SECURITY AGREEMENT
THIS
SECURITY AGREEMENT (the “Agreement”) dated this
19th day of October, 2007, is executed and delivered by
DECORIZE, INC., a Delaware corporation, GUILDMASTER, INC., a
Missouri corporation, and FAITH WALK DESIGNS, INC., a Missouri
corporation (collectively, the “Borrower”), as
debtor, in favor of GUARANTY BANK
, a
state chartered trust company with banking powers (the
“Lender”), as secured party, pursuant to the terms of
the Credit Agreement (hereinafter defined).
W I T N E S S E T H
WHEREAS
, Borrower
has obtained from Lender a Revolving Loan, in an amount not to
exceed Three Million and 00/100 Dollars ($3,000,000.00) (the
“Loan”), pursuant to that certain Credit Agreement (as
may be amended, restated or modified from time to time, the
“Credit Agreement”) dated the same date hereof by and
among Lender and Borrower, which Loan is evidenced by that certain
Revolving Promissory Note dated the same date hereof (the
“Note”). All terms used but not otherwise defined
herein shall have the meaning set forth in the Credit Agreement;
and
WHEREAS,
Borrower and the Lender desire to secure the Obligations for
the benefit of Lender pursuant to the terms of the Credit
Agreement.
NOW,
THEREFORE, in consideration of the Loan by the Lender, and
other good and valuable consideration, receipt and sufficiency
of which are hereby acknowledged by the Borrower, the Borrower
hereby agrees with the Lender as follows.
1.
Grant of Security Interest .
To secure the Obligations, Borrower hereby grants to Lender,
pursuant to the terms of the Credit Agreement, a continuing first
lien on and priority security interest in, and the right to set off
against, any and all right, title and interest of the Borrower,
whether now, or hereafter, owned, existing, created, acquired or
arising, in and to any and all of Borrower’s personal
property, wherever located and whomever held by (collectively the
“Collateral”). The Collateral includes Borrower’s
personal property identified on Exhibit A attached hereto, and the
following:
(i)
All
Accounts, accounts receivable, Deposit Accounts, promissory
notes and other obligations owed to Borrower that arise from
the sale, rental or lease of Inventory, goods or other
property of Borrower or the rendering of services by Borrower,
and all Chattel Paper, Instruments (including Promissory
Notes), Documents, drafts, contract rights and acceptances and
other forms of obligations (including but not limited to all
obligations that may be characterized as General Intangibles
or otherwise under the UCC) respecting the rights of Borrower
to the payment of money from others and all other rights to
the payment of money;
(ii)
All
Goods and Inventory, and all documents of title of at any time
evidencing or representing a part thereof, including all
inventories of raw materials, work-in-process, finished goods,
and merchandise, materials and supplies and all other personal
property and assets of every kind and description held for
sale, rental or lease or held to be furnished under contracts
for services or consumed in Borrower’s business, or in
any case held, used or useable in the supply, servicing,
advertising, processing, packaging, delivery or shipping of
such property;
(iii)
All
Equipment, machinery, tools furniture, and fixtures of every
sort and spare parts therefor, all storage media containing
computer programs and data, and all tools, dies, and molds,
and all motor vehicles, trailers, tractors, barges, and ships
of every sort and spare parts and accessories therefor,
whether or not titled or certificated;
(iv)
All
General Intangibles, including Payment Intangibles, all
computer programs, data and databases, leases, licenses,
claims and causes of action against others (whether in
litigation, settlement or otherwise), and tax refunds, and all
summaries, compilations, mailing and customer, client or
supplier lists, and other supporting evidence records relating
to the business, assets, liabilities or capital of Borrower,
and all disks, files, tapes, printouts, books, records,
periodicals, directories, publications and other documents and
media where the foregoing is stored or embodied, and all
patents, patent applications, trademarks, trademark
applications, trade secrets, trade names, service marks, trade
styles, and copyrights,
designs, prototypes, labels, molds, inventions, improvements,
processes, manufacturing techniques, know-how,
specifications in
each case whether or not registered, licensed or
filed;
(v)
All
rights under all licenses, permits, leases, contracts,
governmental approvals, franchises, applications for any of
the foregoing, renewals of any of the foregoing, and similar
rights or privileges or immunities;
(vi)
(A)
all dividends, cash, securities, instruments and other
property from time to time paid, payable or otherwise
distributed to Borrower in respect of or in exchange for any
shares or other capital stock or trust, partnership or limited
liability company interests, all Investment Property,
Certificated Securities, Uncertificated Securities, Security
Entitlements, Securities Accounts, securities accounts, margin
accounts, financial assets, hedging contracts, options
contracts, and futures contracts; (B) any and all
distributions made to Borrower in respect of any such shares
or capital stock, or trust, partnership or limited liability
company interests, whether in cash or in kind, by way of
dividends or stock splits, or pursuant to a merger or
consolidation or otherwise, or any substitute security issued
to Borrower upon conversion, reorganization or otherwise; and
(C) any and all other property hereafter delivered to Borrower
or Lender in substitution for or in addition to any of the
foregoing (including without limitation all securities issued
pursuant to any shareholder agreement, stock purchase
agreement, partnership agreement, trust agreement or
indenture, limited liability company operating agreement,
stock purchase rights or other agreement to which Borrower may
now or hereafter be a party, all certificates and instruments
representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at
any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all thereof);
(vii)
All
of Borrower’s property in the possession, custody or
control of Lender in any way, whether or not for safekeeping,
custody, pledge, transmission, collection or
otherwise;
(viii)
All
funds paid to Lender or in transit to any deposit account or
fund established by Borrower, and any securities in which such
funds may be invested; and
(ix)
All
cash and non-cash proceeds and products of the foregoing, all
proceeds from insurance on any of the foregoing, all goodwill
associated with the foregoing, all additions and accessions to
and replacements and substitutions for any of the foregoing,
everything that becomes (or is held for the purpose of being)
affixed to or installed in any of the foregoing, and all
products, rents, income, dividends, royalties, and profits of
or from any of the foregoing.
This
Agreement is made and given to secure, and shall secure, the
payment of and performance of any and all indebtedness,
obligations and liabilities of the Borrower to the Lender,
including without limitation the principal advanced or any
interest on the Note and Loan Documents, and under this
Agreement in accordance with their terms and to satisfy all of
its other liabilities to Lender, whether under the Note or
under the Credit Agreement or otherwise, whether now existing
or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions,
modifications, renewals, and substitutions, including, but
without limitation, advances for principal or interest
payments to prior secured parties, mortgagors, or lienors, or
for taxes, levies, insurance, rent, repairs to or maintenance
or storage of any of the Collateral, for all of Lender’s
expenses and costs, including reasonable fees and expenses of
its counsel, in connection with the preparation,
administration, amendment, modification, or enforcement of the
Credit Agreement and the documents required thereunder and in
connection therewith, including, without limitation, any
proceeding brought or threatened to enforce payment of any of
the obligations under the Loan Documents (collectively the
“Obligations”). Notwithstanding the foregoing,
Borrower and Lender agree that the costs payable by Borrower
in connection with the origination of the Loan (i.e., attorney
fees, loan documentation costs, recording fees, etc.) shall
not exceed $10,000.
2.
Defined Terms .
The
term “Loan Documents” and all other capitalized terms
used herein but not otherwise defined herein shall have the
meanings given to them in the Credit Agreement. All capitalized
terms used and not otherwise defined herein or in the Credit
Agreement have the meanings given them in the Uniform Commercial
Code as in effect from time to time in the State of Missouri
(“UCC”). To the extent the provisions of this Agreement
conflict with the provisions of the Credit Agreement, the Credit
Agreement shall govern. The prior sentences notwithstanding, any
reference to any agreement, document, or instrument, including this
Agreement, any other Loan Document and any agreement, document or
instrument defined herein or therein, means such agreement,
document, or instrument as it may have been or may be amended,
restated, extended, renewed, replaced, or otherwise modified and in
effect from time to time in accordance with the terms thereof and,
if applicable, the terms hereof, and includes all attachments
thereto and instruments incorporated therein, if any.
3.
P
ossession
of Collateral .
Other
than during an Event of Default, Borrower may have possession of
all Collateral except for Collateral which is in the possession of
Lender or Collateral which Lender must possess in order to have a
perfected first priority Security Interest therein, and Borrower
may use each item of the Collateral in its possession in any lawful
manner not inconsistent with this Agreement, the other Loan
Documents or with any policy of insurance covering the
same.
4.
Borrower’s Representations and Warranties
.
Borrower represents and warrants to the Lender the
following:
4.1.
Name; Jurisdiction; Taxpayer ID Number .
The
correct corporate name and jurisdiction of formation of Borrower is
set forth in the first paragraph of this Agreement, and the
Borrower does not conduct and, during the five-year period
immediately preceding the date of this Agreement, has not
conducted, business under any trade name or other fictitious name.
The Internal Revenue Service taxpayer identification number of the
Borrower and the organizational identification number of the
Borrower issued by the Borrower’s jurisdiction of formation
are set forth on
Schedule A attached
hereto.
4.2.
Offices; Places of Business .
Borrower’s principal place of business and the books and
records relating to all Accounts and the Collateral is located at
the address set forth on
Schedule A .
All addresses (including applicable counties) of all other places
of business of the Borrower shall at all times be additionally
listed on
Schedule A .
Unless Lender otherwise consents in writing, all of the tangible
Collateral will be kept at Borrower’s chief executive office
or such other places of business described in the Credit Agreement,
including Collateral which is movable when the same is not in use;
and without Borrower first making arrangements satisfactory to
Lender to protect Lender’s Security Interest therein,
Borrower will not place any of the tangible Collateral in any other
location. No Collateral shall at any time be in the possession or
control of any warehouseman, bailee or any of Borrower’s
agents or processors without Lender’s prior written consent
and unless Lender, if Lender has so requested, has received
warehouse receipts or bailee letters satisfactory to Lender prior
to the commencement of such storage. Notwithstanding the foregoing,
Borrower may allow EnCore, Inc. to have possession and control of
the Collateral pursuant to the terms of Agreement between Borrower
and EnCore, Inc. dated September 14, 2006. Borrower shall, upon the
request of Lender, notify any such warehouseman, bailee, agent or
processor of the Security Interests created hereby and shall
instruct such person to provide a written agreement to Lender that
such person holds all such Collateral for Lender’s account
subject to Lender’s instructions.
4.3.
Name, Entity or Office Changes .
If
Borrower intends to change its name, change its structure, change
the location of Borrower’s principal place of business,
create new or otherwise amend its trade names or trademarks, change
its state of organization, or open other places of business,
Borrower will, prior to taking any such action, provide Lender no
less than thirty (30) days prior written notice of the same and,
prior to taking any such action, will promptly execute such
additional documents as Lender may reasonably request in order to
maintain a fully perfected first priority Security Interest in
favor of Lender in the Collateral.
4.4.
Insurance .
Borrower
will keep the Collateral insured in accordance with the terms of
the Credit Agreement.
4.5.
Collateral
Not
to
Become
Fixtures .
Without
first making arrangements satisfactory to Lender to protect its
Security Interest, Borrower will not allow the Collateral to become
affixed to or installed in any property (including but not limited
to any real estate).
4.6.
Condition
of
Collateral
;
Disposal
of
Collateral .
Borrower
will keep the Collateral in the condition required under the terms
of the Credit Agreement. Borrower will not transfer, convey or
otherwise dispose of any Collateral (or any interest therein)
unless and only to the extent permitted herein or by the Credit
Agreement.
4.7.
Liens .
Borrower
is the lawful owner of the Collateral free and clear, and will keep
free and clear, of all security interests, liens, encumbrances,
registered pledges, adverse claims, voting trust restrictions
and
