SECURITY AGREEMENT
EXHIBIT
10.4
SECURITY
AGREEMENT, dated July 30, 2010, made by Frederick’s of Hollywood Group Inc., a
New York corporation (“Grantor”), FOH
Holdings, Inc., a Delaware corporation (the “Parent”), Frederick’s
of Hollywood, Inc., a Delaware corporation (“Frederick’s”),
Frederick’s of Hollywood Stores, Inc., a Nevada corporation (“Stores”), Hollywood
Mail Order, LLC, a Nevada limited liability company (“Mail Order” and
together with Grantor, the Parent, Frederick’s and Stores, individually, a
“Borrower”, and
collectively, the “Borrowers”), in favor
of Hilco Brands, LLC, a Delaware limited liability company, as arranger and
agent for the Lenders (as defined below) party to the Financing Agreement
referred to below (in such capacity, the “Agent”).
WITNESSETH:
WHEREAS,
Grantor, the Borrowers, the lenders from time to time party thereto
(collectively, the “Lenders”) and the
Agent are parties to a Financing Agreement also dated as of this date (as the
same may be amended, restated or otherwise modified from time to time, being
hereinafter referred to as the “Financing
Agreement”);
WHEREAS,
pursuant to the Financing Agreement, the Lenders have agreed to make certain a
certain term loan in the original principal amount of Seven Million Dollars
($7,000,000.00) to the Borrowers (the “Loan”);
WHEREAS,
it is a condition precedent to the making of the Loan pursuant to the Financing
Agreement that Grantor shall have executed and delivered to the Agent a security
agreement providing for the grant to the Agent, for the benefit of the Lenders,
of a security interest in all tangible and intangible personal property and
fixtures of Grantor and the other Borrowers;
WHEREAS,
the Borrowers are mutually dependent on each other in the conduct of their
respective businesses as an integrated operation, with the credit needed from
time to time by Grantor often being provided through financing obtained by the
other Borrowers and the ability to obtain such financing being dependent on the
successful operations of all of the Borrowers as a whole;
WHEREAS,
simultaneously with the execution of this Agreement, Agent and Xxxxx Fargo
Retail Finance II, LLC have entered into an Intercreditor Agreement, dated as of
the Effective Date (the “Intercreditor
Agreement”), that has been acknowledged by the Grantor and the other
Borrowers; and
WHEREAS,
Grantor has determined that the execution, delivery and performance of this
Agreement directly benefit, and are in the best interest of, Grantor and the
other Borrowers.
NOW,
THEREFORE, in consideration of the premises and the agreements herein and in
order to induce the Lenders to make and maintain the Loan pursuant to the
Financing Agreement, Grantor and the other Borrowers hereby agree with the Agent
as follows:
SECTION
1. Definitions.
(a) Reference
is hereby made to the Financing Agreement for a statement of the terms
thereof. All terms used in this Agreement which are defined in the
Financing Agreement or in Article 9 of the Uniform Commercial Code (the “Code”) as in effect
from time to time in the State of New York and which are not otherwise defined
herein shall have the same meanings herein as set forth therein.
(b) The
following terms shall have the respective meanings provided for in the
Code: “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort
Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”,
“Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”,
“Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”,
“Record”, “Security Account”, “Software”, and “Supporting
Obligations.”
(c) As
used in this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular and
plural forms of such terms:
“Books” means all
books and records, including all Records indicating, summarizing or evidencing
assets (including the Collateral) or liabilities, all Records relating to a
Person’s business operations or financial condition, and all goods and General
Intangibles related to such information.
“Copyright Licenses”
means all licenses, contracts or other agreements, whether written or oral,
naming Grantor and any other Borrower as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
“Copyrights” means all
domestic and foreign copyrights, whether registered or unregistered, including,
without limitation, all copyright rights throughout the universe (whether now or
hereafter arising) in any and all media (whether now or hereafter developed), in
and to all original works of authorship fixed in any tangible medium of
expression, now or hereafter owned, acquired, created or used by Grantor or any
other Borrower (including, without limitation, all copyrights described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), all
reissues and extensions or renewals thereof, all income, royalties, damages and
payments now and hereafter due or payable or both with respect to the foregoing,
including, without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, all rights to xxx for past, present
and future infringements or misappropriations thereof, and all other rights
corresponding thereto throughout the world.
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“Customer Records”
means all customer lists, formulae, Website Collateral and other Records of
Grantor and the other Borrowers relating to the distribution of products and
services in connection with which any of such Trademarks are used.
“Domain Names” means
xxxxxxxxxx.xxx or any other Internet domain name by which customers of Grantor
or any other Borrower may access an Internet website through which Grantor or
any other Borrower conducts business.
“Hosting Agent” means
any Person engaged to host or maintain any Website Collateral.
“Hosting Agreement”
means any agreement between Grantor and/or any other Borrower and any Hosting
Agent.
“Intellectual
Property” means the Copyrights, Patents and Trademarks.
“Licenses” means (a)
the Copyright Licenses, the Trademark Licenses and the Patent Licenses, and all
other license agreements and covenants not to xxx with any other party with
respect to any Patent, Trademark, or Copyright, along with any and all (i)
renewals, extensions, supplements and continuations thereof, (ii) income,
royalties, damages, claims and payments now and hereafter due and/or payable to
Grantor or any other Borrower with respect thereto, including, without
limitation, the right to recover any damages and payments for past, present and
future breaches thereof, (iii) rights to xxx for past, present and future
breaches thereof and (iv) other rights to use, exploit or practice any or all of
the Patents, Trademarks or Copyrights throughout the world, in each case whether
now owned or hereafter acquired by Grantor or any other Borrower, and (b) the
Hosting Agreement and any other agreement relating to the Website Collateral or
any Website, or both.
“Patent Licenses”
means all licenses, contracts or other agreements, whether written or oral,
naming Grantor or any other Borrower as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).
“Patents” means all
domestic and foreign letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how, formulae, rights of
publicity and other general intangibles of like nature, now hereafter owned,
acquired or used by Grantor or any other Borrower (including, without
limitation, all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how
and formulae described in Schedule II hereto), all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office,
or in any similar office or agency of the United States or any other country or
any political subdivision thereof), all reissues, divisions, continuations,
continuations-in–part, extensions, renewals and reexaminations thereof, all
income, royalties, damages and payments now and hereafter due or payable or both
with respect to the foregoing, including, without limitation, damages and
payments for past, present or future infringements or misappropriations thereof,
all rights to xxx for past, present and future infringements or
misappropriations thereof, and all other rights corresponding thereto throughout
the world.
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“Trademark Licenses”
means all licenses, contracts or other agreements, whether written or oral,
naming Grantor or any other Borrower as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by Grantor or any other Borrower and now or
hereafter covered by such licenses (including, without limitation, all Trademark
Licenses described in Schedule II hereto).
“Trademarks” means all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, corporate names, business names, d/b/a’s, fictitious names,
alternate names, Domain Names and other Internet domain names, trade dress,
trade styles, designs, logos and other source or business identifiers and all
general intangibles of like nature, now or hereafter owned, adopted, created,
acquired or used by Grantor or any other Borrower (including, without
limitation, all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, corporate names, business names,
d/b/a’s, fictitious names, alternate names, Internet domain names, trade dress,
trade styles, designs, logos and other source or business identifiers described
in Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with the entire product lines and goodwill of the business connected with and
symbolized by the foregoing, all income, royalties, damages and payments now and
hereafter due or payable or both with respect to the foregoing, including,
without limitation, damages and payments for past, present or future
infringements or misappropriations thereof, all rights to xxx for past, present
and future infringements or misappropriations thereof, and all other rights
corresponding thereto throughout the world, and all Customer
Records.
“Website” means an
Internet website accessible through a Domain Name, as may be modified from time
to time.
“Website Collateral”
means all data and content maintained by all Hosting Agents pursuant to the
Hosting Agreement or any other similar agreement with any other
Person.
SECTION
2. Grant of Security
Interest. As collateral security for all of the Obligations
(as defined in Section 3 hereof), Grantor and the other Borrowers hereby pledge
and grant to the Agent, for the benefit of the Lenders, a continuing security
interest in all of the tangible and intangible personal property and Fixtures of
Grantor and the other Borrowers, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, of every kind and
description, tangible or intangible (the “Collateral”),
including, without limitation, the following:
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(a) all
Accounts;
(b) all
Chattel Paper (whether tangible or electronic);
(c) the
Commercial Tort Claims specified on Schedule VI hereto;
(d) all
Deposit Accounts, all cash, and all other property from time to time deposited
therein and the monies and property in the possession or under the control of
the Agent, any Lender or any Subordinated Lender, or any affiliate,
representative, agent or correspondent of the Agent, such Lender or such
Subordinated Lender;
(e) all
Documents;
(f) all
Equipment;
(g) all
Fixtures;
(h) all
General Intangibles (including, without limitation, all Payment
Intangibles);
(i) all
Goods;
(j) all
Instruments (including, without limitation, Promissory Notes);
(k) all
Inventory;
(l) all
Investment Property;
(m) all
Intellectual Property and all Licenses;
(n) all
Leases;
(o) all
Letter-of-Credit Rights;
(p) all
Supporting Obligations;
(q) all
other tangible and intangible personal property of Grantor and the other
Borrowers (whether or not subject to the Code), including, without limitation,
all bank and other accounts and all cash and all investments therein, all
proceeds, products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of Grantor and the
other Borrowers described in the preceding clauses of this Section 2 (including,
without limitation, any proceeds of insurance thereon and all causes of action,
claims and warranties now or hereafter held by Grantor or any other Borrower in
respect of any of the items listed above), and all Books, correspondence, files
and other Records, including, without limitation, all tapes, desks, cards,
Software, data and computer programs in the possession or under the control of
Grantor, any other Borrower or any other Person from time to time acting for
Grantor or any other Borrower that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
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(r) all
Proceeds, including all Cash Proceeds and Noncash Proceeds, including, without
limitation, instruments representing obligations to pay amounts in respect of
any Patents, Trademarks, Copyrights or Licenses, and products of any and all of
the foregoing Collateral;
in each
case howsoever Grantor’s or any Borrower’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION
3. Security for
Obligations. This Security Agreement is intended to grant to
the Agent, on behalf of the Lenders, a first priority lien on and security
interest in all of the Grantor’s Intellectual Property and Licenses, and a
second priority lien on and security interest in all
of the other Collateral as continuing collateral security for all of
the following obligations, in each case subject to Permitted Liens, whether now
existing or hereafter incurred (the “Obligations”):
(a) the
prompt payment or satisfaction by each Borrower, as and when due and payable (by
scheduled maturity, required prepayment, acceleration, demand or otherwise), of
all Obligations (as defined in the Financing Agreement), including, without
limitation, (i) principal of and interest on the Loan (including, without
limitation, all interest that accrues after the commencement of any Insolvency
Proceeding of any Borrower, whether or not the payment of such interest is
unenforceable or is not allowable due to the existence of such Insolvency
Proceeding) and (ii) all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any Loan
Document; and
(b) the
due performance and observance by each Borrower of all of its other obligations
from time to time existing in respect of the Loan Documents.
SECTION
4. Representations and
Warranties. Grantor and each of the other Borrowers, jointly
and severally, represents and warrants as follows:
(a)
Schedule I hereto sets forth (i) the exact legal name of Grantor and each
Borrower, and (ii) the organizational identification number of Grantor and each
Borrower or states that no such organizational identification number
exists.
(b) Each
of Grantor and the other Borrowers (i) is a corporation, duly organized, validly
existing and in good standing under the laws of the state or jurisdiction of its
organization as set forth on Schedule I hereto, (ii) has all requisite power and
authority to execute, deliver and perform this Agreement and each other Loan
Document to be executed and delivered by it pursuant hereto and to consummate
the transactions contemplated hereby and thereby, and (iii) is duly qualified to
do business and is in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be
qualified or in good standing could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
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(c) The
execution, delivery and performance by Grantor and the other Borrowers of this
Agreement and each other Loan Document to which Grantor or any other Borrower is
a party or will be a party (i) have been duly authorized by all necessary
action, (ii) do not and will not contravene its charter or
by-laws, or any applicable law or any contractual restriction binding
on or otherwise affecting Grantor or any other Borrower or any of their
respective properties, (iii) do not and will not result in or require the
creation of any Lien, security interest or other charge or encumbrance upon or
with respect to any of their properties, and (iv) do not and will not result in
any default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to it or
the operations or any of its properties, except where such default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
(d) This
Agreement is, and each other Loan Document to which Grantor or any other
Borrower is or will be a party, when executed and delivered pursuant hereto,
will be, a legal, valid and binding obligation of Grantor and each other
Borrower that is a party thereto, enforceable against Grantor or such other
Borrower in accordance with its terms.
(e) There
is no pending or, to the knowledge of Grantor or any other Borrower, threatened
action, suit, proceeding or claim before any Governmental Authority or any
arbitrator, or any order, judgment or award by any Governmental Authority or
arbitrator, that may adversely affect the grant by Grantor or any other
Borrower, or the perfection, of the security interest purported to be created
hereby in the Collateral, or the exercise by the Agent of any of its rights or
remedies hereunder.
(f) All
taxes, assessments and other governmental charges imposed upon Grantor or any
other Borrower or any property of Grantor or any other Borrower (including,
without limitation, all federal income and social security taxes on employees’
wages) and which have become due and payable on or prior to the date hereof have
been paid, except to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or Lien resulting from the
non-payment thereof and with respect to which adequate reserves have been set
aside for the payment thereof in accordance with GAAP.
(g) All
Equipment, Fixtures, Goods and Inventory now existing are, and all Equipment,
Fixtures, Goods and Inventory hereafter existing will be, located at the
addresses specified therefor in Schedule III hereto. The chief places
of business and chief executive offices of Grantor and each other Borrower, the
place where Grantor and each other Borrower keep their respective Books and
Records concerning Accounts and all originals of all Chattel Paper are located
at the addresses specified therefor in Schedule III hereto. None of
the Accounts are evidenced by a Promissory Note or other
Instrument. Set forth in Schedule II hereto is (i) a complete and
correct list of each trade name used by Grantor and each other Borrower and (ii)
the name of, and each trade name used by, each person from which Grantor or any
other Borrower has acquired any substantial part of the Collateral.
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(h)
Grantor has delivered to the Agent complete and correct copies of each License
described in Schedule II hereto, including all schedules and exhibits thereto,
which represents all of the Licenses existing on the date of this
Agreement. Each such License sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of Grantor or any other
Borrower or any of their Affiliates in respect thereof. Each License
now existing is, and each other License will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms. No default thereunder by any such party
has occurred, nor does any defense, offset, deduction or counterclaim exist
thereunder in favor of any such party, except where such default, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(i)
Grantor and/or the other Borrowers own and control, or otherwise possess
adequate rights to use, all Trademarks, Patents and Copyrights, which are the
only trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity and/or other
intellectual property rights necessary to conduct their respective businesses in
substantially the same manner as conducted as of the date
hereof. Schedule II hereto sets forth a true and complete list of all
Intellectual Property and Licenses owned or used by Grantor and/or the other
Borrowers as of the date hereof. All of such Trademarks, Patents and
Copyrights are subsisting and in full force and effect, have not been adjudged
invalid or unenforceable, are valid and enforceable and have not been abandoned
in whole or in part. Except as set forth in Schedule II, none of such
Intellectual Property is the subject of any licensing or franchising
agreement. Neither Grantor nor any other Borrower has any knowledge
of any conflict with the rights of others to any Intellectual Property and, to
the best knowledge of Grantor and each other Borrower, is not now infringing or
in conflict with any such rights of others in any material respect, and to the
best knowledge of Grantor and each other Borrower, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by Grantor or any other
Borrower. Neither Grantor nor any other Borrower has received any
notice that it is violating or has violated the trademarks, patents, copyrights,
inventions, trade secrets, proprietary information and technology, know-how,
formulae, rights of publicity or other intellectual property rights of any third
party. All Equipment, including, without limitation, computers,
servers, modems, monitors, printers, plotters, or memory storage devices, used
in connection with the creation, design, maintenance or operation of the
Websites (the “Related
Equipment”) is owned by Grantor or another Borrower, except as otherwise
set forth on Schedule III attached hereto. All information
heretofore, herein or hereafter supplied to the Agent by or on behalf of Grantor
and the other Borrowers with respect to the Intellectual Property and/or the
Licenses is accurate and complete in all material respects.
(j)
Grantor and each other Borrower is and will be at all times the sole and
exclusive owner of, or otherwise have and will have adequate rights in, the
Collateral free and clear of any Lien except for (i) the Liens created by
this Agreement and (ii) Permitted Liens, except that any such Permitted
Lien that covers any Intellectual Property, Licenses or Proceeds of the
foregoing is junior and subordinate of the Agent’s Lien therein. No
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording or filing office
except (A) such as may have been filed in favor of the Agent relating to
this Agreement and (B) such as may have been filed to perfect or protect
any Permitted Liens.
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(k) The
exercise by the Agent of any of its rights and remedies hereunder will not
contravene any law or any contractual restriction binding on or otherwise
affecting Grantor or any other Borrower or any of their respective properties
and will not result in or require the creation of any Lien upon or with respect
to any of their respective properties.
(l)
Subject to the provisions of the Intercreditor and Subordination Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority or other regulatory body, or any other Person, is
required for (i) the grant by Grantor and the other Borrowers, or the
perfection, of the security interest purported to be created hereby in the
Collateral or (ii) the exercise by the Agent of any of its rights and
remedies hereunder, except (A) for the filing under the Uniform Commercial
Code as in effect in the applicable jurisdiction of the financing statements
described in Schedule V hereto, all of which financing statements have been duly
filed and are in full force and effect, (B) with respect to the perfection
of the security interest created hereby in the United States Intellectual
Property, for the recording of the appropriate Agreement for Security,
substantially in the form of Exhibit A hereto, in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable,
(C) with respect to the perfection of the security interest created hereby
in foreign Intellectual Property and Licenses, for registrations and filings in
jurisdictions located outside of the United States and covering rights in such
jurisdictions relating to the Intellectual Property and Licenses, and/or
(D) the taking possession of all Documents, Chattel Paper, Instruments and
cash constituting Collateral.
(m) This
Agreement creates in favor of the Agent, for the benefit of the Lenders, a
legal, valid and enforceable security interest in the Collateral, as security
for the Obligations. The recording of the Agreements for Security
executed pursuant hereto in the United States Patent and Trademark Office and
the United States Copyright Office, as applicable, and the filing of the
financing statements described in Schedule V hereto and, with respect to
Intellectual Property hereafter existing and not covered by an Agreement for
Security, the recording in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, of appropriate instruments,
result in the perfection of such security interests. Such security
interests are, or in the case of Collateral in which Grantor or any other
Borrower obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to the Permitted Liens
(except that any such Permitted Lien that covers any Intellectual Property,
Licenses or Proceeds of the foregoing shall be junior and subordinate to the
Agent’s Lien therein) and the recording of such instruments. Such
recordings and filings and all other actions necessary or desirable to perfect
and protect such security interest have been duly taken, except for (i) the
Agent’s having possession of Documents, Chattel Paper, Instruments and cash
constituting Collateral after the date hereof, and (ii) and the other filings
and recordations described in Section 4(l) hereof.
(n)
Neither Grantor nor any other Borrower have any Commercial Tort Claims and is
not aware of any such pending claims, except for such claims described in
Schedule VI.
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SECTION
5. Covenants as to the
Collateral. Subject to the provisions of the Intercreditor
Agreement, so long as any principal of or interest on the Loan or any other
Obligation (whether or not due) shall remain unpaid unless the Agent shall
otherwise consent in writing:
(a) Further
Assurances. Grantor and the other Borrowers will at their
expense, at any time and from time to time, promptly execute and deliver all
further instruments and documents and take all further action that may be
necessary or desirable or that the Agent may request in order (i) to
perfect and protect the security interest purported to be created hereby;
(ii) to enable the Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without
limitation: (A) marking conspicuously each License and, at the
request of the Agent, each of their Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Agent, indicating that such
License or Collateral is subject to the security interest created hereby,
(B) if any Account shall be evidenced by a Promissory Note or other
Instrument, in a face amount exceeding $10,000, delivering and pledging to the
Agent hereunder such Promissory Note, Instrument or Chattel Paper, duly endorsed
and accompanied by executed instruments of transfer or assignment, all in form
and substance satisfactory to the Agent, (C) executing and filing (to the
extent, if any, that Grantor’s or any other Borrower’s signature is required
thereon) or authenticating the filing of, such financing or continuation
statements, or amendments thereto, as may be necessary or desirable or that the
Agent may request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the Agent from time to
time 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, (E) if any Collateral shall
be in the possession of a third party, notifying such Person of the Agent’s
security interest created hereby and obtaining a written acknowledgment from
such Person that such Person holds possession of the Collateral for the benefit
of the Agent, which such written acknowledgement shall be in form and substance
satisfactory to the Agent, (F) if at any time after the date hereof,
Grantor or any other Borrower acquires or holds any Commercial Tort Claim,
immediately notifying the Agent in a writing signed by Grantor setting forth a
brief description of such Commercial Tort Claim and granting to the Agent a
security interest therein and in the proceeds thereof, which writing shall
incorporate the provisions hereof and shall be in form and substance
satisfactory to the Agent, and (G) taking all actions required by any
earlier versions of the Uniform Commercial Code or by other law, as applicable,
in any relevant Uniform Commercial Code jurisdiction, or by other law as
applicable in any foreign jurisdiction.
(b) Location of Equipment and
Inventory. Grantor and the other Borrowers will keep the
Equipment and Inventory (other than used Equipment and Inventory sold in the
ordinary course of business) at the locations specified therefor in
Section 4(g) hereof or, (x) upon at least thirty (30) days’ prior written
notice to the Agent, (y) the delivery to the Agent of a new Schedule III hereto
indicating each new location of the Equipment and Inventory, and (z) at such
other locations in the continental United States as Grantor or another Borrower
may elect, provided that (i) all
action has been taken to grant to the Agent a perfected, second priority
security interest in such Equipment and Inventory (subject only to Permitted
Liens), and (ii) the Agent’s rights in such Equipment and Inventory, including,
without limitation, the existence, perfection and priority of the security
interest created hereby in such Equipment and Inventory, are not adversely
affected thereby.
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(c) Condition of
Equipment. Grantor and each other Borrower will maintain or
cause the Equipment to be maintained and preserved in good condition, repair and
working order as when acquired and in accordance with any manufacturer’s manual,
ordinary wear and tear excepted, and will forthwith, or in the case of any loss
or damage to any Equipment as quickly as practicable after the occurrence
thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or desirable,
consistent with past practice, or which the Agent may request to such
end. Grantor and/or each other Borrower will promptly furnish to the
Agent a statement describing in reasonable detail any loss or damage in excess
of $25,000 to any Equipment.
(d) Taxes,
Etc. Grantor and each other Borrower agree to pay promptly
when due all property and other taxes, assessments and governmental charges or
levies imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Equipment and Inventory, except to the extent the
validity thereof is being contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with GAAP.
(e) Insurance.
(i) Grantor
and each other Borrower will, at their own expense, maintain insurance in
accordance with Section 6.01(h) of the Financing Agreement and the other terms
and conditions of the Financing Agreement. Each policy for liability
insurance shall provide for all losses to be paid on behalf of the Agent and
Grantor (and/or the other Borrowers, as applicable), as their respective
interests may appear, and each policy for property damage insurance shall
provide for all losses to be adjusted with, and paid directly to, the
Agent. Each such policy shall in addition (A) name Grantor (and/or
the other Borrowers, as applicable) and the Agent as insured parties thereunder
(without any representation or warranty by or obligation upon the Agent) as
their interests may appear, (B) contain an agreement by the insurer that any
loss thereunder shall be payable to the Agent on its own account notwithstanding
any action, inaction or breach of representation or warranty by Grantor or any
other Borrower, (C) provide that there shall be no recourse against the Agent
for payment of premiums or other amounts with respect thereto and (D) provide
that at least thirty (30) days’ prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Agent by the
insurer. Grantor and each other Borrower will, if so requested by the
Agent, deliver to the Agent original or duplicate policies of such insurance
and, as often as the Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Grantor and each
other Borrower will also, at the request of the Agent, execute and deliver
instruments of assignment of such insurance policies and cause the respective
insurers to acknowledge notice of such assignment.
11
(ii) All
insurance payments, including, without limitation, any reimbursements, made
under any liability insurance policy maintained by Grantor and/or the other
Borrower pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case
of any loss involving damage to Equipment or Inventory any proceeds of insurance
maintained by Grantor pursuant to this Section 5(e) shall, subject to any prior
payments to the holders of any Permitted Liens, be paid to the Agent as to which
paragraph (iii) of this Section 5(e) is not applicable, Grantor and each other
Borrower will make or cause to be made the necessary repairs to or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained by
Grantor or any other Borrower pursuant to this Section 5(e) shall be paid by the
Agent to Grantor as reimbursement for the costs of such repairs or
replacements.
(f) Provisions Concerning the
Accounts.
(i) Neither
Grantor nor any other Borrower shall, without the prior written consent of the
Agent, change (A) its name, identity or organizational structure or (B) its
jurisdiction of incorporation as set forth in Section 4(b)
hereto. Grantor and each other Borrower shall (x) immediately notify
the Agent upon obtaining an organizational identification number, if on the date
hereof Grantor did not have such identification number, and (y) keep adequate
records concerning the Accounts and Chattel Paper and permit representatives of
the Agent pursuant to the terms of the Financing Agreement to inspect and make
abstracts from such Records and Chattel Paper.
(ii) Grantor
and each other Borrower will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or
to become due under the Accounts. In connection with such
collections, Grantor and each other Borrower may (and, at the Agent’s direction,
will) take such action as Grantor, such Borrower or the Agent may deem necessary
or advisable to enforce collection or performance of the Accounts; provided, however, that,
subject to the prior rights of the holders of any Permitted Liens, the Agent
shall have the right at any time, upon the occurrence and during the continuance
of an Event of Default, to notify the Account Debtors or obligors under any
Accounts of the assignment of such Accounts to the Agent and to direct such
Account Debtors or obligors to make payment of all amounts due or to become due
to Grantor or such Borrower thereunder directly to the Agent or its designated
agent and, upon such notification and at the expense of Grantor or such Borrower
and to the extent permitted by law, to enforce collection of any such Accounts
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as Grantor or such Borrower might have
done. After receipt by Grantor or any other Borrower of a notice from
the Agent that the Agent has notified, intends to notify, or has enforced or
intends to enforce Grantor’s or any other Borrower’s rights against the Account
Debtors or obligors under any Accounts as referred to in the proviso to the
immediately preceding sentence, (A) all amounts and proceeds (including
Instruments) received by Grantor or any other Borrower in respect of the
Accounts shall, subject to the prior rights of the holders of any Permitted
Liens: (i) be received in trust for the benefit of the Agent
hereunder, (ii) be segregated from other funds of Grantor or any other Borrower
and (iii) be forthwith paid over to the Agent, in the same form as so received
(with any necessary endorsement) to be held as cash collateral and, in any such
event, either (i) credited to the Loan Account so long as no Event of
Default shall have occurred and be continuing or (ii) if an Event of Default
shall have occurred and be continuing, applied as specified in Section 7(b)
hereof, and (B) subject to the prior rights of the holders of any Permitted
Liens, neither Grantor nor any other Borrower will adjust, settle or compromise
the amount or payment of any Account or release wholly or partly any Account
Debtor or obligor thereof or allow any credit or discount thereon. In
addition, upon the occurrence and during the continuance of an Event of Default,
subject to the prior rights of the holders of any Permitted Liens, the Agent may
(in its sole and absolute discretion) direct any or all of the banks and
financial institutions with which Grantor or any other Borrower either maintains
a Deposit Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Agent by wire transfer (to such account as the Agent shall
specify, or in such other manner as the Agent shall direct) all or a portion of
such securities, cash, investments and other items held by such
institution. Subject to the prior rights of the holders of any
Permitted Liens, any such securities, cash, investments and other items so
received by the Agent shall (in the sole and absolute discretion of the Agent)
be held as additional Collateral for the Obligations or distributed in
accordance with Section 7 hereof.
12
(g) Provisions Concerning the
Licenses.
(i) Grantor
and each other Borrower will promptly notify the Agent in writing if Grantor or
such Borrower reasonably believe that : (A) any party to a License
other than Grantor or such Borrower is in breach or default of its obligations
under such License; or (B) Grantor or such Borrower has a claim against any
other party to a License; or (C) any party to a License has a claim against
Grantor or any other Borrower. Upon the occurrence and during the
continuance of any breach or default under any License by any party thereto
other than Grantor or any other Borrower, (A) Grantor or such Borrower
will, promptly after obtaining knowledge thereof, give the Agent written notice
of the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto, (B) neither Grantor nor any other
Borrower will, without the prior written consent of the Agent, declare or waive
any such breach or default or affirmatively consent to the cure thereof or
exercise any of its remedies in respect thereof, and (C) Grantor and each other
Borrower will, upon written instructions from the Agent and at Grantor’s
expense, take such action as the Agent may deem necessary or advisable in
respect thereof.
(ii) Grantor
and each other Borrower will, at their expense, promptly deliver to the Agent a
copy of each notice or other communication received by it by which any other
party to any License purports to exercise any of its rights or affect any of its
obligations thereunder, together with a copy of any reply by Grantor or such
Borrower thereto.
(iii) Grantor
and each other Borrower will exercise promptly and diligently each and every
right which it may have under each License (other than any right of termination)
and will duly perform and observe in all respects all of its obligations under
each License and will take all actions necessary to maintain the Licenses in
full force and effect. Neither Grantor nor any other Borrower will
enter into any new License without the prior written consent of the
Agent. Neither Grantor nor any other Borrower will, without the prior
written consent of the Agent, cancel, terminate, amend or otherwise modify in
any respect, or waive any provision of, any License. If any License
is subject to renewal, Grantor and/or the other Borrowers shall give the Agent
written notice of its intentions regarding such renewal at least ninety (90)
days prior to the renewal date.
13
(h) Transfers and Other
Liens.
(i) Except
to the extent expressly permitted by this Agreement or the Financing Agreement,
neither Grantor nor any other Borrower will sell, assign (by operation of law or
otherwise), lease, rent, license, exchange or otherwise transfer or dispose of
any of the Collateral.
(ii) Except
to the extent expressly permitted by this Agreement or the Financing Agreement,
neither Grantor nor any other Borrower will create, suffer to exist or grant any
Lien upon or with respect to any Collateral.
(iii) Except
to the extent expressly permitted by this Agreement or the Financing Agreement,
neither Grantor nor any other Borrower will sell, assign (by operation of law or
otherwise), lease, rent, license, exchange, otherwise transfer or dispose of, or
provide any third party with a copy of or access to any Customer
Records.
(i) Intellectual
Property.
(i) If
applicable, Grantor and each other Borrower has duly executed and delivered the
applicable Agreement for Security in the form attached hereto as Exhibit
A. Grantor and each other Borrower (either itself or through
licensees) will, and will cause each licensee thereof to, take all action
necessary to maintain all of the Intellectual Property in full force and effect,
including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to
so maintain the Trademarks in full force, free from any claim of abandonment for
non-use, and neither Grantor nor any other Borrower will (nor permit any
licensee thereof to) take any act or knowingly omit to take any act whereby any
Intellectual Property may be abandoned or cancelled or otherwise become
invalidated; provided, however, that so long
as no Event of Default has occurred and is continuing, neither Grantor nor any
other Borrower shall have any obligation to use or to maintain any Intellectual
Property (A) that relates solely to any product or work, that has been, or
is in the process of being, discontinued, abandoned or terminated, (B) that is
being replaced with Intellectual Property substantially similar to the
Intellectual Property that may be abandoned, cancelled or otherwise become
invalid, so long as the failure to use or maintain such Intellectual Property
does not materially adversely affect the validity of such replacement
Intellectual Property and so long as such replacement Intellectual Property is
subject to the Lien and security interest created by this Agreement or (C) that
is substantially the same as other Intellectual Property that is in full force
and effect, so long as the failure to use or maintain such Intellectual Property
could not reasonably be expected to have a Material Adverse Effect or on the
validity of such replacement Intellectual Property and so long as such other
Intellectual Property is subject to the Lien and security interest created by
this Agreement.
(ii) If
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, Grantor and each other
Borrower shall (x) upon learning of such infringement, misappropriation,
dilution or other violation, promptly notify the Agent and (y) to the extent
Grantor or such other Borrower shall deem appropriate under the circumstances,
promptly xxx for infringement, misappropriation, dilution or other violation,
seek injunctive relief where appropriate and recover any and all damages for
such infringement, misappropriation, dilution or other violation, or take such
other actions as Grantor or such other Borrower shall deem appropriate under the
circumstances to protect such Intellectual Property.
14
(iii) Grantor
shall furnish to the Agent from time to time (but, unless an Event of Default
has occurred and is continuing, no more frequently than quarterly) statements
and schedules further identifying and describing the Intellectual Property and
Licenses and such other reports in connection with the Intellectual Property and
Licenses as the Agent may reasonably request, all in reasonable detail and
promptly upon request of the Agent. Following receipt by the Agent of
any such statements, schedules or reports, Grantor and each other Borrower shall
modify this Agreement by amending Schedule II hereto, as the case may be, to
include any Intellectual Property and Licenses which become part of the
Collateral under this Agreement, and shall execute and authenticate such
documents and do such acts as shall be necessary or, in the judgment of the
Agent, desirable to subject such Intellectual Property and Licenses to the Lien
and security interest created by this Agreement.
(iv) Grantor
and each other Borrower will cause to be taken all necessary and appropriate
steps in any proceeding before the United States Patent and Trademark Office and
the United States Copyright Office or any similar office or agency in the United
States or any other country or political subdivision thereof to maintain each
registration of the Intellectual Property (other than the Intellectual Property
described in the proviso to the immediately preceding sentence), including,
without limitation, filing of renewals, affidavits or declarations of use,
affidavits or declarations of incontestability, opposition, interference and
cancellation proceedings, and payment of maintenance fees, filing fees, taxes
and/or other governmental fees. Notwithstanding anything herein to
the contrary, upon the occurrence and during the continuance of an Event of
Default, neither Grantor nor any other Borrower may abandon or otherwise permit
any Intellectual Property to become invalid without the prior written consent of
the Agent, and if any Intellectual Property is infringed, misappropriated,
diluted or otherwise violated in any material respect by a third party, Grantor
or another Borrower will take such action as the Agent shall deem appropriate
under the circumstances to protect such Intellectual Property.
(v) Grantor
and each other Borrower shall apply for registration of Intellectual Property to
the extent it deems necessary or advisable in its reasonable business judgment
as such Intellectual Property is created, adopted or used and diligently
prosecute such applications; provided, however, that in no
event shall Grantor or any other Borrower, either itself or through any agent,
employee, licensee or designee, file an application for the registration of any
Intellectual Property unless it gives the Agent prior written notice
thereof. Grantor and each other Borrower shall take such actions as
the Agent may request from time to time to perfect or continue the perfection of
the Lenders’ interest in the Intellectual Property. Upon request of
the Agent, Grantor and/or another Borrower, as appropriate, shall execute,
authenticate and deliver any and all agreements, instruments, documents and
papers as the Agent may reasonably request to evidence the Agent’s security
interest hereunder in such Intellectual Property and the General Intangibles of
Grantor and the other Borrowers relating thereto or represented thereby, and
each of Grantor and the other Borrowers hereby appoints the Agent their
attorney-in-fact to execute and/or authenticate and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed, and such power (being coupled with an interest) shall be irrevocable
until the termination of all Commitments, the repayment or satisfaction of all
of the Obligations in full and the termination of each of the Loan
Documents. Upon request of the Agent, Grantor and each other Borrower
shall provide the Agent with copies of all filings made with respect to any of
the Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office, and any similar office or agency of the
United States or any country or any political subdivision thereof.
15
(j) Inspection and
Reporting. Grantor and each other Borrower shall permit the
Agent, or any agents or representatives thereof or such professionals or other
Persons as the Agent may designate (i) to examine, inspect and make copies
of and abstracts from such Grantor’s and any other Borrower’s
records and books of account, (ii) to visit and inspect its
properties, (iii) to verify materials, leases, notes, Accounts, Inventory and
other assets of such Grantor or such other Borrower from time to time,
(iii) to conduct audits, physical counts, appraisals and/or valuations at
the locations of such Grantor , in each case as provided in the Financing
Agreement and (iv) to discuss the affairs, finances and accounts of the Grantor
or such other Borrower with any of its directors, officers, managerial
employees, independent accountants or any of its other
representatives.
(k) Websites and Website
Collateral. Grantor and each other Borrower will (i) maintain
its Websites in continuous operation, providing at least its current level of
functionality with respect to Grantor’s or such other Borrower’s business
operations, (ii) maintain the Website Collateral and Related Equipment at the
Hosting Agent’s premises and, notwithstanding anything herein to the contrary,
obtain the Agent’s prior written consent prior to any removal from or change in
such location, (iii) permit the Agent, and cause the Hosting Agent to permit the
Agent, to inspect such Website Collateral and Related Equipment at any time,
(iv) promptly upon request by the Agent, cause the administrative contact for
the Domain Names to be changed to a person designated by the Agent, and not
permit any other change or revision in such information without the prior
written consent of the Agent, (v) maintain with the records of the applicable
domain name registrar a billing contact who has a position within Grantor or
another Borrower and has actual responsibility for taking whatever action is
necessary for the maintenance of such Domain Names, (vi) pay all fees and
charges required for the maintenance of such Domain Names at least thirty (30)
days before any such fee or charge is due, and (vii) not obtain any License,
whether of Software or Intellectual Property, for use in connection with any of
the Websites, without the prior written consent of the Agent. Grantor
and each other Borrower shall furnish to the Agent, promptly upon request, (A) a
waiver and consent agreement executed by the Hosting Agent in connection with
the Website Collateral, such waiver and consent to be in such form and upon such
terms as are acceptable to the Agent, and (B) an executed Registrant Name Change
Agreement (or such other document required by the applicable domain name
registrar in connection with the change of registrant for a Domain Name)
providing for the naming of the Agent as registrant for each of the Domain
Names, to be held in escrow by the Agent until the occurrence of an Event of
Default.
16
SECTION
6. Additional Provisions
Concerning the Collateral.
(a) Grantor
and each other Borrower hereby (i) authorizes the Agent to file, one or
more financing or continuation statements, and amendments thereto (which may
identify the collateral as all assets of Grantor and all other Borrowers (or
words of similar effect) or as being of an equal or lesser scope or with greater
detail), relating to the Collateral and (ii) ratifies such authorization to
the extent that the Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(b) Grantor
and each other Borrower hereby irrevocably appoints the Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of
Grantor and such other Borrowers and their names or otherwise, from time to time
in the Agent’s discretion, to take any action and to execute any instrument
which the Agent may deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of Grantor and the other Borrowers under
Section 5 hereof), including, without limitation, (i) to obtain and adjust
insurance required to be paid to the Agent pursuant to Section 5(e) hereof, (ii)
to ask, demand, collect, xxx for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any Collateral, (iii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) or (ii)
above, (iv) to file any claims or take any action or institute any proceedings
which the Agent may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Agent and the Lenders with
respect to any Collateral, and (v) to execute assignments, licenses and other
documents to enforce the rights of the Agent and the Lenders with respect to any
Collateral. This power is coupled with an interest and is irrevocable
until all of the Obligations are paid in full after the termination of the
Financing Agreement and the other Loan Documents.
(c) For
the purpose of enabling the Agent to exercise rights and remedies hereunder, at
such time as the Agent shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, Grantor and each other Borrower hereby
grants to the Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to Grantor
or any other Borrower) to use, assign, license or sublicense any of the
Intellectual Property and/or Licenses now owned or hereafter acquired by Grantor
any other Borrower, wherever the same may be located, 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 programs used for the compilation or
printout thereof. Notwithstanding anything contained herein to the
contrary, but subject to the provisions of the Financing Agreement that limit
the right of Grantor or any other Borrower to dispose of its property and
Sections 5(g), (h) and (i) hereof, so long as no Event of Default shall have
occurred and be continuing, Grantor and the other Borrowers may exploit, use,
enjoy or protect the Intellectual Property and Licenses in the ordinary course
of its business. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Agent shall from time to
time, upon the request of Grantor, execute and deliver any instruments,
certificates or other documents, in the form reasonably requested, which Grantor
or any other Borrower shall have certified are appropriate (in Grantor’s or such
other Borrower’s judgment) to allow it to take any action permitted above
(including relinquishment of the license provided pursuant to this clause (c) as
to any Intellectual Property and/or Licenses). Further, upon the
payment or satisfaction in full of all of the Obligations after the termination
of the Financing Agreement and the other Loan Documents, the Agent (subject to
Section 11(e) hereof) shall release to Grantor or another Borrower, as
appropriate, all of the Agent’s right, title and interest in and to the
Intellectual Property and the Licenses, all without recourse, representation or
warranty whatsoever. The exercise of rights and remedies hereunder by
the Agent shall not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by Grantor or any other Borrower in accordance
with the second sentence of this clause (c). Grantor and each other
Borrower hereby release the Agent from any claims, causes of action and demands
at any time arising out of or with respect to any actions taken or omitted to be
taken by the Agent under the powers of attorney granted herein other than
actions taken or omitted to be taken through the Agent’s gross negligence or
willful misconduct, as determined by a final determination of a court of
competent jurisdiction.
17
(d) If
Grantor or any other Borrower fail to perform any agreement contained herein,
the Agent may itself perform, or cause performance of, such agreement or
obligation, in the name of Grantor or such other Borrower, and the expenses of
the Agent incurred in connection therewith shall be payable by Grantor or such
other Borrower pursuant to Section 8 hereof and shall be secured by the
Collateral.
(e) The
powers conferred on the Agent hereunder are solely to protect its interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(f) Anything
herein to the contrary notwithstanding (i) Grantor and the other Borrowers
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of their respective
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Agent of any of its rights hereunder
shall not release Grantor or any other Borrower from any of its obligations
under the Licenses or otherwise in respect of the Collateral, and (iii) the
Agent shall not have any obligation or liability by reason of this Agreement
under the Licenses or with respect to any of the other Collateral, nor shall the
Agent be obligated to perform any of the obligations or duties of Grantor or any
other Borrower thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
18
SECTION
7. Remedies Upon
Default. Subject to the provisions of the Intercreditor and
Subordination Agreement, if any Event of Default shall have occurred and be
continuing:
(a) The
Agent may exercise in respect of the Collateral, in addition to the other rights
and remedies provided for herein or otherwise available to it, all of the rights
and remedies of a secured party upon default under the Code (whether or not the
Code applies to the affected Collateral), and also may (i) take absolute
control of the Collateral, including, without limitation, transfer into the
Agent’s name or into the name of its nominee or nominees (to the extent the
Agent has not theretofore done so) and thereafter receive, for the benefit of
the Agent and the Lenders, all payments made thereon, give all consents, waivers
and ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof, (ii) require Grantor and the
other Borrowers to, and Grantor and the other Borrowers hereby agree that they
will at their expense and upon request of the Agent forthwith, assemble all or
part of the Collateral as directed by the Agent and make it available to the
Agent at a place or places to be designated by the Agent that is reasonably
convenient to both parties, and the Agent may enter into and occupy any premises
owned or leased by Grantor or any other Borrower where the Collateral or any
part thereof is located or assembled for a reasonable period in order to
effectuate the Agent’s rights and remedies hereunder or under law, without
obligation to Grantor or any other Borrower in respect of such occupation, and
(iii) without notice except as specified below and without any obligation
to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of the Agent’s offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Agent may deem commercially reasonable,
expressly including, without limitation, to the Agent or the Lenders (or any of
them) pursuant to a credit bid for the amount then outstanding under the Loan
and/or (B) lease, license or dispose of the Collateral or any part thereof
upon such terms as the Agent may deem commercially
reasonable. Grantor and the other Borrowers agree that, to the extent
notice of sale or any other disposition of the Collateral shall be required by
law, at least five (5) days’ notice to Grantor and the other Borrowers of the
time and place of any public sale or the time after which any private sale or
other disposition of the Collateral is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale or
other disposition of Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Grantor and the other Borrowers hereby waive any claims
against the Agent and the Lenders arising by reason of the fact that the price
at which the Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Agent accepts the first offer
received and does not offer the Collateral to more than one offeree, and waive
all rights that Grantor and/or the other Borrowers may have to require that all
or any part of the Collateral be marshalled upon any sale (public or private)
thereof. Grantor and the other Borrowers hereby acknowledge that
(i) any such sale of the Collateral by the Agent shall be made without
warranty, (ii) the Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth
in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of the Collateral. In addition to the
foregoing, (i) upon written notice to Grantor and the other Borrowers from
the Agent, Grantor and the other Borrowers shall cease any use of the
Intellectual Property or any trademark, patent or copyright similar thereto for
any purpose described in such notice; (ii) the Agent may, at any time and from
time to time, upon five (5) days’ prior notice to Grantor and the other
Borrowers, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Agent shall in its sole discretion determine; and (iii) the Agent may, at
any time, pursuant to the authority granted in Section 6 hereof (such authority
being effective upon the occurrence and during the continuance of an Event of
Default) execute and deliver, on behalf of Grantor and/or any other Borrower,
one or more instruments of assignment of the Intellectual Property (or any
application or registration thereof), in form suitable for filing, recording or
registration in any country.
19
(b) Any
cash held by the Agent as Collateral and all Cash Proceeds received by the Agent
in respect of any sale of or collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Agent, be held by the
Agent as collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Agent pursuant to Section 8 hereof) in
whole or in part by the Agent against, all or any part of the Obligations in
such order as the Agent shall elect, consistent with the provisions of the
Financing Agreement. Any surplus of such cash or Cash Proceeds held
by the Agent and remaining after payment or satisfaction in full of all of the
Obligations after the termination of the Financing Agreement and the other Loan
Documents shall be paid over to whomsoever shall be lawfully entitled to receive
the same or as a court of competent jurisdiction shall direct.
(c) In
the event that the proceeds of any such sale, collection or realization are
insufficient to pay all amounts to which the Agent and the Lenders are legally
entitled, Grantor and the other Borrowers shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any applicable
Loan Document for interest on overdue principal thereof or such other rate as
shall be fixed by applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the Agent to collect such deficiency.
(d) Grantor
and each other Borrower hereby acknowledges that, if the Agent complies with any
applicable state or federal law requirements in connection with a disposition of
the Collateral, such compliance will not adversely effect the commercial
reasonableness of any sale or other disposition of the Collateral.
(e) The
Agent shall not be required to marshal any present or future collateral security
(including, but not limited to, this Agreement and the Collateral) for, or other
assurances of payment or satisfaction of, the Obligations or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of the Agent’s rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the
extent that Grantor or any other Borrower lawfully may, Grantor and such other
Borrowers hereby agree that they will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Agent’s rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
Grantor and the other Borrowers hereby irrevocably waive the benefits of all
such laws.
20
SECTION
8. Indemnity and
Expenses.
(a) Grantor
and each other Borrower agrees to indemnify and hold the Agent harmless from and
against any and all claims, damages, losses, liabilities, obligations,
penalties, fees, costs and expenses (including, without limitation, legal fees,
costs, expenses, and disbursements of Agent’s counsel) to the extent that they
arise out of or otherwise result from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting solely and directly from the Agent’s gross negligence or willful
misconduct, as determined by a final judgment of a court of competent
jurisdiction.
(b) Grantor
and the other Borrowers will upon demand pay to the Agent the amount of any and
all costs and expenses, including the reasonable fees, costs, expenses and
disbursements of counsel for the Agent and of any experts and agents (including,
without limitation, any collateral trustee which may act as agent of the Agent),
which the Agent may incur in connection with (i) the preparation,
negotiation, execution, delivery, recordation, administration, amendment, waiver
or other modification or termination of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any
of the rights of the Agent hereunder, or (iv) the failure by Grantor or any
other Borrower to perform or observe any of the provisions hereof.
SECTION
9. Notices,
Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied or delivered, if to Grantor or
any other Borrower, to it in care of the Administrative Borrower at its address
specified in the Financing Agreement or as otherwise specified next to Grantor’s
signature below; if to the Agent, to it at its address specified in the
Financing Agreement; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 9. All such notices and
other communications shall be effective (i) if mailed, when received or
three (3) days after deposited in the mails, whichever occurs first, (ii) if
telecopied, when transmitted and confirmation received, or (iii) if delivered,
upon delivery.
SECTION
10. Security Interest
Absolute. All rights of the Agent and the Lenders, all Liens
and all obligations of Grantor and the other Borrowers hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Financing Agreement, any other Loan Document or any other
agreement or instrument relating thereto, (b) any change in the time, manner or
place of payment or satisfaction of, or in any other term in respect of, all or
any of the Obligations, or any other amendment or waiver of or consent to any
departure from the Financing Agreement or any other Loan Document, (c) any
exchange or release of, or non-perfection of any Lien on any Collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Obligations, or (d) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, any of the
Borrowers in respect of the Obligations. All authorizations and
agencies contained herein with respect to any of the Collateral are irrevocable
and powers coupled with an interest.
SECTION
11. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is in
writing and signed by Grantor and the Agent, and no waiver of any provision of
this Agreement, and no consent to any departure by Grantor or any other Borrower
therefrom, shall be effective unless it is in writing and signed by the Agent,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
21
(b) No
failure on the part of the Agent to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Agent or any Lender provided
herein and in the other Loan Documents are cumulative and are in addition to,
and not exclusive of, any rights or remedies provided by law. The
rights of the Agent or any Lender under any Loan Document against any party
thereto are not conditional or contingent on any attempt by such Person to
exercise any of its rights under any other Loan Document against such party or
against any other Person, including but not limited to, any
Borrower.
(c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the later of (A) the payment or
satisfaction in full of the Obligations and (B) the termination of the Financing
Agreement and the other Loan Documents, and (ii) be binding on Grantor, the
other Borrowers and all other Persons who become bound as debtor to this
Agreement in accordance with §9-203(d) of the Code and shall inure, together
with all rights and remedies of the Agent and the Lenders hereunder, to the
benefit of the Agent and the Lenders and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, without notice to Grantor or any
other Borrower, the Agent and the Lenders may assign or otherwise transfer their
rights and obligations under this Agreement and any other Loan Document, to any
other Person and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Agent and the Lenders herein or
otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Agent or any such Lender shall mean the assignee of the
Agent or such Lender. None of the rights or obligations of Grantor or
any other Borrower hereunder may be assigned or otherwise transferred without
the prior written consent of the Agent, and any such assignment or transfer
shall be null and void.
(e) Upon
the satisfaction in full of the Obligations and the termination of the Financing
Agreement and the other Loan Documents, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to Grantor and the other Borrowers and (ii) the Agent will, upon
Grantor’s request and at Grantor’s expense, (A) return to Grantor and the other
Borrowers such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B) execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse
whatsoever.
22
(f) THIS
AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND
THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED
HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(g) Grantor
and each other Borrower hereby irrevocably and unconditionally:
(i) Submits
for themselves and their respective property in any action, suit or proceeding
relating to this Agreement or any other Loan Document to which it is a party, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts thereof;
(ii) Agrees
that any such action, suit or proceeding may be brought in such courts and
waives any objection that it may now or hereafter have to the venue of any such
action, suit or proceeding in any such court or that such action, suit or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(iii) Consents
to the service of any and all process in any such action, suit or proceeding by
mailing (by certified or registered mail, postage prepaid and return receipt
requested) or delivering a copy of such process to Grantor at its address set
forth in Section 9 hereof or at such other address of which the Agent shall have
been notified pursuant thereto;
(iv) To
the extent that Grantor or any other Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Grantor and the other Borrowers hereby irrevocably waives such immunity in
respect of its obligations under this Agreement and the other Loan
Documents;
(v) Agrees
that nothing herein shall affect the right of the Agent or any Lender to effect
service of process in any other manner permitted by law or shall limit the right
of the Agent or any Lender to xxx in any other jurisdiction; and
(vi) Waives
any right it may have to claim or recover in any legal action, suit or
proceeding referred to in this Section any special, exemplary, punitive or
consequential damages.
(h) GRANTOR AND THE OTHER BORROWERS (AND
BY THEIR ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) AND THE AGENT WAIVE ANY
RIGHT THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
23
(i) Section
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(j) This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together constitute one in the same
Agreement.
(k) The
Agent may, in its sole and absolute discretion, enforce the provisions hereof
against Grantor and the other Borrowers without resorting to or regard to other
Collateral or other sources of reimbursement for the Obligations and shall not
be required to proceed against all Borrowers jointly or seek payment from the
all the Borrowers or Guarantors ratably. The release or discharge of
any other Borrower or Guarantor by the Agent shall not release or discharge
Grantor or any other Borrower from the obligations of such Person
hereunder.
(l) Notwithstanding
anything herein to the contrary, the exercise of any right or remedy by the
Agent or the Lenders hereunder with respect to any Collateral is subject to the
provisions of the Intercreditor Agreement.
[SIGNATURE
PAGES ON FOLLOWING PAGE]
24
IN
WITNESS WHEREOF, Grantor has caused this Agreement to be executed and delivered
by its officer thereunto duly authorized, and the other Borrowers have caused
this Agreement to be executed and delivered by their agent thereunto duly
authorized, as of the date first above written.
BORROWERS:
|
|
FREDERICK’S
OF HOLLYWOOD GROUP INC.
|
|
By:
|
/s/ Xxxxxx Xxxxx
|
Name:
Xxxxxx Xxxxx
|
|
Title: Chief
Financial Officer
|
|
FOH
HOLDINGS, INC.
|
|
By:
|
/s/ Xxxxxx Xxxxx
|
Name: Xxxxxx
Xxxxx
|
|
Title: Chief
Financial Officer
|
|
FREDERICK’S
OF HOLLYWOOD, INC.
|
|
By:
|
/s/ Xxxxxx Xxxxx
|
Name: Xxxxxx
Xxxxx
|
|
Title: Chief
Financial Officer
|
|
FREDERICK’S
OF HOLLYWOOD STORES, INC.
|
|
By:
|
/s/ Xxxxxx Xxxxx
|
Name: Xxxxxx
Xxxxx
|
|
Title: Chief
Financial
Officer
|
HOLLYWOOD
MAIL ORDER, LLC
|
||
By:
|
FOH
Holdings, Inc., its Manager
|
|
By:
|
/s/ Xxxxxx Xxxxx
|
|
Name: Xxxxxx
Xxxxx
|
||
Title: Chief
Financial Officer
|
||
AGENT AND
LENDER:
|
||
HILCO
BRANDS, LLC
|
||
By:
|
/s/ Xxxxxxxx Xxxxxxx
|
|
Name:
Xxxxxxxx Xxxxxxx
|
||
Title:
Managing Director
|
25
SCHEDULE
I
LEGAL
NAMES; ORGANIZATIONAL IDENTIFICATION NUMBERS;
STATES OR
JURISDICTION OF ORGANIZATION
Name/Chief Place of Business
|
Jurisdiction of
Incorporation/Formation
|
Organizational ID
|
FEIN
|
|||
FREDERICK’S
OF HOLLYWOOD GROUP INC.
0000
Xxxxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
None
|
00-0000000
|
||||
FOH
HOLDINGS, INC.
0000
Xxxxxx Xxxxxxxxx
0xx
Xxxxx
Xxxxxxxxx,
XX 00000
|
Delaware
|
2749384
|
00-0000000
|
|||
FREDERICK'S
OF HOLLYWOOD, INC.
0000
Xxxxxx Xxxxxxxxx
0xx
Xxxxx
Xxxxxxxxx,
XX 00000
|
Delaware
|
0580404
|
00-0000000
|
|||
FREDERICK’S
OF HOLLYWOOD STORES, INC.
0000
Xxxxxx Xxxxxxxxx
0xx
Xxxxx
Xxxxxxxxx,
XX 00000
|
Nevada
|
C16109-98
|
00-0000000
|
|||
HOLLYWOOD
MAIL ORDER, LLC
0000
Xxxxxx Xxxxxxxxx
0xx
Xxxxx
Xxxxxxxxx,
XX 00000
|
|
Nevada
|
|
LLC5354-99
|
|
00-0000000
|
Schedules
1
SCHEDULE
II
TRADEMARKS
AND TRADEMARK LICENSES;
PATENTS
AND PATENT LICENSES;
COPYRIGHTS
AND COPYRIGHT LICENSES
1. Trademarks Frederick’s of
Hollywood, Inc. (“FOH”)
XXXX
|
SN/REG.
NO.
|
FILED /
ISSUED
|
EXP.
DATE
|
CLASS
|
FIRST
USE
|
DECL.
8 & 15 DUE
|
OWNER
|
GOODS/SERVICES
|
STATUS
|
|||||||||
CALIFORNIA.
|
||||||||||||||||||
FREDERICK’S
|
Reg.
No.
(CA)
4368
Renewal
No. 7565
|
Issued
4/30/76
Renewed
4/30/06
|
4/30/16
|
35
|
4/1947
3/1946
|
N/A
|
FOH
|
Retail
sales of wearing apparel and accessories, toilet preparations, watches,
books.
|
Next
renewal due by 4/30/16.
|
|||||||||
U.S.
|
||||||||||||||||||
F
(Stylized)
|
Reg.
No.
3,532,435
|
Issued
11/11/2008
|
11/11/18
|
3,
18, 21, 25
|
3-
11/1/03
11/1/03
18-
10/1/04
10/1/04
21-
11/1/03
11/2/03
25-
3/1/02
3/1/03
|
Due
11/12/13
-
11/11/14
|
FOH
|
3-Bubble
bath, body oil, body beads, body glitter; body; bath power, face powder,
talcum powder, perfume, cologne, toilet water, essential oils for personal
use, hand cream, body cream, face cream, face cleanser.
18-Toiletry
cases of imitations leather.
21-Non-metal
decorative boxes, namely, soap boxes and ceramic boxes for hair care
accessories.
25-Body
shapers, body suits, bustiers, camisoles, dresses, foundation garments,
garter belts, lingerie, loungewear, negligees, night gowns, night shirts,
pajamas, panties, pantyhose, sleepwear, stockings, tap pants, teddies,
underpants.
|
Decl.
of Continued Use & Incontestability due between 11/11/13 -
11/11/14.
|
|||||||||
F
(Stylized)
|
|
Reg.
No.
3,076,474
|
|
Issued
4/4/2006
|
|
4/4/16
|
|
3,
4, 25, 35
|
|
6/2000
6/2000
|
|
Due
4/4/11-4/4/12
|
|
FOH
|
|