EXHIBIT 10.40
The terms and conditions of this Agreement are subject to the terms and
conditions of the Intercreditor Agreement in all respects, including, without
limitation, with respect to Lien priorities and the application of payments and
proceeds. If any term or provision of this Agreement conflicts with any term or
provision of the Intercreditor Agreement, the term or provision of the
Intercreditor Agreement shall control.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated as of June 16, 2006
is executed by TARRANT APPAREL GROUP, a California corporation ("TAG"), and the
other persons designated as "Credit Parties" in the Credit Agreement, as defined
below (each a "GRANTOR", collectively the "GRANTORS"), in favor of GUGGENHEIM
CORPORATE FUNDING, LLC, a Delaware limited liability company ("GUGGENHEIM"), as
agent (in such capacity, the "AGENT") for itself and the other lenders
(Guggenheim and such other lenders, collectively, the "LENDERS") as are, or may
from time to time become, parties to the Credit Agreement.
W I T N E S S E T H:
RECITALS.
A. Pursuant to that certain Credit Agreement, dated as of even date
herewith (as amended, restated, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), by and among Grantors, the Lenders and the Agent,
the Lenders have agreed to make certain loans to TAG, as more specifically
described in the Credit Agreement; and
B. In order to induce the Lenders and the Agent to enter into the
Credit Agreement, and as a condition to the making of the loans, Grantors have
agreed to grant a continuing security interest in and to the Collateral (as
hereinafter defined) to secure the Secured Obligations (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein, when used in this Agreement including its preamble and
Recitals, shall have the respective meanings provided for in the Credit
Agreement. The following additional terms (whether or not underscored), when
used in this Agreement, shall have the following meanings:
"ACCOUNT DEBTOR" means any Person who is obligated under an Account.
"ACCOUNTS" means all "accounts" (as defined in the UCC), now or
hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires any rights, and, in any event, shall mean and include, without
limitation, (a) all accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebtedness owing to such Person arising from
the sale or lease of goods or other property by it or the performance of
services by it (including, without limitation, any such obligation which might
be characterized as an account,
contract right or general intangible under the UCC), (b) all of such Person's
rights in, to and under all purchase and sales orders for goods, services or
other property, and all of such Person's rights to any goods, services or other
property represented by any of the foregoing (including returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit), (c) all monies due to or to become due to such Person
under all contracts for the sale, lease or exchange of goods or other property
or the performance of services by it (whether or not yet earned by performance
on the part of such Person), and (d) all collateral security and guarantees of
any kind given by such Person with respect to any of the foregoing, in each case
whether now in existence or hereafter arising or acquired.
"CHATTEL PAPER" means any "chattel paper" (as defined in the UCC) now
or hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires any rights.
"COLLATERAL" means, collectively, all rights, title and interest of
Grantors in and to:
(i) Accounts;
(ii) Deposit Accounts;
(iii) Inventory;
(iv) Chattel Paper;
(v) Documents;
(vi) Equipment;
(vii) Instruments;
(viii) General Intangibles;
(ix) Investment Property;
(x) other goods and personal property, whether tangible
or intangible;
(xi) money, cash or cash equivalents;
(xii) Supporting Obligations and Letter-of-Credit Rights;
(xiii) books and records pertaining to any of the Collateral
(including, without limitation, customer lists,
credit files, computer programs, printouts and other
computer materials and records); and
(xiv) products and Proceeds of all or any of the Collateral
described in clauses (i) through (xiii) hereof.
Notwithstanding the foregoing, the Collateral shall not include: (i) any
personal property or fixtures to the extent the granting of a security interest
therein is expressly prohibited by restrictions imposed in connection with
Indebtedness expressly permitted under Section 6.2.4
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(b) of the Credit Agreement, or (ii) any Intellectual Property or License to the
extent the granting of a security interest would render such Intellectual
Property or License unenforceable or is prohibited by, or would result in a
breach of the terms of, or constitute a default thereunder; PROVIDED that the
foregoing exclusion shall not apply if: (A) such prohibition has been waived or
a security interest with respect thereto has been consented to by the other
party thereto or (B) such prohibition would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of Article 9 of the UCC, as applicable and
as then in effect in any relevant jurisdiction, or pursuant to any other
applicable law or principles of equity; PROVIDED, further, immediately upon the
ineffectiveness, lapse or termination of any such provision, Grantors shall be
deemed to have granted a security interest in, all of their right, title and
interest in and to such personal property and fixtures of Grantors as if such
provisions had never been in effect; and PROVIDED, further, the foregoing
exclusion shall in no way be construed so as to limit, impair or otherwise
affect the Agent's unconditional, continuing security interest in and to all
rights, title and interests of Grantors in or to any payment obligations or
other rights to receive monies due or to become due under any such personal
property and fixtures. Grantors hereby represent and warrant to the Agent that
the property excluded from the Collateral pursuant to any of the provisions of
this paragraph is not material to the business, operations or financial
condition of Grantors or their Subsidiaries, taken as a whole. In addition, the
Collateral shall not include (1) any membership interest in PBG7, LLC, a
California limited liability company, for so long as such company constitutes an
uncapitalized, non-operating Subsidiary, (2) any membership interests or capital
stock of the Excluded Foreign Subsidiaries, other than the Luxembourg Subsidiary
and (3) more than 65% of the Luxembourg Subsidiary.
"COPYRIGHT LICENSE" shall mean any and all rights of any Person under
any written agreement granting any right to use any Copyright or Copyright
registration.
"COPYRIGHTS" shall mean all of the following owned or acquired by any
Person or in which any Person now has or hereafter acquires any rights: (a) all
copyrights, published and unpublished works of authorship and general
intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications therefor in
the United States Copyright Office (the "US COPYRIGHT OFFICE") or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision, and (b) all reissues, extensions,
restorations, revisions or renewals thereof.
"DEPOSIT ACCOUNTS" shall mean all "deposit accounts" (as defined in the
UCC) now owned or hereafter acquired by any Person or in which any Person has or
acquires any rights, or other receipts, of any Person covering, evidencing or
representing rights or interest in such deposit accounts.
"DOCUMENTS" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods, now or hereafter owned or
acquired by a Person or in which a Person now or hereafter has or acquires
rights.
"EQUIPMENT" means all "equipment" (as defined in the UCC), now or
hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires rights, and, in any event, shall mean and include, without
limitation, all machinery and equipment, including, without limitation,
processing equipment, conveyors, machine tools, data processing and
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computer equipment with software and peripheral equipment, all engineering,
processing and manufacturing equipment, trailers, trucks, forklifts, molds,
dies, stamps, motor vehicles, rolling stock, furnishings, and other equipment of
every kind and nature, fixtures, together with all additions and accessions
thereto, replacements therefor, and all parts therefor, all substitutes for any
of the foregoing, fuel therefor, and all manuals, drawings, instructions,
warranties and rights with respect thereto.
"GENERAL INTANGIBLES" means all "general intangibles" (as defined in
the UCC), now or hereafter owned or acquired by a Person or in which a Person
now or hereafter has or acquires any rights, and, in any event, shall mean and
include, without limitation, all obligations or indebtedness owing to a Person
(other than Accounts) from whatever source arising, and all rights, title and
interest which a Person may now or hereafter have in or under all contracts (in
addition to contracts described in the definition of Accounts), causes of
action, franchises, tax refund claims, customer lists, Intellectual Property,
Licenses, license royalties, goodwill, trade secrets, proprietary or
confidential information, data bases, business records, data, skill, expertise,
experience, processes, models, drawings, materials and records, permits and
licenses, warranties, manuals, software and all other intangible property of
every kind and nature.
"INSTRUMENTS" means all "instruments" (as defined in the UCC),
including, without limitation, instruments, and letters of credit evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now or hereafter owned or acquired by a Person or in which a Person now or
hereafter has or acquires any rights.
"INTELLECTUAL PROPERTY" shall mean all of the following now owned or
hereafter acquired by any Person or in which any Person has or acquires any
rights: all Patents, Copyrights, Trademarks, Trade Secrets and other
intellectual property or proprietary rights.
"INVENTORY" means all "inventory" (as defined in the UCC), now or
hereafter owned or acquired by a Person or in which a Person now or hereafter
has or acquires any rights, wherever located, and, in any event, shall mean and
include, without limitation, all raw materials, inventory and other materials
and supplies, work-in-process, finished goods, and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto.
"INVESTMENT PROPERTY" shall mean all "investment property" (as defined
in the UCC) now owned or hereafter acquired by any Person or in which any Person
has or acquires any rights and, in any event, shall include all "certificated
securities", "uncertificated securities", "security entitlements", "securities
accounts", "commodity contracts" and "commodity accounts" (as all such terms are
defined in the UCC) of such Person.
"LETTER-OF-CREDIT RIGHTS" shall mean "letter-of-credit rights"
(as defined in the UCC), now owned or hereafter acquired by any Person,
including rights to payment or performance under a letter of credit, whether or
not any Person, as beneficiary, has demanded or is entitled to demand payment or
performance thereunder.
"LETTER OF CREDIT" means a "letter of credit" (as defined in the UCC).
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"LICENSE" shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests of any Person in Intellectual
Property and any other agreement concerning Intellectual Property.
"LUXEMBOURG SUBSIDIARY" means Tarrant Luxembourg Sarl.
"PATENT LICENSE" shall mean any written agreement now owned or
hereafter acquired by any Person or in which any Person has or acquires any
rights granting any right with respect to any property, process or other
invention on which a Patent is in existence.
"PATENTS" shall mean all of the following now owned or hereafter
acquired by any Person or in which any Person has or acquires any rights: (a)
all letters patent of the United States or any other country, all registrations
and recordings thereof, and all applications for letters patent of the United
States or any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office (the "USPTO") or
in any similar office or agency of the United States, any State or Territory
thereof, or any other country; and (b) all reissues, continuations,
continuations-in-part and extensions thereof.
"PERFECTION CERTIFICATE" means a certificate dated as of even date
herewith, setting forth the corporate names, chief executive offices or
principal places of business in each State and other current locations of
Grantors and such other information as the Agent deems pertinent to the
perfection of security interests, completed and supplemented with the schedules
and attachments contemplated thereby to the satisfaction of the Agent, and duly
executed by an Authorized Officer of each Grantor.
"PERMITTED LIENS" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 6.2.4 of the Credit Agreement.
"PROCEEDS" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, Collateral,
including, without limitation all claims of a Person against third parties for
loss of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any Collateral and
the following types of property acquired with cash proceeds: Accounts,
Inventory, General Intangibles, Documents, Instruments and Equipment.
"REGISTERED" shall mean issued by, registered with, renewed by or the
subject of a pending application before any governmental entity or Internet
domain name registrar.
"REVOLVER PRIORITY SECURITY INTEREST" has the meaning specified in
Section 3 hereof.
"SECURED OBLIGATIONS" means (a) the Obligations, including, without
limitation (i) all principal of and interest (including, without limitation, any
interest which accrues after the commencement of any case, proceeding or other
action relating to the bankruptcy, insolvency or reorganization of Grantors) on
any Loan under, any Note issued pursuant to, and any other amount due from
Grantors under the Credit Agreement, and (ii) all other obligations (monetary
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or otherwise) to be performed by Grantors under the Credit Agreement or any
other Loan Document; and (b) all renewals or extensions of any of the foregoing.
"SECURITY INTERESTS" means the security interests granted pursuant to
Section 3, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"SUPPORTING OBLIGATIONS" means all "supporting obligations" (as defined
in the UCC), including Letters of Credit and guaranties issued in support of
Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or
Investment Property.
"TRADEMARK LICENSE" means any written agreement now or hereafter in
existence granting to a Person any right to use any Trademark.
"TRADEMARKS" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear,
designs, collective marks, d/b/a's, Internet domain names, symbols, trade dress
and other indicia of origin, and general intangibles of like nature, whether now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, (ii) all applications in connection therewith, including, without
limitation, registrations, recordings and applications in the USPTO or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision, (iii) all reissues, extensions or renewals
thereof and (iv) all goodwill associated with or symbolized by any of the
foregoing.
"TRADE SECRETS" shall mean confidential information, trade secrets and
know-how, including processes, schematics, business methods, formulae, drawings,
prototypes, models, designs, customer lists and supplier lists.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; PROVIDED that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interests in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Grantors represent and
warrant as follows:
(a) Grantors have good title to and in the case of leased property or
assets valid leasehold interests in all of their Collateral, free and clear of
any Liens other than the Permitted Liens.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to Permitted Liens, to Grantors'
knowledge, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the Collateral is
on file or of record in any jurisdiction, and no Collateral is subject to any
Lien other than Permitted Liens. No Collateral is in the possession of a Person
(other than
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Grantors) asserting any claim thereto or security interest therein, except that
the Agent or its designee may have possession of Collateral as contemplated
hereby.
(c) The Inventory and Equipment are insured in accordance with the
requirements of the Credit Agreement.
(d) None of the Collateral constitutes, or is the Proceeds of, "farm
products" (as defined in the UCC).
(e) SCHEDULE I correctly sets forth each Grantor's state of
incorporation, organizational identification and correct legal name indicated on
the public record of each Grantor's jurisdiction of organization which shows
each Grantor to be organized.
(f) The Perfection Certificate, which is attached hereto as SCHEDULE
II, correctly sets forth (i) all names and tradenames that Grantors have used
within the last five years and the names of all Persons that have merged into or
been acquired by Grantors, (ii) the chief executive offices of Grantors over the
last five years, (iii) all other locations in which tangible assets of Grantors
have been located in the last five years, (iv) the name of each bank at which
Grantors maintain Deposit Accounts, the state of organization of each such bank,
and the account numbers for each Deposit Account, (v) all Letters of Credit
under which Grantors are beneficiaries, (vi) all third parties with possession
of any Inventory or Equipment of Grantors and (vii) each Grantor's mailing
address. All of the information set forth in the Perfection Certificate is true
and correct as of the date hereof.
(g) This Security Agreement is effective to create a valid and
continuing Lien on and, upon completion of the filings specified in SCHEDULE III
attached hereto, shall constitute valid, binding, enforceable and, with respect
to only those items of Collateral for which perfection can be achieved by filing
a financing statement under the UCC, perfected security interests in the
Collateral in favor of the Collateral Agent for the benefit of the Secured
Creditors subject to no other Liens (other than Permitted Encumbrances). When,
in addition to the filings specified in SCHEDULE III, the Assignments for
Security (Trademarks) has been filed with the United States Patent and Trademark
Office with respect to the Collateral specified therein, the security interests
granted hereby will constitute perfected security interests in favor of the
Collateral Agent for the benefit of the Secured Creditors in all right, title
and interest of such Assignors in such Collateral to the extent that security
interests therein may be perfected by such filings, prior to all Liens except
Permitted Liens, and is enforceable as such as against any and all creditors of
and purchasers from Grantors (other than purchasers and lessees of Inventory in
the ordinary course of business and non-exclusive licensees of General
Intangibles in the ordinary course of business). All action by Grantors
necessary or desirable to protect and perfect such Lien on each item of the
Collateral has been duly taken except as otherwise permitted by the Credit
Agreement.
(h) Except as set forth in SCHEDULE II as of the date hereof, Grantors
do not have any commercial tort claim rights.
SECTION 3. THE SECURITY INTERESTS. (a) In order to secure the full and
punctual payment and performance of its Secured Obligations in accordance with
the terms thereof, Grantors hereby mortgage, pledge, assign, hypothecate, set
over and convey to the Agent, for its benefit and the ratable benefit of the
Lenders, and grant to the Agent for its
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benefit and the ratable benefit of the Lenders a continuing security interest
in, all of their right, title and interest in and to, all Collateral now or
hereafter owned or acquired by Grantors or in which Grantors now have or
hereafter have or acquire any rights wherever located, subject only to the first
priority lien of the Revolver Agent with respect to the Revolver Priority
Collateral, created pursuant to the Revolver Credit Agreement (the "Revolver
Priority Security Interest").
The Security Interests are granted as security only and shall not
subject the Agent or any Lender to, or transfer to the Agent or any Lender, or
in any way affect or modify, any obligation or liability of Grantors with
respect to any Collateral or any transaction in connection therewith.
SECTION 4. FURTHER ASSURANCES; COVENANTS.
(a) GENERAL.
(i) Grantors will not change the location of their chief
executive offices or principal places of business in any state unless
they shall have given the Agent thirty (30) days prior written notice
thereof, delivered a landlord, bailee or similar waiver with respect to
such location as reasonably required by the Agent, and complied with
any other requirement in this Agreement or any other Loan Document
relating to the location of any Collateral. Grantors shall not change
locations, or establish new locations, where they keep or hold any
Collateral or any records relating thereto from the applicable
locations described in the Perfection Certificate attached hereto as
SCHEDULE II unless Grantors shall have given the Agent thirty (30) days
prior written notice of such change of location, delivered a landlord,
bailee or similar waiver with respect to such location as reasonably
required by the Agent, and complied with any other requirement in this
Agreement or any other Loan Document relating to the location of any
Collateral, PROVIDED, HOWEVER, that (i) Grantors may keep Collateral
at, or in transit to, any location described in the Perfection
Certificate and (ii) Grantors may keep Collateral at a location not
listed on SCHEDULE II provided the value of such Collateral does not
exceed $300,000 in the aggregate. Grantors shall not in any event
change the location, or establish new locations, of any Collateral if
such change would cause the Security Interests in such Collateral to
lapse or cease to be a perfected, first priority security interest
(subject to the Revolver Priority Security Interest).
(ii) Grantors will not change their names, taxpayer
identification numbers, organizational numbers, identities,
jurisdictions or organizations or corporate structures in any manner
unless they shall have given the Agent thirty (30) days prior written
notice thereof. Grantors shall not merge or consolidate into, or
transfer any of the Collateral to, any other Person except as permitted
under Section 6.2.11 of the Credit Agreement.
(iii) Grantors hereby authorize Agent, its counsel or its
representative, at any time and from time to time, to file financing
statements and amendments that describe the collateral covered by such
financing statements as "all assets of Grantors", "all personal
property of Grantors" or words of similar effect, in such jurisdictions
as Agent may deem necessary or desirable in order to perfect the
security interests granted
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by Grantors under this Agreement. Grantors will, from time to time, at
their expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and take any
other action (including, without limitation, any filings with the
USPTO, or the US Copyright Office, any other Copyright, Patent or
Trademark filings and any filings of financing or continuation
statements under the UCC) that from time to time may be necessary, or
that the Agent may request, in order to create, preserve, upgrade in
rank (to the extent required hereby), perfect, confirm or validate the
Security Interests or to enable the Agent and the Lenders to obtain the
full benefits of this Agreement, or to enable the Agent to exercise and
enforce any of its rights, powers and remedies hereunder with respect
to any of the Collateral. Grantors shall pay the costs of, or
incidental to, any recording or filing of any financing statements,
financing statement amendments or continuation statements concerning
the Collateral.
(iv) Except as set forth in the Perfection Certificate
attached hereto as SCHEDULE II, Grantors shall not permit any of their
tangible assets, including without limitation, their Inventory and
Equipment, to be in the possession of any other Person unless pursuant
to an agreement in form and substance reasonably satisfactory to the
Agent (A) such Person has acknowledged that (1) it holds possession of
such Inventory, Equipment and other tangible assets, as the case may
be, for Agent's benefit, subject to the Agent's instructions, and (2)
such Person does not have a Lien in such Inventory, Equipment or other
tangible assets, (B) such Person agrees not to hold such Inventory,
Equipment or other tangible assets on behalf of any other Person (other
than, in the case of Revolver Priority Collateral, the Revolver Agent),
(C) such Person agrees that, upon request by Agent (or, in the case of
Revolver Priority Collateral, the Revolver Agent), to issue and deliver
to Agent (or, in the case of Revolver Priority Collateral, the Revolver
Agent), warehouse receipts, bills of lading or any similar documents
relating to such Collateral in Agent's (or, in the case of Revolver
Priority Collateral, the Revolver Agent's) name and in form and
substance reasonably acceptable to Agent (or, in the case of Revolver
Priority Collateral, the Revolver Agent) and (D) Grantors may keep any
of their tangible assets, including Inventory and Equipment at a
location not listed on SCHEDULE II provided the value of such tangible
assets, Inventory and Equipment does not exceed $300,000 in the
aggregate.
(v) If any amount payable under or in connection with any
Collateral in excess of $100,000 in the aggregate shall be or become
evidenced by any Instrument, Investment Property, or Document, then
Grantors will immediately deliver and pledge such Instrument,
Investment Property and Document to the Agent, appropriately endorsed
to the Agent (or, in the case of Revolver Priority Collateral, the
Revolver Agent), PROVIDED THAT so long as no Event of Default shall
have occurred and be continuing, Grantors may retain for collection in
the ordinary course any Instruments and Documents (other than checks
and drafts constituting payments in respect of Accounts) received by it
in the ordinary course of business and the Agent shall, promptly upon
request of Grantors, make appropriate arrangements for making any other
Instruments and Documents pledged by Grantors and within Agent's
control available to Grantors for purposes of presentation, collection
or renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Agent, against trust receipt or like document).
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(vi) Grantors will not (A) sell, transfer, lease, exchange,
assign or otherwise dispose of, or grant any option, warrant or other
right with respect to, any Collateral except that, subject to the
rights of the Agent and the Lenders hereunder if an Event of Default
shall have occurred and be continuing, Grantors may dispose of assets
if such disposition is not prohibited by Section 6.2.12 of the Credit
Agreement, whereupon, in the case of such a disposition, sale or
exchange, the Security Interests created hereby in such item (but not
in any Proceeds arising from such disposition, sale or exchange) shall
cease immediately without any further action on the part of the Agent;
or (B) create, incur or suffer to exist any Lien with respect to any
Collateral, except for the Permitted Liens. Nothing in this clause (vi)
shall prohibit Grantors from taking any action with respect to Revolver
Priority Collateral that is required by the Revolver Credit Agreement.
(vii) Grantors will, promptly upon reasonable request, provide
to the Agent all information and evidence it may request concerning the
Collateral, to enable the Agent to enforce the provisions of this
Agreement.
(viii) Prior to each date on which Grantors propose to take
any action contemplated by Section 4(a)(i) or (ii), upon the reasonable
request of the Agent, Grantors shall, at their cost and expense, cause
to be delivered to the Agent and the Lenders an opinion of counsel,
reasonably satisfactory to the Agent, to the effect that all financing
statements and amendments or supplements thereto, continuation
statements and other documents required to be recorded or filed in
order to perfect and protect the Security Interests and priority
thereof against all creditors of and purchasers from Grantors have been
filed in each filing office necessary for such purposes and that all
filing fees and taxes, if any, payable in connection with such filings
have been paid in full.
(ix) Grantors shall not file any amendment to or termination
of a financing statement naming Grantors as debtor and Agent as secured
party, or any correction statement with respect thereto, in any
jurisdiction.
(b) ACCOUNTS, ETC.
(i) Grantors shall use all efforts consistent with prudent
business practice and the customary practices of Grantors as in effect
on the Closing Date to cause to be collected from their Account
Debtors, as and when due, any and all amounts owing under or on account
of each Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful
collection procedures) and apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such
Account. The reasonable out-of-pocket costs and expenses (including,
without limitation, attorney's fees) of collection of Accounts incurred
by Grantors or the Agent, shall be borne by Grantors.
(ii) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Agent (and subject to the
Intercreditor Agreement), Grantors will (subject, in the case of
Revolver Priority Collateral, to Grantor's obligations to the Revolver
Agent under the Revolver Credit Agreement) promptly notify (and
Grantors hereby authorizes the Agent so to notify) each Account Debtor
in respect of any Account
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or Instrument that such Collateral has been assigned to the Agent
hereunder, and that any payments due or to become due in respect of
such Collateral are to be made directly to the Agent or its designee.
(iii) Grantors will perform and comply in all material
respects with all of their obligations in respect of Accounts,
Instruments and General Intangibles.
(c) INVENTORY, ETC. Subject to Section 4(a)(iv), Grantors shall notify
the Agent immediately of any additional location where Inventory is stored which
is not listed in the Perfection Certificate.
(d) EQUIPMENT, ETC. Grantors shall, (i) within twenty (20) days after a
request by the Agent, in the case of Equipment now owned, and (ii) following a
request by the Agent pursuant to subclause (i) above, within ten (10) days after
acquiring any other Equipment, deliver to the Agent, for the benefit of itself
and the Lenders, any and all certificates of title, and applications therefor,
if any, of such Equipment and shall cause the Agent, for the benefit of itself
and the Lenders, to be named as lienholder on any such certificate of title and
applications. Grantors shall promptly inform the Agent of any material additions
to or deletions from the Equipment and shall not permit any such items to become
a fixture to real estate or an accession to other personal property.
(e) INTELLECTUAL PROPERTY. (i) Grantors shall notify the Agent in
writing immediately of their acquisition or creation after the date hereof of
any Intellectual Property ("ADDITIONAL INTELLECTUAL Property"). In no event
shall Grantors, either themselves or through any agent, employee or licensee,
file an application for the registration of any Intellectual Property with the
United States Copyright Office, the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof without informing the Agent and executing and delivering any and all
agreements, instruments, documents and papers the Agent may request to evidence
the Security Interests in such Intellectual Property and the goodwill and
general intangibles of Grantors relating thereto or represented thereby
including any filings necessary to perfect the security interest granted
hereunder in such Additional Intellectual Property with the USPTO, the US
Copyright Office and any other governmental authority. Each Grantor agrees that
any such Additional Intellectual Property shall automatically become part of the
Collateral and subject to the terms and conditions of this Agreement and the
Credit Agreement. Each Grantor shall within thirty (30) days of the creation or
acquisition of any copyrightable work which is material to the business of
Grantor (unless TAG's Board of Directors resolves not to so register such
copyrightable work), apply to register the Copyright in the US Copyright Office.
Grantors hereby constitute the Agent their attorney-in-fact to execute and file
all such writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed, and such power, being coupled with an interest,
shall be irrevocable until the Commitments have terminated and the Secured
Obligations are paid in full. With respect to any Intellectual Property,
Grantors will notify the Agent promptly of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the USPTO, US Copyright
Office or any court) regarding Grantors' ownership of any Intellectual Property,
their right to register the same or to keep and maintain the same. In the event
that Grantors have any Intellectual Property infringed, misappropriated,
diluted, or otherwise violated by a third party, Grantors shall notify the Agent
promptly after they learn thereof and shall, unless TAG's Board
11
of Directors has resolved not to xxx, promptly xxx for infringement,
misappropriation or dilution and to recover any and all damages for and to
obtain an injunction against such infringement, misappropriation or dilution,
and take such other actions as are reasonably appropriate under the
circumstances to protect such Intellectual Property.
(ii) With respect to each item of Registered Intellectual
Property Collateral and material Trade Secrets, each Grantor agrees to
maintain, at its expense, such Registered Intellectual Property
Collateral and material Trade Secrets in full force and effect,
including, with respect to Registered Intellectual Property, the
payment of required fees and taxes, the filing of applications for
renewal or extension, and the participation in interference,
reexamination, opposition, cancellation, infringement and
misappropriation proceedings. Grantors shall take all reasonable steps
to preserve and protect each item of the Intellectual Property
Collateral, including maintaining the quality of any and all products
or services used or provided in connection with any of the Trademarks,
consistent with the quality of the products and services as of the date
hereof, and ensuring that all licensed users of any of the Trademarks
use such consistent standards of quality. Grantors shall not, without
the approval of TAG's Board of Directors and prior written notice to
the Agent, discontinue use of or otherwise abandon any Registered
and/or material Intellectual Property Collateral. Grantors shall not do
or permit any other Person to do any act or knowingly omit to do any
act whereby any of their Intellectual Property Collateral may lapse or
become invalid or unenforceable or placed in the public domain. Each
Grantor will promptly notify the Agent in writing if Grantor becomes
aware that any item of its Intellectual Property Collateral may have
become abandoned, placed in the public domain, invalid or
unenforceable. Each Grantor shall take all steps reasonably necessary
to protect the secrecy of all Trade Secrets. Each Grantor shall take
all reasonable steps within such Grantor's power to keep each License
in full force and effect except to the extent that any such License
would expire by its terms (as in effect on the Closing Date) or is
terminable at will by a Person other than Grantor, or if such License
is not material to TAG.
(iii) With respect to its Intellectual Property Collateral,
Grantor agrees to execute or otherwise authenticate agreements, in
substantially the form set forth in Schedule IV for recording the
security interest granted hereunder in such Intellectual Property.]
(f) DEPOSIT ACCOUNTS, CHATTEL PAPER, INVESTMENT PROPERTY, DOMAIN NAMES
AND LETTERS OF CREDIT.
(i) No Grantors shall open or maintain any Deposit Accounts
other than those listed on the Perfection Certificate attached hereto
as SCHEDULE II except with prior notice to Agent. At the Agent's
reasonable request, such additional Deposit Accounts shall be subject
to Account Control Agreements executed by Grantors, the bank with which
the Deposit Account is maintained and the Agent.
(ii) Grantors, at any time and from time to time, will (a)
take such steps as Agent may reasonably request from time to time for
Agent to obtain "control" of any Investment Property or electronic
Chattel Paper or domain name, with any agreements establishing control
to be in form and substance reasonably satisfactory to
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Agent, and (b) otherwise insure the continued perfection and priority
(subject to Permitted Liens) of Agent's security interest in any of the
Collateral and of the preservation of its rights therein.
(g) COMMERCIAL TORT CLAIMS. If Grantors shall at any time acquire a
"commercial tort claim" (as such term is defined in the UCC) with a claim for
damages that could be expected to be in excess of $300,000, Grantors shall
promptly notify Agent thereof in a writing, providing a description and summary
thereof, and shall execute a supplement to this Agreement granting a security
interest in such commercial tort claim to Agent.
SECTION 5. REPORTING AND RECORDKEEPING. Grantors covenant and agree
with the Agent and the Lenders that from and after the date of this Agreement
and until the Commitments have terminated, and all Secured Obligations are paid
in full (other than any contingent indemnification obligations with respect to
which no claim giving rise thereto has been asserted):
(a) MAINTENANCE OF RECORDS GENERALLY. Grantors will keep and maintain
at their own cost and expense records of the Collateral, complete in all
material respects, including, without limitation, a record of all payments
received and all credits granted with respect to the Collateral and all other
dealings with the Collateral. Upon the occurrence and during the continuance of
an Event of Default, at the request of the Agent, Grantors, to the extent such
books and records are not computer records, will xxxx such books and records
pertaining to the Collateral to evidence this Agreement and the Security
Interests. Upon the occurrence and during the continuance of an Event of
Default, at the request of the Agent (and subject to the applicable
Intercreditor Agreement), all Chattel Paper will be marked with the following
legend: "This writing and the obligations evidenced or secured hereby are
subject to the security interest of Guggenheim Corporate Funding, LLC, as
Agent". For the Agent's and the Lenders' further security, Grantors agree that
the Agent and the Lenders shall have a security interest in all of Grantors'
books and records pertaining to the Collateral (and subject to the applicable
Intercreditor Agreement) and, upon the occurrence and during the continuation of
any Default or Event of Default, Grantors shall deliver and turn over full and
complete copies of any such books and records to the Agent or to its
representatives at any time on demand of the Agent. Grantors shall permit any
representative of the Agent to inspect such books and records in accordance with
Section 6.1.7 of the Credit Agreement.
(b) SPECIAL PROVISIONS REGARDING MAINTENANCE OF RECORDS AND REPORTING
RE: ACCOUNTS, INVENTORY AND EQUIPMENT.
(i) Grantors shall keep complete and accurate records of their
Accounts. Upon the reasonable request of the Agent, Grantors shall
deliver to the Agent copies of all documents, including, without
limitation, repayment histories and present status reports relating to
the Accounts so scheduled and such other matters and information
relating to the status of then existing Accounts as the Agent shall
request.
(ii) In the event any amounts due and owing in excess of
$250,000 individually or $500,000 in the aggregate are in dispute
between any Account Debtor and Grantors, Grantors shall provide the
Agent with written notice thereof promptly after Grantors' learning
thereof explaining in detail the reason for the dispute, all claims
related thereto and the amount in controversy.
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(iii) Grantors shall maintain itemized records, accurate in
all material respects, itemizing and describing the kind, type,
quality, quantity, location and book value of its Inventory and
Equipment and, upon request by the Agent, shall furnish the Agent with
a current schedule containing the foregoing information.
(iv) Grantors will promptly upon, but in no event later than
ten (10) days after:
(A) Grantors' learning thereof, inform the Agent, in
writing, of any material delay in Grantors' performance of any
of their material obligations to any Account Debtor and of any
assertion of any material claims, offsets or counterclaims by
any Account Debtor and of any allowances, credits and/or other
monies granted by Grantors to any Account Debtor, in each case
involving amounts in excess of $250,000 for any single Account
or Account Debtor or in excess of $500,000 in the aggregate
for all Accounts and Account Debtors; and
(B) Grantors' receipt or learning thereof, furnish to
and inform the Agent of all material adverse information
relating to the financial condition of any Account Debtor with
respect to Accounts exceeding $250,000 individually or
$500,000 in the aggregate.
(v) Grantors will promptly notify the Agent in writing if any
Account, the face value of which exceeds $100,000, arises out of a
contract with the United States of America, or any department, agency,
subdivision or instrumentality thereof, or of any state (or department,
agency, subdivision or instrumentality thereof) where such state has a
state assignment of claims act or other law comparable to the Federal
Assignment of Claims Act, and will take any action reasonably requested
by the Agent to give notice of the Agent's security interest in such
Accounts under the provisions of the Federal Assignment of Claims Act
or any comparable law or act enacted by any state or local governmental
authority; and
(vi) Grantors, at their expense, will cause an Authorized
Officer (or after any Event of Default shall have occurred and be
continuing, Grantors' independent public accountant, or other such
accountant satisfactory to the Agent) to prepare and deliver to the
Agent at any time and from time to time as required under the Credit
Agreement and at other times promptly upon the Agent's reasonable
request, the following reports: (A) Accounts receivable agings (foreign
and domestic), (B) schedule of contra Accounts, (C) schedule detailing
any ineligible Accounts other than contra Accounts, (D) schedule of
credits in past due (i.e. greater than 90 days from invoice date), (E)
reconciliation of Accounts receivable aging to general ledger, (F)
reconciliation of perpetual Inventory to general ledger; and (G) list
of supporting documentation for all Inventory reserves.
(c) FURTHER IDENTIFICATION OF COLLATERAL. Grantors will if so requested
by the Agent furnish to the Agent, as the Agent from time to time requests,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may request
from time to time, all in reasonable detail.
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(d) NOTICES. In addition to the notices required by Section 5(b)
hereof, Grantors will advise the Agent promptly, in reasonable detail, (i) of
any Lien or claim made or asserted against any of the Collateral, other than
Permitted Liens or (ii) of any material adverse change with respect to the
Collateral.
SECTION 6. GENERAL AUTHORITY. Grantors hereby irrevocably appoint the
Agent their true and lawful attorney, with full power of substitution, in the
name of Grantors, the Agent, the Lenders or otherwise, for the sole use and
benefit of the Agent and the Lenders, but at Grantors' expense, to exercise, at
any time from time to time all or any of the following powers:
(i) to file the financing statements, financing statement
amendments and continuation statements referred to in Section
4(a)(iii),
(ii) to demand, xxx for, collect, receive and give acquittance
for any and all monies due or to become due with respect to any
Collateral or by virtue thereof and to notify each obligor with respect
thereto of the Agent's interest in such Collateral,
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any Collateral,
(iv) to sell, transfer, assign or otherwise deal in or with
the Collateral or the proceeds thereof, as fully and effectually as if
the Agent were the absolute owner thereof, and
(v) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference to the
Collateral;
PROVIDED that the Agent shall not take any of the actions described in this
Section 6 except those described in clause (i) above unless an Event of Default
shall have occurred and be continuing.
SECTION 7. REMEDIES UPON AN EVENT OF DEFAULT. (a) If any Event of
Default has occurred and is continuing, the Agent may exercise on behalf of the
Lenders without further notice, all rights and remedies under this Agreement,
the Credit Agreement, any other Loan Document or that are available to a secured
creditor under the UCC or that are otherwise available at law or in equity, at
any time, in any order and in any combination. In addition, the Agent may sell
the Collateral or any part thereof at public or private sale, for cash, upon
credit or for future delivery, and at such price or prices as the Agent may deem
satisfactory. The Agent shall give Grantors not less than ten (10) days' prior
written notice of the time and place of any sale or other intended disposition
of Grantors' Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. Grantors agree that any such notice constitutes "reasonable
notification" within the meaning of the UCC (to the extent applicable).
(b) The Agent or any Lender may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations or if otherwise permitted under
applicable law, at any private sale) and thereafter hold the same, absolutely,
free from any right or claim of whatsoever kind. Grantors will execute and
deliver such documents and take such other action as the Agent deems necessary
or advisable in
15
order that any such sale may be made in compliance with law. Upon any such sale
the Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely free from any claim or right of any kind,
including any equity or right of redemption of Grantors. To the extent permitted
by law, Grantors hereby specifically waive all rights of redemption, stay or
appraisal which they have or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale shall (1) in case of a public sale,
state the time and place fixed for such sale, and (2) in the case of a private
sale, state the day on which such sale may be consummated. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Agent may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Agent may determine. The Agent shall not be obligated to make
any such sale pursuant to any such notice. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Agent until
the selling price is paid by the purchaser thereof, but the Agent shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Agent, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction. Grantors shall remain liable for any deficiency.
(c) For the purpose of enforcing any and all rights and remedies under
this Agreement, the Agent may (i) require Grantors to, and Grantors agree that
they will, at their expense and upon the request of the Agent, forthwith
assemble all or any part of the Collateral as directed by the Agent and make it
available at a place designated by the Agent which is, in the Agent's opinion,
convenient to the Agent and Grantors, whether at the premises of Grantors or
otherwise, (ii) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premises where any
of the Collateral is or may be located and, without charge or liability to the
Agent, seize and remove such Collateral from such premises, (iii) have access to
and use Grantors' books and records, computers and software relating to the
Collateral, (iv) prior to the disposition of the Collateral, store or transfer
such Collateral without charge in or by means of any storage or transportation
facility owned or leased by Grantors, process, repair or recondition such
Collateral or otherwise prepare it for disposition in any manner and to the
extent the Agent deems appropriate and, in connection with such preparation and
disposition, use without charge any Trademark, trade name, Copyright, Patent,
Trade Secret technical process or other Intellectual Property used by Grantors,
and Agent is hereby granted a license to use such Intellectual Property.
(d) For the purpose of enabling the Agent to exercise rights and
remedies under this Section 7 at such time as the Agent shall be lawfully
entitled to exercise such rights and remedies, each Grantor hereby grants to the
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantor) to use, and sub-license (to the
extent that such Grantor's rights in such Intellectual Property permit) any of
the Intellectual Property Collateral now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
reasonable access to all media
16
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. The use of
such license by the Agent shall be exercised, at the Agent's option, upon the
occurrence and during the continuation of an Event of Default; provided that any
sub-license or other transaction entered into by the Agent in accordance
herewith shall be binding upon the applicable Grantor notwithstanding any
subsequent cure, waiver or other termination of an Event of Default.
SECTION 8. LIMITATION ON DUTY OF AGENT IN RESPECT OF COLLATERAL. Beyond
reasonable care in the custody thereof, the Agent shall have no duty as to any
Collateral in its possession or control or in the possession or control of any
Agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Agent shall be
deemed to have exercised reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property, and the Agent shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other Agent or bailee
selected by the Agent in good faith.
SECTION 9. DISPOSITION OF PROCEEDS. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral of Grantors shall be
applied by the Agent in the manner set forth in the Credit Agreement and
Intercreditor Agreement.
SECTION 10. CONCERNING THE AGENT. The provisions of the Credit
Agreement shall inure to the benefit of the Agent in respect of this Agreement
and shall be binding upon the parties to the Credit Agreement in such respect.
In furtherance and not in derogation of the rights, privileges and immunities of
the Agent therein set forth:
(a) The Agent is authorized to take all such action as is provided to
be taken by it as Agent hereunder or otherwise permitted under the Credit
Agreement and this Agreement and all other action incidental thereto. As to any
matters not expressly provided for herein or therein, the Agent may request
instructions from the Lenders and shall act or refrain from acting in accordance
with written instructions from the Agent or, in the absence of such
instructions, in accordance with its discretion.
(b) The Agent shall not be responsible for the existence, genuineness
or value of any of the Collateral or for the validity, perfection, priority or
enforceability of the Security Interests, whether impaired by operation of law
or by reason of any action or omission to act on its part. The Agent shall have
no duty to ascertain or inquire as to the performance or observance of any of
the terms of this Agreement by Grantors.
SECTION 11. APPOINTMENT OF CO-AGENTS. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Agent may appoint
another bank or trust company or one or more other Persons acceptable to the
Agent, either to act as co-Agent or co-Agents, jointly with the Agent, or to act
as separate Agent or Agents on behalf of the Agent and the Lenders with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and specified in the instrument of appointment (which may, in
the discretion of the Agent, include provisions for the protection of such
co-Agent or separate Agent similar to the provisions of Section 9).
17
SECTION 12. EXPENSES. Grantors shall pay all expenses in accordance
with the terms of Section 10.3 of the Credit Agreement.
SECTION 13. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
Upon the repayment in full of all Secured Obligations (other than contingent
indemnification obligations with respect to which no claim giving rise thereto
has been asserted) and the termination of the Commitments, the Security
Interests shall terminate and all rights to the Collateral shall revert to
Grantors. At any time and from time to time prior to such termination of the
Security Interests, the Agent may release any of the Collateral in accordance
with the terms of the Credit Agreement; PROVIDED, HOWEVER, that the Security
Interest of the Agent in any Collateral constituting an asset of which Grantors
may dispose under Section 6.2.12 of the Credit Agreement shall automatically
terminate and be released upon such disposition by Grantors without the
necessity of any further action or consent by the Agent or any Lender. Upon any
such termination of the Security Interests or release of Collateral, the Agent
will, at the expense of Grantors, execute and deliver to Grantors such documents
as Grantors shall reasonably request, including but not limited to a termination
statement, to evidence the termination of the Security Interests or the release
of such Collateral, as the case may be.
SECTION 14. AMENDMENTS, ETC. This Agreement, together with the other
Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and may not be amended except by a writing
signed by Grantors and the Agent, as provided in Section 10.1 of the Credit
Agreement.
SECTION 15. NOTICES. All notices hereunder shall be in writing or by
telecopy and shall be sufficiently given to the Agent, the Lenders or Grantors
if addressed or delivered to them at their respective addresses and telecopier
numbers specified in Schedule A and Schedule B of the Credit Agreement (in each
case with copies addressed as provided in Schedule A or Scheduled B of the
Credit Agreement) or at such other address as any party may designate to any
other party by written notice. All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when received if deposited in the mail, postage prepaid; when
transmission is verified, if telecopied; and on the next Business Day, if timely
delivered to an air courier guaranteeing overnight delivery.
SECTION 16. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any jurisdiction.
SECTION 17. GOVERNING LAW; JURISDICTION. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
(b) GRANTORS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE OR FEDERAL COURT SITT IN NEW YORK IN ANY ACTION OR PROCEED ARIS OUT
OF OR RELAT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED DOCUMENT,
AND EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEED MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
18
FEDERAL COURT. GRANTORS AGREE THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH
RESPECT TO ANY SUCH ACTION OR PROCEED BROUGHT BY THEM AGAINST THE AGENT OR ANY
LENDER. GRANTORS HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY
EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEED.
(c) Grantors hereby irrevocably designate, appoint and empower CT
Corporation System, whose present address is 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, as their authorized agent to receive, for and on their behalf and
their property, service of process in the State of New York when and as such
legal actions or proceedings may be brought in the courts of the State of New
York or of the United States of America sitting in New York, and such service of
process shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to Grantors, or upon the earliest
of any other date permitted by applicable law. Grantors shall furnish the
consent of CT Corporation System so to act to the Agent on or prior to the
Closing Date. It is understood that a copy of said process served on such agent
will as soon as practicable be forwarded to Grantors, at their addresses set
forth below, but their failure to receive such copy shall not affect in any way
the service of said process on said agent as the agent of Grantors. Grantors
irrevocably consent to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of the copies thereof by
certified mail, return receipt requested, postage prepaid, to them at their
addresses set forth herein, such service to become effective upon the earlier of
(i) the date 10 calendar days after such mailing or (ii) any earlier date
permitted by applicable law. Grantors agree that they will at all times
continuously maintain an agent to receive service of process in the State of New
York on behalf of themselves and their properties and in the event that, for any
reason, the agent named above or their successor shall no longer serve as their
agent to receive service of process in the State of New York on their behalf,
they shall promptly appoint a successor so to serve and shall advise the Agent
and the Lenders thereof (and shall furnish to the Agent the consent of any
successor agent so to act). Nothing in this SECTION 17 shall affect the right of
the Agent or any Lender to bring proceedings against Grantors in the courts of
any other jurisdiction or to serve process in any other manner permitted by
applicable law.
SECTION 18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that Grantors may not assign or
transfer their rights or obligations hereunder without the prior written consent
of all Lenders.
SECTION 19. WAIVER OF JURY TRIAL, ETC. THE AGENT, THE LENDERS AND
GRANTORS HEREBY KNOWLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARIS OUT
OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEAL, STATEMENTS (WHETHER VERBAL
OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS OR GRANTORS. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND SUCH LENDERS ENTER INTO THIS
AGREEMENT.
19
SECTION 20. LIMITATION OF LIABILITY. Neither the Agent, the Lenders nor
any Affiliate thereof shall have any liability with respect to, and GRANTORS
HEREBY WAIVE, RELEASE AND AGREE NOT TO XXX UPON, ANY CLAIM FOR ANY SPECIAL,
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES SUFFERED BY GRANTORS IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THIS AGREEMENT, THE
LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREIN, OR ANY ACT OR OMISSION.
SECTION 21. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by Grantors and the Agent.
SECTION 22. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of
the Agent to exercise, and no delay in exercising and no course of dealing with
respect to, any right under the Credit Agreement, this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise by the Agent or any Lender of any right under the Credit Agreement,
this Agreement or any other Loan Document preclude any other or further exercise
thereof or the exercise of any other right. The rights in this Agreement, the
Credit Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law. This Agreement is a Loan
Document executed pursuant to the Credit Agreement.
SECTION 23. COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
executed by Grantors and the Agent and be deemed to be an original and all of
which shall constitute together but one and the same Agreement. The Agreement
shall become effective when counterparts hereof executed on behalf of Grantors
and each Lender shall have been received by the Agent and notice thereof shall
have been given by the Agent to Grantors and each Lender. An executed original
counterpart may be delivered by facsimile or other electronic means and shall be
equally effective for all purposes.
SECTION 24. INTERCREDITOR AGREEMENT; CONFLICTS. The terms and
conditions of this Agreement are subject to the terms and conditions of the
Intercreditor Agreement in all respects, including, without limitation, with
respect to Lien priorities and the application of payments and proceeds. If any
term or provision of this Agreement conflicts with any term or provision of the
Intercreditor Agreement, the term or provision of the Intercreditor Agreement
shall control.
[signature page follows]
20
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
TARRANT APPAREL GROUP
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
NO! JEANS, INC.
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
TAG MEX, INC.
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
FASHION RESOURCE (TCL), INC.
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
PRIVATE BRANDS, INC.
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
21
XXXX XXX INTERNATIONAL, LLC
By: /S/ XXXXXXX XXXXX
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
TAG MEX, LLC
By: /S/ XXXXXXX XXXXX
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
UNITED APPAREL VENTURES, LLC
By: /S/ XXXXXX XXXX
---------------------------------------
Name: Xxxxxx Xxxx
Title: Manager
ROCKY APPAREL, LLC
By: /S/ XXXXXXX XXXXX
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
Accepted and Agreed to:
GUGGENHEIM CORPORATE FUNDING, LLC, as Agent
By: /S/ XXXXXXX X. XXXXXX
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
22
SCHEDULE I
GRANTOR'S
GRANTOR'S ORGANIZATIONAL
GRANTOR'S CORRECT LEGAL NAME STATE OF FORMATION IDENTIFICATION
------------------------------- ------------------------- ----------------------
Tarrant Apparel Group California C1446349
------------------------------- ------------------------- ----------------------
No! Jeans, Inc. California C1526267
------------------------------- ------------------------- ----------------------
Tag Mex, Inc. California C2031986
------------------------------- ------------------------- ----------------------
Fashion Resource (TCL), Inc. California C2152378
------------------------------- ------------------------- ----------------------
Private Brands, Inc. California C2098548
------------------------------- ------------------------- ----------------------
Xxxx Xxx International, LLC Delaware 3203356
------------------------------- ------------------------- ----------------------
Tag Mex, LLC California 199836410069
------------------------------- ------------------------- ----------------------
United Apparel Ventures, LLC California 200115810065
------------------------------- ------------------------- ----------------------
Rocky Apparel, LLC Delaware 2913309
------------------------------- ------------------------- ----------------------
SCHEDULE II
ATTACH PERFECTION CERTIFICATE
SCHEDULE III
FINANCING STATEMENTS
FILING
JURISDICTION DEBTOR SECURED PARTY
--------------------- ----------------------- -----------------------------
California Secretary Tarrant Apparel Group Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary No! Jeans, Inc. Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary Tag Mex, Inc. Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary Fashion Resource Guggenheim Corporate Funding,
of State (TCL), Inc. LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary Private Brands, Inc. Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
Delaware Secretary Xxxx Xxx International, Guggenheim Corporate Funding,
of State LLC LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary Tag Mex, LLC Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
California Secretary United Apparel Guggenheim Corporate Funding,
of State Ventures, LLC LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
Delaware Secretary Rocky Apparel, LLC Guggenheim Corporate Funding,
of State LLC, as Collateral Agent
--------------------- ----------------------- -----------------------------
