Section 1.3.                                    Definitions of Certain Terms Used Herein.   As used in this Agreement, in addition to the terms defined in the preamble and Preliminary Statement above, the following terms shall have the following meanings:

 

“ Account ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Aggregate Term Loan Credit Exposure ” means, at any time, the aggregate principal amount of loans outstanding under the Term Loan Credit Agreement at such time.

 

“ Article ” means a numbered article of this Agreement, unless another document is specifically referenced.

 

“ Bankruptcy Proceeding ” means, with respect to any Person, a general assignment by such Person for the benefit of its creditors, or the institution by or against such Person of any proceeding seeking relief as debtor, or seeking to adjudicate such Person as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of such Person or its debts, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for such Person or for any substantial part of its property.

 

“ Chattel Paper ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Collateral ” shall have the meaning set forth in Article II.

 

“ Commercial Tort Claim ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Consignment Inventory ” means any Inventory held by a Grantor on a consignment basis, which Inventory is not owned by a Grantor (and would not be reflected on a consolidated balance sheet of Borrower and its Subsidiaries prepared in accordance with GAAP).

 

“ Consignment Proceeds ” means any proceeds from the sale of any Consignment Inventory, solely to the extent that such proceeds are identifiable proceeds from the sale of Consignment Inventory and that the Borrower identifies such proceeds as such through a method of tracing reasonably satisfactory to the Agent.

 

 “ Control ” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

 

“ Copyrights ” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:  (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, and copyright applications; (b) all renewals of any of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements for any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

 

“ Credit Agreement Event of Default ” means any “Event of Default”, as defined in the Term Loan Credit Agreement.

 

2

 

“ Deposit Account ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Document ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Equipment ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Event of Default ” means a Credit Agreement Event of Default or an Existing Notes Event of Default.

 

“ Excluded Assets ” means

 

(a)                                   the Specified Credit Card Receivables, any Specified Credit Card Payments and any Specified In-Store Credit Card Payments;

 

(b)                                  the HSBC Credit Card Receivables Accounts;

 

(c)                                   more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary;

 

(d)                                  any Domestic Subsidiary that is taxed as a partnership for federal income tax purposes that holds Equity Interests of a Foreign Subsidiary whose Equity Interests are pledged pursuant to this Security Agreement;

 

(e)                                   any Margin Stock;

 

(f)                                     Equity Interests in Kate Spade LLC, Gurwitch Products, L.L.C. and Willow Bend Beverage Corporation;

 

(g)                                  any intercompany Indebtedness of (i) the Borrower or any Subsidiary that is a Loan Party owing to a Subsidiary that is a Loan Party, (ii) a Subsidiary that is a Loan Party owing to the Borrower or (iii) any Subsidiary that is not a Loan Party owing to the Borrower or owing to a Subsidiary that is a Loan Party (in the case of (iii), other than such Indebtedness that is Indebtedness for borrowed money and has a principal amount of $5,000,000 or more);

 

(h)                                  subject to Section 11.16(d) , any Equity Interests to the extent that a pledge of such Equity Interests would give rise to additional subsidiary reporting requirements under Rule 3-10 or Rule 3-16 of Regulation S-X promulgated under the Exchange Act of 1934;

 

(i)                                      any Consignment Inventory and any Consignment Proceeds;

 

(j)                                      any Leased-Department Inventory and any Leased-Department Proceeds;

 

(k)                                   any leases, licenses, rights or other agreements contained within the Collateral to which any Grantor is a party or any of its rights or interests are subject thereto to the extent and solely to the extent that the proximate result of the grant of such security interest shall be to (1) constitute or result in the abandonment, invalidation or unenforceability of any right, title or interest in such Grantor therein, or (2) create a situation under which such Grantor shall be deemed to have breached or terminated pursuant to the terms of, or defaulted under, any such Collateral; and in each case under

 

3

 

clauses (1) and (2) above such abandonment, invalidation, unenforceability, breach, termination or default would not be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law or principles or equity; provided, however, that the Excluded Assets shall not include, and such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation, unenforceability, breach, termination or default shall be remedied and to the extent severable, shall attach immediately to, any portion of such lease, license, right or agreement that does not result in any of the consequences specified in (1) or (2) above; and

 

(l)                                      assets that are acquired by any Grantor with the proceeds of Indebtedness incurred pursuant to Section 6.01(b)(vi)  of the Term Loan Credit Agreement and that are subject to a purchase money Lien in favor of the lenders under such Indebtedness; provided , however , that the aggregate purchase price paid for the acquisition of such assets shall not exceed $75,000,000 in the aggregate.

 

 “ Exhibit ” refers to a specific exhibit to this Agreement, unless another document is specifically referenced.

 

 “ Existing Notes Designated Collateral ” means (a) any “Principal Property” (as such term is defined in the Existing Notes Indenture) of the Borrower or any Restricted Subsidiary (as defined in the Existing Notes Indenture) and (b) any Equity Interests or indebtedness of any Subsidiary of the Borrower.  For the avoidance of doubt, Existing Notes Designated Collateral does not include (i) any Equity Interests of the Borrower or (ii) any Excluded Assets.

 

“ Existing Notes Event of Default ” means any “Event of Default”, as defined in the Existing Notes Indenture.

 

“ Existing Notes Indenture ” has the meaning set forth in the Preliminary Statement.

 

“ Existing Notes Obligations ” means the 2008 Notes Obligations and the 2028 Debenture Obligations.

 

“ Existing Notes Trustee ” means The Bank of New York, in its capacity as trustee under the Existing Notes Indenture.

 

“ Existing Notes Secured Parties ” means the 2008 Notes Secured Parties and the 2028 Debentures Secured Parties.

 

“ Fixture ” shall have the meaning set forth in Article 9 of the UCC.

 

“ General Intangible ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Goods ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Grantors ” means Holdings, the Borrower and the Subsidiary Parties.

 

“ HSBC Credit Card Receivables Accounts ” means the deposit accounts # 001846205 held at HSBC Bank USA, N.A. and # 08806372312 held at JPMorgan Chase Bank, containing proceeds of Specified Credit Card Receivables, which account is owned by the Borrower but

 

4

 

controlled by HSBC and the ownership of which is anticipated to be transferred to HSBC in the first or second calendar quarter of 2006.

 

 “ Instrument ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Intercreditor Agreement ” means the Lien Subordination and Intercreditor Agreement dated as of the date hereof, among Holdings, the Borrower, the Subsidiaries from time to time party thereto, the Revolving Facility Agent and the Agent, as amended, modified or supplemented from time to time.

 

“ Inventory ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Investment Property ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Leased-Department Inventory ” means any Inventory relating to a leased department within one of the Grantors’ retail stores, which Inventory is not owned by a Grantor (and would not be reflected on a consolidated balance sheet of Borrower and its Subsidiaries prepared in accordance with GAAP).

 

“ Leased-Department Proceeds ” means any proceeds from the sale of any Leased-Department Inventory, solely to the extent that such proceeds are identifiable proceeds from the sale of Leased-Department Inventory and that the Borrower identifies such proceeds as such through a method of tracing reasonably satisfactory to the Agent.

 

“ Letter-of-Credit Right ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Licenses ” means, with respect to any Grantor, all of such Grantor’s right, title, and interest in and to (a) any and all licensing agreements or similar arrangements in and to its owned (1) Patents, (2) Copyrights, or (3) Trademarks, (b) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future breaches thereof, and (c) all rights to sue for past, present, and future breaches thereof.

 

“ Obligations ” means the Term Loan Obligations and the Existing Notes Obligations.

 

“ Patents ” means, with respect to any Person, all of such Person’s right, title, and interest in and to:  (a) any and all patents and patent applications; (b) all inventions and improvements described and claimed therein; (c) all reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof; (d) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements thereof; and (f) all rights corresponding to any of the foregoing throughout the world.

 

“ Perfection Certificate ”  means a certificate substantially in the form of Exhibit I completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.

 

5

 

“ Permitted Liens ” means the “Permitted Liens” as defined in the Term Loan Credit Agreement.

 

“ Pledged Collateral ” means all Instruments, Securities and other Investment Property owned by any Grantor, other than any Instruments, Securities or Investment Property that is an Excluded Asset (for so long and to the extent such exclusion is applicable), whether or not physically delivered to the Agent pursuant to this Agreement.

 

“ Receivables ” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments and any other rights or claims to receive money (other than the Specified Credit Card Receivables) that are General Intangibles or that are otherwise included as Collateral.

 

“ Required Secured Parties ” means (a) prior to an acceleration of the Term Loan Obligations under the Term Loan Credit Agreement, the “Required Lenders” as defined in the Term Loan Credit Agreement (with any loans under the Term Loan Credit Agreement and unused commitments thereunder held by the Borrower or any of its Affiliates being excluded for such purpose), (b) after an acceleration of the Term Loan Obligations under the Term Loan Credit Agreement but prior to the date upon which the Term Loan Credit Agreement has terminated by its terms and all of the obligations thereunder have been paid in full, Term Loan Lenders holding in the aggregate loans under the Term Loan Credit Agreement representing more than 50% of the Aggregate Term Loan Credit Exposure (with any such loans held by the Borrower or any of its Affiliates being excluded for this purpose), and (c) after the Term Loan Credit Agreement has terminated by its terms and all of the Term Loan Obligations thereunder have been paid in full (whether or not the Term Loan Obligations under the Term Loan Credit Agreement were ever accelerated), Term Loan Lenders holding in the aggregate at least a majority of the aggregate net Secured Hedging Obligations then due and unpaid from the Grantors to the Term Loan Lenders under Hedge Agreements, as determined by the Term Loan Agent in its reasonable discretion.

 

“ Revolving Facility Agent ” means Deutsche Bank Trust Company Americas, in its capacity as administrative agent and collateral agent under the Revolving Facility Credit Agreement.

 

“ Revolving Facility Credit Agreement ” means the Credit Agreement dated the date hereof among Holdings, the Borrower, the Subsidiary Parties and the Revolving Facility Agent, as amended, restated supplemented or otherwise modified from time to time.

 

“ Revolving Facility First Lien Collateral Transition Date ” has the meaning set forth in the Intercreditor Agreement.

 

“ Section ” means a numbered section of this Agreement, unless another document is specifically referenced.

 

“ Secured Parties ” means the Term Loan Secured Parties and the Existing Notes Secured Parties.

 

“ Security ” shall have the meaning set forth in Article 8 of the UCC.

 

“ Specified Credit Card Receivables ” means the Accounts, Documents and other rights or claims to receive money which are General Intangibles and that have been or from time to time are

 

6

 

sold or otherwise transferred to (i) HSBC pursuant to the HSBC Arrangements or (ii) any third party pursuant to any Permitted Replacement Credit Card Program.

 

“ Specified Credit Card Payments ” means any payments by the holder of a private label credit card subject to the HSBC Arrangements or any Permitted Replacement Credit Card Program to the issuer of such credit card that are (i) in the case of the HSBC Arrangements, made to a HSBC Credit Card Receivables Accounts or (ii) in the case of any Permitted Replacement Credit Card Program, made to any account of a Grantor prior to the transition of ownership of such account to the applicable third party in connection with the establishment of the applicable Permitted Replacement Credit Card Program.

 

“ Specified In-Store Credit Card Payments ” means any payments made in-person by customers in respect of private label credit cards subject to the HSBC Arrangements or any Permitted Replacement Credit Card Program in one of the Grantors’ retail stores, solely to the extent that such payments are identifiable payments from the holders of such private label credit cards and that the Borrower identifies such payments as such through a method of tracing reasonably satisfactory to the Agent.

 

 “ Stock Rights ” means all dividends, instruments or other distributions and any other right or property which any Grantor shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any Equity Interest constituting Collateral, any right to receive an Equity Interest constituting Collateral and any right to receive earnings, in which such Grantor now has or hereafter acquires any right, issued by an issuer of such Equity Interest.

 

“ Subsidiary Parties ” means (a) the Subsidiaries identified on Exhibit J hereto, (b) NM Nevada Trust, a Massachusetts business trust, and (c) each other Domestic Subsidiary that becomes a party to this Agreement as a Subsidiary Party after the date hereof, in accordance with Section 11.14 herein and Section 5.11 of the Term Loan Credit Agreement.

 

“ Supporting Obligation ” shall have the meaning set forth in Article 9 of the UCC.

 

“ Term Loan Credit Agreement ” has the meaning set forth in the Preliminary Statement.

 

“ Term Loan/Notes Documents ” has the meaning set forth in the Intercreditor Agreement.

 

“ Term Loan Lenders ” means the “Lenders” under and as defined in the Term Loan Credit Agreement.

 

“ Term Loan Obligations ” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, on the loans under the Term Loan Credit Agreement and (ii) all other monetary obligations of the Borrower or any other Grantor to any of the Term Loan Secured Parties under the Term Loan Credit Agreement and each of the Term Loan Security Documents, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or

 

7

 

otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower or any other Grantor to any of the Term Loan Secured Parties under or pursuant to the Term Loan Credit Agreement and each of the Term Loan Security Documents and (c) the due and punctual payment and performance of all the obligations of the Borrower and each other Grantor to any of the Term Loan Secured Parties under this Agreement and each of the Term Loan Security Documents.

 

“ Term Loan Secured Parties ” means (a) the Term Loan Lenders, (b) the Agent, (c) each counterparty to any Hedge Agreement with a Loan Party the obligations under which constitute Secured Hedge Obligations, (d) each beneficiary of any indemnification obligation undertaken by the Borrower or any other Grantor under any Term Loan/Notes Document and (e) the successors and assigns of each of the foregoing.

 

“ Term Loan Security Documents ” shall have the meaning set forth in the Intercreditor Agreement.

 

“ Trademarks ” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:  (a) all trademarks (including service marks), trade names, trade dress, and trade styles and the registrations and applications for registration thereof and the goodwill of the business symbolized by the foregoing; (b) all licenses of the foregoing, whether as licensee or licensor; (c) all renewals of the foregoing; (d) all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including, without limitation, damages, claims, and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements of the foregoing, including the right to settle suits involving claims and demands for royalties owing; and (f) all rights corresponding to any of the foregoing throughout the world.

 

“ 2008 Notes Obligations ” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, on the 2008 Notes (ii) and all other monetary obligations of the Borrower or any other Grantor to any of the 2008 Notes Secured Parties under the Existing Notes Indenture and each of the Term Loan Security Documents related thereto, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower or any other Grantor to any of the 2008 Notes Secured Parties under or pursuant to the Existing Notes Indenture and each of the Term Loan Security Documents related thereto and (c) the due and punctual payment and performance of all the obligations of each other Grantor to any of the 2008 Notes Secured Parties under this Agreement and each of the Term Loan Security Documents related thereto.

 

“ 2008 Notes Secured Parties ” means (a) the holders of the 2008 Notes, (b) each beneficiary of any indemnification obligation undertaken by the Borrower or any other Grantor under any Existing Notes Indenture and (c) the successors and assigns of each of the foregoing.

 

8

 

“ 2028 Debentures Obligations ” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, on the 2028 Debentures and (ii) all other monetary obligations of the Borrower or any other Grantor to any of the 2028 Debentures Secured Parties under the Existing Notes Indenture and each of the Term Loan Security Documents related thereto, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower or any other Grantor to any of the 2028 Debentures Secured Parties under or pursuant to the Existing Notes Indenture and each of the Term Loan Security Documents related thereto and (c) the due and punctual payment and performance of all the obligations of each other Grantor to any of the 2028 Debentures Secured Parties under this Agreement and each of the Term Loan Security Documents related thereto.

 

“ 2028 Debentures Secured Parties ” means (a) the holders of the 2028 Debentures, (b) each beneficiary of any indemnification obligation undertaken by the Borrower or any other Grantor under any Existing Notes Indenture and (c) the successors and assigns of each of the foregoing.

 

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York.

 

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

 

ARTICLE II
GRANT OF SECURITY INTEREST

 

Each Grantor hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Secured Parties, a security interest in all of its right, title and interest in, to and under all personal property and other assets, whether now owned by or owing to, or hereafter acquired by or arising in favor of such Grantor (including under any trade name or derivations thereof), and regardless of where located (all of which are collectively referred to as the “ Collateral ”), including:

 

(i)                                      all Accounts;

 

(ii)                                   all Chattel Paper;

 

(iii)                                all Copyrights, Patents and Trademarks;

 

(iv)                               all Documents;

 

(v)                                  all Equipment;

 

(vi)                               all Fixtures;

 

(vii)                            all General Intangibles;

 

9

 

(viii)                         all Goods;

 

(ix)                                 all Instruments;

 

(x)                                    all Inventory;

 

(xi)                                 all Investment Property;

 

(xii)                              all cash or cash equivalents;

 

(xiii)                           all letters of credit, Letter-of-Credit Rights and Supporting Obligations;

 

(xiv)                          all Deposit Accounts with any bank or other financial institution;

 

(xv)                             all Commercial Tort Claims as specified from time to time in Exhibit E ; and

 

(xvi)                          all accessions to, substitutions for and replacements, proceeds (including Stock Rights), insurance proceeds and products of the foregoing, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any General Intangibles at any time evidencing or relating to any of the foregoing;

 

to secure the prompt and complete payment and performance of the Obligations.

 

Notwithstanding the foregoing or anything herein to the contrary, in no event shall the “Collateral” include or the security interest attach to any Excluded Asset.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

The Grantors, jointly and severally, represent and warrant to the Agent, for the benefit of the Secured Parties, that:

 

Section 3.1.                                    Title, Perfection and Priority.   Each Grantor has good and valid rights in, or the power to transfer the Collateral and title to, the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except Permitted Liens, and has full power and authority to grant to the Agent the security interest in such Collateral pursuant hereto.  When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit G , the Agent will have a fully perfected first priority security interest in that Collateral in which a security interest may be perfected by filing under the Uniform Commercial Code in effect in the applicable jurisdiction, subject only to Permitted Liens and to the terms of the Intercreditor Agreement.

 

Section 3.2.                                    Type and Jurisdiction of Organization, Organizational and Identification Numbers.   The type of entity of each Grantor, its jurisdiction of organization, the organizational number issued to it by its jurisdiction of organization and its federal employer identification number are set forth on Exhibit A .

 

10

 

Section 3.3.                                    Principal Location.   Each Grantor’s mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed on Exhibit A .

 

Section 3.4.                                    Collateral Locations.   Each location where Collateral is located as of the date hereof (except for Inventory in transit) is listed on Exhibit A .  All of said locations are owned by a Grantor except for locations (i) that are leased by a Grantor as lessee and designated in Part III(b)  of Exhibit A and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in Part III(c)  of Exhibit A.

 

Section 3.5.                                    Bailees, Warehousemen, Etc.   Exhibit B hereto sets forth a list, as of the date hereof, of each bailee, warehouseman and other third party in possession or control of any Inventory of any Grantor (except for Inventory in transit) and specifies as to each bailee, warehouseman or other third party whether the value of the Inventory, at cost, possessed or controlled by such bailee, warehouseman or other third party exceeds $2,500,000.

 

Section 3.6.                                    Exact Names.   The name in which each Grantor has executed this Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization.  No Grantor has, during the past five years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation (other than, in the case of the Borrower, the Merger) except as disclosed in the Perfection Certificate.

 

Section 3.7.                                    Letter-of-Credit Rights and Chattel Paper.   Exhibit C lists all Letter-of-Credit Rights and Chattel Paper of each Grantor.  All actions necessary or desirable to protect and perfect the Agent’s Lien under the laws of the United States, on each item listed on Exhibit C (including the delivery of all originals as required hereunder) has been duly taken by each Grantor. The Agent will have a fully perfected first priority security interest in the Collateral listed on Exhibit C , subject only to Permitted Liens and to the terms of the Intercreditor Agreement.

 

Section 3.8.                                    Accounts and Chattel Paper.   The names of the obligors, amounts owing, due dates and other information with respect to each Grantor’s Accounts and Chattel Paper that are Collateral are and will be correctly stated, at the time furnished, in all records of such Grantor relating thereto and in all invoices furnished to the Agent by such Grantor from time to time.

 

Section 3.9.                                    Intellectual Property.   No Grantor has any interest in, or title to, any Patent, Trademark or Copyright except as set forth on Exhibit D .  This Agreement is effective to create a valid and continuing Lien under the UCC and the laws of the United States and, upon filing of appropriate financing statements in the offices listed on Exhibit G and this Agreement with the United States Copyright Office and the United States Patent and Trademark Office, fully perfected first priority security interests under the UCC and the laws of the United States (subject to the terms of the Intercreditor Agreement) in favor of the Agent for the ratable benefit of the Secured Parties on the Patents, Trademarks and Copyrights of the Grantors, such perfected security interests are enforceable as such as against any and all creditors of and purchasers from the Grantors; and all action necessary or desirable under the UCC and the laws of the United States to protect and perfect the Agent’s Lien on the Patents, Trademarks or Copyrights of the Grantors shall have been duly taken.

 

11

 

Section 3.10.                              No Financing Statements, Security Agreements.   No financing statement or security agreement describing all or any portion of the Collateral that has not lapsed or been terminated naming a Grantor as debtor has been filed or is of record in any jurisdiction except (a) for financing statements or security agreements naming the Agent on behalf of the Secured Parties as the secured party and (b) Permitted Liens.

 

Section 3.11.                              Pledged Collateral.

 

(a)                                   Exhibit F sets forth a complete and accurate list of all of the Pledged Collateral and the percentage of the total issued and outstanding Equity Interests of the issuer represented thereby (except any Equity Interests in respect of which a Grantor owns less than 10% of the Equity Interests of the issuer of such Equity Interests).  Each Grantor is the direct, sole beneficial owner and sole holder of record of the Pledged Collateral listed on Exhibit F as being owned by it, free and clear of any Liens, except for the security interest granted to the Agent for the ratable benefit of the Secured Parties hereunder and Permitted Liens.  Each Grantor further represents and warrants that (i) all Pledged Collateral constituting an Equity Interest has been (to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized and validly issued by the issuer thereof and are fully paid and non-assessable, (ii) with respect to any certificates delivered to the Agent representing an Equity Interest, either such certificates are Securities as defined in Article 8 of the UCC as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Agent so that the Agent may take steps to perfect its security interest therein as a General Intangible, (iii) it shall have used commercially reasonable efforts to ensure that all Pledged Collateral held by a securities intermediary is covered by a control agreement among the applicable Grantor, the securities intermediary and the Agent pursuant to which the Agent has Control and (iv) all Pledged Collateral that represents Indebtedness owed to any Grantor has been duly authorized, authenticated or issued and delivered by the issuer of such Indebtedness, is the legal, valid and binding obligation of such issuer and such issuer is not in default thereunder.

 

(b)                                  (i) None of the Pledged Collateral has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject, (ii) none of the Pledged Collateral is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Agent of rights and remedies hereunder, and (iii) no consent, approval, authorization, or other action by, and no giving of notice, filing with, any governmental authority or any other Person is required for the pledge by the Grantors of the Pledged Collateral pursuant to this Agreement or for the execution, delivery and performance of this Agreement by the Grantors, or for the exercise by the Agent of the voting or other rights provided for in this Agreement or for the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally.

 

(c)                                   Except as set forth on Exhibit F , none of the Pledged Collateral which represents Indebtedness owed to a Grantor is subordinated in right of payment to other Indebtedness or subject to the terms of an indenture.

 

12

 

Section 3.12.                              Commercial Tort Claims.   As of the date hereof, no Grantor holds any Commercial Tort Claims having a value in excess of $1,000,000 for which such Grantor has filed a complaint in a court of competent jurisdiction, except as indicated on Exhibit E hereto.

 

Section 3.13.                              Perfection Certificate.   The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete in all material respects as of the date hereof.

 

ARTICLE IV
COVENANTS

 

From the date hereof, and thereafter until this Agreement is terminated, each Grantor agrees that:

 

Section 4.1.                                    General.

 

(a)                                   Collateral Records.   Each Grantor will maintain complete and accurate books and records as is consistent with its practices as of the date hereof in all material respects with respect to the Collateral, and furnish to the Agent such reports relating to the Collateral as the Agent shall from time to time reasonably request.

 

(b)                                  Authorization to File Financing Statements; Ratification.   Each Grantor hereby authorizes the Agent to file, and if requested will deliver to the Agent, all financing statements and other documents and take such other actions as may from time to time be requested by the Agent in order to maintain a first priority (subject to the terms of the Intercreditor Agreement) perfected security interest in and, if applicable, Control of, the Collateral.  Any financing statement filed by the Agent may be filed in any filing office in any applicable Uniform Commercial Code jurisdiction and may (i) indicate the Collateral (1) as all assets of the applicable Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (2) by any other description which reasonably approximates the description contained in this Agreement, and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether the Grantor is an organization, the type of organization and any organization identification number issued to the Grantor and (B) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates.  Each Grantor also agrees to furnish any such information to the Agent promptly upon request.  Each Grantor also ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

(c)                                   Further Assurances.   Each Grantor will, if reasonably requested by the Agent, but not more frequently than once per quarter, furnish to the Agent statements and schedules further identifying and describing the Collateral and such other reports and information in connection with the Collateral as the Agent may reasonably request, all in such detail as the Agent may reasonably specify.  Each Grantor also agrees to take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of the Agent in the Collateral and the priority thereof against any Lien other than Permitted Liens.

 

13

 

(d)                                  Disposition of Collateral.   No Grantor will sell, lease, transfer or otherwise dispose of the Collateral except for sales, leases, transfers and other dispositions specifically permitted pursuant to the terms of the Term Loan Credit Agreement.

 

(e)                                   Liens.   No Grantor will create, incur, or suffer to exist any Lien on the Collateral except (i) the security interest created by this Agreement and (ii) Permitted Liens.

 

(f)                                     Other Financing Statements.   No Grantor will authorize the filing of any financing statement naming it as debtor covering all or any portion of the Collateral, except to cover security interests that are Permitted Liens. Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.  Without limiting the foregoing, each Grantor shall use its commercially reasonable efforts to ensure that any financing statement filed by any Person with respect to Consignment Inventory shall clearly indicate that such financing statement relates to a consignment transaction with respect to such Consignment Inventory between the applicable Grantor and such Person.

 

(g)                                  Change of Name, Etc.   Each Grantor agrees to furnish to the Agent prompt written notice of any change in:  (i) such Grantor’s name; (ii) the location of such Grantor’s chief executive office or its principal place of business; (iii) such Grantor’s organizational legal entity designation or jurisdiction of incorporation or formation; (iv) such Grantor’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of incorporation or formation; or (v) the acquisition by such Grantor of any material property for which additional filings or recordings are necessary to perfect and maintain the Agent’s security interest therein (to the extent perfection of the security interest in such property is required by the terms hereof).  Each Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or other applicable law that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected, first priority security interest (subject to the terms of the Intercreditor Agreement and to Permitted Liens that have priority by operation of applicable law) in the Collateral for its benefit and the benefit of the other Secured Parties.

 

(h)                                  Compliance with Terms.   Each Grantor will perform and comply in all material respects with all obligations in respect of the Collateral and all material agreements relating to the Collateral to which it is a party or by which it is bound.

 

Section 4.2.                                    Receivables.

 

(a)                                   Certain Agreements on Receivables.   No Grantor will make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that, prior to the occurrence of an Event of Default, any Grantor may reduce the amount of Accounts, whether from the sale of Inventory or otherwise, in accordance with its present policies and in the ordinary course of business.

 

14

 

(b)                                  Collection of Receivables.   Except as otherwise provided in this Agreement, each Grantor will collect and enforce, in accordance with its present policies and in the ordinary course of business, all amounts due or hereafter due to such Grantor under the Receivables.

 

(c)                                   Electronic Chattel Paper.   If any Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “transferable record”, as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify the Agent thereof and, at the request of the Agent, shall take such action as the Agent may reasonably request to vest in the Agent Control under UCC Section 9-105 of such Electronic Chattel Paper or control (to the extent the meaning of “control” has not been clearly established under such provisions, “control” in this paragraph (c) to have such meaning as the Agent shall in good faith specify in writing after consultation with the Borrower) under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Agent agrees with such Grantor that the Agent will arrange, pursuant to procedures reasonably satisfactory to the Agent and so long as such procedures will not result in the Agent’s loss of Control or control, as applicable, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in Control to allow without loss of Control or control, as applicable, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

 

Section 4.3.                                    Delivery of Instruments, Securities, Chattel Paper and Documents. Each Grantor will (a) deliver to the Agent immediately upon execution of this Agreement the originals of all Chattel Paper, Securities and Instruments constituting Collateral (if any then exist), (b) hold in trust for the Agent upon receipt and promptly thereafter deliver to the Agent any Chattel Paper, Securities and Instruments constituting Collateral received after the date hereof, (c) upon the Agent’s request, deliver to the Agent, and thereafter hold in trust for the Agent upon receipt and promptly deliver to the Agent any Document evidencing or constituting Collateral and (d) upon the Agent’s request, deliver to the Agent a duly executed amendment to this Agreement, in the form of Exhibit H hereto (each, an “ Amendment ”), pursuant to which such Grantor will pledge any additional Collateral.  Each Grantor hereby authorizes the Agent to attach each Amendment to this Agreement and agrees that all additional collateral set forth in such Amendments shall be considered to be part of the Collateral.

 

Section 4.4.                                    Uncertificated Pledged Collateral.  The Grantors will permit the Agent from time to time to cause the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Pledged Collateral with respect to which a Grantor owns 50% or more of the Equity Interests of the issuer of such Pledged Collateral not represented by certificates to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Pledged Collateral not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Agent granted pursuant to this Agreement.  The Grantors will take any actions reasonably necessary to cause (a) the issuers of uncertificated securities which are Pledged Collateral with respect to which a Grantor owns 50% or more of the Equity Interests of the issuer of such Pledged Collateral, and (b) any securities intermediary which is the holder of any Pledged Collateral, to cause the Agent to have and retain

 

15

 

Control over such Pledged Collateral.  Without limiting the foregoing, each applicable Grantor will use its commercially reasonable efforts to cause, with respect to Pledged Collateral held with a securities intermediary in an account with an aggregate asset value of $5,000,000 or more, such securities intermediary to enter into a control agreement with the Agent, in form and substance satisfactory to the Agent, giving the Agent Control.

 

Section 4.5.                                    Pledged Collateral.

 

(a)                                   Registration in Nominee Name; Denominations.   The Agent, on behalf of the Secured Parties, shall hold certificated Pledged Collateral in the name of the applicable Grantor, endorsed or assigned in blank or in favor of the Agent, but following the occurrence and during the continuance of an Event of Default shall have the right (in its sole and absolute discretion) to hold the Pledged Collateral in its own name as pledgee, or in the name of its nominee (as pledgee or as sub-agent).  Each Grantor will promptly give to the Agent copies of any notices or other communications received by it with respect to Pledged Collateral registered in the name of such Grantor.  Following the occurrence and during the continuance of an Event of Default, the Agent shall at all times have the right to exchange the certificates representing Pledged Collateral for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

 

(b)                                  Any Indebtedness of any Subsidiary that is not a Loan Party owing to the Borrower or any Subsidiary that is a Loan Party in excess of $5,000,000 shall be or become evidenced by a promissory note or other instrument, and such note or instrument shall be promptly pledged and delivered to the Agent, duly endorsed in a manner satisfactory to the Agent.

 

(c)                                   Exercise of Rights in Pledged Collateral.

 

(i)                                      Without in any way limiting the foregoing and subject to clause (ii) below, each Grantor shall have the right to exercise all voting rights or other rights relating to the Pledged Collateral for all purposes not inconsistent with this Agreement and the other Term Loan/Note Documents; provided however , that no vote or other right shall be exercised or action taken which would reasonably be expected to have the effect of materially and adversely impairing the rights of the Agent in respect of the Pledged Collateral.

 

(ii)                                   Each Grantor will permit the Agent or its nominee at any time after the occurrence and during the continuance of an Event of Default, without notice, to exercise all voting rights or other rights relating to Pledged Collateral, including, without limitation, exchange, subscription or any other rights, privileges, or options pertaining to any Equity Interest or Investment Property constituting Pledged Collateral as if it were the absolute owner thereof.

 

(iii)                                Each Grantor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Term Loan/Note Documents and applicable law; provided , however , that any non-cash dividends, interest, principal or other distributions that would constitute Pledged Collateral, whether resulting from a subdivision, combination or reclassification of the

 

16

 

outstanding Equity Interests of the issuer of any Pledged Collateral or received in exchange for Pledged Collateral or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Grantor, shall not be commingled by such Grantor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the ratable benefit of the Secured Parties and shall be forthwith delivered to the Agent in the same form as so received (with any necessary endorsement or instrument of assignment).  The proviso to the first sentence of this clause (iii) shall not apply to dividends between or among the Grantors only of property subject to a perfected security interest under this Agreement; provided that the Borrower notifies the Agent in writing, specifically referring to this Section 4.5 at the time of such dividend and takes any actions the Agent reasonably specifies to ensure the continuance of its perfected security interest in such property under this Agreement.

 

Section 4.6.                                    Intellectual Property.

 

(a)                                   Upon the occurrence and during the continuance of an Event of Default, each Grantor will use its best efforts to obtain all consents and approvals necessary or appropriate for the assignment to or for the benefit of the Agent of any License held by such Grantor and to enforce the security interests granted hereunder.

 

(b)                                  Each Grantor shall notify the Agent promptly if it knows or reasonably expects that any application or registration relating to any Patent, Trademark or Copyright (now or hereafter existing) material to the conduct of such Grantor’s business may become abandoned or dedicated, or of any material adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding such Grantor’s ownership of any such Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same.

 

(c)                                   In no event shall any Grantor, either directly or through any agent, employee, licensee or designee, file an application for the registration of any material Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving the Agent prompt written notice thereof, and, upon request of the Agent, such Grantor shall execute and deliver any and all security agreements or other instruments as the Agent may reasonably request to evidence the Agent’s security interest in such Patent, Trademark or Copyright, and the General Intangibles of such Grantor relating thereto or represented thereby.

 

(d)                                  Each Grantor shall take all actions necessary or reasonably requested by the Agent to maintain and pursue each material application, to obtain the relevant registration and to maintain the registration of each of the Patents, Trademarks and Copyrights (now or hereafter existing) material to the conduct of such Grantor’s business, except in cases where, in the ordinary course of business consistent with past practice, such Grantor reasonably decides to abandon, allow to lapse or expire any Patent, Trademark or Copyright, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and, if consistent with good business judgment and past practice, to initiate opposition and interference and cancellation proceedings against third parties.

 

17

 

(e)                                   Consistent with each Grantor’s past practice, each Grantor shall, unless it shall reasonably determine that a Patent, Trademark or Copyright is not material to the conduct of its business, promptly notify the Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution of such Patent, Trademark or Copyright and to recover any and all damages for such infringement, misappropriation or dilution, and shall take such other actions as are appropriate under the circumstances to protect such Patent, Trademark or Copyright.

 

Section 4.7.                                    Commercial Tort Claims.   Each Grantor shall promptly notify the Agent of any Commercial Tort Claim having a value in excess of $1,000,000 acquired by it for which such Grantor has filed a complaint in a court of competent jurisdiction and, unless the Agent otherwise consents, such Grantor shall update Exhibit E to this Agreement, thereby granting to the Agent a first priority security interest in such Commercial Tort Claim (subject to the Intercreditor Agreement).

 

Section 4.8.                                    Letter-of-Credit Rights.   If any Grantor is or becomes the beneficiary of a letter of credit having a face amount in excess of $1,000,000, such Grantor shall promptly notify the Agent thereof and cause the issuer and/or confirmation bank to consent to the assignment of any Letter-of-Credit Rights to the Agent.

 

Section 4.9.                                    No Interference.   Each Grantor agrees that it will not interfere with any right, power and remedy of the Agent provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Agent of any one or more of such rights, powers or remedies.

 

Section 4.10.                              Insurance.   (a)                     In the event any Collateral is located in any area that has been designated by the Federal Emergency Management Agency as a “Special Flood Hazard Area”, the applicable Grantor shall purchase and maintain flood insurance on such Collateral (including any personal property which is located on any real property leased by such Loan Party within a “Special Flood Hazard Area”).  The amount of all insurance required by this Section shall at a minimum comply with applicable law, including the Flood Disaster Protection Act of 1973, as amended.  All premiums on such insurance shall be paid when due by such Grantor, and copies of the policies delivered to the Agent.  If any Grantor fails to obtain any insurance as required by this Section, the Agent at the direction of the Required Lenders may obtain such insurance at the Borrower’s expense.  By purchasing such insurance, the Agent shall not be deemed to have waived any default arising from the Grantors’ failure to maintain such insurance or pay any premiums therefor.

 

(b)                                  All insurance policies required under Section 5.10 of the Term Loan Credit Agreement shall name the Agent (for the benefit of the Secured Parties) as an additional insured or as loss payee, as applicable, and shall contain loss payable clauses or mortgagee clauses, through endorsements in form and substance satisfactory to the Agent, which provide that: (i) subject to the Intercreditor Agreement, all proceeds thereunder with respect to any Collateral shall be payable to the Agent; (ii) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy; and (iii) such policy and loss payable or mortgagee clauses may be canceled, amended, or terminated only upon at least thirty (30) days prior written notice given to the Agent.

 

Section 4.11.                              Certain Accounts .  Each Grantor shall use commercially reasonable efforts to transfer ownership of (i) the HSBC Credit Card Receivables Accounts by the end of the second

 

18

 

calendar quarter of 2006 and (ii) any account established in connection with the establishment of the applicable Permitted Replacement Credit Card Program prior to the establishment thereof or as promptly thereafter as is reasonably practicable.

 

ARTICLE V
REMEDIES

 

Section 5.1.                                    Remedies.

 

(a)                                   Upon the occurrence and during the continuance of an Event of Default, the Agent may exercise any or all of the following rights and remedies:

 

(i)                                      those rights and remedies provided in this Agreement, the Term Loan Credit Agreement, the Existing Notes Indenture or any other Term Loan/Note Document; provided that this Section 5.1(a) shall not be understood to limit any rights available to the Agent, the Term Loan Lenders or the Existing Noteholders prior to an Event of Default;

 

(ii)                                   those rights and remedies available to a secured party under the UCC (whether or not the UCC applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank’s right of setoff or bankers’ Lien) when a debtor is in default under a security agreement;

 

(iii)                                give notice of sole control or any other instruction under any securities account control agreement and take any action provided therein with respect to the applicable Collateral;

 

(iv)                               without notice (except as specifically provided in Section 11.2 or elsewhere herein), demand or advertisement of any kind to any Grantor or any other Person, enter the premises of any Grantor where any Collateral is located (through self-help and without judicial process) to collect, receive, assemble, process, appropriate, sell, lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales (which sales may be adjourned or continued from time to time with or without notice and may take place at such Grantor’s premises or elsewhere), for cash, on credit or for future delivery without assumption of any credit risk, and upon such other terms as the Agent may deem commercially reasonable; and

 

(v)                                  concurrently with written notice to the Grantors, transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon and to otherwise act with respect to the Pledged Collateral as though the Agent was the outright owner thereof.

 

(b)                                  Each Grantor acknowledges and agrees that the compliance by the Agent, on behalf of the Secured Parties, with any applicable state or federal law requirements in connection with

 

19

 

a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

 

(c)                                   The Agent shall have the right upon any public sale or sales and, to the extent permitted by law, upon any private sale or sales, to purchase for the benefit of the Agent and the Secured Parties, the whole or any part of the Collateral so sold, free of any right of equity redemption, which equity redemption each Grantor hereby expressly releases.

 

(d)                                  Until the Agent is able to effect a sale, lease, transfer or other disposition of Collateral, the Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or the value of the Collateral, or for any other purpose deemed appropriate by the Agent.  The Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Agent’s remedies (for the benefit of the Agent and Secured Parties), with respect to such appointment without prior notice or hearing as to such appointment.

 

(e)                                   Notwithstanding the foregoing, neither the Agent nor the Secured Parties shall be required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies against, the Grantors, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or any guarantee of the Obligations or to resort to the Collateral or any such guarantee in any particular order, or (iii) effect a public sale of any Collateral.

 

(f)                                     Each Grantor recognizes that the Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof.  Each Grantor also acknowledges that any private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private.  The Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit any Grantor or the issuer of the Pledged Collateral to register such securities for public sale under the Securities Act of 1933, as amended, or under applicable state securities laws, even if any Grantor and the issuer would agree to do so (it being acknowledged and agreed that no Grantor shall have any obligation hereunder to do so).

 

(g)                                  Notwithstanding the foregoing, any rights and remedies provided in this Section 5.1 shall be subject to the Intercreditor Agreement.

 

Section 5.2.                                    Grantor’s Obligations Upon Default.   Upon the request of the Agent after the occurrence and during the continuance of an Event of Default, each Grantor will:

 

(a)                                   assemble and make available to the Agent the Collateral and all books and records relating thereto at any place or places reasonably specified by the Agent, whether at such Grantor’s premises or elsewhere;

 

(b)                                  permit the Agent, by the Agent’s representatives and agents, to enter, occupy and use any premises where all or any part of the Collateral, or the books and records relating thereto,

 

20

 

or both, are located, to take possession of all or any part of the Collateral or the books and records relating thereto, or both, to remove all or any part of the Collateral or the books and records relating thereto, or both, and to conduct sales of the Collateral, without any obligation to pay any Grantor for such use and occupancy;

 

Section 5.3.                                    Grant of Intellectual Property License.   For the purpose of enabling the Agent to exercise the rights and remedies under this Article V at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby (a) grants to the Agent, for the benefit of the Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sublicense any intellectual property rights now owned or hereafter acquired by such Grantor, wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and (b) irrevocably agrees that, at any time and from time to time following the occurrence and during the continuance of an Event of Default, the Agent may sell any Grantor’s Inventory directly to any Person, including without limitation Persons who have previously purchased any Grantor’s Inventory from such Grantor and in connection with any such sale or other enforcement of the Agent’s rights under this Agreement, may (subject to any restrictions contained in applicable third party licenses entered into by a Grantor) sell Inventory which bears any Trademark owned by or licensed to any Grantor and any Inventory that is covered by any Copyright owned by or licensed to such Grantor and the Agent may finish any work in process and affix any relevant Trademark owned by or licensed to any Grantor and sell such Inventory as provided herein.  The use of the license granted pursuant to clause (a) of the preceding sentence by the Agent may be exercised, at the option of the Agent, only upon the occurrence and during the continuance of an Event of Default; provided , however , that any license, sublicense or other transaction entered into by the Agent in accordance herewith shall be binding upon each Grantor notwithstanding any subsequent cure of an Event of Default.

 

Section 5.4.                                    Application of Proceeds.   Subject to the Intercreditor Agreement, the Agent shall apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral, as well as any Collateral consisting of cash, as follows:

 

FIRST, to the payment of all reasonable costs and expenses incurred by the Agent (in its capacity as such hereunder or under any other Term Loan Security Document) in connection with such collection, sale, foreclosure or realization or otherwise in connection with this Agreement, any other Term Loan Security Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Agent hereunder or under any other Term Loan Security Document on behalf of any Grantor and any other reasonable costs or expenses incurred by the Agent in connection with the exercise of any remedy hereunder or under any other Term Loan Security Document, if reimbursable pursuant to a Term Loan Security Document;

 

SECOND, to the payment in full of the Term Loan Obligations and the Existing Notes Obligations, ratably in accordance with the respective amounts thereof on the date of any such distribution; and

 

21

 

THIRD, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

Except as otherwise provided herein, the Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement.  Upon any sale of Collateral by the Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Agent or such officer or be answerable in any way for the misapplication thereof.

 

ARTICLE VI
CONCERNING THE EXISTING NOTES TRUSTEE AND HOLDERS OF 2028 DEBENTURES AND 2008 NOTES

 

Section 6.1.                                    Agent’s Consent to Serve.   The Agent has consented to serve as Agent hereunder on the express understanding, and the Existing Notes Trustee and each holder of 2028 Debentures and 2008 Notes, by accepting the benefits of this Agreement, shall be deemed to have agreed, that the Agent shall have no duty and shall owe no obligation or responsibility (fiduciary or otherwise) to the Existing Notes Trustee or such holders, other than the duty to perform its express obligations under this Agreement in accordance with its terms.  Without limiting the foregoing, each of the Existing Notes Trustee and each holder of 2028 Debentures and 2008 Notes, by accepting the benefits of this Agreement, shall be deemed to have waived any right it might have, under applicable law or otherwise, to compel the sale or other disposition of any Collateral, and any obligation the Agent might have, under applicable law or otherwise, to obtain any minimum price for any Collateral upon the sale thereof, it being expressly understood, and the availability of the benefits of this Agreement to the Existing Notes Trustee and each holder of 2028 Debentures and 2008 Notes being conditioned upon the understanding, that the sole right of the holders of the 2028 Debentures and the 2008 Notes shall be to receive their ratable share of any proceeds of Collateral in accordance with and subject to the provisions of this Agreement, the Intercreditor Agreement and the other Term Loan Security Documents.

 

Section 6.2.                                    Determination of Amounts of Obligations and Existence of Existing Notes Events of Default; Acceleration.   Whenever the Agent is required to determine the existence or amount of any of the Existing Notes Obligations or the existence of any Existing Notes Event of Default for any purposes of this Agreement, it shall request written certification of such existence or amount from the Existing Notes Trustee and shall be entitled to make such determination on the basis of such certification; provided , however , that if, notwithstanding the request of the Agent, the Existing Notes Trustee shall fail or refuse reasonably promptly to certify as to the existence or amount of any Existing Notes Obligation or the existence of any Existing Notes Event of Default, the Agent shall be entitled to determine such existence or amount by such commercially reasonable method as the Agent may, in the exercise of its good faith judgment, determine, including by reliance upon a certificate of the Borrower.  The Agent may rely conclusively, and shall be fully protected in so relying, on any determination made by it in accordance with the provisions of the preceding sentence (or as otherwise directed by a court of competent jurisdiction) and shall have no liability to the Borrower, any other Grantor, any Secured Party or any other Person as a result of such determination or any action taken pursuant thereto except to the extent such liability is determined by a court of competent jurisdiction

 

22

 

by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of the Agent.  The Existing Notes Trustee shall promptly notify the Agent of any Existing Notes Event of Default of which it shall have been notified by any Existing Notes Secured Party or of which it shall have otherwise become aware or any acceleration of any of the Existing Notes Obligations; provided that failure to give any such notice shall not affect any rights or remedies of the Agent or any Secured Party arising in connection with any such acceleration.

 

ARTICLE VII

CERTAIN INTERCREDITOR AGREEMENTS

 

Section 7.1.                                    Priority of Security Interests.   The Agent and each of the Secured Parties hereby agrees that the Liens and security interests granted to the Agent hereunder shall be treated, as among the Secured Parties, as being for the equal and proportionate benefit of all the Secured Parties, without preference, priority, prejudice or distinction as to Lien or security interest of any Secured Party over any other Secured Party (except as expressly provided in Section 5.4), and shall at all times be shared by the Secured Parties as provided herein.

 

Section 7.2.                                    Notices to Existing Notes Trustee.   The Agent shall promptly notify the Existing Notes Trustee in the event of a Credit Agreement Event of Default or the acceleration of any Term Loan Obligations.

 

Section 7.3.                                    Actions Under This Agreement.   By acceptance of the benefits of this Agreement, each of the Secured Parties shall be deemed irrevocably to confirm that the Agent shall have the authority to act as the exclusive agent of such Secured Party for enforcement of any provisions of this Agreement against any Grantor and of any other Term Loan Security Document against any “grantor” or “pledgor” thereunder or the exercise of remedies hereunder or under any other Term Loan Security Document and to agree that such Secured Party shall not take any action to enforce any provisions of this Agreement against any Grantor or of any of the other Term Loan Security Documents against any “grantor” or “pledgor” thereunder or to exercise any remedy hereunder or under any other Term Loan Security Document.  The Agent shall not be obligated to take any action under this Agreement except for the performance of such duties as are specifically set forth herein.

 

Section 7.4.                                    Turnover of Collateral; Sharing of Setoffs.   (a) If any Secured Party acquires custody, control or possession of any Collateral or proceeds therefrom, other than pursuant to the terms of this Agreement, such Secured Party shall promptly cause such Collateral or proceeds to be delivered to or put in the custody, possession or control of the Agent for disposition or distribution in accordance with the provisions hereof.  Until such time as the provisions of the immediately preceding sentence have been complied with, such Secured Party shall be deemed to hold such Collateral and proceeds in trust for the parties entitled thereto hereunder.  Notwithstanding the foregoing, no Secured Party shall be required to deliv