EXECUTION COPY
SECURITY AGREEMENT dated as of October
17, 1997, among J. CREW OPERATING CORP., a
Delaware corporation (the "Borrower"), J.
CREW GROUP, INC., a New York corporation
("Holdings"), each subsidiary of the
Borrower listed on Schedule I hereto (each
such subsidiary individually a "Subsidiary
Guarantor" and collectively, the "Subsidiary
Guarantors"; the Subsidiary Guarantors,
Holdings and the Borrower are referred to
collectively herein as the "Grantors") and
THE CHASE MANHATTAN BANK, a New York banking
corporation ("Chase"), as collateral agent
(in such capacity, the "Collateral Agent")
for the Secured Parties (as defined herein).
Reference is made to (a) the Credit Agreement dated as
of October 17, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the
Borrower, Holdings, the lenders from time to time party thereto
(the "Lenders"), Chase, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), Collateral Agent
and, with respect to Letters of Credit and Acceptances issued
under the Credit Agreement, as issuing bank (in such capacity,
the "Issuing Bank"), and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, as syndication agent and (b) the Guarantee Agreement
dated as of October 17, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement"),
among the Subsidiary Guarantors, Holdings and the Collateral
Agent.
The Lenders have agreed to make Loans to the Borrower,
and the Issuing Bank has agreed to issue Letters of Credit and
Acceptances for the account of the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the
Credit Agreement. Each of Holdings and the Subsidiary Guarantors
has agreed to guarantee, among other things, all the obligations
of the Borrower under the Credit Agreement. The obligations of
the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Grantors of a Security Agreement in
the form hereof to secure (a) the due and punctual payment of (i)
the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless
of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one
or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in
respect of any Letter of Credit or any acceptance, when and as
due, including payments in respect of reimbursement of
disbursements made by the Issuing Bank with respect thereto,
interest thereon and obligations to provide, under certain
circumstances, cash collateral in connection therewith and (iii)
all other monetary obligations, including fees, costs, expenses
and indemnities, whether primary, secondary, direct, contingent,
fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership
or other similar proceeding, regardless of whether allowed or
allowable in such
proceeding), of the Loan Parties to the Secured Parties
under the Credit Agreement and the other Loan Documents, (b) the
due and punctual performance of all covenants, agreements,
obligations and liabilities of the Loan Parties under or pursuant
to the Credit Agreement, this Agreement and the other Loan
Documents and (c) unless otherwise agreed to in writing by the
applicable Lender party thereto, the due and punctual payment and
performance of all obligations of the Borrower under each Hedging
Agreement entered into with any counterparty that was a Lender at
the time such Hedging Agreement was entered into (all the
monetary and other obligations described in the preceding clauses
(a) through (c) being collectively called the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on
behalf of itself and each Secured Party (and each of their
respective successors or assigns), hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless
the context otherwise requires, all capitalized terms used but
not defined herein shall have the meanings set forth in the
Credit Agreement.
SECTION 1.02. Definition of Certain Terms Used Herein.
As used herein, the following terms shall have the following
meanings:
"Account Debtor" shall mean any person who is or who
may become obligated to any Grantor under, with respect to or on
account of an Account.
"Accounts" shall mean all "accounts" (as defined in the
Uniform Commercial Code as in effect in the state of New York
("UCC")) of any Grantor and shall include, without limitation,
any and all right, title and interest of any Grantor to payment
for goods sold or leased or services rendered, including any such
right evidenced by chattel paper, whether due or to become due,
whether or not it has been earned by performance, and whether now
or hereafter acquired or arising in the future, including
accounts receivable from Affiliates of the Grantors.
"Accounts Receivable" shall mean all Accounts and all
right, title and interest in any returned goods, together with
all rights, titles, securities and guarantees with respect
thereto, including any rights to stoppage in transit, replevin,
reclamation and resales, and all related security interests,
liens and pledges, whether voluntary or involuntary, in each case
whether now existing or owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable,
(b) Documents, (c) Equipment, (d) General Intangibles, (e)
Inventory, (f) cash and cash accounts and (g) Proceeds.
"Copyright License" shall mean any written agreement,
now or hereafter in effect, granting any right to any third party
under any Copyright now or hereafter owned by any Grantor
or which such Grantor otherwise has the right to license, or
granting any right to such Grantor
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under any Copyright now or hereafter owned by any third
party, and all rights of such Grantor under any such agreement.
"Copyrights" shall mean all of the following now owned
or hereafter acquired by any Grantor: (a) all copyright rights in
any work subject to the copyright laws of the United States or
any other country, whether as author, assignee, transferee or
otherwise, and (b) all registrations and applications for
registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental
registrations and pending applications for registration in the
United States Copyright Office, including those listed on
Schedule II.
"Credit Agreement" shall have the meaning assigned to
such term in the preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records,
ledger sheets and other documents covering or relating to any of
the Collateral.
"Equipment" shall mean all "equipment" (as defined in
the UCC) of any Grantor and shall include, without limitation,
equipment, furniture and furnishings, and all tangible personal
property similar to any of the foregoing, including tools, parts
and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter
owned by any Grantor. The term Equipment shall include Fixtures.
"Fixtures" shall mean all items of Equipment, whether
now owned or hereafter acquired, of any Grantor that become so
related to particular real estate that an interest in them arises
under any real estate law applicable thereto.
"General Intangibles" shall mean all "general
intangibles" (as defined in the UCC) of any Grantor and shall
include, without limitation, choses in action and causes of
action and all other assignable intangible personal property of
any Grantor of every kind and nature (other than Accounts
Receivable) now owned or hereafter acquired by any Grantor,
including corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Hedging Agreements and other
agreements), Intellectual Property, goodwill, registrations,
franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of
any of the Accounts Receivable.
"Intellectual Property" shall mean all intellectual and
similar property of any Grantor of every kind and nature now
owned or hereafter acquired by any Grantor, including inventions,
designs, Patents, Copyrights, Licenses, Trademarks, trade
secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information,
software and databases and all embodiments or fixations thereof
and related documentation, registrations and franchises, and all
additions, improvements and accessions to, and books and records
describing or used in connection with, any of the foregoing.
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"Inventory" shall mean all "inventory" (as defined in
the UCC) of any Grantor and shall include, without limitation,
goods of any Grantor, whether now owned or hereafter acquired,
held for sale or lease, or furnished or to be furnished by any
Grantor under contracts of service, or consumed in any Grantor's
business, including raw materials, intermediates, work in
process, packaging materials, finished goods, semi-finished
inventory, scrap inventory, manufacturing supplies and spare
parts, and all such goods that have been returned to or
repossessed by or on behalf of any Grantor.
"License" shall mean any Patent License, Trademark
License, Copyright License or other license or sublicense to
which any Grantor is a party, including those listed on Schedule
III (other than those license agreements in existence on the date
hereof and listed on Schedule III and those license agreements
entered into after the date hereof, which by their terms prohibit
assignment or a grant of a security interest by such Grantor as
licensee thereunder).
"Obligations" shall have the meaning assigned to such
term in the preliminary statement of this Agreement.
"Patent License" shall mean any written agreement, now
or hereafter in effect, granting to any third party any right to
make, use or sell any invention on which a Patent, now or
hereafter owned by any Grantor or which any Grantor otherwise has
the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent,
now or hereafter owned by any third party, is in existence, and
all rights of any Grantor under any such agreement.
"Patents" shall mean all of the following now owned or
hereafter acquired by any Grantor: (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 pending applications in the United States Patent
and Trademark Office or any similar offices in any other country,
including those listed on Schedule IV, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed
therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate
substantially in the form of Annex 1 hereto, completed and
supplemented with the schedules and attachments contemplated
thereby, and duly executed by a Financial Officer.
"Proceeds" shall mean "proceeds" (as defined in the
UCC) of any Grantor and shall include, without limitation, any
consideration received from the sale, exchange, license, lease or
other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession
of any Collateral and any payment received from any insurer or
other person or entity as a result of the destruction, loss,
theft, damage or other involuntary conversion of whatever nature
of any asset or property which constitutes Collateral, and shall
include (a) any claim of any Grantor against any third party for
(and the right to xxx and recover for and the rights to damages
or profits due or accrued arising out of or in connection with)
(i) past, present or future infringement of any Patent now or
hereafter owned by any Grantor, or
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licensed under a Patent License, (ii) past, present or future
infringement or dilution of any Trademark now or hereafter owned
by any Grantor or licensed under a Trademark License or injury to
the goodwill associated with or symbolized by any Trademark now
or hereafter owned by any Grantor, (iii) past, present or future
breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License and (b) any and all
other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Receivables Transaction Assets" means all assets
described in the Receivables Transaction Documents as being sold,
contributed, assigned, transferred or conveyed to the Receivables
Subsidiary by Popular Club, or described in the Receivables
Transaction Documents as being sold, contributed, assigned,
transferred or conveyed by the Receivables Subsidiary to any
other Person; provided, however, that any amendment or
modification to the description of such assets in such documents
made after the date hereof shall not be effective for purposes of
this Agreement unless the Collateral Agent shall have consented
in writing to such amendment.
"Secured Parties" shall mean (a) the Lenders, (b) the
Administrative Agent, (c) the Collateral Agent, (d) the Issuing
Bank, (e) each counterparty to a Hedging Agreement entered into
with the Borrower if such counterparty was a Lender at the time
the Hedging Agreement was entered into, (f) the beneficiaries of
each indemnification obligation undertaken by any Grantor under
any Loan Document and (g) the successors and assigns of each of
the foregoing.
"Security Interest" shall have the meaning assigned to
such term in Section 2.01.
"Trademark License" shall mean any written agreement,
now or hereafter in effect, granting to any third party any right
to use any Trademark now or hereafter owned by any Grantor or
which any Grantor otherwise has the right to license, or granting
to any Grantor any right to use any Trademark now or hereafter
owned by any third party, and all rights of any Grantor under any
such agreement.
"Trademarks" shall mean all of the following now owned
or hereafter acquired by any Grantor: (a) all trademarks, service
marks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, trade dress,
logos, other source or business identifiers, designs and general
intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection
therewith, including registrations and registration applications
in the United States Patent and Trademark Office, any State of
the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals
thereof, including those listed on Schedule V, (b) all goodwill
associated therewith or symbolized thereby and (c) all other
assets, rights and interests that uniquely reflect or embody such
goodwill.
SECTION 1.03. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement
shall be applicable to this Agreement.
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ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the
payment or performance, as the case may be, in full of the
Obligations, each Grantor hereby assigns and grants to the
Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in, all of
such Grantor's right, title and interest in, to and under the
Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one
or more financing statements (including fixture filings),
continuation statements, filings with the United States Patent
and Trademark Office or United States Copyright Office (or any
successor office or any similar office in any other country) or
other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted
by each Grantor, without the signature of any Grantor, and naming
any Grantor or the Grantors as debtors and the Collateral Agent
as secured party.
SECTION 2.02. No Assumption of Liability. The Security
Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or in any way
alter or modify, any obligation or liability of any Grantor with
respect to or arising out of the Collateral.
SECTION 2.03 Release of Receivable Transaction Assets.
Notwithstanding anything herein to the contrary, the Collateral
shall not include any Receivable Transaction Assets, and the
Collateral Agent hereby releases, without recourse or warranty,
any security or other interest which it may have in the
Receivable Transaction Assets. The parties to the Receivables
Transaction Documents shall be entitled to rely on this Section
2.03, and this Section 2.03 shall not be amended without the
prior written consent of the trustee appointed under the terms of
the Receivables Transaction Documents. To further evidence such
release and to give effect to certain other agreements between
the Collateral Agent and such trustee, the Collateral Agent shall
(and is hereby authorized to) enter into intercreditor agreements
with such trustee in such form as the Collateral Agent deems
appropriate. By accepting the benefits of this Agreement, each
holder of an Obligation authorizes the Collateral Agent to enter
into such intercreditor agreements, and agrees to be bound by the
terms thereof. The failure of the Collateral Agent to execute any
such intercreditor agreement shall not, however, impair or
otherwise affect the release provided for in this Section 2.03 or
any other provision of this Section.
ARTICLE III
Representations and Warranties
The Grantors jointly and severally represent and
warrant to the Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has
good and valid rights in and title to the Collateral with respect
to which it has purported to grant a Security Interest
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hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral
pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement,
without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate
has been duly prepared, completed and executed and the
information set forth therein is correct and complete in all
material respects. Fully executed Uniform Commercial Code
financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations
containing a description of the Collateral have been delivered to
the Collateral Agent for filing in each governmental, municipal
or other office specified in Schedule 6 to the Perfection
Certificate, which are all the filings, recordings and
registrations (other than filings required to be made in the
United States Patent and Trademark Office and the United States
Copyright Office in order to perfect the Security Interest in
Collateral consisting of United States Patents, Trademarks and
Copyrights) that are necessary to publish notice of and protect
the validity of and to establish a legal, valid and perfected
security interest in favor of the Collateral Agent (for the
ratable benefit of the Secured Parties) in respect of all
Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation
statements.
(b) Each Grantor shall ensure that fully executed
security agreements in the form hereof (or short-form supplements
to this Agreement in form and substance satisfactory to the
Collateral Agent) and containing a description of all Collateral
consisting of Intellectual Property shall have been received and
recorded within three months after the execution of this
Agreement with respect to United States Patents and United States
registered Trademarks (and Trademarks for which United States
registration applications are pending) and within one month after
the execution of this Agreement with respect to United Sates
registered Copyrights have been delivered to the Collateral Agent
for recording by the United States Patent and Trademark Office
and the United States Copyright Office pursuant to 35 U.S.C. ss.
261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations
thereunder, as applicable, and otherwise as may be required
pursuant to the laws of any other necessary jurisdiction in the
United States (or any political subdivision thereof) and its
territories and possessions, to protect the validity of and to
establish a legal, valid and perfected security interest in favor
of the Collateral Agent (for the ratable benefit of the Secured
Parties) in respect of all Collateral consisting of Patents,
Trademarks and Copyrights in which a security interest may be
perfected by filing, recording or registration in the United
States (or any political subdivision thereof) and its territories
and possessions, or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording,
registration or reregistration is necessary (other than such
actions as are necessary to perfect the Security Interest with
respect to any Collateral consisting of Patents, Trademarks and
Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The
Security Interest constitutes (a) a legal and valid security
interest in all the Collateral securing the payment and
performance
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of the Obligations, (b) subject to the filings described in
Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by
filing, recording or registering a financing statement or
analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant
to the UCC or other analogous applicable law in such
jurisdictions and (c) a security interest that shall be perfected
in all Collateral in which a security interest may be perfected
upon the receipt and recording of this Agreement with the United
States Patent and Trademark Office and the United States
Copyright Office, as applicable, within the three month period
(commencing as of the date hereof) pursuant to 35 U.S.C. ss. 261
or 15 U.S.C. ss. 1060 or the one month period (commencing as of
the date hereof) pursuant to 17 U.S.C. ss. 205 and otherwise as
may be required pursuant to the laws of any other necessary
jurisdiction in the United States (or any political subdivision
thereof) and its territories and possessions. The Security
Interest is and shall be prior to any other Lien on any of the
Collateral, other than Liens expressly permitted to be prior to
the Security Interest pursuant to Section 6.02 of the Credit
Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is
owned by the Grantors free and clear of any Lien, except for
Liens expressly permitted pursuant to Section 6.02 of the Credit
Agreement. The Grantor has not filed or consented to the filing
of (a) any financing statement or analogous document under the
UCC or any other applicable laws covering any Collateral, (b) any
assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral
with the United States Patent and Trademark Office or the United
States Copyright Office or (c) any assignment in which any
Grantor assigns any Collateral or any security agreement or
similar instrument covering any Collateral with any foreign
governmental, municipal or other office, which financing
statement or analogous document, assignment, security agreement
or similar instrument is still in effect, except, in each case,
for Liens expressly permitted pursuant to Section 6.02 of the
Credit Agreement.
ARTICLE IV
Covenants
SECTION 4.01. Records. Each Grantor agrees to maintain,
at its own cost and expense, such complete and accurate records
with respect to the Collateral owned by it as is consistent with
its current practices but in any event to include complete
accounting records indicating all payments and proceeds received
with respect to any part of the Collateral, and, at such time or
times as the Collateral Agent may reasonably request, promptly to
prepare and deliver to the Collateral Agent an updated Perfection
Certificate, noting all material changes, if any, since the date
of the most recent Perfection Certificate.
SECTION 4.02. [Intentionally Omitted]
SECTION 4.03. Protection of Security. Each Grantor
shall, at its own cost and expense, take any and all reasonable
actions necessary to defend title to the Collateral against all
persons and to defend the Security Interest of the Collateral
Agent in the Collateral and the
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priority thereof against any Lien not expressly permitted
pursuant to Section 6.02 of the Credit Agreement.
SECTION 4.04. Further Assurances. Each Grantor agrees,
at its own expense, to execute, acknowledge, deliver and cause to
be duly filed all such further instruments and documents and take
all such actions as the Collateral Agent may from time to time
reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created
hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing
statements (including fixture filings) or other documents in
connection herewith or therewith. If any amount payable under or
in connection with any of the Collateral shall be or become
evidenced by any promissory note or similar instrument, such note
or instrument shall be immediately pledged and delivered to the
Collateral Agent, duly endorsed in a manner satisfactory to the
Collateral Agent.
SECTION 4.05. Inspection and Verification. The
Collateral Agent and such persons as the Collateral Agent may
reasonably designate shall have the right to inspect the
Collateral, all records related thereto (and to make extracts and
copies from such records) and the premises upon which any of the
Collateral is located, at reasonable times and intervals during
normal business hours upon reasonable advance notice to the
respective Grantor, to verify under reasonable procedures the
validity, amount, quality, quantity, value, condition and status
of the Collateral. The Collateral Agent shall have the right to
share any information it gains from such inspection or
verification with any Secured Party in accordance with and
subject to the provisions set forth in Section 9.12 of the Credit
Agreement; provided that any information shared with a Secured
Party pursuant to this Section 4.05 shall be deemed "Information"
which has been "clearly identified at the time of delivery as
confidential" under Section 9.12 of the Credit Agreemnent.
SECTION 4.06. Taxes; Encumbrances. At its option, the
Collateral Agent may discharge past due taxes, assessments,
charges, fees, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral and not permitted
pursuant to Section 6.02 of the Credit Agreement, and may pay for
the maintenance and preservation of the Collateral to the extent
any Grantor fails to do so as required by the Credit Agreement or
this Agreement, and each Grantor jointly and severally agrees to
reimburse the Collateral Agent on demand for any payment made or
any expense incurred by the Collateral Agent pursuant to the
foregoing authorization; provided, however, that nothing in this
Section 4.06 shall be interpreted as excusing any Grantor from
the performance of, or imposing any obligation on the Collateral
Agent or any Secured Party to cure or perform, any covenants or
other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances
and maintenance as set forth herein or in the other Loan
Documents.
SECTION 4.07. Assignment of Security Interest. If at
any time any Grantor shall take a security interest in any
property of an Account Debtor or any other person to secure
payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent to
the extent permitted by any contracts or arrangements to which
such property is subject. Such assignment need not be filed of
public record unless necessary to
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continue the perfected status of the security interest against
creditors of and transferees from the Account Debtor or other
person granting the security interest.
SECTION 4.08. Continuing Obligations of the Grantors.
Each Grantor shall remain liable to observe and perform all the
conditions and obligations to be observed and performed by it
under each contract, agreement or instrument relating to the
Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to
indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such
performance.
SECTION 4.09. Use and Disposition of Collateral. None
of the Grantors shall make or permit to be made an assignment,
pledge or hypothecation of the Collateral or shall grant any
other Lien in respect of the Collateral, except as expressly
permitted by Section 6.02 of the Credit Agreement. None of the
Grantors shall make or permit to be made any transfer of the
Collateral and each Grantor shall remain at all times in
possession of the Collateral owned by it, except that (a)
Inventory may be sold and Accounts Receivable may be collected in
the ordinary course of business and (b) unless and until the
Collateral Agent shall notify the Grantors that an Event of
Default shall have occurred and be continuing and that during the
continuance thereof the Grantors shall not sell, convey, lease,
assign, transfer or otherwise dispose of any Collateral (which
notice may be given by telephone if promptly confirmed in
writing), the Grantors may use and dispose of the Collateral in
any lawful manner not inconsistent with the provisions of this
Agreement, the Credit Agreement or any other Loan Document.
Without limiting the generality of the foregoing, each Grantor
agrees that it shall not permit any material Inventory to be in
the possession or control of any warehouseman, bailee, agent or
processor at any time unless such warehouseman, bailee, agent or
processor shall have been notified of the Security Interest and
shall have agreed in writing to hold the Inventory subject to the
Security Interest and the instructions of the Collateral Agent
and to waive and release any Lien held by it with respect to such
Inventory, whether arising by operation of law or otherwise.
SECTION 4.10. Limitation on Modification of Accounts.
None of the Grantors will, without the Collateral Agent's prior
written consent, grant any extension of the time of payment of
any of the Accounts Receivable, compromise, compound or settle
the same for less than the full amount thereof, release, wholly
or partly, any person liable for the payment thereof or allow any
credit or discount whatsoever thereon, other than extensions,
credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with its current
practices.
SECTION 4.11. Insurance. The Grantors, at their own
expense, shall maintain or cause to be maintained insurance
covering physical loss or damage to the Inventory and Equipment
in accordance with Section 5.07 of the Credit Agreement. Each
Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents
designated by the Collateral Agent) as such Grantor's true and
lawful agent (and attorney-in-fact) for the purpose, during the
continuance of an Event of Default, of making, settling and
adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of
such policies of insurance and for making all determinations and
decisions with respect thereto. In the event that
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any Grantor at any time or times shall fail to obtain or maintain
any of the policies of insurance required hereby or to pay any
premium in whole or part relating thereto, the Collateral Agent
may, without waiving or releasing any obligation or liability of
the Grantors hereunder or any Event of Default, in its sole
discretion, obtain and maintain such policies of insurance and
pay such premium and take any other actions with respect thereto
as the Collateral Agent deems advisable. All sums disbursed by
the Collateral Agent in connection with this Section 4.11,
including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto, shall be payable, upon demand, by
the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.
SECTION 4.12. [Intentionally Omitted]
SECTION 4.13. Covenants Regarding Patent, Trademark and
Copyright Collateral. (a) Each Grantor agrees that it will not,
nor will it permit any of its licensees to, do any act, or omit
to do any act, whereby any Patent which is material to the
conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to
xxxx any products covered by a Patent with the relevant patent
number as necessary and sufficient to establish and preserve its
rights under the laws pursuant to which each such Patent is
issued.
(b) Each Grantor (either itself or through its
licensees or its sublicensees) will, for each Trademark material
to the conduct of such Grantor's business, (i) maintain such
Trademark in full force free from any circumstance that would
lead to a finding of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such
Trademark sufficient to preclude any findings of abandonment,
(iii) display such Trademark with notice of Federal or foreign
registration to the extent necessary and sufficient to establish
and preserve its rights under the laws pursuant to which each
such Trademark is issued and (iv) not knowingly use or knowingly
permit the use of such Trademark in violation of any third party
rights.
(c) Each Grantor (either itself or through licensees)
will, for each work covered by a material Copyright, continue to
publish, reproduce, display, adopt and distribute the work with
appropriate copyright notice as necessary and sufficient to
establish and preserve its rights under the laws pursuant to
which each such copyright is issued.
(d) Each Grantor shall notify the Collateral Agent
immediately if it knows or has reason to know that any Patent,
Trademark or Copyright material to the conduct of its business
may become abandoned, lost or dedicated to the public, or of any
adverse determination or development (including the institution
of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country)
regarding such Grantor's ownership of any Patent, Trademark or
Copyright, its right to register the same, or to keep and
maintain the same.
(e) In no event shall any Grantor, either itself or
through any agent, employee, licensee or designee, file an
application for any Patent, Trademark or Copyright (or for the
registration of any Trademark or Copyright) with the United
States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of
the United
11
States or in any other country or any political subdivision
thereof, unless it promptly informs the Collateral Agent, and,
upon request of the Collateral Agent, executes and delivers any
and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Collateral Agent's
security interest in such Patent, Trademark or Copyright. Each
Grantor hereby appoints the Collateral Agent as its
attorney-in-fact to execute and file such writings evidencing the
Collateral Agent's security interest in such Patent, Trademark or
Copyright, all acts of such attorney being hereby ratified and
confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all reasonably necessary
steps that are consistent with the practice in any proceeding
before the United States Patent and Trademark Office, United
States Copyright Office or any similar office or agency in any
political subdivision of the United States or in any other
country or any political subdivision thereof, to maintain and
pursue each material application relating to the Patents,
Trademarks and/or Copyrights (and to obtain the relevant grant or
registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to
the conduct of any Grantor's business, including timely filings
of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if
consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(g) In the event that any Grantor has reason to believe
that any Collateral consisting of a Patent, Trademark or
Copyright material to the conduct of any Grantor's business has
been or is about to be infringed, misappropriated or diluted by a
third party, such Grantor promptly shall notify the Collateral
Agent and shall, if consistent with good business judgment,
promptly xxx for infringement, misappropriation or dilution and
to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
(h) Upon and during the continuance of an Event of
Default, each Grantor shall use its best efforts to obtain all
requisite consents or approvals by the third party licensor of
each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and
interest thereunder to the Collateral Agent or its designee.
ARTICLE V
Collections
SECTION 5.01. Power of Attorney. Each Grantor
irrevocably makes, constitutes and appoints the Collateral Agent
(and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent and
attorney-in-fact, and in such capacity the Collateral Agent shall
have the right, with power of substitution for each Grantor and
in each Grantor's name or otherwise, for the use and benefit of
the Collateral Agent and the Secured Parties, upon the occurrence
and during the continuance of an Event of Default (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment
relating to the Collateral or any part thereof; (b) to demand,
collect, receive payment of, give receipt for and give discharges
and releases of all or any of the
12
Collateral; (c) to sign the name of any Grantor on any invoice or
xxxx of lading relating to any of the Collateral; (d) to send
verifications of Accounts Receivable to any Account Debtor; (e)
to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral;
(f) to settle, compromise, compound, adjust or defend any
actions, suits or proceedings relating to all or any of the
Collateral; (g) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent;
and (h) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things reasonably
necessary to carry out the purposes of this Agreement, as fully
and completely as though the Collateral Agent were the absolute
owner of the Collateral for all purposes; provided, however, that
nothing herein contained shall be construed as requiring or
obligating the Collateral Agent or any Secured Party to make any
commitment or to make any inquiry as to the nature or sufficiency
of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted to be taken by
the Collateral Agent or any Secured Party with respect to the
Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of any Grantor or to any claim or
action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral
Agent as the agent and attorney-in-fact of the Grantors for the
purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event
relieve any Grantor of any of its obligations hereunder or under
any other Loan Document with respect to the Collateral or any
part thereof or impose any obligation on the Collateral Agent or
any Secured Party to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way
limit the exercise by the Collateral Agent or any Secured Party
of any other or further right which it may have on the date of
this Agreement or hereafter, whether hereunder, under any other
Loan Document, by law or otherwise.
ARTICLE VI
Remedies
SECTION 6.01. Remedies upon Default. Upon the
occurrence and during the continuance of an Event of Default,
each Grantor agrees to deliver each item of Collateral to the
Collateral Agent on demand, and it is agreed that the Collateral
Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any
Collateral consisting of Intellectual Property, on demand, to
cause the Security Interest to become an assignment, transfer and
conveyance of any of or all such Collateral by the applicable
Grantors to the Collateral Agent (except to the extent
assignment, transfer or conveyance thereof would result in a loss
of said Intellectual Property), or to license or sublicense,
whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any such Collateral throughout
the world on such terms and conditions and in such manner as the
Collateral Agent shall determine (other than in violation of any
then-existing licensing arrangements to the extent that waivers
cannot be obtained), and (b) with or without legal process and
with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for
13
trespass to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing
the Collateral and, generally, to exercise any and all rights
afforded to a secured party under the UCC or other applicable
law. Without limiting the generality of the foregoing, each
Grantor agrees that the Collateral Agent shall have the right,
subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral, at
public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery
as the Collateral Agent shall deem appropriate. The Collateral
Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are
purchasing the Collateral for their own account for investment
and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Collateral Agent shall have the
right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor
hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which such Grantor now has or may
at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days'
prior written notice (which each Grantor agrees is reasonable
notice within the meaning of Section 9-504(3) of the Uniform
Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral. Such notice, in the
case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or
portion thereof, will first be offered for sale at such board or
exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may (in its sole and
absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of
sale of such Collateral shall have been given. The Collateral
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 sale, and such
sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice.
At any public (or, to the extent permitted by law, private) sale
made pursuant to this Section, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any
Grantor (all said rights being also hereby waived and released to
the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account
thereof by using any claim then due and payable to such Secured
Party from any Grantor as a credit
14
against the purchase price, and such Secured Party may,
upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to any Grantor
therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such
sale pursuant to such agreement and no Grantor shall be entitled
to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Collateral Agent
shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by a suit or suits at law or
in equity to foreclose this Agreement and to sell the Collateral
or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver.
SECTION 6.02. Application of Proceeds. The Collateral
Agent shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, as
follows:
FIRST, to the payment of all costs and expenses
incurred by the Administrative Agent or the Collateral
Agent (in its capacity as such hereunder or under any other
Loan Document) in connection with such collection or sale
or otherwise in connection with this Agreement or any of
the Obligations, including all court costs and the fees and
expenses of its agents and legal counsel, the repayment of
all advances made by the Collateral Agent hereunder or
under any other Loan Document on behalf of any Grantor and
any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the payment in full of the Obligations (the
amounts so applied to be distributed among the Secured
Parties pro rata in accordance with the amounts of the
Obligations owed to them on the date of any such
distribution); and
THIRD, to the Grantors, their successors or assigns,
or as a court of competent jurisdiction may otherwise
direct.
The Collateral Agent shall have absolute discretion as
to the time of application of any such proceeds, moneys or
balances in accordance with this Agreement. Upon any sale of the
Collateral by the Collateral Agent (including pursuant to a power
of sale granted by statute or under a judicial proceeding), the
receipt of the Collateral Agent or of the officer making the sale
shall be a sufficient discharge to the purchaser or purchasers of
the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer
or be answerable in any way for the misapplication thereof.
SECTION 6.03. Grant of License to Use Intellectual
Property. For the purpose of enabling the Collateral Agent to
exercise rights and remedies under this Article at such time as
the Collateral Agent shall be lawfully entitled to exercise such
rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Grantors) to use,
license or sub-license any of
15
the Collateral consisting of Intellectual Property 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 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 Collateral Agent shall be exercised, at the option of the
Collateral Agent, upon the occurrence and during the continuation
of an Event of Default; provided that any license, sub-license or
other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon the Grantors
notwithstanding any subsequent cure of an Event of Default.
ARTICLE VII
Miscellaneous
SECTION 7.01. Notices. All communications and notices
hereunder shall (except as otherwise expressly permitted herein)
be in writing and given as provided in Section 9.01 of the Credit
Agreement. All communications and notices hereunder to any
Subsidiary Guarantor shall be given to it at its address or
telecopy number set forth on Schedule I, with a copy to the
Borrower.
SECTION 7.02. Security Interest Absolute. All rights of
the Collateral Agent hereunder, the Security Interest and all
obligations of the Grantors hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document,
any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (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 any other
amendment or waiver of or any consent to any departure from the
Credit Agreement, any other Loan Document or any other agreement
or instrument, (c) any exchange, release or non- perfection of
any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee,
securing or guaranteeing all or any of the Obligations, or (d)
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement (other than the indefeasible
payment in full of all the Obligations).
SECTION 7.03. Survival of Agreement. All covenants,
agreements, representations and warranties made by any Grantor
herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement shall
be considered to have been relied upon by the Secured Parties and
shall survive the making by the Lenders of the Loans, and the
execution and delivery to the Lenders of any notes evidencing
such Loans, regardless of any investigation made by the Lenders
or on their behalf, and shall continue in full force and effect
until this Agreement shall terminate as provided in Section 7.14.
SECTION 7.04. Binding Effect; Several Agreement. This
Agreement shall become effective as to any Grantor when a
counterpart hereof executed on behalf of such Grantor shall have
been delivered to the Collateral Agent and a counterpart hereof
shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Grantor and the Collateral
Agent and their respective successors and assigns, and shall
inure to the benefit of
16
such Grantor, the Collateral Agent and the other Secured
Parties and their respective successors and assigns, except that
no Grantor shall have the right to assign or transfer its rights
or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void)
except as expressly contemplated by this Agreement or the Credit
Agreement. This Agreement shall be construed as a separate
agreement with respect to each Grantor and may be amended,
modified, supplemented, waived or released with respect to any
Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.
SECTION 7.05. Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns
of such party; and all covenants, promises and agreements by or
on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns.
SECTION 7.06. Collateral Agent's Fees and Expenses;
Indemnification. (a) Each Grantor jointly and severally agrees to
pay upon demand to the Collateral Agent the amount of any and all
reasonable expenses, including the reasonable fees, disbursements
and other charges of its counsel and of any experts or agents,
which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other
realization upon any of the Collateral in accordance with the
terms hereof, (iii) the exercise, enforcement or protection of
any of the rights of the Collateral Agent hereunder or (iv) the
failure of any Grantor to perform or observe any of the
provisions hereof applicable to it.
(b) Without limitation of its indemnification
obligations under the other Loan Documents, each Grantor jointly
and severally agrees to indemnify the Collateral Agent and the
other Indemnitees against, and hold each of them harmless from,
any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other
charges of counsel, incurred by or asserted against any of them
arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or
to the Collateral, whether or not any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder
shall be additional Obligations secured hereby and by the other
Security Documents. The provisions of this Section 7.06 shall
remain operative and in full force and effect regardless of the
termination of this Agreement or any other Loan Document, the
consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability
of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the
Collateral Agent or any Lender. All amounts due under this
Section 7.06 shall be payable on written demand therefor.
17
SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7.08. Waivers; Amendment. (a) No failure or
delay of the Collateral Agent in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of
the Collateral Agent hereunder and of the Collateral Agent, the
Issuing Bank, the Administrative Agent and the Lenders under the
other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of
any provisions of this Agreement or any other Loan Document or
consent to any departure by any Grantor therefrom shall in any
event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for
which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor or any other Grantor to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Collateral Agent and
the respective Grantor or Grantors with respect to which such
waiver, amendment or modification is to apply, subject to any
consent required in accordance with Section 9.02 of the Credit
Agreement. In addition, any waiver, amendment or modification of
Section 2.03 shall be subject to the prior written consent of the
trustee acting for the benefit of investors under the Receivables
Transaction Documents.
SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.
SECTION 7.10. Severability. In the event any one or
more of the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it
being understood that the invalidity of a particular provision in
a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The
parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
18
SECTION 7.11 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute but one contract (subject to Section 7.04), and shall
become effective as provided in Section 7.04. Delivery of an
executed signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually
executed counterpart hereof.
SECTION 7.12. Headings. Article and Section headings
used herein are for the purpose of reference only, are not part
of this Agreement and are not to affect the construction of, or
to be taken into consideration in interpreting, this Agreement.
SECTION 7.13. Jurisdiction; Consent to Service of
Process. (a) Each Grantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect
any right that the Collateral Agent, the Administrative Agent,
the Issuing Bank or any Lender may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan
Documents against any Grantor or its properties in the courts of
any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of
or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in
Section 7.01. Nothing in this Agreement will affected the right
of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 7.14. Termination. This Agreement and the
Security Interest shall terminate when all the Obligations have
been indefeasibly paid in full, the Lenders have no further
commitment to lend under the Credit Agreement, the LC and
Acceptance Exposure has been reduced to zero and the Issuing Bank
has no further commitment to issue Letters of Credit and
Acceptances under the Credit Agreement, at which time the
Collateral Agent shall execute and deliver to the Grantors, at
the Grantors' expense, all Uniform Commercial Code termination
statements and similar documents which the Grantors shall
reasonably request to evidence such termination. Any execution
and delivery of termination statements or documents pursuant to
this Section 7.14 shall be without recourse to or warranty by the
Collateral Agent. A Subsidiary Guarantor shall automatically be
released from its obligations hereunder and the Security Interest
19
in the Collateral of such Subsidiary Guarantor shall be
automatically released in the event that all the capital stock of
such Subsidiary Guarantor shall be sold, transferred or otherwise
disposed of to a person that is not an Affiliate of the Borrower
in accordance with the terms of the Credit Agreement; provided
that the Required Lenders shall have consented to such sale,
transfer or other disposition (to the extent required by the
Credit Agreement) and the terms of such consent did not provide
otherwise.
SECTION 7.15. Additional Grantors. Upon execution and
delivery by the Collateral Agent and a Subsidiary Loan Party that
was not in existence on the date of the Credit Agreement or was
an Inactive Subsidiary that ceased to be an Inactive Subsidiary
of an instrument in the form of Annex 2 hereto, such Subsidiary
shall become a Grantor hereunder with effect from and after the
date of such execution and delivery. The execution and delivery
of any such instrument shall not require the consent of any other
Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Agreement.
20
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
J. CREW OPERATING CORP.,
by /s/ Xxxxxxx X. XxXxxx
----------------------------
Name:
Title:
J. CREW GROUP, INC.,
by /s/ Xxxxxxx X. XxXxxx
----------------------------
Name:
Title:
EACH OF THE SUBSIDIARY
GUARANTORS LISTED ON
SCHEDULE I HERETO,
by /s/ Xxxxxxx X. XxXxxx
----------------------------
Name:
Title: Authorized Officer
THE CHASE MANHATTAN BANK,
as Collateral Agent,
by /s/ Xxxxx X. Xxxxxx
----------------------------
Name:
Title: Authorized Officer
22
SCHEDULE I
SUBSIDIARY GUARANTORS
SCHEDULE II
COPYRIGHTS
SCHEDULE III
LICENSES
SCHEDULE IV
PATENTS
SCHEDULE V
TRADEMARKS
Annex 1 to the
Security Agreement
[Form Of]
PERFECTION' CERTIFICATE
Reference is made to (a) the Credit Agreement dated as
of October 17, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"),
among the Borrower, Holdings, the lenders from time to time party
thereto (the "Lenders"), The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), Collateral Agent and, with respect to
Letters of Credit and Acceptances issued under the Credit
Agreement, as issuing bank (in such capacity, the "Issuing Bank")
and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, as
syndication agent, and (b) the Guarantee Agreement dated as of
October 17, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Guarantee Agreement"), among the
Subsidiary Guarantors, Holdings and the Collateral Agent.
Capitalized terms used herein and not defined herein shall have
the meaning assigned to such terms in the Guarantee Agreement and
the Credit Agreement.
The undersigned, a Financial Officer, hereby certifies
to the Collateral Agent and each other Secured Party as follows:
1. Names. (a) The exact corporate name of each Grantor,
as such name appears in its respective certificate of
incorporation, is as follows:
(b) Set forth below is each other corporate name each
Grantor has had in the past five years, together with the date of
the relevant change:
(c) Except as set forth in Schedule 1 hereto, no
Grantor has changed its identity or corporate structure in any
way within the past five years. Changes in identity or corporate
structure would include mergers, consolidations and acquisitions,
as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include
in Schedule 1 the information required by Sections 1 and 2 of
this certificate as to each acquiree or constituent party to a
merger or consolidation.
(d) The following is a list of all other names
(including trade names or similar appellations) used by each
Grantor or any of its divisions or other business units in
connection with the conduct of its business or the ownership of
its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer
Identification Number of each Grantor:
2. Current Locations. (a) The chief executive office of
each Grantor is located at the address set forth opposite its
name below:
Grantor Mailing Address County State
------- --------------- ------ -----
(b) Set forth below opposite the name of each Grantor
are the locations where such Grantor maintains any books or
records relating to any Accounts Receivable (with each location
at which chattel paper, if any, is kept being indicated by an
"*"):
Grantor Mailing Address County State
------- --------------- ------ -----
(c) Set forth below opposite the name of each Grantor
are all the places of business of such Grantor not identified in
paragraph (a) or (b) above:
Grantor Mailing Address County State
------- --------------- ------ -----
(d) Set forth below opposite the name of each Grantor
are all the locations where such Grantor maintains any Collateral
not identified above:
Grantor Mailing Address County State
------- --------------- ------ -----
(e) Set forth below opposite the name of each Grantor
are the names and addresses of all persons other than such
Grantor that have possession of any of the Collateral of such
Grantor:
Grantor Mailing Address County State
------- --------------- ------ -----
2
3. Unusual Transactions. All Accounts Receivable have
been originated by the Grantors and all Inventory has been
acquired by the Grantors in the ordinary course of business.
4. UCC Filings. Duly signed financing statements on
Form UCC-1 in substantially the form of Schedule 5 hereto have
been prepared for filing in the Uniform Commercial Code filing
office in each jurisdiction where a Grantor has Collateral as
identified in Section 2 hereof.
5. Schedule of Filings. Attached hereto as Schedule 5
is a schedule setting forth, with respect to the filings
described in Section 5 above, each filing and the filing office
in which such filing is to be made.
6. Stock Ownership. Attached hereto as Schedule 6 is a
true and correct list of all the duly authorized, issued and
outstanding stock of each Subsidiary and the record and
beneficial owners of such stock.
7. Notes. Attached hereto as Schedule 7 is a true and
correct list of all notes held by Holdings and each Subsidiary
and all intercompany notes (other than a Purchase Money Note)
between Holdings and each Subsidiary of Holdings and between each
Subsidiary of Holdings and each other such Subsidiary.
8. Advances. Attached hereto as Schedule 8 is (a) a
true and correct list of all advances made by (i) Holdings to the
Borrower or any Subsidiary Loan Party, (ii) the Borrower to
Holdings or any Subsidiary Loan Party and (iii) any Subsidiary
Loan Party to Holdings, the Borrower or any other Subsidiary Loan
Party, which advances will be on and after the date hereof
evidenced by one or more intercompany notes pledged to the
Collateral Agent under the Pledge Agreement, and (b) a true and
correct list of all unpaid intercompany transfers of goods sold
and delivered by or to Holdings or any Subsidiary of Holdings.
9. Mortgage Filings. Attached hereto as Schedule 9 is a
schedule setting forth, with respect to each Mortgaged Property,
(i) the exact corporate name of the corporation that owns such
property as such name appears in its certificate of
incorporation, (ii) if different from the name identified
pursuant to clause (i), the exact name of the current record
owner of such property reflected in the records of the filing
office for such property identified pursuant to the following
clause and (iii) the filing office in which a Mortgage with
3
respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest
therein.
IN WITNESS WHEREOF, the undersigned have duly executed
this certificate on this [ ] day of [ ].
J. CREW OPERATING CORP.
by_______________________________
Name:
Title: [Financial Officer]
by_______________________________
Name:
Title: [Legal Officer]
5
Annex 2 to the
Security Agreement
SUPPLEMENT NO. __ dated as of , to the
Security Agreement dated as of October 17, 1997,
among J. CREW OPERATING CORP., a Delaware
corporation (the "Borrower"), J. CREW GROUP, INC.,
a New York corporation ("Holdings"), each
subsidiary of the Borrower listed on Schedule I
thereto (each such subsidiary individually a
"Subsidiary Guarantor" and collectively, the
"Subsidiary Guarantors"; the Subsidiary Guarantors,
Holdings and the Borrower are referred to
collectively herein as the "Grantors") and THE
CHASE MANHATTAN BANK, a New York banking
corporation ("Chase"), as collateral agent (in such
capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated
as of October 17, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the
Borrower, Holdings, the lenders from time to time party thereto
(the "Lenders"), Chase, as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), Collateral Agent
and, with respect to Letters of Credit and Acceptances issued
under the Credit Agreement, as issuing bank (in such capacity,
the "Issuing Bank"), and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation, as syndication agent, and (b) the Guarantee
Agreement dated as of October 17, 1997 (as amended, supplemented
or otherwise modified from time to time, the "Guarantee
Agreement"), among the Subsidiary Guarantors, Holdings and the
Collateral Agent.
B. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
the Security Agreement and the Credit Agreement.
C. The Grantors have entered into the Security
Agreement in order to induce the Lenders to make Loans and the
Issuing Bank to issue Letters of Credit and Acceptances. Section
7.15 of Security Agreement provides that additional Subsidiary
Loan Party that was not in existence on the date of the Credit
Agreement or was an Inactive Subsidiary that ceased to be an
Inactive Subsidiary may become Grantors under the Security
Agreement by execution and delivery of an instrument in the form
of this Supplement. The undersigned Subsidiary (the "New
Grantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Grantor under
the Security Agreement in order to induce the Lenders to make
additional Loans and the Issuing Bank to issue additional Letters
of Credit and Acceptances and as consideration for Loans
previously made and Letters of Credit and Acceptances previously
issued.
Accordingly, the Collateral Agent and the New Grantor
agree as follows:
SECTION 1. In accordance with Section 7.15 of the
Security Agreement, the New Grantor by its signature below
becomes a Grantor under the Security Agreement with effect from
and after the date of execution and delivery of this Supplement
in accordance with Section 3 hereof and the New Grantor hereby
(a) agrees to all the terms and provisions of the Security
Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties
made by it as a Grantor thereunder are true and correct on and
as of the date hereof. In furtherance of the foregoing,
the New Grantor, as security for the payment and performance in
full of the Obligations (as defined in the Security Agreement),
does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties,
their successors and assigns, a security interest in and lien on
all of the New Grantor's right, title and interest in and to the
Collateral (as defined in the Security Agreement) of the New
Grantor. Each reference to a "Grantor" in the Security Agreement
shall be deemed to include the New Grantor. The Security
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to
the Collateral Agent and the other Secured Parties that this
Supplement has been duly authorized, executed and delivered by it
and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in
counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but
all of which when taken together shall constitute a single
contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the
New Grantor and the Collateral Agent. Delivery of an executed
signature page to this Supplement by facsimile transmission shall
be as effective as delivery of a manually signed counterpart of
this Supplement.
SECTION 4. The New Grantor hereby represents and
warrants that (a) set forth on Schedule I attached hereto is a
true and correct schedule of the location of any and all
Collateral of the New Grantor and (b) set forth under its
signature hereto, is the true and correct location of the chief
executive office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the
Security Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
SECTION 7. In case any one or more of the provisions
contained in this Supplement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other
jurisdiction). The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder
shall be in writing and given as provided in Section 7.01 of the
Security Agreement. All communications and notices
2
hereunder to the New Grantor shall be given to it at the address
set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the
Collateral Agent for its reasonable out-of-pocket expenses in
connection with this Supplement, including the reasonable fees,
other charges and disbursements of counsel for the Collateral
Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral
Agent have duly executed this Supplement to the Security
Agreement as of the day and year first above written.
[Name Of New Grantor],
by_____________________________
Name:
Title:
Address:
THE CHASE MANHATTAN BANK,
as Collateral Agent,
by_____________________________
Name:
Title:
3
SCHEDULE I
to Supplement No.___ to the
Security Agreement
LOCATION OF COLLATERAL
----------------------
Description Location
----------- --------
