Exhibit 10.2
SECOND AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (as
such agreement may be amended, supplemented, modified or amended and restated
from time to time, this "Agreement"), dated as of November 14, 2003, is made
by ANNTAYLOR, INC., a Delaware corporation ("ATI"), ANNTAYLOR STORES
CORPORATION, a Delaware corporation (the "Parent"), ANNCO, INC., a Delaware
corporation ("ANNCO"), AnnTaylor Distribution Services, INC., a Delaware
corporation ("ATDS"), and ANNTAYLOR RETAIL, INC., a Delaware corporation
("ATR" and, together with ATI, the Parent, ANNCO and ATDS, the "Grantors" and
each, individually, a "Grantor") in favor of BANK OF AMERICA, N.A., in its
capacity as administrative agent for each of the Lenders now or hereafter
party to the Credit Agreement (as defined below) (the "Agent").
W I T N E S S E T H:
WHEREAS, ATI, the Agent, the lenders referred to therein, the
syndication agents named therein, and the issuing banks named therein have
entered into that certain $150,000,000 Credit Agreement dated June 30, 1998
(as amended, the "Original Credit Agreement"), as amended and restated
pursuant to the terms of that certain $175,000,000 Amended and Restated Credit
Agreement dated April 30, 2001 (as amended, the "Restated Credit Agreement");
and
WHEREAS, at the Borrowers' request, Lenders, the Agent, and the
syndication and documentation agents named therein have agreed to amend and
restate the Restated Credit Agreement in its entirety as of the date hereof (as
so amended and restated and as such agreement may be further amended,
supplemented, modified, or amended and restated from time to time, the "Credit
Agreement"); and
WHEREAS, the Parent is the parent of each of ATI, ANNCO, ATDS and ATR
and has and will materially benefit from the Loans made or to be made and the
Letters of Credit issued or to be issued under the Credit Agreement, and in
connection therewith and pursuant to the terms of the Credit Agreement, the
Parent simultaneously herewith has entered into that certain Second Amended
and Restated ATSC Guaranty and is required to execute and deliver this
Agreement; and
WHEREAS, each of ANNCO, ATDS and ATR is, directly or indirectly, a
wholly owned Subsidiary of ATI and has and will materially benefit from the
Loans and Advances made and to be made, and the Letters of Credit issued and
to be issued, under the Credit Agreement; and
WHEREAS, the Parent and the Agent have entered into that certain ATSC
Pledge Agreement dated June 30, 1998 (as amended, the "Original ATSC Pledge
Agreement"), pursuant to which the Parent has granted a security interest in
certain personal property and assets as collateral security for the payment
and performance of ATI's obligations under the Original Credit Agreement, as
amended and restated pursuant to the terms that certain Amended and Restated
ATSC Security and Pledge Agreement dated April 30, 2001 (as amended, the
"Restated ATSC Pledge Agreement"); and
WHEREAS, (i) ATDS and the Agent have entered into that certain
Subsidiary Guaranty and Collateral Agreement dated June 30, 1998 (as amended,
the "Original Subsidiary Guaranty") and (ii) ATR and ANNCO have entered into
an Assignment and Assumption Agreement dated as of February 29, 2000 (the
"Assumption Agreement" and, together with the Original Subsidiary Guaranty,
the "Original Agreements"), in each case, as amended and restated pursuant to
the terms of that certain Amended and Restated Subsidiary Guaranty and
Collateral Agreement dated April 30, 2001 (as amended, the "Restated
Subsidiary Guaranty"); and
WHEREAS, as collateral security for payment and performance by each
Grantor of its Obligations, each Grantor is willing to continue, amend and
grant to the Lender, as the case may be, a security interest in certain of its
personal property and assets pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the above premises and in order
to induce the Lenders and each Issuing Bank to amend and restate the Restated
Credit Agreement and continue to, respectively, make Loans and issue Letters
of Credit under the Credit Agreement, each Grantor hereby agrees with the
Agent for its benefit, and for the benefit of the Lenders and the Issuing
Banks, by acceptance hereof, as follows:
1. DEFINED TERMS. The following terms shall have the following
respective meanings:
"Accounts" means all of each Grantor's now owned or hereafter
acquired or arising accounts, as defined in the UCC, including all Credit Card
Accounts and any rights to payment for the sale or lease of goods or rendition
of services, whether or not they have been earned by performance.
"Affiliate" as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote 10% or more of the
Securities having voting power for the election of directors of such Person or
otherwise to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting Securities or by contract
or otherwise; provided that no financial institution, mutual fund or
investment banking firm shall be an Affiliate of any Grantor unless it owns,
directly or indirectly, at least 20% of such Securities of such Grantor.
"Chattel Paper" means all of each Grantor's now owned or
hereafter acquired chattel paper, as defined in the UCC, including electronic
chattel paper.
"Copyrights" means all of each Grantor's right, title and
interest, whether now owned or hereafter acquired, in and to all United States
and foreign copyrights and copyright applications (including without
limitation the copyrights and copyright applications identified on Schedule
III attached hereto and incorporated herein by reference) and including the
right to recover for all past, present and future infringements thereof and
all reissues, divisions, continuations, continuations-in-part, substitutes,
renewals, and extensions thereof, all improvements thereon, and all other
rights of any kind whatsoever of such Grantor accruing thereunder or
pertaining thereto.
"Deposit Accounts" means all "deposit accounts" as such term
is defined in the UCC, now or hereafter held in the name of any Grantor.
"Documents" means all documents as such term is defined in
the UCC, including bills of lading, warehouse receipts or other documents of
title, now owned or hereafter acquired by any Grantor.
"Equipment" means all of each Grantor's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including embedded
software, motor vehicles with respect to which a certificate of title has been
issued, aircraft, dies, tools, jigs, molds and office equipment, as well as
all of such types of property leased by such Grantor and all of such Grantor's
rights and interests with respect thereto under such leases (including,
without limitation, options to purchase); together with all present and future
additions and accessions thereto, replacements therefor, component and
auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.
"Equity Interests" means, with respect to any Person, all
shares, interests, participations or other equivalent ownership interests
(however, designated, whether voting or non-voting) of such Person's capital,
whether now outstanding or issued after the Effective Date.
"Excluded Notes" means (i) any promissory note with an
original principal amount of less than $1,000,000 owing to any Grantor from a
senior executive or key employee of such Grantor, (ii) the Convertible
Debentures Note and (iii) the Promissory Note, dated as of January 2, 2003,
made by The Yacobian Group, LLC for and payable to ATI, in the amount of
$3,000,000, and any amendments or modifications thereto.
"General Intangibles" means all of each Grantor's now owned
or hereafter acquired general intangibles, choses in action and causes of
action and all other intangible personal property of such Grantor of every
kind and nature (other than Accounts), including, without limitation, all
contract rights, payment intangibles, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets,
goodwill, computer software, customer lists, registrations, licenses,
franchises, tax refund claims, any funds which may become due to such Grantor
in connection with the termination of any employee benefit plan or any rights
thereto and any other amounts payable to such Grantor from any employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which such
Grantor is beneficiary, all Pledged Equity Interests constituting "general
intangibles" as defined in the UCC, rights to receive dividends,
distributions, cash and other property in respect of or in exchange for
pledged equity interests or Investment Property and any letter of credit,
guarantee, claim, security interest or other security held by or granted to
such Grantor, including without limitation, all Patents, Trademarks and
Copyrights constituting "general intangibles" as defined in the UCC.
"Goods" means all "goods" as defined in the UCC, now owned
or hereafter acquired by any Grantor, wherever located, including embedded
software to the extent included in "goods" as defined in the UCC.
"Instruments" means all instruments as such term is defined
in the UCC, now owned or hereafter acquired by any Grantor, including, without
limitation, all Pledged Notes constituting "instruments" as defined in the
UCC.
"Inventory" means all of each Grantor's now owned and
hereafter acquired inventory, goods and merchandise, wherever located, to be
furnished under any contract of service or held for sale or lease, all
returned goods, raw materials, work-in-process, finished goods (including
embedded software), other materials and supplies of any kind, nature or
description which are used or consumed in such Grantor's business or used in
connection with the packing, shipping, advertising, selling or finishing of
such goods, merchandise, and all documents of title or other Documents
representing them.
"Investment Property" means all of each Grantor's right title
and interest in and to any and all: (a) securities whether certificated or
uncertificated; (b) securities entitlements; (c) securities accounts; (d)
commodity contracts; or (e) commodity accounts, including, without limitation,
all Pledged Equity Interests constituting "investment property" as defined in
the UCC.
"Letter-of-Credit Rights" means "letter-of-credit rights" as
such term is defined in the UCC, now owned or hereafter acquired by any
Grantor, including rights to payment or performance under a letter of credit,
whether or not such Grantor, as beneficiary, has demanded or is entitled to
demand payment or performance.
"LLC Agreement" means the limited liability company
agreement, operating agreement and other organizational document of a
Securities Issuer which is a limited liability company, as the same may be
amended, restated, amended and restated, supplemented or otherwise modified
from time to time.
"Partnership Agreement" means the partnership agreement and
other organizational document of a Securities Issuer which is a partnership,
as the same way be amended, restated, amended and restated, supplemented or
otherwise modified from time to time.
"Patents" means all of each Grantor's right, title and
interest, whether now owned or hereafter acquired, in and to all United States
and foreign patents and patent applications (including without limitation the
patents and patent applications identified on Schedule III attached hereto and
incorporated herein by reference) and including the right to recover for all
past, present and future infringements thereof and all reissues, divisions,
continuations, continuations in part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever
of such Grantor accruing thereunder or pertaining thereto.
"Payment Account" means each bank account established
pursuant to this Security Agreement, to which the proceeds of Accounts and
other Collateral are deposited or credited, and which is maintained in the
name of the Agent or such Grantor, as the Agent may determine, on terms
acceptable to the Agent.
"Pledged Collateral" is defined in Section 3(c).
"Pledged Equity Interests" means all Pledged Shares, Pledged
Partnership Interests and Pledged Membership Interests.
"Pledged Membership Interests" means all Equity Interests of
each Securities Issuer which is a limited liability company identified in Item
D of Schedule IV opposite the name of any Grantor and all additional Equity
Interests of any such Securities Issuer from time to time acquired by such
Grantor in any manner, including, in each case, (i) the LLC Agreement of such
Securities Issuer, (ii) all rights (but not obligations) of such Grantor as a
member thereof and all rights to receive dividends or distributions (whether
payable in cash, securities or otherwise) and all principal, interest, and
other payments and rights from time to time received, receivable, or otherwise
distributed thereunder, (iii) all claims of such Grantor for damages arising
out of or for breach of or default under such LLC Agreement, (iv) the right of
such Grantor to terminate such LLC Agreement, to perform and exercise
consensual or voting rights thereunder, and to compel performance and
otherwise exercise all remedies thereunder, (v) all rights of such Grantor,
whether as a member thereof or otherwise, to all property and assets of such
Securities Issuer (whether real property, inventory, equipment, accounts,
general intangibles, securities, instruments, chattel paper, documents, choses
in action, financial assets, or otherwise) and (vi) all certificates or
instruments evidencing such Equity Interests.
"Pledged Notes" means all promissory notes of each
Securities Issuer identified in Item A of Schedule IV hereto opposite the name
of any Grantor and all other promissory notes of any such Securities Issuer
issued from time to time to such Grantor other than any Excluded Notes, as
such promissory notes are amended, modified, supplemented, restated or
otherwise modified from time to time and together with any promissory note of
any Securities Issuer taken in extension or renewal thereof or substitution
therefor.
"Pledged Partnership Interests" means all Equity Interests
of each Securities Issuer which is a partnership identified in Item D of
Schedule IV opposite the name of any Grantor and all additional Equity
Interests of any such Securities Issuer from time to time acquired by such
Grantor in any manner, including, in each case, (i) the Partnership Agreement
of such Securities Issuer, (ii) all rights (but not obligations) of such
Grantor as a partner thereof and all rights to receive dividends or
distributions (whether payable in cash, securities or otherwise) and all
principal, interest, and other payments and rights from time to time received,
receivable, or otherwise distributed thereunder, (iii) all claims of such
Grantor for damages arising out of or for breach of or default under such
Partnership Agreement, (iv) the right of such Grantor to terminate such
Partnership Agreement, to perform and exercise consensual or voting rights
thereunder, and to compel performance and otherwise exercise all remedies
thereunder, (v) all rights of such Grantor, whether as a partner thereof or
otherwise, to all property and assets of such Securities Issuer (whether real
property, inventory, equipment, accounts, general intangibles, securities,
instruments, chattel paper, documents, choses in action, financial assets, or
otherwise) and (vi) all certificates or instruments evidencing such Equity
Interests.
"Pledged Shares" means all issued and outstanding shares of
capital stock of each Securities Issuer which is a corporation (or similar
type of issuer) identified in Item B of Schedule IV hereto opposite the name
of any Grantor including, in each case, (i) all rights (but not obligations)
of such Grantor as an owner thereof and all rights to receive dividends or
distributions (whether payable in cash, securities or otherwise) and all
principal, interest, and other payments and rights from time to time received,
receivable, or otherwise distributed thereunder, (ii) all rights of such
Grantor, whether as an owner thereof or otherwise, to all property and assets
of such Securities Issuer (whether real property, inventory, equipment,
accounts, general intangibles, securities, instruments, chattel paper,
documents, choses in action, financial assets, or otherwise) and (iii) all
additional shares of capital stock of any such Securities Issuer from time to
time acquired by such Grantor in any manner, and (iv) the certificates
representing such shares of capital stock.
"Securities Issuer" means any Person listed on Schedule IV
hereto that has issued or may issue a Pledged Equity Interest or a Pledged
Note.
"Software" means all "software" as such term is defined in
the UCC, now owned or hereafter acquired by any Grantor, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to
any program.
"Supporting Obligations" means all supporting obligations as
such term is defined in the UCC.
"Trademarks" means all of each Grantor's right, title and
interest, whether now owned or hereafter acquired, in and to all United States
and foreign trademarks, trade names, trade dress, service marks, trademark and
service mark registrations, and applications for trademark or service mark
registration and any renewals thereof (including without limitation each
trademark, trade name, trade dress, registration and application identified in
Schedule III attached hereto and incorporated herein by reference) and
including all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto (including without limitation damages for
past or future infringements thereof), the right to sue or otherwise recover
for all past, present and future infringements thereof, all rights
corresponding thereto throughout the world (but only such rights as now exist
or may come to exist under applicable local law) and all other rights of any
kind whatsoever of each Grantor accruing thereunder or pertaining thereto,
together in each case with the goodwill of the business connected with the use
of, and symbolized by, each such trademark and service mark.
"UCC" means the Uniform Commercial Code, as in effect from
time to time, of the State of New York or of any other state the laws of which
are required as a result thereof to be applied in connection with the issue of
perfection of security interests.
"Uniform Commercial Code jurisdiction" means any
jurisdiction that has adopted "Revised Article 9" of the UCC on or after July
1, 2001.
All other capitalized terms used but not otherwise defined
herein have the meanings given to them in the Credit Agreement or in Annex A
thereto. All other undefined terms contained in this Security Agreement,
unless the context indicates otherwise, have the meanings provided for by the
UCC to the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) As security for all Obligations, each Grantor hereby
pledges, assigns, charges, mortgages, delivers, transfers and grants to the
Agent, for the benefit of the Agent and the Lenders, a continuing security
interest in, lien on, assignment of and right of set-off against, all of the
following property and assets of such Grantor, whether now owned or existing
or hereafter acquired or arising, regardless of where located:
(i) all Accounts;
(ii) all Inventory;
(iii) all contract rights;
(iv) all Chattel Paper;
(v) all Documents;
(vi) all Instruments;
(vii) all Supporting Obligations and Letter-of-Credit
Rights;
(viii) all General Intangibles (including payment
intangibles and Software);
(ix) all Goods;
(x) all Equipment;
(xi) all Investment Property;
(xii) all money, cash, cash equivalents, securities and
other property of any kind of such Grantor held directly or indirectly by the
Agent or any Lender;
(xiii) all of such Grantor's Deposit Accounts, credits, and
balances with and other claims against the Agent or any Lender or any of their
Affiliates or any other financial institution with which such Grantor
maintains deposits, including any Payment Accounts;
(xiv) all books, records and other property related to or
referring to any of the foregoing, including books, records, account ledgers,
data processing records, computer software and other property and General
Intangibles at any time evidencing or relating to any of the foregoing;
(xv) all accessions to, substitutions for and replacements,
products and proceeds of any of the foregoing, including, but not limited to,
proceeds of any insurance policies, claims against third parties, and
condemnation or requisition payments with respect to all or any of the
foregoing;
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in (a) any lease, license, contract, property rights or agreement to
which any Grantor is a party or any of its rights or interests thereunder, or
any property or assets subject to any lease, license, contract or agreement if
and for so long as the grant of such security interest shall constitute or
result in (i) the abandonment, invalidation or unenforceability of any right,
title or interest of any Grantor therein or (ii) in a breach or termination
pursuant to the terms of, or a default under, any such lease license, contract
property rights or agreement (other than to the extent that any such term
would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or
9-409 of the UCC (or any successor provision or provisions) of any relevant
jurisdiction or any other applicable law (including the Bankruptcy Code) or
principles of equity), provided however that such security interest shall
attach immediately at such time as the condition causing such abandonment,
invalidation or unenforceability shall be remedied and, to the extent
severable, shall attach immediately to any portion of such lease, license,
contract, property rights or agreement, or such property or assets subject to
any lease, license, contract or agreement that does not result in any of the
consequences specified in (i) or (ii), (b) any real property leasehold held by
a Grantor, (c) any of the outstanding Equity Interests of a Foreign Subsidiary
in excess of 65% of the voting power of all classes of Equity Interests of
such Foreign Subsidiary entitled to vote, (d) any Excluded Notes, (e) motor
vehicles covered by certificates of title, (f) patent number 6,427,855 issued
on August 6, 2002 and owned by ANNCO and (g) any shares of Parent's capital
stock owned by any Grantor.
All of the foregoing, together with the Real Estate covered by the Mortgage(s)
and all other property of such Grantor in which the Agent or any Lender may at
any time be granted a Lien as collateral for the Obligations, is herein
collectively referred to as the "Collateral."
(b) The Collateral of each Grantor secures (i) in the case
of the Borrower, all Obligations of the Borrower under the Loan Documents,
(ii) in the case of the Parent, the Guaranteed Obligations under the Parent
Guaranty and (iii) in the case of each Subsidiary Guarantor, the Guaranteed
Obligations under the Subsidiary Guaranty. All of the Obligations shall be
secured by all of the Collateral.
(c) This Section 2 continues, reaffirms and amends, as the
case may be, those respective first priority pledge and security interests
granted under the Restated Security Agreement, the Restated ATSC Pledge
Agreement and the Restated Subsidiary Guaranty.
3. Perfection and Protection of Security Interest.
(a) Each Grantor shall, at its expense, perform all steps
requested by the Agent at any time to perfect, maintain, protect, and enforce
the Agent's Liens, including: (i) executing, delivering and/or filing and
recording of the Mortgage(s), the Trademark Security Agreement and executing
and filing financing or continuation statements, and amendments thereof, in
form and substance reasonably satisfactory to the Agent; (ii) delivering to
the Agent warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued and certificates of
title covering any portion of the collateral for which certificates of title
have been issued; (iii) when an Event of Default has occurred and is
continuing, transferring Inventory to warehouses or other locations designated
by the Agent; (iv) placing notations on such Grantor's books of account to
disclose the Agent's security interest; and (v) taking such other steps as are
deemed necessary by the Agent to maintain and protect the Agent's Liens. Each
Grantor agrees that a carbon, photographic, photostatic, or other reproduction
of this Security Agreement or of a financing statement is sufficient as a
financing statement.
(b) Unless the Agent shall otherwise consent in writing
(which consent may be revoked), each Grantor shall deliver to the Agent all
Collateral consisting of negotiable Documents and Chattel Paper promptly after
such Grantor receives the same.
(c) All certificates, notes and other instruments
representing or evidencing the Pledged Equity Interests or the Pledged Notes
and all other instruments now owned or at any time hereafter acquired by any
Grantor other than any Excluded Notes (collectively, the "Pledged Collateral")
shall be delivered to and held by or on behalf of the Agent pursuant hereto
(except as otherwise provided in the last sentence of Section 15(c) hereof)
and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignments in blank,
all in form and substance satisfactory to the Agent. Upon the occurrence and
during the continuance of an Event of Default, the Agent shall have the right,
at any time in its discretion and without notice to such Grantor, to transfer
to or to register in the name of the Agent or any nominee of the Agent any or
all of the Pledged Collateral, subject only to the revocable rights specified
in Section 15 hereof. In addition, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right at any time
to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
(d) If required by the terms of the Credit Agreement and not
waived by Agent in writing (which waiver may be revoked), each Grantor shall
obtain authenticated control agreements from each issuer of uncertificated
securities, securities intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for such Grantor.
(e) If any Grantor is or becomes the beneficiary of a letter
of credit, such Grantor shall promptly notify Agent thereof and enter into a
tri-party agreement with Agent and the issuer and/or confirmation bank with
respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to
Agent and directing all payments thereunder to the Payment Account, all in
form and substance reasonably satisfactory to Agent.
(f) Each Grantor shall take all steps necessary to grant the
Agent control of all electronic chattel paper in accordance with the Code and
all "transferable records" as defined in the Uniform Electronic Transactions
Act.
(g) Each Grantor hereby irrevocably authorizes the Agent at
any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto that (a) indicate the Collateral (i) as all assets of such Grantor or
words of similar effect, regardless of whether any particular asset comprised
in the Collateral falls within the scope of Article 9 of the UCC of the State
of New York or such jurisdiction, or (ii) as being of an equal or lesser scope
or with greater detail, and (b) contain any other information required by part
5 of Article 9 of the UCC of the State of New York for the sufficiency or
filing office acceptance of any financing statement or amendment, including
(i) whether such Grantor is an organization, the type of organization and any
organization identification number issued to such Grantor, and (ii) in the
case of a financing statement filed as a fixture filing or indicating
Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real property to which the Collateral relates. Each Grantor
agrees to furnish any such information to the Agent promptly upon request.
Each Grantor also ratifies its authorization for the Agent to have filed in
any Uniform Commercial Code jurisdiction any like initial financing statements
or amendments thereto if filed prior to the date hereof.
(h) Each Grantor shall promptly notify Agent of any
commercial tort claim (as defined in the UCC) acquired by it and unless
otherwise consented by Agent, such Grantor shall enter into a supplement to
this Security Agreement, granting to Agent a Lien in such commercial tort
claim.
(i) From time to time, each Grantor shall, upon the Agent's
request, execute and deliver confirmatory written instruments pledging to the
Agent, for the ratable benefit of the Agent and the Lenders, the Collateral,
but such Grantor's failure to do so shall not affect or limit any security
interest or any other rights of the Agent or any Lender in and to the
Collateral with respect to such Grantor. So long as the Credit Agreement is in
effect and until all Obligations have been fully satisfied, the Agent's Liens
shall continue in full force and effect in all Collateral (whether or not
deemed eligible for the purpose of calculating the Availability or as the
basis for any advance, loan, extension of credit, or other financial
accommodation).
(j) No Reincorporation. Without limiting the prohibitions on
mergers involving any Grantor contained in the Credit Agreement or any other
Loan Document, no Grantor shall reincorporate or reorganize itself under the
laws of any jurisdiction other than the jurisdiction in which it is
incorporated or organized as of the date hereof or change its type of entity
as identified on Schedule II without the prior written consent of Agent.
(k) Terminations Amendments Not Authorized. Each Grantor
acknowledges that it is not authorized to file any financing statement
covering the Collateral or amendment or termination statement with respect to
any financing statement covering the Collateral without the prior written
consent of Agent and agrees that it will not do so without the prior written
consent of Agent, subject to such Grantor's rights under Section 9-509(d)(2).
(l) No Restriction on Payments to Agent. No Grantor shall
enter into any Contract that restricts or prohibits the grant of a security
interest in Accounts, Chattel Paper, Instruments or payment intangibles or the
proceeds of the foregoing to Agent.
4. LOCATION OF COLLATERAL. (a) Each Grantor represents and warrants
to the Agent and the Lenders that: Schedule I is a correct and complete list
of the location of such Grantor's chief executive office and the location of
its books and records and (b) Schedule I correctly identifies any of such
facilities and locations that are not owned by such Grantor. Each Grantor
covenants and agrees that it will not (i) maintain any Collateral at any
location other than those locations owned or leased by such Grantor or
otherwise listed for such Grantor on Schedule I except for Collateral which is
in transit from a supplier to a Grantor or to customers of a Grantor or
between any such locations or (ii) change the location of its chief executive
office or location of its books and records from the location identified in
Schedule I, unless it gives the Agent at least thirty (30) days' prior written
notice thereof. Without limiting the foregoing, each Grantor represents that
all of its Inventory (other than Inventory in transit from a supplier to a
Grantor or to customers of a Grantor or between any such locations) is, and
covenants that all of its Inventory will be, located either (a) on premises
owned by such Grantor, (b) on premises leased by such Grantor, or (c) in a
warehouse or with a bailee, provided that the Agent has received an executed
bailee letter from the applicable Person in form and substance reasonably
satisfactory to the Agent.
5. Jurisdiction of Organization. Schedule II hereto identifies each
Grantor's name as of the Closing Date as it appears in official filings in the
state of its incorporation or other organization, the type of entity of such
Grantor (including corporation, partnership, limited partnership or limited
liability company), organizational identification number issued by such
Grantor's state of incorporation or organization or a statement that no such
number has been issued and the jurisdiction in which such Grantor is
incorporated or organized. Each Grantor has only one state of incorporation or
organization.
6. Title to, Liens on, and Sale and Use of Collateral. Each Grantor
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) such Grantor has rights in and the power to transfer
all of the Collateral free and clear of all Liens whatsoever, except for Liens
permitted by Section 7.10 of the Credit Agreement; (b) the Agent's Liens in
the Collateral will not be subject to any prior Lien except for those Liens
identified in clause (a), (b), (c) and (f) of the definition of Permitted
Liens and permitted by clauses (a)(iii), (iv), (v), (vi), (vii) and (viii) of
Section 7.10 of the Credit Agreement; and (c) such Grantor will use, store,
and maintain the Collateral in accordance with customary business practices
and will use such Collateral for lawful purposes only.
7. [INTENTIONALLY OMITTED].
8. [inTENTIONALLY OMITTED].
9. [INTENTIONALLY OMITTED].
10. ACCOUNTS.
(a) Each Grantor hereby represents and warrants to the Agent
and the Lenders, with respect to such Grantor's Accounts that are to be
included in the determination of Eligible Accounts, that: (i) each such
existing Account other than Credit Card Accounts represents, and each such
future Account other than Credit Card Accounts will represent, a bona fide
sale or lease and delivery of goods by such Grantor, or rendition of services
by such Grantor, in the ordinary course of such Grantor's business; (ii) each
such existing Account is, and each such future Account will be, for a
liquidated amount payable by the Account Debtor thereon on the terms set forth
in the invoice therefor or in the schedule thereof delivered to the Agent,
without any material offset, deduction, defense, or counterclaim except those
known to such Grantor and disclosed to the Agent and the Lenders pursuant to
this Security Agreement; (iii) no payment will be received with respect to any
such Account, and no credit, discount, or extension, or agreement therefor
will be granted on any Account, except in the ordinary course of business or
as otherwise reported to the Agent and the Lenders in Borrowing Base
Certificates delivered in accordance with this Security Agreement; (iv) each
copy of an invoice delivered to the Agent by such Grantor will be a genuine
copy of the original invoice sent to the Account Debtor named therein; (v) all
goods described in any invoice representing a sale of goods will have been
delivered to the Account Debtor and all services of such Grantor described in
each invoice will have been performed and (vi) to the extent any such Account
is a Credit Card Account (1) such Account arises from the sale, lease or
rental of goods or rendition of services, is owned by such Grantor and
represents a complete bona fide transaction which requires no further act on
the part of such Grantor to make such Account payable by the Account Debtor;
(2) such Account and the underlying contract related thereto does not
contravene in any material respect any laws, rules or regulations applicable
thereto including, without limitation, rules and regulations relating to
truth-in-lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy and no party to the
underlying contract related thereto is in violation of any such laws, rules or
regulations in any material respect; (3) the goods, the sale of which gave
rise to the Account, were not at the time of the sale subject to any Lien
other than Liens permitted under Section 7.10(b) of the Credit Agreement; and
(4) no Grantor is in material breach of any express or implied material
representations or warranty with respect to the goods, the sale of which gave
rise to such Account nor in material breach of any material representation or
warranty, covenant or other agreement contained in the Loan Documents with
respect to such Account.
(b) No Grantor shall re-date any invoice or sale or make
sales on extended dating or extend or modify any Account beyond that customary
in such Grantor's business. If any Grantor becomes aware of any matter
adversely affecting the collectibility of any Account or the Account Debtor
therefor involving an amount greater than $500,000, including information
regarding the Account Debtor's creditworthiness, such Grantor will promptly so
advise the Agent and exclude such Account from Eligible Accounts.
(c) No Grantor shall accept any note or other instrument
(except a check or other instrument for the immediate payment of money) with
respect to any Account without the Agent's written consent. If the Agent
consents to the acceptance of any such instrument, it shall be considered as
evidence of the Account and not payment thereof and such Grantor will promptly
deliver such instrument to the Agent, endorsed by such Grantor to the Agent in
a manner satisfactory in form and substance to the Agent. Regardless of the
form of presentment, demand, notice of protest with respect thereto, such
Grantor shall remain liable thereon until such instrument is paid in full.
(d) Each Grantor shall notify the Agent promptly of all
disputes and claims in excess of $500,000 with any Account Debtor, and agrees
to settle, contest, or adjust such dispute or claim at no expense to the Agent
or any Lender. No discount, credit or allowance shall be granted to any such
Account Debtor without the Agent's prior written consent, except for
discounts, credits and allowances made or given in the ordinary course of such
Grantor's business when no Event of Default exists hereunder. The Agent may at
all times when an Event of Default exists hereunder, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms which the
Agent or the Required Lenders, as applicable, shall consider advisable and, in
all cases, the Agent will credit the Borrower's Loan Account with the net
amounts received by the Agent in payment of any Accounts.
11. [Intentionally omitted]
12. INVENTORY; PERPETUAL INVENTORY.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the
Inventory owned by such Grantor is and will be held for sale or lease, or to
be furnished in connection with the rendition of services, in the ordinary
course of such Grantor's business, and is and will be fit for such purposes.
Each Grantor will keep its Inventory in good and marketable condition, except
for damaged or defective goods arising in the ordinary course of such
Grantor's business. No Grantor will, without the prior written consent of the
Agent, acquire or accept any Inventory on consignment or approval. Each
Grantor agrees that all Inventory produced by such Grantor in the United
States of America will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. Each Grantor will conduct a physical count of the Inventory at
least once per Fiscal Year, and after and during the continuation of an Event
of Default, at such other times as the Agent requests. Each Grantor will
maintain a perpetual inventory reporting system at all times. No Grantor will,
without the Agent's written consent, sell any Inventory on a bill-and-hold,
guaranteed sale, sale on approval, consignment, or other repurchase or return
basis.
(b) If an Event of Default has occurred and is continuing or
during any period that Liquidity is less than $35,000,000, in connection with
all Inventory financed by Letters of Credit, each Grantor will, at the Agent's
request, instruct all suppliers, carriers, forwarders, customs brokers,
warehouses or others receiving or holding cash, checks, Inventory, Documents
or Instruments in which the Agent holds a security interest to deliver them to
the Agent and/or subject to the Agent's order, and if they shall come into
such Grantor's possession, to deliver them, upon request, to the Agent in
their original form and shall also, designate the Agent as the consignee on
all bills of lading and other negotiable and non-negotiable documents.
13. EQUIPMENT.
(a) Each Grantor represents and warrants to the Agent and
the Lenders and agrees with the Agent and the Lenders that all of the
Equipment owned by such Grantor is and will be used or held for use in such
Grantor's business, and is and will be fit for such purposes. Each Grantor
shall keep and maintain its Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof.
(b) Each Grantor shall promptly inform the Agent of any
material additions to or deletions from the Equipment. No Grantor shall permit
any Equipment to become a fixture with respect to real property or to become
an accession with respect to other personal property with respect to which
real or personal property the Agent does not have a Lien. No Grantor will,
without the Agent's prior written consent, alter or remove any identifying
symbol or number on any of such Grantor's Equipment constituting Collateral.
(c) Except as permitted by the Credit Agreement, no Grantor
shall, without the Agent's prior written consent, sell, license, lease as a
lessor, or otherwise dispose of any of such Grantor's Equipment.
14. [Intentionally omitted].
15. PLEDGED COLLATERAL. (a) The Pledged Equity Interests have been
duly authorized and validly issued and are fully paid and non-assessable. The
Pledged Notes of any Grantor's Subsidiaries (if any), and, to the best of each
Grantor's knowledge, all other Pledged Notes, have been duly authorized,
issued and delivered, and is the legal, valid, binding and enforceable
obligation of the issuers thereof.
(b) The Pledged Equity Interests indicated on Schedule IV
hereto constitute all of the shares of stock held by each Grantor of the
respective issuers thereof who are not Foreign Subsidiaries and constitute 65%
of all of the shares of stock of the respective issuers who are Foreign
Subsidiaries. The Pledged Equity Interests and the Pledged Notes constitute
all of the Pledged Collateral except for Pledged Collateral consisting of
checks and drafts received in the ordinary course of business and with respect
to which the Agent has not at any time requested possession and which are not
a material portion of the Collateral under this Security Agreement (the
"Personal Property Collateral"), either singly or in the aggregate.
(c) The pledge and delivery of the Pledged Collateral
pursuant to this Security Agreement and all other filings and other actions
taken by each Grantor to perfect such security interest prior to the date
hereof, create a continuing, valid and perfected first priority security
interest in the Pledged Collateral, securing the payment of the Obligations
except for Pledged Collateral consisting of checks and drafts received in the
ordinary course of business with respect to which the Agent has not at any
time requested possession and which are not a material portion of the Personal
Property Collateral, either singly or in the aggregate.
(d) So long as no Event of Default shall have occurred and
be continuing:
(i) Each Grantor, and not the Agent, shall be entitled
to exercise any and all voting and other rights of consent or approval
pertaining to the Pledged Collateral or any part thereof for any purpose
not inconsistent with the terms of this Security Agreement or the Credit
Agreement; provided, however, that no Grantor shall exercise or refrain
from exercising any such right without the consent of the Agent if such
action or inaction would have a material adverse effect on the benefits
to the Agent, the Lenders and the Issuing Banks, including, without
limitation, the validity, priority or perfection of the security interest
granted hereby or the remedies of the Agent hereunder.
(ii) Each Grantor, and not the Agent, shall be
entitled to receive and retain any and all dividends and interest paid in
respect of the Pledged Collateral; provided, however, that any and all
(A) dividends and interest paid or payable other
than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or
payable in cash in respect of any Pledged Collateral consisting of
stock or other equity interest of any Subsidiary of any Grantor and
dividends and other distributions paid or payable in cash in respect
of any other Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital-surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed
in respect of principal of, or in redemption of, or in exchange for,
any Pledged Collateral,
shall forthwith be delivered to the Agent, in the case of (A)
above, to hold as Pledged Collateral and shall, if received by any
Grantor, be received in trust for the benefit of the Lenders and the
Issuing Banks, be segregated from the other property or funds of such
Grantor, and be forthwith delivered to the Agent, as Pledged Collateral
in the same form as so received (with any necessary indorsement) and,
in the case of (B) and (C) above, shall forthwith be delivered to the
Agent to be applied to the Obligations in such order as provided in
Section 3.8 of the Credit Agreement.
(iii) The Agent shall promptly execute and deliver (or
cause to be executed and delivered) to each Grantor all such proxies and
other instruments as such Grantor may reasonably request for the purpose
of enabling such Grantor to exercise the voting and other rights which it
is entitled to exercise pursuant to paragraph (i) above and to receive
the dividends or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(e) Upon the occurrence and during the continuance of an
Event of Default and at the direction of the Required Lenders:
(i) All rights of any Grantor to exercise the voting and
other rights of consent or approval which it would otherwise be entitled
to exercise pursuant to Section 15(d)(i) hereof and to receive the
dividends and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 15(d)(ii) hereof shall cease, and
all such rights shall thereupon become vested in the Agent, who shall
thereupon have the sole right to exercise such voting and other rights of
consent or approval and to receive and hold as Pledged Collateral such
dividends and interest payments.
(ii) All dividends and interest payments which are
received by any Grantor contrary to the provisions of paragraph (ii) of
Section 15(d) hereof shall be received in trust for the benefit of the
Lenders and the Issuing Banks and shall be segregated from other funds of
such Grantor and shall be forthwith paid over to the Agent as Pledged
Collateral in the same form as so received (with any necessary
indorsement).
(f) Each Grantor agrees that it will (i) cause each issuer
of the Pledged Equity Interests subject to its control not to issue any stock
or other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to such Grantor or as otherwise permitted under
the Credit Agreement, and (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of the Pledged Equity Interests;
provided that in no event shall any Grantor be required to pledge more than
65% of the shares of any Foreign Subsidiary. Each Grantor hereby authorizes
the Agent to modify this Security Agreement by amending Annex IV to include
such additional shares or other securities.
(g) Determination by the Agent to exercise its right to sell
any or all of the Pledged Collateral pursuant to Section 24 hereof without
making a request of the relevant Grantor to register such Pledged Collateral
under the Securities Act shall not by the sole fact of such sale be deemed to
be commercially unreasonable.
(h) The Grantors hereby agree that the aggregate principal
amount of all promissory notes described in clause (i) of the definition of
Excluded Notes at any time outstanding shall not exceed $3,000,000.
16. Documents, Instruments, and Chattel Paper. Each Grantor
represents and warrants to the Agent and the Lenders that (a) all Documents,
Instruments, and Chattel Paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine, and (b) all goods evidenced by such Documents,
Instruments, Letter of Credit Rights and Chattel Paper are and will be owned
by such Grantor, free and clear of all Liens other than Permitted Liens. If
any Grantor retains possession of any Chattel Paper or Instruments with
Agent's consent, such Chattel Paper and Instruments shall be marked with the
following legend: "This writing and the obligations evidenced or served hereby
are subject to the security interest of Bank of America, N.A., as Agent, for
the benefit of Agent and certain Lenders."
17. Right to Cure. The Agent may, in its reasonable discretion, and
shall, at the direction of the Required Lenders, pay any amount or do any act
reasonably required of any Grantor hereunder or under any other Loan Document
in order to preserve, protect, maintain or enforce the Obligations, the
Collateral or the Agent's Liens therein, and which such Grantor fails to pay
or do, including payment of any judgment against such Grantor, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's or bailee's claim, and any other Lien upon or with respect to the
Collateral. All payments that the Agent makes under this Section 17 and all
out-of-pocket costs and expenses that the Agent pays or incurs in connection
with any action taken by it hereunder shall be charged to the Borrower's Loan
Account as a Revolving Loan. Any payment made or other action taken by the
Agent under this Section 17 shall be without prejudice to any right to assert
an Event of Default hereunder and to proceed thereafter as herein provided.
18. Power of Attorney. Each Grantor hereby appoints the Agent and the
Agent's designee as each Grantor's attorney, with power: (a) to endorse such
Grantor's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Agent's or any Lender's possession;
(b) to sign such Grantor's name on any invoice, bill of lading, warehouse
receipt or other negotiable or non-negotiable Document constituting
Collateral, on drafts against customers, on assignments of Accounts, on
notices of assignment, financing statements and other public records and to
file any such financing statements by electronic means with or without a
signature as authorized or required by applicable law or filing procedure; (c)
so long as any Event of Default has occurred and is continuing to notify the
post office authorities to change the address for delivery of such Grantor's
mail to an address designated by the Agent and to receive, open and dispose of
all mail addressed to such Grantor; (d) to send requests for verification of
Accounts to customers or Account Debtors; (e) upon the occurrence and during
the continuance of an Event of Default, to complete in such Grantor's name or
the Agent's name, any order, sale or transaction, obtain the necessary
Documents in connection therewith, and collect the proceeds thereof; (f) upon
the occurrence and during the continuance of an Event of Default, to clear
Inventory through customs in such Grantor's name, the Agent's name or the name
of the Agent's designee, and to sign and deliver to customs officials powers
of attorney in such Grantor's name for such purpose; (g) to the extent such
Grantor's authorization given in Section 3(g) of this Security Agreement is
not sufficient, to file such financing statements with respect to this
Security Agreement, with or without such Grantor's signature, or to file a
photocopy of this Security Agreement in substitution for a financing
statement, as the Agent may deem appropriate and to execute in such Grantor's
name such financing statements and amendments thereto and continuation
statements which may require such Grantor's signature; (h) to receive, indorse
and collect all instruments made payable to such Grantor representing any
dividend, interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same; and
(i) to do all things necessary to carry out the Credit Agreement and this
Security Agreement. Each Grantor ratifies and approves all acts of such
attorney. None of the Lenders or the Agent nor their attorneys will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law except for their willful misconduct. This power, being coupled with an
interest, is irrevocable until the Credit Agreement has been terminated and
the Obligations have been fully satisfied.
19. The Agent's and Lenders' Rights, Duties and Liabilities.
(a) Each Grantor assumes all responsibility and liability
arising from or relating to the use, sale, license or other disposition of the
Collateral. The Obligations shall not be affected by any failure of the Agent
or any Lender to take any steps to perfect the Agent's Liens or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release any Grantor from any of the Obligations. Following the occurrence and
during the continuation of an Event of Default, the Agent may (but shall not
be required to), and at the direction of the Required Lenders shall, without
notice to or consent from any Grantor, sue upon or otherwise collect, extend
the time for payment of, modify or amend the terms of, compromise or settle
for cash, credit, or otherwise upon any terms, grant other indulgences,
extensions, renewals, compositions, or releases, and take or omit to take any
other action with respect to the Collateral, any security therefor, any
agreement relating thereto, any insurance applicable thereto, or any Person
liable directly or indirectly in connection with any of the foregoing, without
discharging or otherwise affecting the liability of any Grantor for the
Obligations or under the Credit Agreement or any other agreement now or
hereafter existing between the Agent and/or any Lender and any Grantor.
(b) It is expressly agreed by each Grantor that, anything
herein to the contrary notwithstanding, each Grantor shall remain liable under
each of its contracts and each of its licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder.
Neither Agent nor any Lender shall have any obligation or liability under any
contract or license by reason of or arising out of this Security Agreement or
the granting herein of a Lien thereon or the receipt by Agent or any Lender of
any payment relating to any contract or license pursuant hereto. Neither Agent
nor any Lender shall be required or obligated in any manner to perform or
fulfill any of the obligations of any Grantor under or pursuant to any
contract or license, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it or the sufficiency of
any performance by any party under any contract or license, or to present or
file any claims, or to take any action to collect or enforce any performance
or the payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
(c) Agent may at any time after an Event of Default has
occurred and be continuing (or if any rights of set-off (other than set-offs
against an Account arising under the contract giving rise to the same Account)
or contra accounts may be asserted with respect to the following), without
prior notice to any Grantor, notify Account Debtors, and other Persons
obligated on the Collateral that Agent has a security interest therein, and
that payments shall be made directly to Agent, for itself and the benefit of
Lenders. Upon the request of Agent, each Grantor shall so notify Account
Debtors and other Persons obligated on Collateral. Once any such notice has
been given to any Account Debtor or other Person obligated on the Collateral,
such Grantor shall not give any contrary instructions to such Account Debtor
or other Person without Agent's prior written consent.
(d) Agent may at any time in Agent's own name or in the name
of any Grantor communicate with Account Debtors, parties to Contracts and
obligors in respect of Instruments to verify with such Persons, to Agent's
reasonable satisfaction, the existence, amount and terms of Accounts, payment
intangibles, Instruments or Chattel Paper. If an Event of Default shall have
occurred and be continuing, each Grantor, at its own expense, shall cause the
independent certified public accountants then engaged by such Grantor to
prepare and deliver to Agent and each Lender at any time and from time to time
promptly upon Agent's request the following reports with respect to such
Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts;
(iii) trial balances; and (iv) a test verification of such Accounts as Agent
may request. Each Grantor, at its own expense, shall deliver to Agent the
results of each physical verification, if any, which such Grantor may in its
discretion have made, or caused any other Person to have made on its behalf,
of all or any portion of its Inventory.
20. PATENT, TRADEMARK AND COPYRIGHT COLLATERAL.
(a) No Grantor has any interest in, or title to, any
Trademark, Copyright or material Patent except as set forth in Schedule III
hereto. This Security Agreement is effective to create a valid and continuing
Lien on and, upon filing of the Trademark Security Agreement with the United
States Patent and Trademark Office, perfected Liens in favor of Agent on such
Grantor's patents, trademarks and copyrights and such perfected Liens are
enforceable as such as against any and all creditors of and purchasers from
such Grantor. Upon filing of the Trademark Security Agreement with the United
States Patent and Trademark Office and the filing of appropriate financing
statements, all action necessary or desirable to protect and perfect Agent's
Lien on such Grantor's patents, trademarks or copyrights shall have been duly
taken.
(b) Each Grantor shall notify Agent immediately if it knows
that any application or registration relating to any patent, trademark or
copyright (now or hereafter existing) may become abandoned or dedicated, 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 court)
regarding such Grantor's ownership of any such patent, trademark or copyright,
its right to register the same, or to keep and maintain the same.
(c) In no event shall any Grantor, either directly or
through any agent, employee, licensee or designee, file an application for the
registration of any patent, trademark or copyright with the United States
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency without giving Agent written notice thereof, and, upon
request of Agent, Grantor shall execute and deliver any and all patent
security agreements, copyright security agreements or trademark security
agreements as Agent may request to evidence Agent's Lien on such patent,
trademark or copyright, and the General Intangibles of such Grantor relating
thereto or represented thereby.
(d) Each Grantor shall take all actions appropriate under
the circumstances or reasonably requested by Agent to maintain and pursue each
patent, trademark and copyright application currently pending, to obtain the
relevant registration and to maintain the registration of each of the patents,
trademarks and copyrights (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability
and opposition and interference and cancellation proceedings, unless such
Grantor shall determine in its reasonable business judgment that such patent,
trademark or copyright is not material to the conduct of its business.
(e) In the event that any of the patent, trademark or
copyright Collateral is infringed upon, or misappropriated or diluted by a
third party, such Grantor shall notify Agent promptly after such Grantor
learns of such infringement. Each Grantor shall, unless it shall reasonably
determine that such patent, trademark or copyright Collateral is not material
to the conduct of its business or operations, promptly take appropriate action
to protect such patent, copyright or trademark, including, where such Grantor
believes in its reasonable business judgment that it would be prudent to do
so, sue for infringement, misappropriation or dilution and to recover any and
all damages for such infringement, misappropriation or dilution, and shall
take such other actions as Agent shall reasonably request under the
circumstances to protect such patent, trademark or copyright Collateral.
21. INDEMNIFICATION. In any suit, proceeding or action brought by
Agent or any Lender relating to any Collateral for any sum owing with respect
thereto or to enforce any rights or claims with respect thereto, each Grantor
will save, indemnify and keep Agent and Lenders harmless from and against all
expense (including reasonable attorneys' fees and expenses), loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the Account Debtor or other Person
obligated on the Collateral, arising out of a breach by any Grantor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from such Grantor, except in the case of Agent or any Lender, to the extent
such expense, loss, or damage is attributable solely to the gross negligence
or willful misconduct of Agent or such Lender as finally determined by a court
of competent jurisdiction. All such obligations of any Grantor shall be and
remain enforceable against and only against such Grantor and shall not be
enforceable against Agent or any Lender.
22. LIMITATION ON LIENS ON COLLATERAL. No Grantor will create, permit
or suffer to exist, and will defend the Collateral against, and take such
other action as is necessary to remove, any Lien on the Collateral except
Liens permitted by Section 7.10(b) of the Credit Agreement, and will defend
the right, title and interest of Agent and Lenders in and to any of such
Grantor's rights under the Collateral against the claims and demands of all
Persons whomsoever.
23. NOTICE REGARDING COLLATERAL. Each Grantor will advise Agent promptly, in
reasonable detail of any Lien (other than Liens permitted by Section 7.10(b)
of the Credit Agreement) or claim made or asserted against any of the
Collateral.
24. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to
it under this Security Agreement, the Credit Agreement, the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, if any Event of Default shall have
occurred and be continuing, Agent may exercise all rights and remedies of a
secured party under the UCC. Without limiting the generality of the foregoing,
each Grantor expressly agrees that in any such event Agent, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
any Grantor or any other Person (all and each of which demands, advertisements
and notices are hereby expressly waived to the maximum extent permitted by the
UCC and other applicable law), may forthwith enter upon the premises of such
Grantor where any Collateral is located through self-help, without judicial
process, without first obtaining a final judgment or giving such Grantor or
any other Person notice and opportunity for a hearing on Agent's claim or
action and may collect, receive, assemble, process, appropriate and realize
upon the Collateral, or any part thereof, and may forthwith sell, lease,
license, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part
thereof, in one or more parcels at a public or private sale or sales, at any
exchange at such prices as it may deem acceptable, for cash or on credit or
for future delivery without assumption of any credit risk. Agent or any Lender
shall have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of Agent and Lenders, the whole or any part of said Collateral so
sold, free of any right or equity of redemption, which equity of redemption
such Grantor hereby releases. Such sales may be adjourned and continued from
time to time with or without notice. Agent shall have the right to conduct
such sales on any Grantor's premises or elsewhere and shall have the right to
use any Grantor's premises without charge for such time or times as Agent
deems necessary or advisable. The Agent is authorized, at any such sale, if it
deems it advisable so to do, to restrict the prospective bidders or purchasers
of any of the Pledged Collateral to persons who will represent and agree that
they are purchasing for their own account for investment, and not with a view
to the distribution or sale of any such Pledged Collateral, and to take such
other actions as it may deem appropriate to exempt the offer and sale of the
Collateral from any registration requirements of state or federal securities
laws (including, if it deems it appropriate, actions to comply with Regulation
D of the Securities and Exchange Commission under the Securities Act of 1933,
as from time to time amended (the "Securities Act")).
(b) Each Grantor further agrees, at Agent's request, to
assemble the Collateral and make it available to Agent at a place or places
designated by Agent which are reasonably convenient to Agent and such Grantor,
whether at such Grantor's premises or elsewhere. Until Agent is able to effect
a sale, lease, or other disposition of Collateral, Agent shall have the right
to hold or use Collateral, or any part thereof, to the extent that it deems
appropriate for the purpose of preserving Collateral or its value or for any
other purpose deemed appropriate by Agent. Agent shall have no obligation to
any Grantor to maintain or preserve the rights of such Grantor as against
third parties with respect to Collateral while Collateral is in the possession
of Agent. Agent may, if it so elects, seek the appointment of a receiver or
keeper to take possession of Collateral and to enforce any of Agent's remedies
(for the benefit of Agent and Lenders), with respect to such appointment
without prior notice or hearing as to such appointment. Agent shall apply the
net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale to the Obligations as provided in the Credit Agreement,
and only after so paying over such net proceeds, and after the payment by
Agent of any other amount required by any provision of law, need Agent account
for the surplus, if any, to such Grantor. To the maximum extent permitted by
applicable law, each Grantor waives all claims, damages, and demands against
Agent or any Lender arising out of the repossession, retention or sale of the
Collateral except such as arise solely out of the gross negligence or willful
misconduct of Agent or such Lender as finally determined by a court of
competent jurisdiction. Each Grantor agrees that ten (10) days prior notice by
Agent of the time and place of any public sale or of the time after which a
private sale may take place is reasonable notification of such matters. Each
Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all Obligations,
including any attorneys' fees or other expenses incurred by Agent or any
Lender to collect such deficiency.
(c) Except as otherwise specifically provided herein, each
Grantor hereby waives presentment, demand, protest or any notice (to the
maximum extent permitted by applicable law) of any kind in connection with
this Security Agreement or any Collateral.
(d) To the extent that applicable law imposes duties on the
Agent to exercise remedies in a commercially reasonable manner, each Grantor
acknowledges and agrees that it is commercially reasonable for the Agent (a)
to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or
work in process into finished goods or other finished products for
disposition, (b) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against Account Debtors or other Persons
obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (d) to exercise collection remedies against Account Debtors and
other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as such Grantor,
for expressions of interest in acquiring all or any portion of such
Collateral, (g) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the Collateral is of a specialized
nature, (h) to dispose of Collateral by utilizing internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capacity of doing so, or that match buyers and sellers of
assets, (i) to dispose of assets in wholesale rather than retail markets, (j)
to disclaim disposition warranties, such as title, possession or quiet
enjoyment, (k) to purchase insurance or credit enhancements to insure the
Agent against risks of loss, collection or disposition of Collateral or to
provide to the Agent a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by the Agent, to obtain
the services of other brokers, investment bankers, consultants and other
professionals to assist the Agent in the collection or disposition of any of
the Collateral. Each Grantor acknowledges that the purpose of this Section
24(d) is to provide non-exhaustive indications of what actions or omissions by
the Agent would not be commercially unreasonable in the Agent's exercise of
remedies against the Collateral and that other actions or omissions by the
Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 24(d). Without limitation upon the foregoing,
nothing contained in this Section 24(d) shall be construed to grant any rights
to any Grantor or to impose any duties on Agent that would not have been
granted or imposed by this Security Agreement or by applicable law in the
absence of this Section 24(d).
25. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the purpose of
enabling Agent to exercise rights and remedies under Section 24 hereof
(including, without limiting the terms of Section 24 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to Agent, wherever permitted by law or by agreement, for the benefit of
Agent and Lenders, an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to such Grantor) to use, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
access to all media in which any of the licensed items may be recorded or
stored and to all computer software and programs used for the compilation or
printout thereof.
26. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall
have any other duty as to any Collateral in its possession or control or in
the possession or control of any agent or nominee of Agent or such Lender, or
any income thereon or as to the preservation of rights against prior parties
or any other rights pertaining thereto.
27. MISCELLANEOUS.
(a) Reinstatement. This Security Agreement shall remain in
full force and effect and continue to be effective should any petition be
filed by or against any Grantor for liquidation or reorganization, should such
Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any
significant part of such Grantor's assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance
of the Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
(b) Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give and serve upon any other party any communication with respect to this
Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given in
the manner, and deemed received, as provided for in the Credit Agreement.
(c) Severability. Whenever possible, each provision of this
Security Agreement shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under applicable 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 Security Agreement. This Security Agreement is to be read, construed and
applied together with the Credit Agreement and the other Loan Documents which,
taken together, set forth the complete understanding and agreement of Agent,
Lenders and Grantor with respect to the matters referred to herein and
therein.
(d) No Waiver; Cumulative Remedies. Neither Agent nor any
Lender shall by any act, delay, omission or otherwise be deemed to have waived
any of its rights or remedies hereunder, and no waiver shall be valid unless
in writing, signed by Agent and then only to the extent therein set forth. A
waiver by Agent of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which Agent would otherwise have
had on any future occasion. No failure to exercise nor any delay in exercising
on the part of Agent or any Lender, any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by
law. None of the terms or provisions of this Security Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Agent and each Grantor.
(e) Limitation by Law. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that
the exercise thereof does not violate any applicable provision of law, and all
the provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
(f) Termination of this Security Agreement.
(a) Subject to Section 27(a) hereof, this Security
Agreement shall terminate upon all Letters of Credit being Fully
Supported, the payment in full of all other Obligations (other than
indemnification Obligations as to which no claim has been asserted) and
the termination of all Commitments under the Credit Agreement.
(b) Upon any sale or other transfer by a Grantor of
any Collateral that is permitted under the Credit Agreement to any
Person that is not a Grantor, or, upon the effectiveness of any written
consent to the release of the security interest granted hereby in any
Collateral pursuant to the Credit Agreement, the security interest in
such Collateral shall automatically be released.
(c) The Agent agrees that upon such termination or
release of the security interests or release of any Collateral, the
Agent shall, at the expense of the Grantors, execute and deliver to
each Grantor such documents as such Grantor shall reasonably request to
evidence the termination of the security interests or the release and
reassignment of such Collateral, as the case may be.
(g) Successors and Assigns. This Security Agreement and all
obligations of each Grantor hereunder shall be binding upon the successors and
assigns of each Grantor (including any debtor-in-possession on behalf of such
Grantor) and shall, together with the rights and remedies of Agent, for the
benefit of Agent and Lenders, hereunder, inure to the benefit of Agent and
Lenders, all future holders of any instrument evidencing any of the
Obligations and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of
any agreement governing or instrument evidencing the Obligations or any
portion thereof or interest therein shall in any manner affect the Lien
granted to Agent, for the benefit of Agent and Lenders, hereunder. No Grantor
may assign, sell, hypothecate or otherwise transfer any interest in or
obligation under this Security Agreement.
(h) Counterparts. This Security Agreement may be
authenticated in any number of separate counterparts, each of which shall
collectively and separately constitute one and the same agreement. This
Security Agreement may be authenticated by manual signature, facsimile or, if
approved in writing by Agent, electronic means, all of which shall be equally
valid.
(i) Governing Law. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THAT STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY GRANTOR,
AGENT AND LENDERS PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS
AND EACH GRANTOR ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY OF NEW YORK, AND,
PROVIDED, FURTHER, NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
AGENT. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
GRANTOR HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS SET
FORTH IN SECTION 13.8 OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(j) Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT DISPUTES ARISING HEREUNDER OR RELATING HERETO BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, AMONG AGENT, LENDERS, AND ANY GRANTOR ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION
WITH, THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
(k) Section Titles. The Section titles contained in this
Security Agreement are and shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreement between the parties
hereto.
(l) No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Security
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Security Agreement shall be construed as if drafted jointly by
the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Security Agreement.
(m) Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Security Agreement and,
specifically, the provisions of Section 27(i) and Section 27(j), with its
counsel.
(n) Benefit of Lenders. All Liens granted or contemplated
hereby shall be for the benefit of Agent and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to
the Obligations in accordance with the terms of the Credit Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.
ANNTAYLOR, INC.
By: /s/ James M. Smith
Name: James M. Smith
Title: Senior Vice President, Chief Financial
Officer and Treasurer
ANNTAYLOR STORES CORPORATION
By: /s/ James M. Smith
Name: James M. Smith
Title: Senior Vice President, Chief
Financial Officer, Treasurer and
Assistant Secretary
ANNCO, INC.
By: /s/ James M. Smith
Name: James M. Smith
Title: Chief Financial Officer
ANNTAYLOR DISTRIBUTION SERVICES, INC.
By: /s/ James M. Smith
Name: James M. Smith
Title: Senior Vice President and Treasurer
ANNTAYLOR RETAIL, INC.
By: /s/ James M. Smith
Name: James M. Smith
Title: Senior Vice President and Treasurer
BANK OF AMERICA, N.A.,
as Agent
By: /s/ Jang S. Kim
Name: Jang S. Kim
Title: Vice President