Exhibit 4.8
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SECURITY AND DISBURSEMENT AGREEMENT
Dated as of October 29, 1997
From
COUNTY SEAT STORES, INC.
as Pledgor
to
FIRST TRUST NATIONAL ASSOCIATION
as Trustee and Security Agent
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SECURITY AND DISBURSEMENT AGREEMENT
This SECURITY AND DISBURSEMENT AGREEMENT (as amended, restated,
supplemented or modified from time to time, this "Security and Disbursement
Agreement") is made and entered into as of October 29, 1997 by and among
COUNTY SEAT STORES, INC., a Minnesota corporation (the "Pledgor"), having its
principal office at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and
FIRST TRUST NATIONAL ASSOCIATION, as trustee under the Indenture (as defined
below), having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
(in such capacity, the "Trustee") for the holders (the "Holders") of the
Notes (as defined herein) issued by the Pledgor under the Indenture referred
to below and as securities intermediary (in such capacity, the "Security
Agent").
WITNESSETH:
WHEREAS, the Pledgor and ▇▇▇▇▇▇▇▇▇ & Company, Inc. as Initial Purchaser
(the "Initial Purchaser") are parties to a Purchase Agreement, dated October
23, 1997 (the "Purchase Agreement"), pursuant to which the Pledgor will issue
and sell to the Initial Purchaser 85,000 Units, each consisting of $1,000
principal amount of its 12 3/4% Senior Notes due 2004 (collectively, as
replaced or exchanged, the "Notes"), and one Series A Warrant to purchase
shares of the Pledgor's common stock, par value $.01 per share;
WHEREAS, the Pledgor, and the Trustee, have entered into that certain
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Pledgor is issuing the Initial Notes on the date hereof;
WHEREAS, pursuant to the Purchase Agreement and the Indenture, the
Pledgor is required to deposit on the Issue Date cash in a disbursement
account/▇▇▇-▇▇▇▇▇-▇ established by the Trustee and the Security Agent (such
account, together with any successor account, the "Security Account") to be
held by the Trustee for its benefit and the ratable benefit of the Holders to
secure the Pledgor's obligation (i) to provide for payment in full of any and
all scheduled payments of interest due on the Notes from the Issue Date
through May 1, 1999 and (ii) in the event that the Notes are required to be
redeemed or prepaid or otherwise become due and payable prior to May 1, 1999,
to secure the partial repayment of the principal, premium, if any, and
interest on the Notes that are redeemed, prepaid or otherwise due and payable
(collectively, the "Obligations");
WHEREAS, pursuant to the terms and conditions of this Security and
Disbursement Agreement, the Pledgor shall instruct the Security Agent to
purchase or caused to be purchased with all or a portion of the Disbursement
Funds (as hereinafter defined) certain Pledged Securities (as hereinafter
defined) to be maintained in the Security Account in the
name of the Trustee (or as otherwise required in accordance with applicable
law), and under the sole dominion and control of the Trustee, as set forth
herein; and
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has agreed
to (i) pledge to the Trustee for its benefit and the ratable benefit of the
Holders, a security interest in the Disbursement Funds, the Pledged Securities
and the other Collateral (as hereinafter defined) and (ii) execute and deliver
this Security and Disbursement Agreement in order to secure the payment and
performance by the Pledgor of all the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained, and in
order to induce the Holders to purchase the Notes, the Pledgor, the Initial
Purchaser and the Security Agent hereby agree, for the benefit of the Security
Agent and for the ratable benefit of the Holders, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions. All defined terms used herein without definition
shall have the respective meanings ascribed to them in the Indenture. Unless
otherwise defined herein or in the Indenture, terms used in Articles 8 or 9 of
the Uniform Commercial Code as in effect in the State of New York (the "U.C.C.")
are used herein as therein defined.
1.2 Pledge and Grant of Security Interest. The Pledgor hereby pledges
to the Trustee for its benefit and for the ratable benefit of the Holders, and
hereby grants to the Trustee for its benefit and for the ratable benefit of the
Holders, a continuing first priority perfected security interest in and to all
of the Pledgor's right, title and interest in, to and under the following
(hereinafter collectively referred to as the "Collateral"), whether
characterized as investment property, general intangibles or otherwise: (a) the
Security Account, all funds and securities or other investment property held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the Security Account, including, without limitation,
the Disbursement Funds and the Pledged Securities, and any and all securities
entitlements to the Disbursement Funds and the Pledged Securities, and any and
all related securities accounts in which security entitlements to the
Disbursement Funds and the Pledged Securities are carried, (b) all notes,
certificates of deposit, deposit accounts, checks and other instruments from
time to time hereafter delivered to or otherwise possessed by the Security Agent
for or on behalf of the Pledgor in substitution for or in addition to any or all
then existing Collateral, (c) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Collateral, and
(d) all proceeds of any and all of the foregoing Collateral (including, without
limitation, proceeds that constitute property of the types described in clauses
(a) - (c) above) and, to the extent not otherwise included, all cash.
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1.3. Deposit of Disbursement Funds. Concurrently, with the execution
and delivery of this Security and Disbursement Agreement, the Pledgor has
deposited, or caused the Initial Purchaser to deposit $ in cash
(collectively, the "Disbursement Funds") into the Security Account. Such amount
as invested in Pledged Securities and interest earned thereon will be sufficient
to provide for payment in full of the first three scheduled interest payments
due on the outstanding Notes.
1.4. Purchase of Pledged Securities. At the direction of the Pledgor,
as set forth in a written notice (the "Pledged Securities Notice"), the first of
which will be delivered to the Security Agent no later than two business days
after the date of this Security and Disbursement Agreement, the form of which is
acceptable to the Security Agent, the Security Agent shall invest the
Disbursement Funds in U.S. Government Obligations in the manner as directed in
the Pledged Securities Notice (such U.S. Government Obligations, hereinafter,
the "Pledged Securities"), which Pledged Securities shall be deposited in the
Security Account and shall be maintained by the Security Agent for the benefit
of the Trustee and the ratable benefit of the Holders in accordance with the
terms and conditions of this Security and Disbursement Agreement. Each Pledged
Securities Notice shall specify the amount and nature of the Pledged Securities
required to be purchased by the Security Agent with the Disbursement Funds and
contain all necessary directions or authorizations necessary or reasonably
required by the Security Agent to make such investment. The initial Pledged
Securities Notice shall be accompanied by a written opinion of a nationally
recognized firm of independent public accountants or a recognized financial
advisor, selected by the Pledgor and approved by the Initial Purchaser (the
"Independent Financial Advisor"), in form and substance reasonably acceptable to
the Security Agent and the Trustee, confirming that the aggregate amount of the
Pledged Securities and Disbursement Funds, after giving effect to the investment
in the Pledged Securities referred to in such Pledged Securities Notice, will be
sufficient upon receipt of scheduled interest and principal payments of all
Pledged Securities to provide for payment in full of all scheduled interest
payments due on the outstanding Notes during the period commencing on the Issue
Date and ending on May 1, 1999.
SECTION 2. Security for Obligation. This Security and Disbursement
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. Perfection of Security Interest in Collateral. The Securities
Agent hereby agrees that each item of property (whether investment property,
financial asset, security, instrument or cash) credited to the Security Account
shall be treated as a "financial asset" within the meaning of Section
8-102(a)(9) of the UCC. Notwithstanding any other provision of this Agreement,
if at any time the Security Agent shall receive any order from the Trustee
directing transfer or redemption of any financial asset relating to the Security
Account, the Security Agent shall comply with such entitlement order without
further consent by the Pledgor or any other person. The Trustee agrees with the
Pledgor not to issue any such entitlement order except as contemplated by this
Security and Disbursement Agreement;
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however, the Security Agent shall comply with all entitlement orders issued by
the Trustee regardless of whether such entitlement orders are issued in
accordance with this Security and Disbursement Agreement.
SECTION 4. Maintaining the Security Account.
(a) So long as any Obligation shall remain unpaid, the Pledgor
will maintain the Escrow Interest Account with the Security Agent.
(b) It shall be a term and condition of the Security Account,
notwithstanding any term or condition to the contrary in any other agreement
relating to the Security Account, and except as otherwise provided by the
provisions of Section 7 and Section 14, that no amount (including interest on
Disbursement Funds or Pledged Securities) shall be paid or released to or for
the account of, or withdrawn by or for the account of, the Pledgor or any other
Person (other than the Trustee for the benefit of the Holders), from the
Security Account.
(c) The Security Account shall be subject to such applicable
laws, and such applicable regulations of the Board of Governors of the Federal
Reserve System and of any other appropriate banking or governmental authority,
as may now or hereafter be in effect.
SECTION 5. Investments. If requested in writing by the Pledgor, the
Security Agent will, subject to the provisions of Section 7 and Section 14, from
time to time (a) invest Disbursement Funds and other amounts on deposit in the
Security Account (other than Pledged Securities) in accordance with Section 1.4
in the name of the Security Agent, as the Pledgor may select in writing, and (b)
invest interest paid on the Pledged Securities referred to in clause (a) above,
and so reinvest other proceeds of such Pledged Securities that may mature or be
sold, in each case in accordance with Section 1.4 in the name of the Security
Agent, as the Pledgor may select in writing, all of which Pledged Securities
shall be maintained in the Security Account. Interest and proceeds that are not
invested or reinvested in Pledged Securities as provided above shall at the
option of Pledgor, either be deposited or remain on deposit in, as the case may
be, and held in the Security Account or be invested in the Security Agent's
First American Treasury Obligations Fund. In no event shall the Security Agent
be liable for any loss in the investment or reinvestment of amounts held in the
Security Account. All such investments selected by the Pledgor shall be subject
to availability to the Security Agent. The Security Agent and the Trustee shall
be under no duty to invest (or otherwise pay interest on) any amounts held by it
hereunder, absent specific written investment instructions from the Pledgor in
accordance with the terms hereof.
SECTION 6. Delivery of Collateral Investments; Filing.
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(a) The Security Agent hereby confirms that (i) the Security
Agent has established account #▇▇-▇▇▇▇▇-▇ in the name "First Trust National
Association, as Trustee" and that such account is the "Security Account"
pursuant to this Security and Disbursement Agreement, (ii) the Security Account
is an account to which financial assets are or may be credited and the Security
Agent shall, subject to the terms of this Security and Disbursement Agreement,
treat the Trustee as entitled to exercise the rights with respect to any
financial asset credited to the account, (iii) all property delivered to the
Security Agent pursuant to this Security and Disbursement Agreement will be
promptly credited to the Security Account, and (iv) all securities or other
property underlying any financial assets credited to the Security Account shall
be registered in the name of the Security Agent, endorsed to the Security Agent
or in blank or credited to another securities account maintained in the name of
the Security Agent and in no case will any financial asset credited to the
Security Agent Account be registered in the name of the Pledgor, payable to the
order of the Pledgor or specially indorsed to the Pledgor except to the extent
the foregoing have been specially indorsed to the Security Agent or in blank.
(b) In the event that the Security Agent has or subsequently
obtains by agreement, operation of law or otherwise a security interest in the
Security Account or any security entitlement credited thereto, the Security
Agent hereby agrees that such security interest shall be subordinate to the
security interest of the Trustee. The financial assets and other items deposited
to the Security Account will not be subject to deduction, set-off, banker's
lien, or any other right in favor of any person other than the Trustee.
(c) The Security Agent represents that: (i) there are no other
agreements entered into between the Security Agent and the Pledgor with respect
to the Security Account and (ii) except for the claims and interest of the
Trustee and of the Pledgor in the Security Account, the Security Agent does not
know of any claim to, or interest in, the Security Account or in any "financial
asset" (as defined in Section 8-102(a) of the UCC) credited thereto. In the
event of any conflict between this Security and Disbursement Agreement (or any
portion thereof) and any other agreement now existing or hereafter entered into,
the terms of this Security and Disbursement Agreement shall prevail.
(d) Concurrently with the execution and delivery of this Security
and Disbursement Agreement, the Security Agent is delivering to the Pledgor and
the Initial Purchaser a duly executed certificate, in the form of Exhibit A
hereto, of an officer of the Security Agent confirming the Security Agent's
establishment and maintenance of the Security Account and its receipt and
holding of the Disbursement Funds and the crediting of the Disbursement Funds to
the Security Account, all in accordance with this Security and Disbursement
Agreement.
SECTION 7. Disbursements. The Security Agent shall hold the Collateral in
the Security Account and release the same, or a portion thereof, only as
directed by the Trustee. The Trustee agrees to direct the Security Agent as
follows:
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(a) At least five Business Days prior to the due date of any of
the first three scheduled interest payments on the Notes from the Issue Date
through May 1, 1999, the Pledgor may, pursuant to written instructions executed
by the Pledgor (an "Issuer Order"), direct the Trustee to cause the Security
Agent to release from the Security Account and pay to the Holders proceeds
sufficient to provide for payment in full of the scheduled interest then due on
the Notes. Upon receipt of an Issuer Order, the Trustee will take any action
necessary to provide for the payment of the scheduled interest on the Notes in
accordance with the payment provisions of the Indenture to the Holders from (and
to the extent of) the Pledged Securities, Disbursement Funds and proceeds
thereof in the Security Account. Nothing in this Section 7 shall affect the
Trustee's rights to apply the Collateral to the payments of amounts due on the
Notes upon acceleration thereof.
(b) At least five Business Days prior to the due date of any of
the first three scheduled interest payments on the Notes, the Pledgor covenants
to give the Trustee (by Issuer Order) notice as to the amount of interest that
will be paid pursuant to Section 7(a). If no such notice is given by such fifth
Business Day prior to the respective first three scheduled interest payments on
the Notes, the Trustee will act pursuant to Section 7(a) as if it had received
an Issuer Order pursuant thereto for the payment in full of the scheduled
interest then due.
(c) If Pledgor has optionally redeemed Notes with the net
proceeds of a Primary Offering, the Pledgor may, pursuant to an Issuer Order,
direct the Trustee to release to Pledgor proceeds from the Security Account in
an amount which bears the same proportion to the aggregate value of the Security
Account immediately prior to the release of such proceeds as the aggregate
principal amount of the Notes so redeemed by Pledgor bears to the aggregate
principal amount of the Notes outstanding immediately prior to such redemption,
net of any costs, fees or expenses (such as breakage fees) incurred to permit
such release, so that there remains in the Security Account an amount sufficient
to pay in full, after receipt of scheduled interest and principal payments on
Pledged Securities, in the written opinion of an Independent Financial Advisor
(which written opinion shall accompany any Issuer Order) the remaining of the
first three interest payments due on the Notes. Immediately prior to any release
of funds to the Pledgor pursuant to this Section 7(c), the Pledgor shall deliver
any and all certificates described in and pursuant to Section 7(c).
(d) Upon the occurrence and after the continuation of an Event of
Default, the Trustee in its sole and absolute discretion may apply any or all
Collateral, including the Disbursement Funds and the Pledged Securities, to the
payment of all Obligations and any and all principal of and interest and
expenses on the Notes, in accordance with the terms and provisions of Section
14.
(e) Upon payment in full of the first three scheduled interest
payments on the Notes in a timely manner, and if no Event of Default has
occurred and is continuing, the security interest in the Collateral evidenced by
this Security and
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Disbursement Agreement will automatically terminate and be of no further force
and effect and upon receipt of an Issuer Order in accordance with Section
17.9(b) hereof, the Collateral remaining, if any, shall promptly be paid over
and transferred to the Pledgor.
(f) The Trustee may, but shall not be required to, liquidate any
Disbursement Funds or Pledged Securities, in whole or in part, in order to make
any scheduled payment of interest or any release or other required payment
hereunder and shall not be responsible for any loss, cost or expense, including
any breakage fee, diminution in principal or penalty in connection therewith,
all of which loss, cost or expense shall be borne solely by the Pledgor.
(g) Nothing contained in Section 1, Section 5, this Section 7 or
any other provision of this Security and Disbursement Agreement shall (i) afford
the Pledgor any right to issue entitlement orders with respect to any security
entitlement to the Disbursement Funds, the Pledged Securities or any securities
account in which any such security entitlement may be carried, or otherwise
afford the Pledgor control of any such security entitlement or (ii) otherwise
give rise to any rights of Pledgor with respect to the Disbursement Funds, the
Pledged Securities, any security entitlement thereto or any securities account
in which any such security entitlement may be carried, other than the Pledgor's
rights under this Security and Disbursement Agreement as the beneficial owner of
Collateral pledged to and subject to the exclusive dominion and control (except
as expressly provided in Sections 7(a) - (e) hereof) of the Trustee in its
capacity as such (and not as a securities intermediary). The Pledgor
acknowledges, confirms and agrees that the Trustee holds a security entitlement
to the Disbursement Funds and the Pledged Securities, as applicable, solely as
escrow agent for the Holders and not as a securities intermediary.
SECTION 8. Representations and Warranties. The Pledgor hereby represents
and warrants that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Security and
Disbursement Agreement does not contravene any provision of applicable law or
the Certificate of Incorporation of the Pledgor or any material agreement or
other material instrument binding upon the Pledgor or any of its subsidiaries or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any security interest on any assets of the Pledgor,
except for the security interest granted under this Security and Disbursement
Agreement; no consent, approval, authorization or order of, or qualification
with, any governmental body or agency that have not been obtained is required
(i) for the performance by the Pledgor of its obligations under this Security
and Disbursement Agreement, (ii) for the pledge by the Pledgor of the Collateral
pursuant to this Security and Disbursement Agreement or (iii) except for any
such consents, approvals, authorizations or orders required to be obtained by
the Trustee (or the Holders) for reasons other than the consummation of this
transaction, for the exercise by the
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Trustee of the rights provided for in this Security and Disbursement Agreement
or the remedies in respect of the Collateral pursuant to this Security and
Disbursement Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free
and clear of any security interest or any Lien or claims of any person or entity
(except for the security interests granted under this Security and Disbursement
Agreement). No financing statement covering the Pledgor's interest in the
Collateral is on file in any public office other than the financing statements,
if any, filed pursuant to this Security and Disbursement Agreement and no notice
to or arrangement with any financial institution (other than the Security Agent)
has been made regarding any security interest in or Lien on or nominee
arrangement for any Collateral.
(c) This Security and Disbursement Agreement has been duly
authorized, validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Security and Disbursement
Agreement by the Trustee and the Security Agent and enforceability of the
Security and Disbursement Agreement against the Trustee and the Security Agent
in accordance with its terms) constitutes the valid and binding agreement of the
Pledgor, enforceable against the Pledgor in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or similar laws
now or hereafter in effect relating to or affecting creditors' rights or
remedies generally, (ii) equitable remedies may be limited by equitable
principles of general applicability and the discretion of the court before which
any proceeding therefor may be brought, (iii) the exculpation provisions and
rights to indemnification hereunder may be limited by U.S. federal and state
securities laws and public policy considerations and (iv) the waiver of rights
and defenses contained in Section 14(b), Section 17.11 and Section 17.16 hereof
may be limited by applicable law.
(d) Upon execution and delivery of this Security and Disbursement
Agreement, the pledge of and grant of a security interest in the Collateral
securing the payment of the Obligations for the benefit of the Security Agent
and the Holders constitute a first priority perfected security interest in such
Collateral, enforceable as such against all creditors of the Pledgor (and any
persons purporting to purchase any of the Collateral from the Pledgor).
(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or any of
its subsidiaries is a party or to which any of the properties of the Pledgor or
any such subsidiary will be subject that would materially adversely affect the
power or ability of the Pledgor to perform its obligations under this Security
and Disbursement Agreement or to consummate the transactions contemplated
hereby.
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(f) The pledge of the Collateral pursuant to this Security and
Disbursement Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default, or event which with notice or passage of
time or both would be an Event of Default, exists.
SECTION 9. Further Assurances. The Pledgor will, promptly upon request by
the Trustee (which request the Trustee may submit at the direction of the
Holders of at least a majority in principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or use
its reasonable best efforts to procure, all assignments, instruments and other
documents, deliver any instruments to the Trustee and take any other actions
that are necessary or desirable to perfect, continue the perfection of or
protect the first priority of the Trustee's security interest in and to the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons (other than any such rights, claims or interests created by or
arising through the Trustee) or to effect the purposes of this Security and
Disbursement Agreement. The Pledgor also hereby authorizes the Trustee to file
any financing or continuation statements in the United States with respect to
the Collateral without the signature of the Pledgor (to the extent permitted by
applicable law). The Pledgor will promptly pay all costs incurred in connection
with any of the foregoing within 30 days of receipt of an invoice therefor. The
Pledgor also agrees, whether or not requested by the Security Agent, to take all
actions that are necessary to perfect or continue the perfection of, or to
protect the first priority of, the Trustee's security interest in and to the
Collateral, including the filing of all necessary financing and continuation
statements, and to protect the Collateral against the rights, claims or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Security Agent).
SECTION I0. Covenants. The Pledgor covenants and agrees with the Trustee
and the Holders that from and after the date of this Security and Disbursement
Agreement until the earlier of payment in full in cash of (x) each of the first
three scheduled interest payments due on the Notes under the terms of the
Indenture or (y) all obligations due and owing under the Indenture and the Notes
in the event such obligations become due and payable prior to the payment of the
first three scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) it will not create or permit to exist any Lien upon or with
respect to any of the Collateral (except for the security interests granted
under this Security and Disbursement Agreement and any Lien created by or
arising through the Security Agent) and at all times will be the sole beneficial
owner of the Collateral; or
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(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit the
Security Agent's rights or remedies hereunder, including, without limitation,
the Security Agent's right to sell or otherwise dispose of the Collateral
pursuant to the terms hereof or (ii) fail to pay or discharge any tax,
assessment or levy of any nature with respect to the Collateral not later than
five days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to the Collateral.
SECTION 11. Power of Attorney. In addition to all of the powers granted to
the Trustee pursuant to the Indenture, the Pledgor hereby appoints and
constitutes the Trustee as the Pledgor's attorney-in-fact (with full power of
substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Security Agent in its sole reasonable discretion, and
such payments made by the Security Agent to become part of the Obligations, due
and payable immediately upon demand. The Security Agent's authority under this
Section 11 shall include, without limitation, the authority to endorse and
negotiate any checks, certificates or instruments representing proceeds of
Collateral in the name of the Security Agent, execute and give receipt for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and to take any other actions arising
from or incident to the powers granted to the Trustee in this Security and
Disbursement Agreement. This power of attorney is coupled with an interest and
is irrevocable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The rights and powers
granted to the Trustee hereunder are being granted in order to preserve and
protect the security interest of the Trustee and the Holders in and to the
Collateral granted hereby and shall not be interpreted to, and shall not impose
any duties on the Trustee in connection therewith other than those expressly
provided herein or imposed under applicable law and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be read
into this Security and Disbursement Agreement or otherwise exist against the
Trustee. Except as provided by applicable law or by the Indenture, the Security
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Security Agent accords similar
property held by the Security Agent for similar accounts, it being understood
that the Security Agent in its capacity as such shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions,
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exchanges, maturities or other matters relative to any Collateral, whether or
not the Security Agent has or is deemed to have knowledge of such matters, (b)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral or (c) investing or reinvesting any of the Collateral,
provided, however, that nothing contained in this Security and Disbursement
Agreement shall relieve the Security Agent of any responsibilities as a
securities intermediary under applicable law.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold harmless and
defend the Trustee and the Security Agent and their respective directors,
officers, agents and employees, from and against any and all claims, actions,
obligations, liabilities and expenses, including reasonable defense costs and
expenses, reasonable investigative fees and costs, and reasonable legal fees and
damages arising from the Trustee's and Security Agent's performance under this
Security and Disbursement Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to the bad
faith, gross negligence or wilful misconduct of such indemnified person.
SECTION 14. Remedies Upon Event of Default. If any Event of Default under
the Indenture (any such Event of Default being referred to in this Security and
Disbursement Agreement as an "Event of Default") shall have occurred and be
continuing:
(a) The Trustee and the Holders shall have, in addition to all
other rights given by law or by this Security and Disbursement Agreement or the
Indenture or any other Collateral Agreement, all of the rights and remedies with
respect to the Collateral of a secured party under the UCC in effect in the
State of New York at that time. In addition, with respect to any Collateral, the
Trustee may and, at the direction of the Holders of a majority in principal
amount of the Notes then outstanding, shall, sell or cause the same to be sold
at any broker's board or at public or private sale, in one or more sales or
lots, at such price or prices as the Trustee may deem best, for cash or on
credit or for future delivery, without assumption of any credit risk. The
purchaser of any or all Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind whatsoever
created by or through the Pledgor. Unless any of the Collateral threatens, in
the reasonable judgment of the Trustee, to decline speedily in value or is or
becomes of a type sold on a recognized market, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or of the
time after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable. Any requirements of reasonable notice
shall be met if such notice is delivered to the address of the recipient in and
in accordance with Section 17.1 hereof at least ten days before the time of the
sale or disposition. The Trustee or any Holder of Notes may, in its own name or
in the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable
11
attorneys' fees, expenses and disbursements) of, or incident to, the enforcement
of any of the provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Collateral.
(b) The Pledgor further agrees to do or cause to be done all such
other acts as may be necessary to make such sale or sales of all or any portion
of the Collateral pursuant to this Section 14 valid and binding and in
compliance with the Indenture and any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 14 will cause irreparable injury to the Trustee and the Holders,
that the Trustee and the Holders have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained in
this Section 14 shall be specifically enforceable against the Pledgor, and the
Pledgor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to each of the
Trustee and the Security Agent the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, experts and agents retained by each of the Trustee and the
Security Agent, that each of the Trustee and the Security Agent may incur in
connection with (a) the review, negotiation and administration of this Security
and Disbursement Agreement, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Trustee and the Holders
hereunder or (d) the hilum by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the Trustee and the
Holders and security interests and Liens hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations or other obligations under the
Indenture, or any other amendment or waiver of or any consent to any departure
from the Indenture;
(c) any exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Security and
Disbursement Agreement.
12
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telex notice, when sent, answer-back
received, or in the case of telecopy notice, when sent, or in the case of a
nationally recognized overnight courier service, one business day after delivery
to such courier service, addressed, in the case of each party hereto to the
following address, or to such other address as may be designated by any party in
a written notice to the other party hereto:
if to the Pledgor:
County Seat Stores, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to the Security Agent:
First Trust National Association
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Finance Department
17.2. No Adverse Interpretation of Other Agreements. This Security and
Disbursement Agreement may not be used to interpret another pledge, security or
debt agreement of the Pledgor or any subsidiary thereof. No such pledge,
security or debt agreement (other than the Indenture) may be used to interpret
this Security and Disbursement Agreement.
17.3. Severability. The provisions of this Security and Disbursement
Agreement are. severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in
13
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Security and Disbursement Agreement in any
jurisdiction.
17.4. Headings. The headings in this Security and Disbursement
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
17.5. Counterpart Originals. This Security and Disbursement Agreement
may be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
17.6. Benefits of Security and Disbursement Agreement. Nothing in this
Security and Disbursement Agreement, express or implied, shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Security and Disbursement Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Security and Disbursement Agreement and any consent to any
departure by the Pledgor from any provision of this Security and Disbursement
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Security Agent nor
any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Failure of the Security Agent or any Holder of Notes to
exercise, or delay in exercising, any right, power or privilege hereunder shall
not preclude. any other or further exercise thereof or the exercise of any other
fight, power or privilege. A waiver by the Security Agent or any Holder of Notes
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that the Security Agent or such Holder of Notes would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
17.8. Interpretation of Agreement. All terms not defined herein or in
the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Security
and Disbursement Agreement conflicts with the Indenture, the Indenture shall
control with respect to the subject matter of such term or provision. Acceptance
of or acquiescence in a course of performance rendered under this Security and
Disbursement Agreement shall not be relevant to determine the meaning of this
Security and Disbursement Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
17.9. Continuing Security Interest; Termination.
14
(a) This Security and Disbursement Agreement shall create a
continuing security interest in and to and Lien on the Collateral and shall,
unless otherwise provided in the Indenture or in this Security and Disbursement
Agreement, remain in full force and effect until the payment in full in cash of
the Obligations. This Security and Disbursement Agreement shall be binding upon
the Pledgor, its transferees, successors and assigns, and shall inure, together
with the rights and remedies of the Security Agent hereunder, to the benefit of
the Trustee, the Holders and their respective successors, transferees and
assigns.
(b) This Security and Disbursement Agreement shall terminate upon
the payment in full in cash of the Obligations. At such time, the Trustee shall
cause the Security Agent, pursuant to an Issuer Order, and subject to and in
accordance with the applicable terms of the Indenture, if any, to reassign and
redeliver to the Pledgor all of the Collateral hereunder that has not been sold,
disposed of, retained or applied by the Trustee in accordance with the terms of
this Security and Disbursement Agreement and the Indenture.
Such reassignment and redelivery shall be without warranty by or recourse to the
Security Agent in its capacity as such, except as to the absence of any Liens on
the Collateral created by or arising through the Trustee, and shall be at the
cost and expense of the Pledgor.
17.10. Survival Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Security and Disbursement Agreement, and shall terminate only
upon the termination of this Security and Disbursement Agreement. The
obligations of the Pledgor under Sections 13 and 15 hereof shall survive the
termination of this Security and Disbursement Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or default with
respect to any of the Obligations, and all other notices to which the Pledgor
might otherwise be entitled, except as otherwise expressly provided herein or in
the Indenture.
17.12. Authority of the Security Agent.
(a) The Security Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Security Agent by the
terms hereof, together with such powers as are reasonably incident thereto. The
Security Agent may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Security and
Disbursement Agreement or the Indenture, neither the Security Agent nor any
director, officer, employee, attorney or agent of the Security Agent shall be
liable to the Pledgor for any action taken or omitted to be taken by the
Security Agent, in its capacity as Security
15
Agent, hereunder, except for its own bad faith, gross negligence or willful
misconduct, and the Security Agent shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Security Agent and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons. The Security Agent shall have no
duty to cause any financing statement or continuation statement to be filed in
respect of the Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities
of the Security Agent under this Security and Disbursement Agreement with
respect to any action taken by the Security Agent or the exercise or
non-exercise by the Security Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Security and Disbursement Agreement shall, as between the Security Agent and the
Holders, be governed by the Indenture and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the Security
Agent and the Pledgor, the Security Agent shall be conclusively presumed to be
acting as agent for the Holders with full and valid authority so to act or
refrain from acting, and the Pledgor shall not be obligated or entitled to make
any inquiry respecting such authority.
(c) The Security Agent shall maintain appropriate books and
records with respect to the Collateral in which shall be recorded all deposits
and transactions in and disbursements from the Security Account and regarding
the Pledged Securities and shall permit the Pledgor to inspect and to make
copies of such books and records at the Pledgor's sole cost and expense.
17.13. Successor Security Agent. The term Security Agent shall mean
the Person named as the "Security Agent' in the first paragraph of the Security
and Disbursement Agreement until a successor Security Agent shall have become
such, and thereafter "Security Agent" shall mean the Person who is then the
Security Agent hereunder. If the Security Agent consolidates with, merges or
converts into, or transfers all or substantially all of its corporate trust
business to another entity, the resulting, surviving or transferee entity,
without any further act, shall be the successor Security Agent.
17.14. Final Expression. This Security and Disbursement Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Security and
Disbursement Agreement and is intended as a complete and exclusive statement of
the terms and conditions thereof.
17.15. Rights of Holders. No Holder of Notes shall have any rights
granted to individual Holders pursuant to Section 6.7 of the Indenture; provided
that nothing in this subsection shall limit any rights granted to the Security
Agent under the Notes or the Indenture.
16
17.16. GOVERNING LAW, SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(a) THIS SECURITY AND DISBURSEMENT AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE SECURITY AGENT AND THE HOLDERS IN
CONNECTION WITH THIS SECURITY AND DISBURSEMENT AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE SECURITY ACCOUNT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. REGARDLESS OF ANY PROVISION IN ANY OTHER
AGREEMENT, FOR PURPOSES OF THE UCC, NEW YORK SHALL BE DEEMED TO BE THE SECURITY
AGENT'S LOCATION AND THE SECURITY ACCOUNT (AS WELL AS THE SECURITIES
ENTITLEMENTS RELATED THERETO) SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
(b) THE PLEDGOR AGREES THAT THE SECURITY AGENT SHALL, IN ITS
CAPACITY AS SECURITY AGENT OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES,
HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST
THE PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE SECURITY AGENT TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE SECURITY AGENT. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE SECURITY
AGENT TO REALIZE ON SUCH COLLATERAL OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE SECURITY AGENT, WITH RESPECT TO SUCH COLLATERAL, EXCEPT
FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY
SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
(c) THE RIGHTS AND POWERS GRANTED TO THE SECURITY AGENT
HEREUNDER ARE BEING GRANTED IN ORDER TO PRESERVE AND PROTECT THE SECURITY
INTEREST OF THE SECURITY AGENT AND THE HOLDERS IN AND TO THE COLLATERAL GRANTED
HEREBY AND SHALL NOT BE INTERPRETED TO, AND SHALL NOT IMPOSE ANY DUTIES ON THE
SECURITY AGENT IN CONNECTION THEREWITH OTHER THAN THOSE EXPRESSLY PROVIDED
HEREIN OR IMPOSED UNDER APPLICABLE LAW AND NO IMPLIED
17
COVENANTS, FUNCTIONS, RESPONSIBILITIES, DUTIES, OBLIGATIONS, OR LIABILITIES
SHALL BE READ INTO THIS SECURITY AND DISBURSEMENT AGREEMENT OR OTHERWISE EXIST
AGAINST THE SECURITY AGENT. EXCEPT AS PROVIDED BY APPLICABLE LAW OR BY THE
INDENTURE THE SECURITY AGENT SHALL BE DEEMED TO HAVE EXERCISED REASONABLE CARE
IN THE CUSTODY AND PRESERVATION OF THE COLLATERAL IN ITS POSSESSION IF THE
COLLATERAL IS ACCORDED TREATMENT SUBSTANTIALLY EQUAL TO THAT WHICH THE SECURITY
AGENT ACCORDS SIMILAR PROPERTY HELD BY THE SECURITY AGENT FOR SIMILAR ACCOUNTS,
IT BEING UNDERSTOOD THAT THE SECURITY AGENT IN ITS CAPACITY AS SUCH SHALL NOT
HAVE ANY RESPONSIBILITY FOR (A) ASCERTAINING OR TAKING ACTION WITH RESPECT TO
CALLS, CONVERSIONS, EXCHANGES, MATURITIES OR OTHER MATTERS RELATIVE TO ANY
COLLATERAL, WHETHER OR NOT THE SECURITY AGENT HAS OR IS DEEMED TO HAVE KNOWLEDGE
OF SUCH MATTERS, (B) TAKING ANY NECESSARY STEPS TO PRESERVE RIGHTS AGAINST ANY
PARTIES WITH RESPECT TO ANY COLLATERAL OR (C) INVESTING OR REINVESTING ANY OF
THE COLLATERAL, PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN THIS SECURITY AND
DISBURSEMENT AGREEMENT SHALL RELIEVE THE SECURITY AGENT OF ANY RESPONSIBILITIES
AS A SECURITIES INTERMEDIARY UNDER APPLICABLE LAW.
18
EXHIBIT A
FIRST TRUST NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
Pursuant to Section 6(d) of the Security and Disbursement Agreement (the
"Security and Disbursement Agreement") dated as of October 29, 1997 by and among
County Seat Stores, Inc. (the "Pledgor"), and First Trust National Association,
as trustee (the "Trustee") and as securities intermediary (the "Security
Agent"), for the holders of the Pledgor's 12 3/4% Senior Notes Due 2004, the
undersigned officer of the Security Agent, on behalf of the Security Agent,
makes the following certifications to the Pledgor and the Initial Purchaser.
Capitalized terms used and not defined in this Officer's Certificate have the
meanings set forth or referred to in the Security and Disbursement Agreement.
1. Substantially contemporaneously with the execution and delivery of
this Officer's Certificate, the Security Agent has established at its offices,
as securities intermediary a securities account in the name of "First Trust
National Association Security Account Re: County Seat Stores" (the "Security
Account") with respect to which the Trustee is the entitlement holder and
through which the Trustee has acquired a security entitlement to certain
Collateral. The Security Agent has sole dominion and control and has made
appropriate book entries in its records establishing that such Collateral and
the Trustee's security entitlement thereto have been credited to and are held in
the Security Account.
2. The Security Agent has established and maintained and will maintain
the Security Account and all securities entitlements and other positions carried
in the Security Account solely in its capacity as Security Agent and has not
asserted and will not assert any claim to or interest in the Security Account or
any such securities entitlements or other positions except in such capacity.
3. The Trustee has acquired its security entitlement to the Collateral
for value and without notice of any adverse claim thereto. Without limiting the
generality of the foregoing, the Collateral is not and the Trustee's security
entitlement to such Collateral is not, to the Trustee's knowledge, subject to
any Lien granted by or to or arising through or in favor of any securities
intermediary.
4. The Security Agent has not caused or permitted the Collateral or its
security entitlement thereto to become subject to any Lien created by or arising
through the Security Agent.
19
IN WITNESS WHEREOF, the undersigned officer has executed this Officer's
Certificate on behalf of First Trust National Association, as Security Agent
this 29th day of October, 1997.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee and Security Agent
By:
---------------------------------------
Name:
Title:
20
IN WITNESS WHEREOF, the Pledgor, the Initial Purchaser and the Security
Agent have each caused this Security and Disbursement Agreement to be duly
executed and delivered as of the date first above written.
Pledgor:
COUNTY SEAT STORES, INC.
By:
---------------------------------------
Name:
Title:
Trustee:
FIRST TRUST NATIONAL ASSOCIATION
By:
---------------------------------------
Name:
Title:
Security Agent:
FIRST TRUST NATIONAL ASSOCIATION
By:
---------------------------------------
Name:
Title:
21
