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Exhibit 10(b)(iv)
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated December 30, 1997, made by THE
XXXXX-XXXXXXX STORES CORP., an Ohio corporation (the "Borrower"), THE EL-BEE
CHARGIT CORP., an Ohio corporation ("Chargit"), and THE BEE-GEE SHOE CORP., an
Ohio corporation ("Bee-Gee" and, together with the Borrower and Chargit, each, a
"Grantor" and collectively, the "Grantors") in favor of CITICORP USA, INC., as
agent for the financial institutions party to the Credit Agreement referred to
below (in such capacity, the "Agent").
W I T N E S S E T H :
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WHEREAS, the Borrower has entered into a Credit Agreement,
dated as of December 30, 1997, with the financial institutions party thereto
(the "Lenders") and the Agent, as agent and Swing Loan Bank (said Agreement, as
it may be amended or otherwise modified from time to time, being the "Credit
Agreement" and capitalized terms not defined herein but defined therein being
used herein as therein defined); and
WHEREAS, the Borrower owns beneficially and of record 100% of
the capital stock of each of Chargit and Bee-Gee and the Borrower and each of
Chargit and Bee-Gee are members of the same consolidated group of companies and
are engaged in related businesses, and each of Chargit and Bee-Gee will derive
direct and indirect economic benefit from the Loans and Letters of Credit; and
WHEREAS, each of Chargit and Bee-Gee has entered into a
Guaranty, dated December 30, 1997 in favor of the Agent for the ratable benefit
of the Guarantied Parties (as defined in each Guaranty) (as each may be amended,
supplemented or otherwise modified from time to time, being a "Guaranty"); and
WHEREAS, it is a condition precedent to the making of the
Loans and the issuance of the Letters of Credit pursuant to the Credit Agreement
that the Grantors shall have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to make the Loans and the Issuer to issue the Letters of
Credit that each Grantor
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hereby agrees with the Agent on behalf and for the ratable benefit of the
Secured Parties as follows:
1. DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified below (such meanings being equally applicable
to both the singular and plural forms of the terms defined):
"ACCOUNT" means any "account," as such term is
defined in Section 9-106 of the UCC, now owned or hereafter
acquired by a Grantor and, in any event, includes, without
limitation, (i) all accounts receivable, book debts and other
forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or
owing to such Grantor (including, without limitation, under
any trade name, style or division thereof) whether arising out
of goods sold or services rendered by such Grantor or from any
other transaction, whether or not the same involves the sale
of goods or services by such Grantor (including, without
limitation, any such obligation which might be characterized
as an account or contract right under the UCC), (ii) all of
such Grantor's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or
services, and all of such Grantor's rights to any goods
represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), (iii) all moneys due or to
become due to such Grantor under all contracts for the sale of
goods or the performance of services or both by such Grantor
(whether or not yet earned by performance on the part of such
Grantor or in connection with any other transaction), now in
existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase
orders and contracts, and (iv) all collateral security and
guarantees of any kind given by any Person with respect to any
of the foregoing.
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"ACCOUNT DEBTOR" means any "account debtor," as such
term is defined in Section 9-105(1)(a) of the UCC.
"BROKER" means any "broker," as such term is defined
in Chapter 8 (or Article 8) of the UCC, and in any event shall
include, but not be limited to, any Person defined as a broker
or dealer under the federal securities laws, but without
excluding a bank acting in that capacity.
"CHATTEL PAPER" means any "chattel paper," as such
term is defined in Section 9-105(1)(b) of the UCC, now owned
or hereafter acquired by either Grantor.
"CLEARING CORPORATION" means any "clearing
corporation," as such term is defined in Chapter 8 (or Article
8) of the UCC, and in any event shall include, but not be
limited to, any (i) Person that is registered as a "clearing
agency" under the federal securities laws, (ii) federal
reserve bank, or (iii) other Person that provides clearance or
settlement services with respect to Financial Assets that
would require it to register as a clearing agency under the
federal securities laws but for an exclusion or exemption from
the registration requirement, if its activities as a clearing
corporation, including promulgation of rules, are subject to
regulation by a federal or state Governmental Authority.
"COLLATERAL" has the meaning assigned to such
term in Section 2 of this Agreement.
"CONTRACTS" means all contracts, undertakings or
other agreements (other than Chattel Paper, Documents or
Instruments) in or under which either Grantor may now or
hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
"DOCUMENTS" means any "document," as such term is
defined in Section 9-105(1)(f) of the UCC, now owned or
hereafter acquired by either Grantor.
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"ENTITLEMENT HOLDER" means any Person identified in
the records of a Securities Intermediary as the Person having
a Security Entitlement against the Securities Intermediary.
"EQUIPMENT" means any "equipment," as such term is
defined in Section 9-109(2) of the UCC, now owned or hereafter
acquired by either Grantor and, in any event, includes,
without limitation, all machinery, equipment, furnishings,
fixtures, vehicles, computers and other electronic
data-processing and office equipment now owned or hereafter
acquired by such Grantor and any and all additions,
substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed
thereto.
"FINANCIAL ASSET" means any financial asset, and in
any event shall include, but not be limited to, any (i)
Security, (ii) obligation of a Person or a share,
participation or other interest in a Person or in property or
an enterprise of a Person, which is, or is of a type, dealt in
or traded on financial markets, or which is recognized in any
area in which it is issued or dealt in as a medium for
investment and (iii) any property that is held by a Securities
Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other
Person that the property is to be treated as a Financial Asset
under Chapter 8 (or Article 8) of the UCC.
"GENERAL INTANGIBLES" means any "general
intangibles," as such term is defined in Section 9-106 of the
UCC, now owned or hereafter acquired by a Grantor and, in any
event, includes, without limitation, all customer lists,
trademarks, pa tents, rights in intellectual property,
licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether patented or
patentable or not) and technical information, procedures,
designs, knowledge, know-how, software, data bases, data,
skill, expertise, experience, processes, models,
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drawings, materials and records, goodwill, rights of
indemnification and all right, title and interest which such
Grantor may now or hereafter have in or under any Contract,
now owned or hereafter acquired by such Grantor.
"GOVERNMENTAL AUTHORITY" means any nation or
government, any federal, state, county, municipal, parish,
provincial or other political subdivision thereof and any
department, commission, board, court, agency or other
instrumentality or entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"INSTRUMENT" means any "instrument," as such term is
defined in Section 9-105(1)(i) of the UCC, now owned or
hereafter acquired by a Grantor, other than instruments that
constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INVENTORY" means any "inventory," as such term is
defined in Section 9-109(4) of the UCC, now owned or hereafter
acquired by a Grantor, and wherever located, and, in any
event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or
hereafter acquired by such Grantor which are held for sale or
lease or are furnished or are to be furnished under a contract
of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in
such Grantor's business, or the processing, packaging,
delivery or shipping of the same, and all finished goods.
"INVESTMENT PROPERTY" means any investment property,
now owned or hereafter acquired, and, in any event, shall
include, without limitation, each of the following: (a) any
Security, whether certificated or uncertificated, (b) any
Security Entitlement, (c) any Securities Account, and (d) all
proceeds of any of the foregoing.
"ISSUER" means any "issuer," as such term is
defined in Chapter 8 (or Article 8) of the UCC,
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and in any event shall include, but not be limited to, any
Person that, with respect to an obligation on or a defense to
a Security, (i) places or authorizes the placing of its name
on a Security Certificate, other than as authenticating
trustee, registrar, transfer agent or the like, to evidence a
share, participation or other interest in its property or in
an enterprise, or to evidence its duty to perform an
obligation represented by the certificate, (ii) creates a
share, participation or other interest in its property or in
an enterprise, or undertakes an obligation, that is an
Uncertificated Security, (iii) directly or indirectly creates
a fractional interest in its rights or property, if the
fractional interest is represented by a Security Certificate,
or (iv) becomes responsible for, or in the place of, another
Issuer.
"OBLIGATIONS" means, (a) with respect to the
Borrower, the Obligations as defined in the Credit Agreement
and all obligations, now existing or hereafter arising, of the
Borrower under this Agreement and (b) with respect to Bee-Gee
and Chargit, all the obligations, now existing or hereafter
arising, of such Grantor under its Guaranty and all
obligations, now existing or hereafter arising, of Bee-Gee and
Chargit under this Agreement.
"PERMITTED LIENS" means Liens permitted by Section
7.1 of the Credit Agreement existing as of the date hereof or
to be created hereafter.
"PERSON" means any individual, corporation, limited
liability company, joint venture, general or limited
partnership, association, trust, unincorporated organization
or Governmental Authority, or other similar entity.
"PROCEEDS" means "proceeds," as such term is defined
in Section 9-306(1) of the UCC, and, in any event, shall
include, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to either
Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form
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whatsoever) made or due and payable to either Grantor from
time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting
under color of Governmental Authority), and (iii) any and all
other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"SECURITIES ACCOUNT" means any account to which a
Financial Asset is or may be credited in accordance with an
agreement under which the Person maintaining the account
undertakes to treat the Person for whom the account is
maintained as entitled to exercise the rights that comprise
the Financial Asset.
"SECURITIES INTERMEDIARY" means any (i) Clearing
Corporation, or (ii) Person, including a bank or Broker, that
in the ordinary course of its business maintains Securities
Accounts for others and is acting in that capacity.
"SECURITY" means any "security," as such term is
defined in Chapter 8 (or Article 8) of the UCC and, in any
event, shall include, but not be limited to, any obligation of
an Issuer or a share, participation or other interest in an
Issuer or in property or an enterprise of an Issuer: (i) which
is represented by a Security Certificate in bearer or
registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of the
Issuer; (ii) which is one of a class or series or but its
terms is divisible into a class or series of shares,
participations, interests or obligations; and (iii) which (a)
is, or is of a type, dealt in or traded on securities
exchanges or securities markets or (b) is a medium for
investment and by its terms expressly provides that it is a
security governed by Chapter 8 (or Article 8) of the UCC.
"SECURITY CERTIFICATE" means any certificate
representing a Security.
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"SECURITY ENTITLEMENT" means any of the rights and
property interests of an Entitlement Holder with respect to a
Financial Asset.
"UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York;
PROVIDED, HOWEVER, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or
priority of the Agent's and the Secured Parties' security
interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the
State of New York, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related
to such provisions.
"UNCERTIFICATED SECURITY" means any "uncertificated
security," as such term is defined in Chapter 8 (or Article 8)
of the UCC, and in any event shall include, but not be limited
to, any Security that is not represented by a certificate.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the full and prompt payment
when due (whether at stated maturity, by acceleration or otherwise) of,
and the performance of, all of the Obligations for which it is
responsible and to induce the Lenders to make the Loans and the Issuer
to issue the Letters of Credit pursuant to the Credit Agreement, each
Grantor hereby assigns, conveys, mortgages, pledges, hypothecates and
transfers to the Agent, on behalf and for the ratable benefit of the
Secured Parties, and hereby grants to the Agent, on behalf and 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 following
(all of which being hereinafter collectively called the "Collateral"):
(i) all Accounts;
(ii) all Inventory;
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(iii) all General Intangibles that related to
Inventory;
(iv) all of the rights (but none of the obligations)
of each of the Borrower and Chargit under (x) the Purchase
Agreement between the Borrower and Chargit, (y) the Purchase
Agreement between Chargit and The El-Bee Receivables
Corporation, each dated as of December 30, 1997, and (z) each
of the other Securitization Documents, as each such Purchase
Agreement or other Securitization Document may be amended,
supplemented or otherwise modified from time to time, and
including any and all extensions, renewals, replacements and
substitutions of either such Purchase Agreement or other
Securitization Document; and
(v) to the extent not otherwise included, all
Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and
products of, each of the foregoing, including, without
limitation, Proceeds in the form of Accounts, Chattel Paper,
Contracts, Documents, Equipment, General Intangibles,
Instruments and Investment Property.
(b) In addition, as collateral security for the prompt and
complete payment when due of the Obligations, each Secured Party is
hereby granted a lien and security interest in all property of the
Grantor held by such Secured Party or any Affiliate of such Secured
Party, including, without limitation, all property of every
description, now or hereafter in the possession or custody of or in
transit to such Secured Party for any purpose, including safekeeping,
collection or pledge, for the account of the Grantor, or as to which a
Grantor may have any right or power.
3. RIGHTS OF THE SECURED PARTIES; LIMITATIONS ON
SECURED PARTIES' OBLIGATIONS. With Respect to Accounts, Contracts, Chattel
Paper and Instruments Constituting Collateral:
(a) It is expressly agreed by each Grantor that, anything
herein to the contrary notwithstanding, such Grantor shall remain
liable under each of the Contracts
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to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and such Grantor shall perform
all of its duties and obligations thereunder, all in accordance with
and pursuant to the terms and provisions of each such Contract. Neither
the Agent nor any Lender shall have any obligation or liability under
any Contract by reason of or arising out of this Agreement or the
granting of a security interest in any contract to the Agent on behalf
and for the ratable benefit of and the Secured Parties of a security
interest therein or the receipt by the Agent or any Lender of any
payment relating to any Contract pursuant hereto, nor shall the Agent
or any Lender be required or obligated in any manner to perform or
fulfill any of the obligations of such Grantor under or pursuant to any
Contract, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any Contract, or to
present or file any claim, or to take any action to collect or enforce
any performance or the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) The Agent authorizes each Grantor to collect its Accounts,
Chattel Paper and Instruments that are Collateral, provided that such
collection is performed in a prudent and businesslike manner, and the
Agent may, upon the occurrence and during the continuance of any Event
of Default and without notice, limit or terminate said authority at any
time. If required by the Agent at any time during the continuance of
any Event of Default, any Proceeds, when first collected by such
Grantor, received in payment of any such Account or in payment for any
of its Inventory or on account of any of its Contracts, shall be
promptly deposited by such Grantor in precisely the form received (with
all necessary indorsements) in a special bank account maintained by the
Agent and subject to withdrawal only by the Agent, as hereinafter
provided, and until so turned over shall be deemed to be held in trust
by such Grantor for and as the Agent's property and shall not be
commingled with such Grantor's other funds or properties. Such
Proceeds, when deposited, shall continue to be collateral security for
all of the Obligations and shall not constitute payment thereof
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until applied as hereinafter provided. The Agent shall upon the request
of the Majority Lenders apply all or a part of the funds on deposit in
said special account to the principal of or interest on or both in
respect of any of the Obligations in accordance with the provisions of
Section 8(d) hereof and any part of such funds which the Majority
Lenders elect not so to apply and deem not required as collateral
security for the Obligations shall be paid over from time to time by
the Agent to such Grantor. If an Event of Default has occurred and is
continuing, at the request of the Agent such Grantor shall deliver to
the Agent all original and other documents evidencing, and relating to,
the sale and delivery of such Inventory or the performance of labor or
service which created such Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
(c) The Agent may at any time, upon the occurrence and during
the continuance of any Default or Event of Default, after first
notifying the relevant Grantor of its intention to do so, notify
Account Debtors of such Grantor, parties to Contracts of such Grantor,
obligors of Instruments of such Grantor and obligors in respect of
Chattel Paper of such Grantor that the Accounts and the right, title
and interest of such Grantor in and under such Contracts, such
Instruments and such Chattel Paper have been assigned to the Agent and
that payments shall be made directly to the Agent. Upon the request of
the Agent, such Grantor will so notify such Account Debtors, parties to
such Contracts, obligors of such Instruments and obligors in respect of
such Chattel Paper. Upon the occurrence and during the continuance of
an Event of Default, the Agent may in its own name or in the name of
others communicate with such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of such
Chattel Paper to verify with such Persons to the Agent's satisfaction
the existence, amount and terms of any such Accounts, Contracts,
Instruments or Chattel Paper.
(d) Upon reasonable prior notice to the relevant Grantor
(unless an Event of Default has occurred and is continuing, in which
case no notice is necessary), the Agent shall have the right to make
test verifications of the Accounts and physical verifications of the
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Inventory of such Grantor in any manner and through any medium that it
considers advisable, and each Grantor agrees to furnish all such
assistance and information as the Agent may require in connection
therewith.
4. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby
represents and warrants to the Secured Parties as follows:
(a) Each Grantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
organization.
(b) The execution, delivery and performance by each Grantor of
this Agreement are within such Grantor's corporate powers, have been
duly authorized by all necessary corporate action, do not contravene
such Grantor's certificate of incorporation or by-laws, any Requirement
of Law or any order or decree of any court, or any Contractual
Obligation of such Grantor, and do not result in or require the
creation of any Lien (other than pursuant to the Credit Agreement) upon
or with respect to any of its properties.
(c) No consent, authorization, approval or other action by,
and no notice to or filing with, any Governmental Authority is required
for the due execution, delivery and performance by each Grantor of this
Agreement.
(d) This Agreement has been duly executed and delivered by
each Grantor and is the legal, valid and binding obligation of such
Grantor, enforceable against such Grantor in accordance with its terms.
(e) There are no pending or threatened actions, investigations
or proceeding affecting any Grantor or any of its Subsidiaries before
any court, Governmental Authority or arbitrator other than those that
in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
(f) Each Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good title thereto, free and clear of any and all Liens, except
for the security interest granted pursuant to this Agreement
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and other Permitted Liens. No material amounts payable under or in
connection with any of its Accounts or Contracts (to the extent
constituting Collateral) are evidenced by Instruments which have not
been delivered to the Agent.
(g) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by any Grantor in
favor of the Agent pursuant to this Agreement or such as relate to
other Permitted Liens.
(h) Appropriate financing statements having been filed in the
jurisdictions listed on Schedule I hereto, this Agreement is effective
to create a valid and continuing first priority Lien on and prior to
all other Liens except Permitted Liens. All action necessary or
desirable to protect and perfect such security interest in each item of
the Collateral has been duly taken.
(i) Each Grantor's principal place of business and the place
where its records concerning the Collateral are kept and the location
of its Inventory and Equipment are set forth on Schedule II hereto.
(j) The amount represented by each Grantor to the Agent from
time to time as owing by each Account Debtor or by all Account Debtors
in respect of the Accounts of such Grantor will at such time be the
correct amount actually and unconditionally owing by such Account
Debtors thereunder.
5. COVENANTS. Each Grantor covenants and agrees with the Agent
and the Lenders that from and after the date of this Agreement and until the
Obligations are fully satisfied:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At any time
and from time to time, upon the written request of the Agent, and at
the sole expense of each Grantor, such Grantor will promptly and duly
execute and deliver any and all such further instruments and documents
and take such further action as the Agent may reasonably deem desirable
to obtain the full benefits
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of this Agreement and of the rights and powers herein granted,
including, without limitation, using its best efforts to secure all
consents and approvals necessary or appropriate for the assignment to
the Agent of any Contract (to the extent constituting part of the
Collateral) held by such Grantor or in which such Grantor has any
rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the Liens and
security interests granted hereby, transferring Collateral to the
Agent's possession (if a security interest in such Collateral can be
perfected by possession) and placing the interest of the Agent as
lienholder on the certificate of title of any vehicle. Each Grantor
also hereby authorizes the Agent to file any such financing or
continuation statement without the signature of such Grantor to the
extent permitted by applicable law. If any of the Collateral shall be
or become evidenced by any Instrument, each Grantor agrees to pledge
such Instrument to the Agent and shall duly endorse such Instrument in
a manner satisfactory to the Agent and deliver the same to the Agent.
(b) MAINTENANCE OF RECORDS. Each Grantor will keep and
maintain at its own cost and expense satisfactory and complete records
of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral. Each Grantor
will xxxx its books and records pertaining to the Collateral to
evidence this Agreement and the Lien and security interests granted
hereby. If requested by the Agent, all Chattel Paper that is Collateral
will be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security
interest of Citicorp USA, Inc., as the Agent". If requested by the
Agent, the security interest of the Agent shall be noted on the
certificate of title of each vehicle that is Collateral. For the
Agent's and the Lenders' further security, each Grantor agrees that,
upon the occurrence and during the continuance of any Event of Default,
each Grantor shall deliver and turn over all of such Grantor's books
and records pertaining to the Collateral to the Agent or to its
representatives at any time on demand of the Agent. Prior to the
occurrence of an Event of Default and upon reasonable notice from the
Agent, each Grantor shall
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permit any representative of the Agent to inspect such books and
records and will provide photocopies thereof to the Agent all in
accordance with the provisions of the Credit Agreement.
(c) INDEMNIFICATION. In any suit, proceeding or action brought
by the Agent or any Lender relating to any Account, Chattel Paper,
Contract, General Intangible or Instrument constituting Collateral for
any sum owing thereunder, or to enforce any provision of any such
Account, Chattel Paper, Contract, General Intangible or Instrument,
each Grantor will save, indemnify and keep each of the Agent and the
Lenders harmless from and against all expense, loss or damage suffered
by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder, arising
out of a breach by such Grantor of any obligation thereunder or arising
out of any other agreement, Indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from such Grantor,
and all such obligations of such Grantor shall be and remain
enforceable against and only against such Grantor and shall not be
enforceable against the Agent or the Lenders.
(d) COMPLIANCE WITH LAWS, ETC. Each Grantor will comply, in
all material respects, with all acts, rules, regulations, orders,
decrees and directions of any Governmental Authority, applicable to the
Collateral or any part thereof or to the operation of such Grantor's
business; PROVIDED, HOWEVER, that such Grantor may contest any act,
regulation, order, decree or direction in any reasonable manner which
shall not, in the sole opinion of the Agent, adversely affect the
Agent's rights hereunder or adversely affect the first priority of its
Lien on and security interest in the Collateral.
(e) PAYMENT OF OBLIGATIONS. Each Grantor will pay promptly
when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without limitation,
claims for labor, materials and supplies), except that no such charge
need be paid if (i) such non-payment does not involve any danger of the
sale, forfeiture or loss of any of the Collateral or
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any interest therein, and (ii) such charge is adequately reserved
against in accordance with and to the extent required by GAAP.
(f) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all material
respects, each Grantor will comply with and perform with all
obligations, covenants, conditions and agreements with respect to any
Account, Chattel Paper, Contract, License and all other agreements to
which it is a party or by which it is bound (to the extent constituting
Collateral).
(g) LIMITATION ON LIENS ON COLLATERAL. No Grantor will create,
permit or suffer to exist, and each Grantor will defend the Collateral
against and take such other action as is necessary to remove, any Lien
on the Collateral except Permitted Liens, and will defend the right,
title and interest of the Agent and the Lenders in and to any of such
Grantor's rights under the Chattel Paper, Contracts, Documents, General
Intangibles and Instruments (to the extent constituting Collateral) and
to the Inventory and in and to the Proceeds thereof against the claims
and demands of all Persons whomsoever.
(h) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Upon the
occurrence and during the continuance of any Event of Default, no
Grantor will, without the Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts, Chattel Paper
or Instruments that are Collateral or compromise, compound or settle
the same for less than the full amount thereof, or release, wholly or
partly, any Person liable for the payment thereof, or allow any credit
or discount whatsoever thereon.
(i) MAINTENANCE OF INSURANCE. Each Grantor will maintain, with
financially sound and reputable companies, insurance policies (i)
insuring its Inventory against loss by fire, explosion, theft and such
other casualties as are usually insured against by companies engaged in
the same or similar businesses and (ii) insuring such Grantor and the
Agent and the Banks against liability for personal injury and property
damage relating to such Inventory, such policies to be in such amounts
and against at least such risks as are usually insured against in the
same general area by
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companies engaged in the same or a similar business, naming the Agent
as an additional insured with a lender loss payable clause in favor of
the Agent on behalf and for the ratable benefit of the Secured Parties.
Each Grantor shall, if so requested by the Agent, deliver to the Agent
as often as the Agent may reasonably request, a report of a reputable
insurance broker satisfactory to the Agent with respect to the
insurance on such Inventory. All insurance with respect to such
Inventory shall (i) contain a clause which provides that the Secured
Parties' interest under the policy will not be invalidated by any act
or omission of, or any breach of warranty by, the insured, or by any
change in the title, ownership or possession of the insured property,
or by the use of the property for purposes more hazardous than is
permitted in the policy, and (ii) provide that no cancellation,
reduction in amount or change in coverage thereof shall be effective
until at least ten days after receipt by the Agent of written notice
thereof.
(j) LIMITATIONS ON DISPOSITION. No Grantor will sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or
contract to do so, except as permitted by the Credit Agreement.
(k) FURTHER IDENTIFICATION OF COLLATERAL. Each Grantor will,
if so requested by the Agent, furnish to the Agent, as often as the
Agent reasonably requests, statements and schedules further identifying
and describing the Collateral and such other reports in connection with
the Collateral as the Agent may reasonably request, all in reasonable
detail.
(l) NOTICES. Each Grantor will advise the Agent promptly, in
reasonable detail, (i) of any material Lien or claim made or asserted
against any of the Collateral, (ii) of any material change in the
composition of the Collateral, and (iii) of the occurrence of any other
event which would have a material adverse effect on the aggregate value
of the Collateral or in the security interests created hereunder.
(m) RIGHT OF INSPECTION. Upon reasonable notice to the
relevant Grantor (unless an Event of Default has occurred and is
continuing, in which case no notice is
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necessary), the Agent shall at all times have full and free access
during normal business hours to all the books and records and
correspondence of such Grantor, and the Agent or its representatives
may examine the same, take extracts therefrom and make photocopies
thereof, and such Grantor agrees to render to the Agent, at such
Grantor's cost and expense after an Event of Default has occurred and
is continuing, such clerical and other assistance as may be reasonably
requested with regard thereto. Upon reasonable notice to the relevant
Grantor (unless an Event of Default has occurred and is continuing, in
which case no notice is necessary), the Agent and its representatives
shall also have the right to enter into and upon any premises where any
of the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
(n) CONTINUOUS PERFECTION. No Grantor will change its name,
identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith
seriously misleading within the meaning of Section 9-402(7) of the UCC
(or any other then applicable provision of the UCC) unless such Grantor
shall have given the Agent at least 30 days' prior written notice
thereof and shall have taken all action (or made arrangements to take
such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend such financing statement or
continuation statement so that it is not seriously misleading. No
Grantor will change its principal place of business or remove its
records or change the location of its Inventory, each as set forth on
Schedule II hereto, unless it gives the Agent at least 30 days' prior
written notice thereof and has taken such action as is necessary to
cause the security interest of the Agent in the Collateral to continue
to be perfected.
6. THE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each Grantor hereby irrevocably constitutes and appoints
the Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor
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and in the name of such Grantor or in its own name, from time to time
in the Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute
and deliver any and all documents and instruments which the Agent may
deem necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing, hereby
gives the Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of such
Grantor or in its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by the Agent for the purpose of collecting
any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and
all such moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or
threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs
thereof; and
(iii) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to the
Agent or as the Agent shall direct; (B) to receive payment of
and receipt for any and all moneys, claims and other amounts
due, and to become due at any time, in respect of or arising
out of any Collateral;
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(C) to sign and indorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications and notices in
connection with Accounts and other Documents constituting or
relating to the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Collateral or any
part thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral;
(F) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to
give such discharges or releases as the Agent may deem
appropriate; (G) to license or, to the extent permitted by an
applicable license, sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis,
any patent or trademark, throughout the world for such term or
terms, on such conditions, and in such manner, as the Agent
shall in its sole discretion determine; and (H) generally to
sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof
for all purposes, and to do, at the Agent's option and such
Grantor's expense, at any time, or from time to time, all acts
and things which the Agent reasonably deems necessary to
protect, preserve or realize upon the Collateral and the
Agent's and the Lenders' Lien therein, in order to effect the
intent of this Agreement, all as fully and effectively as such
Grantor might do.
(b) The Agent agrees that, except upon the occurrence and
during the continuance of an Event of Default, it will forbear from
exercising the power of attorney or any rights granted to the Agent
pursuant to this Section 6. Each Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do or cause
to be done by virtue hereof. The power of attorney granted pursuant to
this Section 6, being coupled with an interest, shall be
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irrevocable until the Obligations are indefeasibly paid
in full.
(c) The powers conferred on the Agent hereunder are solely to
protect the Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The
Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers and neither it nor any of
its officers, directors, employees or agents shall be responsible to
any Grantor for any act or failure to act, except for its own gross
negligence or willful misconduct.
(d) Each Grantor also authorizes the Agent, at any time and
from time to time upon the occurrence and during the continuance of an
Event of Default, (i) to communicate in its own name with any party to
any Contract with regard to the assignment of the right, title and
interest of such Grantor in and under the Contracts hereunder and other
matters relating thereto and (ii) to execute, in connection with the
sale provided for in Section 8 hereof, any indorsements, assignments or
other instruments of conveyance or transfer with respect to the
Collateral.
7. PERFORMANCE BY THE AGENT OF EACH GRANTOR'S OBLIGATIONS. If
any Grantor fails to perform or comply with any of its agreements contained
herein and the Agent, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the reasonable expenses of the Agent incurred in connection with
such performance or compliance, together with interest thereon at the highest
rate then in effect in respect of the Loans, shall be payable by such Grantor to
the Agent on demand and shall constitute Obligations secured hereby.
8. REMEDIES, RIGHTS UPON AN EVENT OF DEFAULT.
(a) If an Event of Default shall occur and be continuing, the
Agent shall, at the request of the Majority Lenders, or may with the
consent of the Majority Lenders, exercise in addition to all other
rights and remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Obligations, all rights
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and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, each Grantor expressly agrees that in any
such event the Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon such Grantor or
any other Person (all and each of which demands, advertisements and/or
notices are hereby expressly waived to the maximum extent permitted by
the UCC and other applicable law), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at
public or private sale or sales, at any exchange or broker's board or
any of the Agent's offices or elsewhere at such prices as it may deem
best, for cash or on credit or for future delivery without assumption
of any credit risk. The Agent or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part
of said Collateral so sold, free of any right or equity of redemption,
which equity of redemption such Grantor hereby releases to the fullest
extent permitted by law. Each Grantor further agrees, at the Agent's
request to assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such
Grantor's premises or elsewhere. The Agent shall apply the net proceeds
of any such collection, recovery receipt, appropriation, realization or
sale, as provided in Section 8(d) hereof, each Grantor remaining liable
for any deficiency remaining unpaid after such application, and only
after so paying over such net proceeds and after the payment by the
Agent of any other amount required by any provision of law, including
Section 9-504(1)(c) of the UCC, need the Agent account for the surplus,
if any, to such Grantor. To the maximum extent permitted by applicable
law, each Grantor waives all claims, damages, and demands against the
Secured Parties arising out of the repossession, retention or sale of
the Collateral. Each Grantor agrees that the Agent need not give more
that ten days' notice of the time and place of any public sale or of
the time after which a private sale may take place and
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that such notice is reasonable notification of such matters. Each
Grantor shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all
amounts to which the Secured Parties are entitled, such Grantor also
being liable for the fees and expenses of any attorneys employed by the
Agent and the Lenders to collect such deficiency.
(b) Each Grantor also agrees to pay all costs of the Agent and
the Lenders, including, without limitation, attorneys' fees, incurred
in connection with the enforcement of any of its rights and remedies
hereunder.
(c) Each Grantor hereby waives presentment, demand, protest or
any notice (to the maximum extent permitted by applicable law) of any
kind in connection with this Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by the
Agent in the following order of priorities:
First, to the payment of the costs and expenses of such sale,
including, without limitation, all expenses of the Agent and its agents
including the fees and expenses of its counsel, and all expenses,
liabilities and advances made or incurred by the Agent and the Lenders
in connection therewith or pursuant to Section 7 hereof;
Next, to the Lenders and the Agent, pro rata, for
the payment in full of the Obligations; and
Finally, after payment in full of all the Obligations, to the
payment to the Grantor of such Collateral, or its successors or
assigns, or to whomsoever may be lawfully entitled to receive the same
as a court of competent jurisdiction may direct.
9. LIMITATION ON THE SECURED PARTIES' DUTY IN RESPECT OF
COLLATERAL. No Secured Party shall have any duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against
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prior parties or any other rights pertaining thereto, except that each Secured
Party shall use reasonable care with respect to the Collateral in its possession
or under its control. Upon request of the relevant Grantor, the Agent shall
account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
10. NOTICES. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telex, telecopy, or
cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered by hand, if to any Grantor, addressed to it at the address indicated
on the signature pages hereto, and if to any Secured Party, addressed to it at
the address of such Secured Party specified in the Credit Agreement, or, as to
each party, at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or delivered, be effective when
deposited in the mails, delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation or receipt, delivered to the cable
company, or delivered by hand to the addressee or its agent, respectively.
11. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement nor consent to any departure by any Grantor therefrom shall in
any event be effective unless the same shall be in writing, approved by the
Majority Lenders (except where under Section 10.1 of the Credit Agreement, the
approval of each Lender is required) and signed by the Agent, and then any such
waiver or consent shall only be effective in the specific instance and for the
specific purpose for which given.
12. NO WAIVER; REMEDIES. (a) No failure on the part of any
Secured Party to exercise, and no delay in exercising any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative, may be
exercised singly or concurrently, and are not exclusive of any remedies provided
by law or any of the other Loan Documents.
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(b) Failure by any of the Secured Parties at any time or times
hereafter to require strict performance by any Grantor or any other Person of
any of the provisions, warranties, terms or conditions contained in any of the
Loan Documents now or at any time or times hereafter executed by such Grantor or
any such other Person and delivered to any of the Secured Parties shall not
waive, affect or diminish any right of any of the Secured Parties at any time or
times hereafter to demand strict performance thereof, and such right shall not
be deemed to have been modified or waived by any course of conduct or knowledge
of any of the Secured Parties, or any agent, officer or employee of any Secured
Party.
13. SUCCESSORS AND ASSIGNS. This Agreement and all obligations
of each Grantor hereunder shall be binding upon the successors and assigns of
such Grantor, and shall, together with the rights and remedies of the Agent here
under, inure to the benefit of the Agent, the Lenders, and their respective
successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the law of the State of New York.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions of this Agreement.
15. WAIVER OF JURY TRIAL. Each Grantor waives any right it may
have to trial by jury in any action or proceeding to enforce or defend any
rights or remedies hereunder, under the Credit Agreement or under any of the
other Loan Documents or any other document relating to any of the foregoing.
16. FURTHER INDEMNIFICATION. Each Grantor agrees to pay, and
to save the Agent and each Lender harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all excise, sales or
other similar taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
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17. SECTION TITLES. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of this Agreement.
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to
be executed and delivered by its duly authorized officer on the date first above
written.
Address: THE XXXXX-XXXXXXX STORES CORP.
By:_________________________
Title:
Address: THE BEE-GEE SHOE CORP.
By: ________________________
Title:
Address: THE EL-BEE CHARGIT CORP.
By:_________________________
Title:
Accepted and acknowledged by:
CITICORP USA, INC., as Agent
By:
----------------------
Title:
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SCHEDULE I TO SECURITY AGREEMENT
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FILINGS
JURISDICTION FILING OFFICE
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29
SCHEDULE II
SCHEDULE II TO SECURITY AGREEMENT
LOCATION OF RECORDS AND CERTAIN COLLATERAL
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Principal Place of
Business and
Location of Records
--------------------
Location of
Inventory
and Equipment
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