnify on a joint and
several basis, (which indemnification shall survive any termination of this
Agreement) and hold harmless Lender from any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (including attorneys' fees and legal expenses) of any kind
whatsoever which may be imposed on, incurred by or asserted against Lender in
connection with or in any way arising out of such suits, proceedings or other
actions. Notwithstanding the foregoing, Lender shall have no obligations or
liabilities regarding any Debtor's Intellectual Property Collateral by reason
of, or arising out of, this Agreement.
(b) If any Event of Default or Unmatured Insolvency Event shall have
occurred and be continuing, upon the written demand of Lender, each Debtor shall
execute and deliver to Lender an assignment or assignments of its Intellectual
Property Collateral and such other documents as are necessary or appropriate to
carry out the intent and purposes of this Agreement along with, in the case of
any of its Trademarks, goodwill and assets relating to the products sold under
such Trademark. Each Debtor agrees that such an assignment shall be applied to
reduce the Liabilities then due only to the extent that Lender receives cash
proceeds in respect of the sale of, or other realization upon, such Debtor's
Intellectual Property Collateral or licenses; such cash proceeds to be applied
to the payment of expenses incurred in connection with such Intellectual
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Property Collateral or licenses, including attorneys' fees and legal expenses,
and any balance of such proceeds shall be applied by Lender as provided in
SECTION 10(a)(iii). Without limiting any other rights and remedies of Lender,
each Debtor shall within five (5) Business Days of written notice from the
Lender make available to Lender such personnel in such Debtor's employ on the
date of the Event of Default or Unmatured Insolvency Event as the Lender may
reasonably designate, by name, title or job responsibility, to permit Lender to
continue, directly or indirectly, to advertise and operate the business of such
Debtor under any of such Debtor's General Intangibles.
SECTION 14. SUBMISSION TO JURISDICTION. LENDER MAY ENFORCE ANY CLAIM
ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT, ANY COLLATERAL OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR ARISING FROM OR RELATED TO ANY
CREDIT RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO,
ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT
TO ANY SUCH CLAIM, EACH DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS AND ALSO HAS IRREVOCABLY DESIGNATED THE PERSON WHOSE NAME AND
ADDRESS ARE SET FORTH IN THE SECURED CREDIT AGREEMENT TO RECEIVE FOR AND ON
BEHALF OF EACH DEBTOR SERVICE OF PROCESS IN ILLINOIS. EACH DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY MAILING A
COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO SUCH DEBTOR AND AGREES
THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION
OR PROCEEDING AND (II) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON
AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF
LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE LENDER
FROM BRINGING AN ACTION OR PROCEEDING IN RESPECT HEREOF IN ANY OTHER COUNTRY,
STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. EACH DEBTOR IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN CHICAGO, ILLINOIS AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
SECTION 15. MISCELLANEOUS PROVISIONS.
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(a) Lender and any Depositary Account Bank shall be deemed to have
exercised reasonable care in the custody and preservation of each Debtor's
Collateral if they take such action for that purpose as any such Debtor requests
in writing, but failure of Lender or any Depositary Account Bank to comply with
any such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of Lender or any Depositary Account Bank to preserve or
protect any rights with respect to any of such Collateral against prior or other
parties, or to do any act with respect to the preservation of any of such
Collateral not so requested by any Debtor, shall be deemed a failure to exercise
reasonable care in the custody or preservation of such Collateral.
(b) Each Debtor hereby appoints Lender, with full power of
substitution, as such Debtor's attorney-in-fact for the purpose of carrying out
the provisions of this Agreement and taking any action and executing any
instrument which Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, each Debtor agrees that Lender
shall have the right and authority: (i) while any Event of Default or Unmatured
Insolvency Default shall exist, to assign, sell, license, sublicense or
otherwise dispose of all right, title and interest of such Debtor in and to its
Intellectual Property Collateral and any other of its General Intangibles
including, without limitation, assignments, recordings, registrations and
applications therefor in the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency of the United
States, any State thereof or any other country or political subdivision thereof,
and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose; and, (ii) subject to
SECTION 16 hereof, to make claim for, and receive and give acquittance for
payment on account of, loss under any insurance policy covering its Collateral,
or any part thereof, and to receive, endorse and collect all checks, drafts and
other orders for the payment of money representing the proceeds of such
insurance.
(c) All notices or other communications hereunder shall be given (and
shall be deemed to have been received, in each case) in the manner specified
under Section 14.3 of the Secured Credit Agreement, whether or not then in
effect.
(d) No delay on the part of Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Lender of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.
(e) No amendment to, modification or waiver of, or consent with respect
to, any provision of this Agreement shall in any event be effective unless the
same shall be in writing and signed and delivered by Lender, and then any such
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(F) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN DELIVERED
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AT CHICAGO, ILLINOIS, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAW. WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER
SUCH LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION
OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT. ALL OBLIGATIONS OF EACH DEBTOR, ANY OF
SUCH DEBTOR'S SUBSIDIARIES OR ANY RELATED PERSON AND RIGHTS OF LENDER AND ANY
OTHER HOLDER OF A NOTE OR LIABILITY EXPRESSED IN THIS AGREEMENT SHALL BE IN
ADDITION TO AND NOT IN LIMITATION OF THOSE PROVIDED UNDER APPLICABLE LAW OR IN
ANY OTHER WRITTEN INSTRUMENT OR AGREEMENT RELATING TO ANY OF THE LIABILITIES.
(g) The rights and privileges of Lender hereunder shall inure to the
benefit of its successors and assigns. This Agreement shall be binding upon
each Debtor and its successors and assigns.
(h) At the option of Lender, this Agreement, or a carbon, photographic
or other reproduction of this Agreement or of any Uniform Commercial Code
financing statement covering each Debtor's Collateral or any portion thereof,
shall be sufficient as a Uniform Commercial Code financing statement and may be
filed as such.
(i) The section headings in this Agreement are inserted for convenience
of reference and shall not be considered a part of this Agreement or used in its
interpretation.
(j) This Agreement may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
for all purposes be deemed an original, but all such counterparts shall together
constitute but one and the same Agreement. Each Debtor hereby acknowledges
receipt of a true, correct and complete counterpart of this Agreement.
(K) EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR
RELATED TO THIS AGREEMENT, ANY COLLATERAL OR ANY AMENDMENT, INSTRUMENT, DOCUMENT
OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
WITH THE FOREGOING OR ARISING FROM ANY CREDIT RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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(l) Each Debtor hereby expressly waives to the fullest extent permitted
by law: (i) notice of the acceptance by Lender of this Agreement, (ii) notice
of the existence or creation or non-payment of all or any of the Liabilities,
(iii) presentment, demand, notice of dishonor, protest, and all other notices
whatsoever except as required hereunder and under the Secured Credit Agreement,
and (iv) all diligence in collection or protection of or realization upon the
Liabilities or any thereof, any obligation hereunder, or any security for or
guaranty of any of the foregoing.
(m) Subject to the provisions of the Secured Credit Agreement, Lender
may, from time to time, without notice to any Debtor, assign or transfer any or
all of the Liabilities or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Liabilities shall be and remain Liabilities for the purposes of this Agreement,
and each and every immediate and successive assignee or transferee of any
portion of the Liabilities or of any interest therein shall, to the extent of
the interest of such assignee or transferee in the Liabilities, be entitled to
the benefits of this Agreement to the same extent as if such assignee or
transferee were an original Lender; PROVIDED, HOWEVER, that each Lender shall
have an unimpaired right, prior and superior to that of any such assignee or
transferee, to enforce this Agreement, as to those of the Liabilities which
Lender has not assigned or transferred.
(n) Each Debtor agrees that, if at any time all or any part of any
payment theretofore applied by Lender to any of the Liabilities is or must be
rescinded or returned by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of any Debtor or any of
its Affiliates), such Liabilities shall, for the purposes of this Agreement, to
the extent that such payment is or must be rescinded or returned, be deemed to
have continued in existence, notwithstanding such application, except that no
interest shall be charged from the date of application of such payment to the
date of rescission or return of such payment, and the Security Interest granted
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such Liabilities, all as though such application had not been made.
(o) Lender is the current holder of all Liabilities, but, subject to
the Secured Credit Agreement, may in the future transfer, assign or sell certain
Liabilities.
(p) Each Debtor hereby acknowledges that there are no conditions to the
effectiveness of this Agreement.
(q) If any item of Collateral hereunder also constitutes collateral
granted to Lender under any other mortgage, agreement or instrument, in the
event of any conflict between the provisions under this Agreement and those
under such other mortgage, agreement or instrument relating to such Collateral,
the provision or provisions selected by the Lender shall control with respect to
such Collateral.
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(r) In case of conflict between any provision of this Agreement and any
provision of the Secured Credit Agreement, the provisions of the Secured Credit
Agreement shall control.
SECTION 16. APPLICATION OF INSURANCE PROCEEDS. Any loss benefits under
any of the insurance policies maintained by any Debtor pursuant to SECTION 6(i)
hereof shall be applied in accordance with SECTION 7.6 of the Secured Credit
Agreement.
SECTION 17. LENDER MAY PURCHASE INSURANCE. Unless Debtors provide Lender
with evidence reasonably satisfactory to Lender of the insurance coverage
required by SECTION 6(i) of this Agreement, Lender may purchase insurance at
Debtors' expense to protect Lender's interest in the Collateral. This insurance
may, but need not, protect any Debtor's interest in the Collateral. The
coverage purchased by Lender may not pay any claim made by any Debtor or any
claim made against any Debtor in connection with the Collateral. Debtors may
later cancel any insurance purchased by Lender, but only after providing Lender
with evidence reasonably satisfactory to Lender that Debtors have obtained
insurance as required by SECTION 6(i) of this Agreement. If Lender purchases
insurance for the Collateral, Debtors will be responsible on a joint and several
basis for the costs of that insurance, including interest at the Default Rate
(or such lower maximum rate as shall be legal under applicable law) and any
other charges imposed by Lender in connection with the placement of insurance,
until the effective date of the cancellation or expiration of such insurance.
The costs of the insurance may, at Lender's discretion, be added to the
Liabilities, and in any event shall be secured by the Collateral Documents. It
is understood and agreed that the costs of insurance obtained by Lender may be
more than the costs of insurance any Debtor may be able to obtain on its own.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
ADDRESS: THE ROACH ORGANIZATION, INC.,
c/o TRO Learning, Inc. a Delaware corporation
4660 West 77th Street
Edina, Minnesota 55311 By:
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Attention: John Murray and Steven R. Schuster
Steven Schuster Vice President
Telecopy:
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Telephone:
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TRO LEARNING (CANADA), INC., a Canadian
corporation
By:
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Steven R. Schuster
Vice President
ADDRESS: FIRST SOURCE FINANCIAL LLP, an
c/o First Source Financial, Inc. Illinois registered limited liability
2850 West Golf Road partnership
5th Floor
Delaware By: First Source Financial, Inc., a
Rolling Meadows, Illinois 60008 corporation, its Agent/Manager
Telephone: (847) 734-2000
Telecopy: (847) 734-7910
By:
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John P. Thacker
Senior Vice President