Document:

chke-ex102_94.htm

 

Exhibit 10.2

PLEDGE AND SECURITY AGREEMENT

PLEDGE AND SECURITY AGREEMENT (this “Agreement”), dated as of August 3, 2018, made by each of the Grantors referred to below, in favor of Gordon Brothers Finance Company, a Delaware corporation, in its capacity as collateral agent for the Secured Parties referred to below (in such capacity, together with its successors and assigns in such capacity, if any, the “Collateral Agent”). 

RECITALS:

WHEREAS, Cherokee Inc., a Delaware corporation (the “Parent”), as the U.S. borrower, Irene Acquisition Company B.V., a company incorporated under the laws of the Netherlands (the “Dutch Borrower” and together with the Parent, the “Borrowers”), as the Dutch borrower, the subsidiaries of the Parent from time to time party thereto, the lenders from time to time party thereto (each a “Lender” and collectively, the “Lenders”), and the Collateral Agent are parties to a Financing Agreement, dated as of the date hereof (such agreement, as amended, restated, supplemented, modified or otherwise changed from time to time, including any replacement agreement therefor, being hereinafter referred to as the “Financing Agreement”);

WHEREAS, certain of the subsidiaries of Parent that are organized in the United States (including the Parent, each a “Grantor” and collectively, the “Grantors”) are guaranteeing the Borrowers’ Obligations under the Financing Agreement and are, together with the Parent, providing the Lenders with a security interest in certain assets;

WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make certain term loans (each a “Loan” and collectively, the “Loans”), to the Borrowers;

WHEREAS, it is a condition precedent to the Lenders making any Loan and providing any other financial accommodation to the Borrowers pursuant to the Financing Agreement that each Grantor shall have executed and delivered this Agreement to the Collateral Agent for the benefit of the Secured Parties; and

WHEREAS, each Grantor has determined that the execution, delivery and performance of this Agreement directly benefit, and are in the best interest of, such Grantor.

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Collateral Agent and the Lenders to make and maintain the Loans and to provide other financial accommodations to the Borrowers pursuant to the Financing Agreement, the Grantors hereby jointly and severally agree with the Collateral Agent, for the benefit of the Secured Parties, as follows:

SECTION 1.Definitions.

(a)Reference is hereby made to the Financing Agreement for a statement of the terms thereof.  All capitalized terms used in this Agreement that are defined in the Financing Agreement 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 Article 8 or Article 9, as applicable, of the Code: “Accounts”, “Account Debtor”, “Cash Proceeds”, “Certificate of Title”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General 

 

 

Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Record”, “Security Account”, “Software”, “Supporting Obligations” and “Tangible Chattel Paper”. 

(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:

“Additional Collateral” has the meaning specified therefor in Section 4.  

“Additional Grantor” has the meaning specified therefor in Section 13(f).

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

“Collateral” has the meaning specified therefor in Section 2.

“Collateral Agent” has the meaning specified therefor in the preamble.

“Copyright Licenses” means, with respect to any Person, all written agreements pursuant to which such Person grants or obtains any right with respect to any Copyright (including those agreements listed on Schedule II), including, without limitation, the rights to print, publish, copy, distribute, create derivative works, or otherwise exploit and sell copyrighted materials or materials derived from any Copyright, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such agreements or Copyrights, together with any and all (i) amendments, modifications, renewals, extensions, and supplements thereof, (ii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present and future infringements, misappropriations, breaches or other violations with respect thereto and (iii) rights to sue for past, present and future infringements, misappropriations, breaches or violations thereof.

“Copyright Security Agreement” means each agreement substantially in the form of Exhibit B-1.

“Copyrights” means, collectively, with respect to any Person, all copyrights (whether statutory or common law, whether registered or unregistered in the United States or any other country or any political subdivision thereof and whether published or unpublished) and all mask works (as such term is defined in 17 U.S.C. Section 901, et seq.), and all copyright registrations and applications made by any Person, in each case, whether now owned or hereafter created or acquired by or assigned to any Grantor, including, without limitation, each registration and application identified on Schedule II, together with any and all (i) registrations and applications therefor, (ii) rights and privileges arising under applicable law with respect to such copyrights, (iii) renewals and extensions thereof and amendments thereto, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present and future infringements, dilutions, misappropriations, or other violations thereof, (v) rights to sue or otherwise recover for past, present and future infringements, misappropriations, dilutions or other violations thereof and (vi) rights corresponding thereto throughout the world.

“Financing Agreement” has the meaning specified therefor in the Recitals. 

“Grantors” has the meaning specified in the Recitals.

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“Intellectual Property” means all Copyrights, Patents, Trademarks and Other Intellectual Property.

“Lenders” has the meaning specified therefor in the Recitals.

“Licenses” means the Copyright Licenses, the Patent Licenses and the Trademark Licenses.

“Loans” has the meaning specified therefor in the Recitals.

“Other Intellectual Property” means (i) all trade secrets, confidential information, know-how and processes, designs, inventions, invention disclosures, engineering or other technical data, financial data, procedures, designs personal information, supplier lists, customer lists, business, production or marketing plans, formulae, methods (whether or not patentable), processes, compositions, schematics, ideas, techniques, analyses, proposals, technology, and compilations, data, databases, and computer programs (whether in source code, object code, or other form) and all documentation (including, without limitation, user manuals and training materials) related thereto, and proprietary methodologies, algorithms, and information, and any other intangible rights, to the extent not covered by the definitions of Patents, Trademarks and Copyrights, whether registered or unregistered in the United States or any other country or any political subdivision thereof, together with any and all registrations and applications for the foregoing, (ii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present and future infringements, misappropriations, and other violations thereof, (iii) rights to sue or otherwise recover for past, present and future infringements, misappropriations, and other violations thereof and (iv) rights corresponding thereto throughout the world.

“Patent License” means, with respect to any Person, all written agreements pursuant to which such Person grants or obtains any right to any Patent (including those agreements listed on Schedule II), including, without limitation, the right to manufacture, use, import, export, distribute, offer for sale or sell any invention covered in whole or in part by a Patent, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such agreements or Patents, together with any and all (i) amendments, modifications, renewals, extensions, and supplements thereof, (ii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present and future infringements, misappropriations, breaches or other violations with respect thereto and (iii) rights to sue for past, present and future infringements, misappropriations, breaches or violations thereof.

“Patent Security Agreement” means each agreement substantially in the form of Exhibit B-2.

“Patents” means, collectively, with respect to any Person, all patents, patent applications, certificates of inventions, industrial designs (whether registered or unregistered in the United States or any other country or any political subdivision thereof), including, without limitation, each issued patent and patent application identified on Schedule II, together with any and all (i) inventions and improvements described and claimed therein, (ii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present and future infringements, dilutions, misappropriations, or other violations thereof, (iv) rights to sue or otherwise recover for past, present and future infringements, misappropriations, dilutions or other violations thereof and (v) rights corresponding thereto throughout the world.

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“Perfection Requirements” has the meaning specified therefor in Section 5(j).

“Pledge Amendment” has the meaning specified therefor in Section 4(a)(ii).

“Pledged Debt” means the indebtedness described in Schedule VII hereto and all indebtedness from time to time owned or acquired by a Grantor, the Promissory Notes and other Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments, Investment Property, financial assets, securities, Equity Interests, stock options and Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidences of indebtedness and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness.

“Pledged Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged Shares and (c) all security entitlements in any and all of the foregoing.

“Pledged Issuers” means, collectively, (a) the issuers of the shares of Equity Interests described in Schedule VIII hereto and (b) any other issuer of Equity Interests at any time and from time to time owned or acquired by a Grantor whose shares of Equity Interests are required to be pledged as Collateral under this Agreement.

“Pledged Partnership/LLC Agreement” has the meaning specified therefor in Section 6(k)(ii).

“Pledged Shares” means (a) the shares of Equity Interests of the Pledged Issuers, whether or not evidenced or represented by any stock certificate, certificated security or other Instrument, (b) certificates representing such shares of Equity Interests, all options and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, Instruments, Investment Property, financial assets, securities, Equity Interests, stock options and Commodity Contracts, notes, debentures, bonds, Promissory Notes or other evidences of indebtedness and all other property (including, without limitation, any stock dividend and any distribution in connection with a stock split) from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests and (c) without affecting the obligations of any Grantor under any provision prohibiting such action under this Agreement, the Financing Agreement or any other Loan Document, in the event of any consolidation or merger involving any Pledged Issuer and in which such Pledged Issuer is not the surviving entity, all Equity Interests of the successor entity formed by or resulting from such consolidation or merger.

“Secured Obligations” has the meaning specified therefor in Section 3.

“Security Agreement Supplement” has the meaning specified therefor in Section 13(f).

“Titled Collateral” means all Collateral for which the title to such Collateral is governed by a Certificate of Title or certificate of ownership, including, without limitation, all motor vehicles (including, without limitation, all trucks, trailers, tractors, service vehicles, automobiles and other mobile equipment) for which the title to such motor vehicles is governed by a Certificate of Title or certificate of ownership.

“Trademark License” means, with respect to any Person, any written agreement pursuant to which such Person grants or obtains any right to use any Trademark (including those agreements listed on Schedule II), and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such agreements or Trademarks, together with all (i) amendments, modifications, renewals, extensions, and supplements thereof, (ii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages 

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and payments for past, present and future infringements, misappropriations, breaches or other violations with respect thereto and (iii) rights to sue for past, present and future infringements, misappropriations, breaches or violations thereof.

“Trademark Security Agreement” means each agreement substantially in the form of Exhibit B-3.

“Trademarks” means, collectively, with respect to any Person, all trademarks, service marks, certification marks, trade names, corporate names, company names, business names, fictitious business names, slogans, logos, trade styles, trade dress, Internet domain names, and other source or business identifiers, whether registered or unregistered in the United States or any other country or any political subdivision thereof, including, without limitation, each registration and application identified on Schedule II, together with any and all (i) registrations and applications for any of the foregoing, (ii) goodwill connected with the use thereof and symbolized thereby, (iii) rights and privileges arising under applicable law with respect to the use of any of the foregoing, (iv) reissues, continuations, extensions and renewals thereof and amendments thereto, (v) income, fees, royalties, damages and payments now or hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present and future infringements, dilutions, misappropriations, or other violations thereof, (vi) rights to sue or otherwise recover for past, present and future infringements, misappropriations, dilutions or other violations thereof and (vii) rights corresponding thereto throughout the world.

SECTION 2.Grant of Security Interest.  As collateral security for the payment, performance and observance of all of the Secured Obligations, each Grantor hereby pledges and assigns to the Collateral Agent (and its agents and designees), and grants to the Collateral Agent (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in, all personal property and Fixtures of such Grantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible, including, without limitation, the following (all being collectively referred to herein as the “Collateral”):

(a)all Accounts;

(b)all Chattel Paper (whether tangible or electronic);

(c)all Commercial Tort Claims, including, without limitation, the Commercial Tort Claims described in Schedule VI hereto;

(d)all Deposit Accounts, all cash, and all other property from time to time deposited therein or otherwise credited thereto and the monies and property in the possession or under the control of the Collateral Agent or any Lender or any affiliate, representative, agent or participant of the Collateral Agent or any Lender;

(e)all Documents;

(f)all General Intangibles (including, without limitation, all Payment Intangibles, Intellectual Property and Licenses);

(g)all Goods, including, without limitation, all Equipment, Fixtures and Inventory;

(h)all Instruments (including, without limitation, Promissory Notes);

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(i)all Investment Property;

(j)all Letter-of-Credit Rights;

(k)all Pledged Interests;

(l)all Supporting Obligations;

(m)all Additional Collateral;

(n)all other tangible and intangible personal property and Fixtures of such Grantor (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 such Grantor 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 such Grantor in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, disks, cards, Software, data and computer programs in the possession or under the control of such Grantor or any other Person from time to time acting for such Grantor 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

(o)all Proceeds, including all Cash Proceeds and Noncash Proceeds, and products of any and all of the foregoing Collateral;

in each case, howsoever such Grantor’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).

Notwithstanding anything herein to the contrary, the term “Collateral” shall not include, and no Grantor is pledging, nor granting a security interest hereunder, in (i) those assets as to which the Collateral Agent and the Administrative Borrower reasonably agree that the cost of obtaining such a security interest or perfection thereof are excessive in relation to the value afforded thereby, (ii) any fee-owned real property with a Current Value of less than $250,000 and all real property leasehold interests, (iii) any of such Grantor’s right, title or interest in any lease, permit, license, contract or agreement to which such Grantor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that such a grant would, under the terms of such lease, permit, license, contract or agreement result in a breach of the terms of, or constitute a default under, such lease, permit, license, contract or agreement (other than to the extent that any such term (1) has lapsed or terminated or has been waived or (2) has been rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 of the Code or other applicable provisions of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, that (A) immediately upon the ineffectiveness, lapse, termination or waiver of any such provision, the Collateral shall include, and such Grantor shall be deemed to have granted a security interest in, all such right, title and interest as if such provision had never been in effect and (B) the foregoing exclusion shall in no way be construed so as to limit, impair or otherwise affect the Collateral Agent’s unconditional continuing security interest in and liens upon any rights or interests of a Grantor in or to the proceeds of, or any monies due or to become due under, any such license, contract or agreement, (iv) any intent-to-use United States trademark applications for which an amendment to allege use or statement of use has not been filed under 15 U.S.C. § 1051(c) or 15 U.S.C. § 1051(d), respectively, or if filed, has not been deemed in conformance with 15 U.S.C. § 1051(a) or examined and accepted, respectively, by the United States Patent and Trademark Office; provided that, upon such filing and acceptance, such intent-to-use applications shall be included in the definition of Collateral, (v) any property 

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to the extent that such grant of a security interest is prohibited by any Requirement of Law of any Governmental Authority or requires a consent not obtained, after using commercially reasonable efforts, of any Governmental Authority pursuant to such Requirements of Law, until such prohibition is removed or such consent is obtained; provided that the foregoing exclusion shall in no way be construed so as to limit, impair or otherwise affect the Collateral Agent’s unconditional continuing security interest in and liens upon any rights or interests of a Grantor in or to the proceeds of such property, or any monies due or to become due under any such license, contract or agreement with respect to such property, (vi) the voting stock of any CFC in excess of 65% of such voting stock or the assets owned by such CFC, in each case to secure the Obligations and only to the extent any such pledge under this clause (vi) would result in material adverse tax consequences to such Grantor (and without limiting such pledge in respect of non-voting stock of such CFC to secure the U.S. Obligations or in connection with the pledge and grant of a security interest in any stock or assets of such CFC to secure the Foreign Obligations), or (vii) any Margin Stock.

No Grantor shall be required to take any action with respect to perfection of any security interest in (i) Letter-of-Credit Rights to the extent a security interest therein may not be perfected by the filing of a financing statement under the Uniform Commercial Code, (ii) Commercial Tort Claims asserting damages of less than $250,000 or (iii) Titled Collateral to the extent that a security interest therein may not be perfected by the filing of a financing statement under the Uniform Commercial Code.

The Grantors agree that the pledge of the shares of Equity Interests of any Pledged Issuer who is a Foreign Subsidiary may be supplemented by one or more separate pledge agreements, deeds of pledge, share charges, or other similar agreements or instruments, executed and delivered by the relevant Grantors in favor of the Collateral Agent, which pledge agreements will provide for the pledge of such shares of Equity Interests in accordance with the laws of the applicable foreign jurisdiction.  With respect to such shares of Equity Interests, the Collateral Agent may, at any time and from time to time, in its sole discretion, take actions in such foreign jurisdictions that will result in the perfection of the Lien created in such shares of Equity Interests. 

SECTION 3.Security for Secured Obligations.  The security interest created hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether now existing or hereafter incurred (collectively, the “Secured Obligations”):

(a)the prompt payment by each Grantor, as and when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by the Borrowers in respect of the Financing Agreement and/or the other Loan Documents, including, without limitation, (i) all Obligations, (ii) in the case of a Guarantor, all amounts from time to time owing by such Grantor in respect of its guaranty made pursuant to Article XI of the Financing Agreement and (iii) all interest, fees, commissions, charges, expense reimbursements, indemnifications and all other amounts due or to become due under any Loan Document (including, without limitation, all interest, fees, commissions, charges, expense reimbursements, indemnifications and other amounts that accrue after the commencement of any Insolvency Proceeding of any Loan Party, whether or not the payment of such interest, fees, commissions, charges, expense reimbursements, indemnifications and other amounts are unenforceable or are not allowable, in whole or in part, due to the existence of such Insolvency Proceeding); and 

(b)the prompt payment and due performance and observance by each Grantor of all of its other obligations from time to time existing in respect of this Agreement and any other Loan Document. 

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SECTION 4.Delivery of the Pledged Interests. 

(a)All Promissory Notes currently evidencing the Pledged Debt and all certificates currently representing the Pledged Shares shall be delivered to the Collateral Agent on or prior to the Effective Date (or such later date as may be determined by the Collateral Agent in its sole discretion).  All other Promissory Notes, certificates and Instruments constituting Pledged Interests from time to time required to be pledged to the Collateral Agent pursuant to the terms of this Agreement or the Financing Agreement (the “Additional Collateral”) shall be delivered to the Collateral Agent promptly upon, but in any event within 10 Business Days of, receipt thereof by or on behalf of any of the Grantors.  All such Promissory Notes, certificates and Instruments shall be (A) held by or on behalf of the Collateral Agent pursuant hereto, and (B) delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment executed in blank, all in form and substance reasonably satisfactory to the Collateral Agent.  If any Pledged Interests consist of uncertificated securities such Grantor shall cause each issuer of such securities to agree that upon the occurrence and during the continuance of an Event of Default it will comply with instructions originated by the Collateral Agent with respect to such securities without further consent by such Grantor.  If any Pledged Interests consist of security entitlements, such Grantor shall cause the applicable securities intermediary to agree that upon the occurrence and during the continuance of an Event of Default it will comply with entitlement orders by the Collateral Agent without further consent by such Grantor. 

(b)Within 5 Business Days of the receipt by a Grantor of any Additional Collateral, a pledge amendment duly executed by such Grantor, in substantially the form of Exhibit A (a “Pledge Amendment”), shall be delivered to the Collateral Agent, in respect of the Additional Collateral that must be pledged pursuant to this Agreement or the Financing Agreement.  The Pledge Amendment shall from and after delivery thereof constitute part of Schedules VII and VIII hereto.  Each Grantor hereby authorizes the Collateral Agent to attach each Pledge Amendment to this Agreement and agrees that all Promissory Notes, certificates or Instruments listed on any Pledge Amendment delivered to the Collateral Agent shall for all purposes hereunder constitute Pledged Interests and such Grantor shall be deemed upon delivery thereof to have made the representations and warranties set forth in Section 5 hereof with respect to such Additional Collateral. 

SECTION 5.Representations and Warranties.  Each Grantor represents and warrants as follows:

(a)Schedule I hereto sets forth a complete and accurate list as of the date hereof of (i) the exact legal name of each Grantor, (ii) the jurisdiction of organization of each Grantor, (iii) the type of organization of each Grantor and (iv) the organizational identification number of each Grantor (or states that no such organizational identification number exists). 

(b)All Equipment, Fixtures, Inventory and other Goods now existing are, and all Equipment, Fixtures, Inventory and other Goods hereafter existing will be, located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with Section 6(b)).  Each Grantor’s chief place of business and chief executive office, the place where such Grantor keeps its Records concerning Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in Schedule III hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof).  As of the date hereof, none of the Accounts is evidenced by Promissory Notes or other Instruments.  Set forth in Schedule IV hereto is a complete and accurate list, as of the date of this Agreement, of each Deposit Account, Securities Account and Commodities Account of each Grantor, together with the name and address of each institution at which each such Account is maintained, the account number for each such Account and a description of the purpose of each such Account.  Set forth in Schedule II hereto is (i) a complete and correct list of each trade 

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name used by each Grantor and (ii) the name of, and each trade name used by, each Person from which such Grantor has acquired any substantial part of the Collateral within five years of the date hereof. 

(c)Each Grantor has delivered to the Collateral Agent true, complete and correct copies of each License described in Schedule II hereto, including all schedules and exhibits thereto, which represents all of the Licenses that are Material Contracts 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 any Grantor or any of its Affiliates in respect thereof.  Each License now existing is the legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally.  No written notice of default under any License by any such party has been received which default has not been cured.  No third party to any License has given any Grantor written notice of its intention to cancel or terminate any License. 

(d)Schedule II hereto sets forth a complete and accurate list of all Registered Intellectual Property owned or used by each Grantor that are reasonably necessary for the operation of their respective businesses.  In all material respects, all such Registered Intellectual Property is subsisting and in full force and effect, has not been adjudged invalid or unenforceable, is valid and enforceable and has not been abandoned in whole or in part.  To each Grantor’s knowledge, no Intellectual Property owned or used by such Grantor conflicts with the rights of others to any such Intellectual Property and no Grantor has received written notice that it is now infringing or in conflict with any such rights of others, and to the knowledge of each Grantor, no other Person is now infringing or in conflict with any such properties, assets and rights owned or used by any Grantor, except for infringements and conflicts that could not reasonably be expected to materially adversely affect, individually or in the aggregate, such Grantor’s operation of its business.  No Grantor has received any written notice that it is violating or has violated the Intellectual Property rights of any third party. 

(e)None of the Other Intellectual Property of any Grantor has been used, divulged, disclosed or appropriated to the detriment of such Grantor for the benefit of any other Person other than such Grantor in any material respect; no employee, independent contractor or agent of any Grantor has misappropriated any Other Intellectual Property of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of such Grantor in any material respect; and no employee, independent contractor or agent of any Grantor is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement, or contract relating in any way to the protection, ownership, development, use or transfer of such Grantor’s Intellectual Property in any material respect. 

(f)The Pledged Issuers set forth in Schedule VIII are the only Subsidiaries of each Grantor listed thereon.  The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other similar rights.  Except as noted in Schedule VIII hereto, the Pledged Shares constitute 100% of the issued shares of Equity Interests of the Pledged Issuers as of the date hereof. All other shares of Equity Interests constituting Pledged Interests are duly authorized and validly issued, fully paid and nonassessable. 

(g)The Promissory Notes evidencing the Pledged Debt have been duly authorized, executed and delivered by the respective makers thereof, and all such Promissory Notes are or will be, as the case may be, legal, valid and binding obligations of such makers, enforceable against such makers in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally. 

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(h)Each Grantor (i) has good and marketable title to, or otherwise has and will have adequate rights in, the Collateral free and clear of any and all Liens or claims of others except for the Permitted Liens, (ii) is the sole record and beneficial owner of the Collateral, and (iii) has full power and authority to grant to the Collateral Agent the security interests in the Collateral pursuant hereto, (iv) has good and valid rights in or the power to transfer each item of Collateral in which a security interest is granted by it hereunder.  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 such as may have been filed to perfect or protect any Permitted Lien. 

(i)The exercise by the Collateral Agent of any of its rights and remedies hereunder will not result in a violation of (i) the Governing Documents of any Grantor, (ii) any applicable material Requirement of Law, or (iii) any Material Contract binding on or otherwise affecting any Grantor or any of its properties, except in the case of this subclause (iii) where the failure to so comply could not reasonably be expected to materially adversely affect such Grantor’s operation of its business. 

(j)No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for (i) the due execution, delivery and performance by any Grantor of this Agreement, (ii) the grant by any Grantor of the security interest purported to be created hereby in the Collateral or (iii) the exercise by the Collateral Agent of any of its rights and remedies hereunder, except, in the case of this clause (iii), as may be required in connection with any sale of any Pledged Interests by laws affecting the offering and sale of securities generally.  No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for the perfection of the security interest purported to be created hereby in the Collateral, 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 and Licenses, for the recording of the appropriate Assignment for Security, substantially in the form of Exhibit B 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 such foreign Intellectual Property and Licenses, (D) with respect to the perfection of the security interest created in Letter-of-Credit Rights or Titled Collateral, the filing of financing statements under the Uniform Commercial Code (which shall be the sole requirement for the perfection of such security interests hereunder), (E) with respect to any action that may be necessary to obtain control of Collateral constituting Deposit Accounts, Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights, the taking of such actions, and (F) the Collateral Agent’s having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral (subclauses (A) -- (F), each a “Perfection Requirement” and collectively, the “Perfection Requirements”). 

(k)This Agreement creates a legal, valid and enforceable security interest in favor of the Collateral Agent, for the benefit of the Secured Parties, in the Collateral, as security for the Secured Obligations.  Subject to Section 5.02 of the Financing Agreement and the satisfaction of the Perfection Requirements, such security interests are, or in the case of Collateral in which any Grantor obtains rights after the date hereof, will be, perfected, first priority security interests, subject in priority only to the Permitted Liens, and the recording of such instruments of assignment described above.

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(l)As of the date hereof, Schedule VI lists all Commercial Tort Claims held by any Grantor.

(m)Each Grantor and any of its Subsidiaries that is a partnership or a limited liability company with certificated Equity Interests, has irrevocably opted into (and has caused each of its Subsidiaries that is a partnership or a limited liability company with certificated Equity Interests, and a Pledged Issuer to opt into) Article 8 of the relevant Uniform Commercial Code (collectively, the “Certificated Entities”).  Such interests are securities for purposes of Article 8 of the relevant Uniform Commercial Code.  With respect to each Grantor and its Subsidiaries that is a partnership or a limited liability company and is not a Certificated Entity, the partnership interests or membership interests of each such Person are not (i) dealt in or traded on securities exchanges or in securities markets, (ii) securities for purposes of Article 8 of any relevant Uniform Commercial Code, (iii) investment company securities within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (iv) evidenced by a certificate.

SECTION 6.Covenants as to the Collateral.  During the period from the Effective Date until the Termination Date, unless the Collateral Agent shall otherwise consent in writing:

(a)Further Assurances.  Each Grantor will take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as the Collateral Agent may reasonably require from time to time in order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby; (ii) to enable the Collateral 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) at the request of the Collateral Agent, marking conspicuously all Chattel Paper, Instruments, Licenses and all of its Records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such Chattel Paper, Instrument, License or Records is subject to the security interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other Instrument or Chattel Paper, delivering and pledging to the Collateral Agent such Promissory Note, other Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent, (C) executing and filing (to the extent, if any, that such Grantor’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, (D) if at any time after the date hereof, any Grantor acquires any Intellectual Property not covered by an appropriate security interest grant, notifying the Collateral Agent in writing in accordance with Section 6(f)(iv) herein, and with respect to such Intellectual Property hereafter existing, the executing and recording in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, appropriate instruments granting a security interest, as may be necessary or desirable or that the Collateral Agent may request in order to perfect and preserve the security interest purported to be created hereby, (E) if at any time after the date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a writing signed by such Grantor setting forth a brief description of such Commercial Tort Claim and, to the extent required hereunder, granting to the Collateral 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 Collateral Agent, and (F) taking all actions required by law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction.  No Grantor shall take or fail to take any action which could in any manner materially impair the validity or enforceability of the Collateral Agent’s security interest in and Lien on any Collateral. 

(b)Location of Equipment and Inventory.  Each Grantor will keep the Equipment and Inventory at the locations specified in Schedule III hereto or, upon not less than 10 days’ prior written notice to the Collateral Agent accompanied by a new Schedule III hereto indicating each new location of the Equipment and Inventory, at such other locations in the continental United States as the Grantors may elect; 

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provided that all action has been taken in accordance herewith to grant to the Collateral Agent a perfected, first priority security interest in such Equipment and Inventory (subject only to Permitted Liens) in favor of the Collateral Agent, for the benefit of the Secured Parties.

(c)Condition of Equipment.  Each Grantor will promptly furnish to the Collateral Agent a statement describing in reasonable detail any loss or damage in excess of $250,000 to any Equipment.

(d)Provisions Concerning the Accounts and the Licenses.

(i)Each Grantor will, except as otherwise provided in this subsection (d), continue to collect, at its own expense, all amounts due or to become due under the Accounts.  In connection with such collections, each Grantor may (and, at the Collateral Agent’s direction during the occurrence and continuation of an Event of Default, will) take such action as such Grantor (or, if applicable, the Collateral Agent) may deem necessary or advisable to enforce collection or performance of the Accounts; provided, however, that the Collateral Agent shall have the right 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 Collateral Agent and to direct such Account Debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent or its designated agent and, upon such notification and at the expense of such Grantor 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 such Grantor might have done.  After receipt by any Grantor of a notice from the Collateral Agent during the occurrence and continuance of an Event of Default that the Collateral Agent has notified, intends to notify, or has enforced or intends to enforce a Grantor’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 such Grantor in respect of the Accounts shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent or its designated agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and either credited to the Loan Account or applied as otherwise specified in the Financing Agreement, and (B) such Grantor will not 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.  Any such securities, cash, investments and other items so received by the Collateral Agent or its designated agent shall (in the sole and absolute discretion of the Collateral Agent) be held as additional Collateral for the Secured Obligations or distributed in accordance with Section 9 hereof. 

(ii)Upon the occurrence and during the continuance of any material breach or default under any material License by any party thereto other than a Grantor, the relevant Grantor will, as soon as practicable after obtaining knowledge thereof, give the Collateral Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto. 

(iii)Each Grantor will, at its expense, promptly deliver to the Collateral Agent a copy of each written notice or other written communication received by it by which any other party to any License (A) declares a material breach or default by a Grantor of any material term thereunder, (B) terminates such License (other than the expiration of such License in accordance with the terms thereof) or (C) purports to exercise any of its rights or affect any of its obligations thereunder, together with a copy of any reply by such Grantor thereto. 

(iv)Each Grantor will duly perform and observe in all respects all of its obligations under each License and will take all commercially reasonable action necessary to maintain the 

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Licenses in full force and effect.  During the occurrence and continuance of an Event of Default, no Grantor will, without the prior written consent of the Collateral Agent, cancel, terminate, amend or otherwise modify in any respect, or waive any material provision of, any material License. 

(e)Notices and Communications; Defense of Title; Amendments; Equity Issuances.  Each Grantor will defend the Collateral Agent’s right, title and security interest in and to the Pledged Interests against the claims of any Person, keep the Pledged Interests free from all Liens (except Permitted Liens), and not sell, exchange, transfer, assign, lease or otherwise dispose of the Pledged Interests or any interest therein, except as permitted under the Financing Agreement and the other Loan Documents;

(i)not make or consent to any amendment or other modification or waiver with respect to any Pledged Interests or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests other than as expressly permitted under the Financing Agreement; and

(ii)not permit the issuance of (A) any additional shares of any class of Equity Interests of any Pledged Issuer, (B) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or condition into, or exchangeable for, any such shares of Equity Interests or (C) any warrants, options, contracts or other commitments entitling any Person to purchase or otherwise acquire any such shares of Equity Interests, in each case, other than as permitted under the Financing Agreement.

(f)Intellectual Property.

(i)If applicable, each Grantor has duly executed and delivered the applicable Assignment for Security in the form attached hereto as Exhibit B.  Except as provided in subsection (ii) below, each Grantor (either itself or through licensees) will, and will cause each licensee thereof to, take all action reasonably necessary to maintain all of the Intellectual Property material to or necessary for the operation of each Grantor’s business 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 valid claim of abandonment for non-use, and no Grantor will (nor permit any licensee thereof to) knowingly do any act or knowingly omit to do any act whereby any Intellectual Property necessary for the operation of any Grantor’s business may become invalidated. 

(ii)Notwithstanding the foregoing and subject to the terms of the Financing Agreement, so long as no Event of Default has occurred and is continuing, no Grantor shall have an 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 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 created by this Agreement, (C) that is substantially the same as any other Intellectual Property that is in full force, 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 other Intellectual Property is subject to the Lien and security interest created by this Agreement or (D) that is not material to or necessary for the operation of any Grantor’s business. 

(iii)Each Grantor will cause to be taken all reasonably necessary steps in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each 

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registration of Intellectual Property material to the operation of any Grantor’s business (other than the Intellectual Property described in the proviso to the immediately preceding sentence), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees.  If any Intellectual Property owned by any Grantor is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Grantors shall (A) upon obtaining knowledge of such infringement, misappropriation, dilution or other violation, promptly notify the Collateral Agent in writing setting forth a brief description of such infringement, misappropriation, dilution or other violation and (B) to the extent the Grantors shall deem reasonable and appropriate under the circumstances, sue 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 the Grantors shall deem appropriate under the circumstances to protect such Intellectual Property. 

(iv)Concurrently with the delivery of financial information required by Section 7.01(a)(ii) of the Financing Agreement, the Grantors shall furnish to the Collateral Agent a schedule identifying and describing any Intellectual Property and Licenses which are Material Contracts that have been acquired by any of the Grantors since the date of the last such delivery; provided that within 10 Business Days of such acquisition the Grantors shall furnish to the Collateral Agent a schedule identifying and describing any such Intellectual Property and Licenses which are Material Contracts that have been acquired during any fiscal quarter of the Parent and its Subsidiaries in which such Intellectual Property and Licenses which are Material Contracts with an aggregate value of $250,000 or more have been acquired.  The Grantors agree to execute and authenticate a Copyright Security Agreement, Patent Security Agreement or Trademark Security Agreement, as applicable, and do take all other actions reasonably requested by the Collateral Agent to subject such Intellectual Property and Licenses to the Lien and security interest created by this Agreement. 

(v)Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, no Grantor may abandon or otherwise permit any Intellectual Property to become invalid without the prior written consent of the Collateral Agent (which shall not be unreasonably withheld, delayed or conditioned), and if any Intellectual Property owned by any Grantor is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, each of the Grantors will take such action as the Collateral Agent shall reasonably deem appropriate under the circumstances to protect such Intellectual Property. 

(vi)In the event that any Grantor shall (A) obtain rights to any new Trademarks, or any reissue, renewal or extension of any existing Trademark necessary for the operation of its business, (B) obtain rights to or develop any new patentable inventions, or become entitled to the benefit of any Patent, or any reissue, division, continuation, renewal, extension or continuation-in-part of any existing Patent or any improvement thereof (whether pursuant to any license or otherwise), (C) obtain rights to or develop any new works protectable by Copyright, or become entitled to the benefit of any rights with respect to any Copyright or any registration or application therefor, or any renewal or extension of any existing Copyright or any registration or application therefor, or (D) obtain rights to or develop new Other Intellectual Property, the provisions of Section 2 hereof shall automatically apply thereto and, with respect to each such item of Registered Intellectual Property, such Grantor shall give to the Collateral Agent notice thereof in accordance with clause (iv), above. 

(vii)Each Grantor shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent’s security interest hereunder in such Intellectual Property and the General Intangibles of such Grantor relating thereto or represented thereby, and each Grantor hereby 

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appoints the Collateral Agent as its 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 Date. 

(g)Deposit, Commodities and Securities Accounts.  In accordance with and subject to Section 5.02 and Article VIII of the Financing Agreement, each Grantor shall cause each bank and other financial institution with an account referred to in Schedule IV hereto to execute and deliver to the Collateral Agent (or its designee) a Control Agreement, in form and substance reasonably satisfactory to the Collateral Agent, duly executed by such Grantor and such bank or financial institution, or enter into other arrangements in form and substance reasonably satisfactory to the Collateral Agent, pursuant to which such institution shall irrevocably agree (unless otherwise agreed to by the Collateral Agent), among other things, that (i) it will comply at any time with the instructions originated by the Collateral Agent (or its designee) to such bank or financial institution directing the disposition of cash, Commodity Contracts, securities, Investment Property and other items from time to time credited to such account, without further consent of such Grantor, which instructions the Collateral Agent (or its designee) shall not give to such bank or other financial institution in the absence of a continuing Event of Default, (ii) all cash, Commodity Contracts, securities, Investment Property and other items of such Grantor deposited with such institution shall be subject to a perfected, first priority security interest in favor of the Collateral Agent (or its designee), and (iii) any right of set off, banker’s Lien or other similar Lien, security interest or encumbrance shall be fully waived as against the Collateral Agent (or its designee).  The provisions of this Section 6(g) shall not apply to any Excluded Accounts. 

(h)[Reserved]. 

(i)Control.  Each Grantor hereby agrees to take any or all action that is reasonably necessary or reasonably requested by the Collateral Agent in order for the Collateral Agent to obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107 of the Code with respect to the following Collateral: (i) Deposit Accounts, (ii) Securities Accounts, Electronic Chattel Paper, (iv) Investment Property and (v) Letter-of-Credit Rights.  Each Grantor hereby acknowledges and agrees that any agent or designee of the Collateral Agent shall be deemed to be a “secured party” with respect to the Collateral under the control of such agent or designee for all purposes.

(j)Records; Inspection and Reporting.

(i)Each Grantor shall keep adequate records concerning the Accounts, Chattel Paper and Pledged Interests.

(ii)Except as otherwise expressly permitted by Section 6(b), if any Grantor shall, upon 5 days’ prior written notice to the Collateral Agent (or such shorter period agreed to by the Collateral Agent), amend, modify or otherwise change (A) its name, organizational identification number or FEIN, (B) its jurisdiction of organization as set forth in Schedule I hereto or (C) its chief executive office as set forth in Schedule III hereto.  Each Grantor shall promptly notify the Collateral Agent upon obtaining an organizational identification number, if on the date hereof, such Grantor did not have such identification number. 

(k)Partnership and Limited Liability Company Interests. 

(i)Except with respect to partnership interests and limited liability company interests evidenced by a certificate, which certificate has been pledged and delivered to the Collateral Agent pursuant to Section 4 hereof, no Grantor that is a partnership or a limited liability company shall, nor shall 

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any Grantor with any Subsidiary that is a partnership or a limited liability company, permit such Subsidiary’s partnership interests or membership interests to (A) be dealt in or traded on securities exchanges or in securities markets, (B) become a security for purposes of Article 8 of any relevant Uniform Commercial Code, (C) become an investment company security within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (D) be evidenced by a certificate.  Each Grantor agrees that such partnership interests or membership interests shall constitute General Intangibles. 

(ii)Each Grantor covenants and agrees that it shall amend any limited liability agreement, operating agreement, membership agreement, partnership agreement or similar agreement to which a Grantor is a party and relating to any Pledged Interests (as amended, restated, supplemented or otherwise modified from time to time, each a “Pledged Partnership/LLC Agreement”) as follows: (A) to permit each member, manager and partner that is a Grantor (1) to pledge all of the Pledged Interests in which such Grantor has rights, (2) to grant to the Collateral Agent, for the benefit of each Secured Party, a lien on and security interest in such Pledged Interests and (3) to, upon any foreclosure by the Collateral Agent on such Pledged Interests (or any other sale or transfer of such Pledged Interests in lieu of such foreclosure), transfer to the Collateral Agent (or to the purchaser or other transferee of such Pledged Interests in lieu of such foreclosure) its rights and powers to manage and control the affairs of the applicable Pledged Issuer, in each case, without any further consent, approval or action by any other party, including, without limitation, any other party to any Pledged Partnership/LLC Agreement or otherwise and (B) to provide that (1) the bankruptcy or insolvency of such Grantor shall not cause such Grantor to cease to be a holder of such Pledged Interests, (2) upon the occurrence of such an event, the applicable Pledged Issuer shall continue without dissolution and (3) such Grantor waives any right it might have to agree in writing to dissolve the applicable Pledged Issuer upon the bankruptcy or insolvency of such Grantor, or the occurrence of an event that causes such Grantor to cease to be a be a holder of such Pledged Interests. 

(iii)Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent or its designee shall have the right (but not the obligation) to be substituted for the applicable Grantor as a member, manager or partner under the applicable limited liability agreement, operating agreement, membership agreement, partnership agreement or similar agreement to which a Grantor is a party (each a “Pledged Partnership/LLC  Agreement”), and the Collateral Agent or its designee shall have all rights, powers and benefits of such Grantor as a member, manager or partner, as applicable, under such Pledged Partnership/LLC Agreement in accordance with the terms of this Section 6(k).  For avoidance of doubt, such rights, powers and benefits of a substituted member, manager or partner shall include all voting and other rights and not merely the rights of an economic interest holder. 

(iv)During the period from the Effective Date until the Termination Date, no further consent, approval or action by any other party, including, without limitation, any other party to the applicable Pledged Partnership/LLC Agreement or otherwise shall be necessary to permit the Collateral Agent or its designee to be substituted as a member, manager or partner pursuant to this Section 6(k).  The rights, powers and benefits granted pursuant to this paragraph shall inure to the benefit of the Collateral Agent, on its own behalf and on behalf of each other Secured Party, and each of their respective successors, assigns and designees, as intended third party beneficiaries. 

(v)Each Grantor and each applicable Pledged Issuer agrees that during the period from the Effective Date until the Termination Date, no Pledged Partnership/LLC Agreement shall be amended to be inconsistent with the provisions of this Section 6(k) without the prior written consent of the Collateral Agent. 

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SECTION 7.Voting Rights, Dividends, Etc. in Respect of the Pledged Interests.

(a)So long as no Event of Default shall have occurred and be continuing:

(i)each Grantor may exercise any and all voting and other consensual rights pertaining to any Pledged Interests for any purpose not inconsistent with the terms of this Agreement, the Financing Agreement or the other Loan Documents; and

(ii)each Grantor may receive and retain any and all dividends, interest or other distributions paid in respect of the Pledged Interests to the extent permitted by the Financing Agreement.

(b)Upon the occurrence and during the continuance of an Event of Default:

(i)all rights of each Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends, distributions, interest and other payments that it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Interests such dividends, distributions and interest payments, and the Collateral Agent (personally or through an agent) shall thereupon be solely authorized and empowered to transfer and register in the Collateral Agent’s name, or in the name of the Collateral Agent’s nominee, the whole or any part of the Pledged Interests, it being acknowledged by each Grantor that such transfer and registration may be effected by the Collateral Agent through its irrevocable appointment as attorney-in-fact pursuant to Section 8 hereof;

(ii)the Collateral Agent is authorized to notify each debtor with respect to the Pledged Debt to make payment directly to the Collateral Agent (or its designee) and may collect any and all moneys due or to become due to any Grantor in respect of the Pledged Debt, and each of the Grantors hereby authorizes each such debtor to make such payment directly to the Collateral Agent (or its designee) without any duty of inquiry;

(iii)without limiting the generality of the foregoing, the Collateral Agent may, at its option, exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any of the Pledged Interests as if it were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Interests upon the merger, consolidation, reorganization, recapitalization or other adjustment of any Pledged Issuer, or upon the exercise by any Pledged Issuer of any right, privilege or option pertaining to any Pledged Interests, and, in connection therewith, to deposit and deliver any and all of the Pledged Interests with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as it may determine; and

(iv)all dividends, distributions, interest and other payments that are received by any of the Grantors contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Grantors, and shall be forthwith paid over to the Collateral Agent as Pledged Interests in the exact form received with any necessary indorsement and/or appropriate instruments of transfer or assignment or undated Equity Interest powers duly executed in blank, to be held by the Collateral Agent as Pledged Interests and as further collateral security for the Secured Obligations.

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SECTION 8.Additional Provisions Concerning the Collateral.

(a)To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, each Grantor hereby (i) authorizes the Collateral Agent to execute any such agreements, instruments or other documents in such Grantor’s name and to file such agreements, instruments or other documents in such Grantor’s name and in any appropriate filing office, (ii) at any time and from time to time to file, one or more financing or continuation statements and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (A) describe the Collateral as “all assets” or “all personal property” (or words of similar effect) or that describe or identify the Collateral by type or in any other manner as the Collateral Agent may determine, regardless of whether any particular asset of such Grantor falls within the scope of Article 9 of the Uniform Commercial Code or whether any particular asset of such Grantor constitutes part of the Collateral, and (B) contain any other information required by Part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including, without limitation, whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor) and (iii) ratifies such authorization to the extent that the Collateral Agent has filed any such financing statements, 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)Each Grantor hereby irrevocably appoints the Collateral Agent as its attorney-in-fact and proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent’s discretion, if an Event of Default has occurred and is continuing, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement in accordance with the terms hereof, including, without limitation, (i) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to the Financing Agreement, (ii) to ask, demand, collect, sue 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 receive, indorse and collect all Instruments made payable to such Grantor representing any dividend, interest payment or other distribution in respect of any Pledged Interests and to give full discharge for the same, (v) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of each Secured Party with respect to any Collateral, (vi) to execute assignments, licenses and other documents to enforce the rights of each Secured Party with respect to any Collateral, (vii) to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Agent (in its sole discretion), and such payments made by the Collateral Agent shall constitute additional Secured Obligations of such Grantor to the Collateral Agent, be due and payable immediately without demand, and shall bear interest from the date payment of said amounts is demanded at the Post-Default Rate, and (viii) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral.  This power is coupled with an interest and is irrevocable until the Termination Date. 

(c)For the purpose of enabling the Collateral Agent, upon the occurrence and during the continuance of an Event of Default, to exercise rights and remedies hereunder, at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, each Grantor hereby (i) grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, assign, license or sublicense any 

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Intellectual Property now or hereafter owned by any Grantor, 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; and (ii) assigns to the Collateral Agent, to the extent assignable, all of its rights to any Intellectual Property now or hereafter licensed or used by any Grantor.  Each Grantor hereby releases the Collateral Agent from, and indemnifies the Collateral Agent against, 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 Collateral Agent under the powers of attorney, proxy or license, granted herein other than actions taken or omitted to be taken through the Collateral Agent’s gross negligence or willful misconduct, as determined by a final non-appealable judgment of a court of competent jurisdiction. 

(d)If any Grantor fails to perform any agreement or obligation contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement or obligation, in the name of such Grantor or the Collateral Agent, and the fees and expenses of the Collateral Agent incurred in connection therewith shall be jointly and severally payable by the Grantors pursuant to Section 10 hereof constitute additional Secured Obligations of the Grantor to the Collateral Agent, be due and payable immediately without demand and bear interest from the date payment of said amounts is demanded at the Post-Default Rate. 

(e)The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Other than the exercise of reasonable care to assure the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against other parties or any other rights pertaining to any Collateral and shall be relieved of all further responsibility for any Collateral in its possession upon surrendering it or tendering surrender of it to any of the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct).  The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property. 

(f)Anything herein to the contrary notwithstanding (i) each Grantor shall remain liable under the Licenses and otherwise in respect of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its obligations under the Licenses or otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not have any obligation or liability by reason of this Agreement under the Licenses or otherwise in respect of the Collateral, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 

(g)The Collateral Agent may at any time in its discretion (i) if an Event of Default has occurred and is continuing, without notice to any Grantor, transfer or register in the name of the Collateral Agent or any of its nominees any or all of the Pledged Interests, subject only to the revocable rights of such Grantor under Section 7(a) hereof, and (ii) exchange certificates or Instruments constituting Pledged Interests for certificates or Instruments of smaller or larger denominations. 

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SECTION 9.Remedies Upon Default.  If any Event of Default shall have occurred and be continuing:

(a)The Collateral Agent may exercise in respect of the Collateral, in addition to any 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, and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Collateral Agent’s name or into the name of its nominee or nominees (to the extent the Collateral Agent has not theretofore done so) and thereafter receive, for the benefit of each Secured Party, 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 each Grantor to, and each Grantor hereby agrees that it will at its expense and upon reasonable request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place or places to be designated by the Collateral Agent that is reasonably convenient to both parties, and the Collateral Agent may enter into and occupy any premises owned or leased by any Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Collateral Agent’s rights and remedies hereunder or under law, without obligation to any Grantor 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 Collateral Agent’s offices, at any exchange or broker’s board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral or any part thereof upon such terms as the Collateral Agent may deem commercially reasonable.  Each Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least 10 days’ prior notice to the applicable Grantor 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.  If the Collateral Agent sells any of the Collateral upon credit, the Grantors will be credited only with payments actually received by the Collateral Agent from the purchaser thereof, and if such purchaser fails to pay for the Collateral, the Collateral may resell the Collateral and the Grantors shall be credited with proceeds of the sale.  The Collateral Agent shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given.  The Collateral 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.  Each Grantor hereby waives any claims against each Secured Party 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 Secured Obligations, even if the Collateral Agent accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such Grantor may have to require that all or any part of the Collateral be marshaled upon any sale (public or private) thereof.  Each Grantor hereby waives any claims against each Secured Party 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 Secured Obligations, even if the Collateral Agent accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such Grantor may have to require that all or any part of the Collateral be marshaled upon any sale (public or private) thereof.  Each Grantor hereby acknowledges that (A) any such sale of the Collateral by the Collateral Agent shall be made without warranty, (B) the Collateral Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, (C) the Collateral Agent may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness), if permitted by law, for the purchase, lease, license or other disposition of the Collateral or any portion thereof for the account of the Collateral Agent (on behalf of itself and each Secured Party) and (D) such actions set forth in clauses (A), (B) and (C) above shall not adversely affect the commercial reasonableness of any such sale of the Collateral.  In addition to the foregoing, (1) upon written notice to any Grantor from the 

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Collateral Agent (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under Sections 9.01(f) or (g) of the Financing Agreement), each Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose described in such notice; (2) the Collateral Agent may, at any time and from time to time, upon 5 days’ prior notice to any Grantor (which notice shall be deemed to have been given immediately upon the occurrence of an Event of Default under Sections 9.01(f) or (g) of the Financing Agreement), license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property owned by such Grantor, throughout the universe for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (3) the Collateral Agent may, at any time, execute and deliver on behalf of a Grantor, one or more instruments of assignment of the Intellectual Property owned by such Grantor (or any application or registration thereof), in form suitable for filing, recording or registration in any country.

(b)In the event that the Collateral Agent determines to exercise its right to sell all or any part of the Pledged Interests pursuant to Section 9(a) hereof, each Grantor will, at such Grantor’s expense and upon request by the Collateral Agent: (i) execute and deliver, and cause each issuer of such Pledged Interests and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Collateral Agent, advisable to register such Pledged Interests under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto, (ii) cause each issuer of such Pledged Interests to qualify such Pledged Interests under the state securities or “Blue Sky” laws of each jurisdiction, and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as requested by the Collateral Agent, (iii) cause each Pledged Issuer to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance with applicable law.  Each Grantor acknowledges the impossibility of ascertaining the amount of damages which would be suffered by the Collateral Agent by reason of the failure by any Grantor to perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if any Grantor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Pledged Interests on the date the Collateral Agent demands compliance with this Section 9(b); provided, however, that the payment of such amount shall not release any Grantor from any of its obligations under any of the other Loan Documents. 

(c)Notwithstanding the provisions of Section 9(b) hereof, each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, Collateral Agent may be compelled, with respect to any sale of all or any part of the Pledged Interests, to limit purchasers to those who will agree, among other things, to acquire the Pledged Interests for their own account, for investment and not with a view to the distribution or resale thereof.  Each of the Grantors acknowledge that any such private sales may be at prices and on terms less favorable to Collateral Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agree that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Interests for the period of time necessary to permit the issuer thereof to register it for public sale.

(d)Any cash held by the Collateral Agent (or its agent or designee) as Collateral and all Cash Proceeds received by the Collateral Agent (or its agent or designee) in respect of any sale of or 

- 21 -

 

collection from, or other realization upon, all or any part of the Collateral, the Collateral Agent may, in the discretion of the Collateral Agent, be held by the Collateral Agent (or its agent or designee) as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 10 hereof) in whole or in part by the Collateral Agent against, all or any part of the Secured Obligations in such order as the Collateral Agent shall elect, consistent with the provisions of the Financing Agreement.  Any surplus of such cash or Cash Proceeds held by the Collateral Agent (or its agent or designee) and remaining after the Termination Date shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct. 

(e)In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which each Secured Party is legally entitled, the Grantors shall be jointly and severally liable for the deficiency, together with interest thereon at the highest rate specified in the Financing Agreement 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 and documented fees, costs, expenses and other client charges of any attorneys employed by the Collateral Agent to collect such deficiency (but limited to one primary counsel and one local counsel in each relevant jurisdiction). 

(f)Each Grantor hereby acknowledges that if the Collateral Agent complies with any applicable requirements of law in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of any sale or other disposition of the Collateral. 

(g)To the extent that any Grantor lawfully may, such Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Collateral Agent’s rights under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws. 

SECTION 10.Indemnity and Expenses. 

(a)Each Grantor jointly and severally agrees to defend, protect, indemnify and hold harmless the Collateral Agent and each other Indemnitee in accordance with Section 12.15 of the Financing Agreement.

(b)Each Grantor jointly and severally agrees to pay to the Collateral Agent costs and expenses in accordance with Section 12.04 of the Financing Agreement.

SECTION 11.Notices, Etc.  All notices and other communications provided for hereunder shall be given in accordance with the notice provision of the Financing Agreement.

SECTION 12.Security Interest Absolute; Joint and Several Obligations.

(a)All rights of the Secured Parties, all Liens and all obligations of each of the Grantors hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Financing Agreement or any other Loan Document, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Secured Obligations, or any other amendment or waiver of or consent to any departure from the Financing Agreement or any other Loan Document, (iii) 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 Secured Obligations, or (iv) any other circumstance that might otherwise constitute a defense available to, or a 

- 22 -

 

discharge of, any of the Grantors in respect of the Secured Obligations.  All authorizations and agencies contained herein with respect to any of the Collateral are irrevocable and powers coupled with an interest. 

(b)Each Grantor hereby waives (i) notice of acceptance and notice of the incurrence of any Secured Obligation by any Borrower and (ii) all other notices, demands, and protests in connection with the enforcement of the Secured Obligations, the omission of or delay in which, but for the provisions of this subsection (b), might constitute grounds for relieving such Grantor of any such Grantor’s obligations hereunder. 

(c)All of the obligations of the Grantors hereunder are joint and several.  The Collateral Agent may, in its sole and absolute discretion, enforce the provisions hereof against any of the Grantors and shall not be required to proceed against all Grantors jointly or seek payment from the Grantors ratably.  In addition, the Collateral Agent may, in its sole and absolute discretion, select the Collateral of any one or more of the Grantors for sale or application to the Secured Obligations, without regard to the ownership of such Collateral, and shall not be required to make such selection ratably from the Collateral owned by all of the Grantors.  The release or discharge of any Grantor by the Collateral Agent shall not release or discharge any other Grantor from the obligations of such Person hereunder. 

SECTION 13.Miscellaneous. 

(a)No amendment of any provision of this Agreement (including any Schedule attached hereto) shall be effective unless it is in writing and signed by each Grantor and the Collateral Agent, and no waiver of any provision of this Agreement, and no consent to any departure by any Grantor therefrom, shall be effective unless it is in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 

(b)No failure on the part of the Secured Parties 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 Secured Parties 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 Secured Parties 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 Grantor. 

(c)This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to paragraph (e) below, until the Termination Date and (ii) be binding on each Grantor all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d) of the Code, and shall inure, together with all rights and remedies of the Secured Parties hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns.  Without limiting the generality of clause (ii) of the immediately preceding sentence, each Secured Party may assign or otherwise transfer its respective rights and obligations under this Agreement and any other Loan Document to any other Person pursuant to the terms of the Financing Agreement, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Secured Parties herein or otherwise.  Upon any such assignment or transfer, all references in this Agreement to any Secured Party shall mean the assignee of any such Secured Party.  None of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Collateral Agent, and any such assignment or transfer shall be null and void. 

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(d)After the occurrence of the Termination Date, (i) subject to paragraph (e) below, this Agreement and the security interests and licenses created hereby shall automatically terminate and all rights to the Collateral shall revert to the Grantors, (ii) the Collateral Agent agrees to file UCC amendments on or promptly after the Termination Date to evidence the termination of the Liens so released and (iii) the Collateral Agent will, upon the Grantors’ request and at the Grantors’ cost and expense, (A) promptly return to the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (B) promptly execute and deliver to the Grantors such documents and make such other filings as the Grantors shall reasonably request to evidence such termination, without representation, warranty or recourse of any kind.  In addition, upon any sale or disposition of any Collateral in a transaction not prohibited by the Financing Agreement, the security interest in such Collateral shall automatically terminate, and the Collateral Agent shall, upon the reasonable request of the Grantors and at the Grantors’ cost and expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such release, without representation, warranty or recourse of any kind. 

(e)This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent or make a general assignment for the benefit of any creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 

(f)Upon the execution and delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit C hereto (each a “Security Agreement Supplement”), (i) such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor, and each reference in this Agreement to “Grantor” shall also mean and be a reference to such Additional Grantor, and each reference in this Agreement and the other Loan Documents to “Collateral” shall also mean and be a reference to the Collateral of such Additional Grantor, and (ii) the supplemental Schedules I-VIII attached to each Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I-VIII, respectively, hereto, and the Collateral Agent may attach such Schedules as supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto. 

(g)THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT (I) AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND (II) 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. 

(h)In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Loan Document and shall otherwise be subject to all of terms and conditions contained in Sections 12.10 and 12.11 of the Financing Agreement, mutatis mutandis.

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(i)Each party hereto irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding with respect to this Agreement any special, exemplary, punitive or consequential damages.

(j)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 affecting the validity or enforceability of such provision in any other jurisdiction.

(k)Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

(l)This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed an original, but all of such counterparts taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart. 

(m)For purposes of this Agreement, all references to Schedules I-VIII attached hereto shall be deemed to refer to each such Schedule as updated from time to time in accordance with the terms of this Agreement. 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer thereunto duly authorized, as of the date first above written.

 

	
GRANTORS:

	
 
	
 
	
 

	
CHEROKEE INC.

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

	
SPELL C. LLC

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

	
CHEROKEE BRANDS LLC

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

	
HAWK 900 BRANDS LLC

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

[Signature Page to U.S. Security Agreement]

 

	
EDCA LLC

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

	
FFS HOLDINGS, LLC

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

	
 
	
 
	
 

	
 
	
 
	
 

	
FLIP FLOP SHOPS FRANCHISE COMPANY, LLC

	
 
	
 
	
 

	
By:
	
FFS HOLDINGS, LLC, its sole member

	
 
	
 
	
 

	
By:
	
CHEROKEE INC., its sole member

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
/s/ Henry Stupp

	
 
	
Name:
	
Henry Stupp

	
 
	
Title:
	
Chief Executive Officer

 

 

 

[Signature Page to U.S. Security Agreement]

 

Accepted and Agreed:

 

	
GORDON BROTHERS FINANCE COMPANY, as Collateral Agent

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
By:
	
/s/
	
Felicia Galeota
	
 

	
Name:
	
 
	
Felicia Galeota
	
 

	
Title:
	
 
	
Vice Presidentchke-ex103_93.htm

Exhibit 10.3

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (the “Agreement”) is dated this 3rd day of August, 2018, and is entered into by and between Cherokee Inc., a Delaware corporation (the “Company”), and each of the holders of a Participation (defined below) listed on Schedule I hereto (each, a “Purchaser”).

WHEREAS, the Company and Gordon Brothers Finance Company, as agent (in such capacity the “Senior Agent”) for itself and other Secured Parties (as defined in the Senior Credit Agreement referred to below) (each individually, a “Senior Creditor” and collectively, the “Senior Creditors”), among others, have entered or concurrently will enter, into a Financing Agreement dated as of August 3, 2018 (the “Senior Credit Agreement”);  

WHEREAS, the loans made under the Senior Credit Agreement will be used to refinance in part obligations outstanding under that certain Financing Agreement (the “Existing Facility”), dated as of December 7, 2016 (as amended) entered into by the Company, Cerberus Business Finance, LLC, a Delaware limited liability company (“Cerberus”), as administrative agent and collateral agent, and the lenders from time to time party thereto; 

WHEREAS, the Purchasers have heretofore purchased junior participations in the Existing Facility (the “Participations”) in the corresponding aggregate principal amount set forth on Schedule I.

WHEREAS, in order to fully retire the Existing Facility concurrently with the entry by the Company into the Senior Credit Agreement, Company and the Purchasers have agreed to exchange the Participations for replacement instruments issued directly by Company on substantially equivalent terms and conditions as the Participations.  The replacement instruments shall consist of those certain Subordinated Exchange Note(s), dated as of the date hereof, made by Company in favor of each Purchasers or their designees, in the corresponding aggregate original principal amounts set forth on Schedule I (the “Notes”, and together with accrued and unpaid interest and reimbursable expenses, the “Obligations”);

WHEREAS, the Obligations are secured by liens on that portion of the Collateral in which the U.S. Loan Parties (defined in the Senior Credit Agreement) have an interest pursuant to a Pledge and Security Agreements, identical in all material respects, dated as of even date herewith made by the Company and its Subsidiaries (defined below) that are party thereto in favor of the Purchasers (collectively without differentiation the “Security Agreement”); 

WHEREAS, payment and performance of the Obligations is guaranteed by the Subsidiaries of Company that are party thereto pursuant to Guaranties dated as of even date herewith made by the subsidiaries of the Company that are party thereto in favor of each of the Purchasers (the collectively without differentiation the “Guaranty” and collectively with the Notes and the Security Agreement, each in form and substance acceptable to the Purchasers, the “Exchange Documents”); 

WHEREAS, Company and each of the Purchasers acknowledges that Section 4.1 of this Agreement is for the exclusive benefit of Cove Street Capital and that no other Purchaser party hereto or any successor or assign thereof shall have any rights under, or be a party, to Section 4.1 of this Agreement; and

WHEREAS, in reliance upon the representations made by the Purchasers and the Company in this Agreement, the transactions contemplated by this Agreement are such that the offer and sale of securities by the Company under this Agreement will be exempt from registration under applicable United States securities laws as a result of the Exchange being undertaken pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.

NOW, THEREFORE, in consideration of the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Purchaser hereby agree as follows:

Section 1.Exchange.  Subject to and upon the terms and conditions set forth in this Agreement, the Purchasers agree to exchange with the Company, and the Company agrees to exchange with the Purchasers, one or more Notes in favor of each Purchaser or its designees and the other Exchange Documents (such transaction, the “Exchange”) in the aggregate principal amount set for on Schedule I in exchange for surrender of the Participations by the Purchasers to the Company and delivery by the Purchasers of cash equal to the aggregate principal amount set for on Schedule I (collectively, the “Exchange Consideration”).  The Exchange Documents shall be in the form of EXHIBIT A hereto.  

1.1Closing.  On the Closing Date (as defined below), upon the terms and subject to the conditions set forth herein, the Company agrees to deliver the Exchange Documents to Purchaser in exchange for the Exchange Consideration and the Purchaser agrees to exchange the Exchange Consideration for the Exchange Documents.  The closing of the Exchange (the “Closing”) shall occur on August 3, 2018, or on such other date as the parties may mutually agree in writing (the “Closing Date”).  The Notes issuable at the Closing shall bear a restrictive legend as follows:

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF (EACH, A “TRANSFER”) ONLY IF SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR IF SUCH TRANSFER IS MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS AFTER PROVIDING AN OPINION OF COUNSEL TO SUCH EFFECT.

1.2Section 4(a)(2).  Assuming the accuracy of the representations and warranties of each of the Company and the Purchasers set forth in Section 2 and Section 3, respectively, the parties acknowledge and agree that the purpose of such representations and 

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warranties is, among other things, to ensure that the Exchange qualifies as a sale of securities under Section 4(a)(2) of the Securities Act.

1.3Deliveries.  

(a)On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Purchasers: 

(i)the Exchange Documents, fully executed by all parties thereto and in full force and effect; and

(ii)The Registration Rights Agreement in the form attached hereto as EXHIBIT B (the “Registration Rights Agreement”), fully executed by the Company.

(b)On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

(i)A written cancellation of such Purchaser’s Participation; 

(ii)The cash portion of the Exchange Consideration, if any, payable by such Purchaser by wire transfer in immediately available funds to the account specified by the Company; and

(iii)The Registration Rights Agreement, fully executed by such Purchaser.

1.4Transaction Fee.  As further consideration for the Exchange and in addition to the Exchange Consideration, no later than five (5) business days after the Closing Date, the Company shall pay in cash (i) a transaction fee of $28,571 to Cove Street Capital Small Cap Value Fund, (ii) a transaction fee of $21,429 to Square Deal Growth, LLC, and (iii) a transaction fee of $50,000 to Ravich Revocable Trust of 1989. 

Section 2.Representations and Warranties of the Company.  The Company hereby represents and warrants to each Purchaser, as of the date of this Agreement and as of the Closing Date, that:

2.1Organization and Qualification.  The Company and each majority-controlled subsidiary of the Company (collectively, the “Subsidiaries”) is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company, nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to result in:  (a) a material adverse effect on the legality, validity or enforceability of this Agreement, the 

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Notes, the Officer’s Certificate or the Registration Rights Agreement (collectively, the “Exchange Documents”), (b) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (c) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Exchange Document (any of (a), (b) or (c), a “Material Adverse Effect”), and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.  For purposes of this Agreement, a “controlled subsidiary of the Company” is a subsidiary of the Company for which the Company has the power to vote or direct the voting of a majority of the outstanding voting power, or for which the Company has the power to elect a majority of the members of the board of directors or similar governing body, in either case as of the date of this Agreement.

2.2Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Exchange Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Exchange Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company, and no further action is required by the Company, the Board or the Company’s stockholders in connection herewith or therewith.  This Agreement and each other Exchange Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

2.3[Reserved].

2.4No Conflicts.  The execution, delivery and performance by the Company of this Agreement and the other Exchange Documents to which it is a party, the issuance of the Notes and the consummation by it of the transactions contemplated hereby and thereby do not and will not:  (a) conflict with or violate any provision of the Notes, the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (b) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any options, contracts, agreements, liens, security interests, or other encumbrances (“Liens”) upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (c) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (b) and (c), such as would not have or reasonably be expected to result in a Material Adverse Effect.

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2.5Acknowledgment Regarding the Exchange.  The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length third party with respect to this Agreement and the transactions contemplated hereby.  The Company also acknowledges that it is not relying on any advice or representation of the Purchaser in connection with entering into this Agreement or the transactions contemplated hereunder other than the representations made by the Purchaser in this Agreement.  The Company further acknowledges the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby, and any advice given by the Purchaser or any of its respective representatives or agents in connection with this Agreement is merely incidental to the Exchange.  None of the Company, any of its Affiliates or any person acting on its or their behalf has conducted any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to any of the Notes, or made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Notes under the Securities Act.

2.6SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the two years preceding the date of this Agreement (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”).  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Securities Exchange Commission (the “SEC”) with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.  As of the date of this Agreement, there are no outstanding or unresolved comments received from the staff of the SEC with respect to the SEC Reports.

2.7Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth in the SEC Reports.  The capital stock or other equity interests of each Subsidiary that are owned by the Company are owned by the Company free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary of the Company that are owned by the Company are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

2.8[Reserved]  

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2.9Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date of this Agreement:  (a) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (b) the Company has not incurred any liabilities (contingent or otherwise) other than (i) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, and (ii) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the SEC, (c) the Company has not altered its method of accounting, (d) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (e) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  Except for the issuance of the Notes contemplated by this Agreement and the entry into the Senior Credit Agreement and the transactions related thereto, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed prior to the date that this representation is made.

2.10Litigation.  Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (a) adversely affects or challenges the legality, validity or enforceability of any of the Exchange Documents, (b) adversely affects or imposes any liabilities on the Purchaser or any of its Affiliates with respect the Notes, or (c) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Except as disclosed in the SEC Reports, none of the Company, any Subsidiary, or any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  To the knowledge of the Company, there is no pending or contemplated investigation by the SEC involving the Company or any current or former director or officer of the Company.  The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

2.11Compliance.  Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary:  (a) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received any notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (b) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (c) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including 

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without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, anti-corruption, anti-money laundering, SEC reporting, occupational health and safety, product quality and safety and employment and labor matters (collectively, “Laws”), except in each case as would not have, or reasonably be expected to result in, a Material Adverse Effect.  The Company holds all material licenses, franchises, permits, certificates, approvals and authorizations from each governmental body, or required by Laws or any governmental body to be obtained, in each case necessary for the lawful conduct of its business and operations as currently conducted (collectively, “Permits”).  The Company is in compliance in all material respects with the terms of all Permits.  To the Company’s knowledge, it has not received written notice since April 19, 2018 (the date of filing the Company’s most recent Annual Report on Form 10-K) to the effect that a governmental body (i) claimed or alleged that the Company was not in compliance with all Laws applicable to the Company, any of its properties or other assets or any of its business or operations other than as previously disclosed to the Purchaser in writing, or (ii) was considering the amendment, termination, revocation or cancellation of any Permit.  The consummation of the transactions contemplated hereby, in and of itself, will not cause the revocation or cancellation of any Permit.

2.12Certain Fees.  No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Exchange Documents.

2.13Investment Company.  The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Notes, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

2.14Disclosure.  All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  The Company acknowledges and agrees that the Purchaser makes no, nor has made any, representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3. 

2.15Taxes.  The Company and the Subsidiaries have filed all federal, state, local and foreign tax returns that have been required to be filed and paid all taxes shown thereon through the date of this Agreement, to the extent that such taxes have become due and are not being contested in good faith, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.  Except as disclosed in the SEC Reports, no tax deficiency has been determined adversely to the Company or any Subsidiary which has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The Company has no knowledge of any federal, state or other governmental tax deficiency, penalty or assessment which has been or might be asserted or threatened against it which would reasonably be expected to have a Material Adverse Effect.

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2.16Intellectual Property.  The Company and the Subsidiaries own or possesses or have valid right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property”) necessary for the conduct of the business of the Company and its subsidiaries as currently carried on, except as such failure to own, possess, license or acquire such rights has not had and would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect.  To the knowledge of the Company, no action or use of such Intellectual Property by the Company or any of its subsidiaries gives rise to any infringement or misappropriation of the Intellectual Property of others. Neither the Company nor the Subsidiaries has received any notice, or has actual knowledge of any pending notice, in each case alleging any such infringement.

2.17Disclosure Controls.  The Company maintains systems of internal accounting controls designed to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Except as disclosed in the SEC Reports, the Company is not aware of any material weakness in its internal control over financial reporting.  Since the date of the latest audited financial statements of the Company included within the SEC Reports, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company and the Subsidiaries is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of a date within 90 days prior to the filing date of the Annual Report on Form 10-K for the fiscal year most recently ended (such date, the “Evaluation Date”).  The Company presented in its Annual Report on Form 10-K for the fiscal year most recently ended the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the most recent Evaluation Date.  Since the most recent Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Securities Act) or, to the Company’s knowledge, in other factors that would significantly adversely affect the Company’s internal controls.

2.18No “Bad Actor” Disqualifying Events.  No “Bad Actor” disqualifying event described in Rule 506(d)(1)(i) to (viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is applicable; provided that, for purposes of this representation and warranty, the Company relied exclusively on completed and executed questionnaires delivered to the Company by its directors and executive officers and beneficial owners of twenty percent (20%) or more of the Company’s outstanding voting equity securities.

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2.19Foreign Corrupt Practices Act.  None of the Company, the Subsidiaries, or, to the knowledge of the Company, any agent or other person acting in the course of its actions on behalf of the Company or the Subsidiaries, has, directly or indirectly, (i) used any corporate funds, or will use any proceeds from the sale of the Notes, for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful influence payment to foreign or domestic government officials or to any foreign or domestic political parties or campaigns from corporate funds, or (iii) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder which was or is applicable to the Company or any of the Subsidiaries.

2.20Compliance with Anti-Money Laundering Laws.  The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the USA Patriot Act of 2001 and the applicable money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), the Company has in place policies and procedures reasonably designed to ensure that its and its Subsidiaries’, if any, operations will continue to be conducted in compliance with all applicable Money Laundering Laws and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

2.21Sarbanes-Oxley Act.  The Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

2.22Application of Takeover Protections.  The Company and the Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of its formation which is or could become applicable to the Purchaser as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Notes and the Purchaser’s ownership of the Notes.

2.23Insurance.  The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the business in which the Company is engaged.  The Company has not been refused any insurance coverage sought or applied for, the refusal of which would reasonably be expected to have a Material Adverse Effect.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.

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2.24Title.  The Company has marketable title to all personal property owned by it which is material to the business of the Company, in each case free and clear of all Liens except for Liens which do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company.  Any real property and facilities held under material lease by the Company are held by it under valid and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company.

Section 3.Representations and Warranties of each Purchaser.  Each Purchaser represents and warrants to the Company solely on its own behalf and not with respect to any other Purchaser, as of the date of this Agreement and as of the Closing Date, that:

3.1No Public Sale or Distribution.  The Purchaser and its designees are acquiring the Notes in the ordinary course of business for their own accounts and not with a view toward, or for resale in connection with, the public sale or distribution thereof.  The Purchaser does not presently have any agreement or understanding, directly or indirectly, with any person not managed or advised by Purchaser to distribute, or transfer any interest or grant participation rights in the Notes.

3.2Accredited Investor Status.  The Purchaser is an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act.  

3.3Reliance on Exemptions.  The Purchaser understands that the Exchange is being made in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to complete the Exchange and to acquire the Notes.

3.4Information.  The Purchaser has been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the Exchange which have been requested by the Purchaser.  The Purchaser has been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by the Purchaser or its representatives shall modify, amend or affect the Purchaser’s right to rely on the Company’s representations and warranties contained herein.  The Purchaser acknowledges that all of the documents filed by the Company with the SEC under Sections 13(a), 14(a) or 15(d) of the Exchange Act that have been posted on the SEC’s EDGAR site are available to the Purchaser.

3.5Risk.  The Purchaser understands that its investment in the Notes involves a high degree of risk.  The Purchaser is able to bear the risk of an investment in the Notes including, without limitation, the risk of total loss of its investment.  The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to the Exchange.  The Purchaser is not relying on any advice or representation of the Company in connection with entering into this Agreement or the Registration Rights Agreement or the transactions contemplated hereunder or thereunder (other than the 

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representations made by the Company in this Agreement) and has not received from the Company any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into this Agreement or the Registration Rights Agreement or the performance of the Purchaser’s obligations hereunder or thereunder.

3.6No Governmental Review.  The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement in connection with the Exchange or the fairness or suitability of the investment in the Notes.

3.7Organization; Authorization.  The Purchaser is duly organized, validly existing and in good standing under the laws of jurisdiction of its incorporation or organization and has the requisite organizational power and authority to enter into and perform its obligations under this Agreement and the Registration Rights Agreement.

3.8Validity; Enforcement.  This Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered on behalf of the Purchaser and constitute the legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their terms.  The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby and thereby will not result in a violation of the organizational documents of the Purchaser.

3.9Prior Investment Experience.  The Purchaser acknowledges that it has prior investment experience, including investment in securities of the type being sold, including the Notes, and has read all of the documents furnished or made available by the Company to it and is able to evaluate the merits and risks of such an investment on its behalf, and that it recognizes the highly speculative nature of this investment.

3.10Tax Consequences.  The Purchaser acknowledges that the Company has made no representation regarding the potential or actual tax consequences for the Purchaser that will result from entering into this Agreement and from consummation of the Exchange.  The Purchaser acknowledges that it bears complete responsibility for obtaining adequate tax advice for the Purchaser itself regarding this Agreement and the Exchange.

3.11No Registration, Review or Approval; Restricted Securities.  The Purchaser acknowledges, understands and agrees that the Notes are being sold hereunder pursuant to an offer exemption under Section 4(a)(2) of the Securities Act and/or the safe harbor provided under Regulation D promulgated thereunder.  The Purchaser understands that the Notes constitute “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be sold, pledged or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from registration thereunder is available.

3.12Jurisdiction.  The Purchaser made its investment decision to purchase the Notes at its offices located at the address set forth on the Purchaser’s signature page hereto.  The 

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Purchaser’s principal place of business is located in the jurisdiction listed in the address set forth on the Purchaser’s signature page hereto.

3.13Exculpation.  The Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.

3.14No Disqualifying Events.  Neither (a) the Purchaser; nor (b) any of the Purchaser’s directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, is subject to any of Disqualification Events, except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed reasonably in advance of the Closing in writing in reasonable detail to the Company.

Section 4.Covenants of the Company. 

4.1Board Representation.  On and after the Closing Date, Cove Street Capital shall be entitled to designate two (2) qualified individuals (each a “Designated Nominee”) to serve on the Board.  Each Designated Nominee shall, as a condition of his/her appointment to the Board, execute and deliver a letter agreement in form and substance satisfactory to Cove Street Capital, agreeing to immediately resign from the Board upon request of the Cove Street Capital; provided that a Designated Nominee’s refusal to resign when so requested shall constitute “cause” for removal from the Board and the Board and the Company shall use their best efforts to support Cove Street Capital’s exercise of its board designation rights.  The Cove Street Capital also shall be entitled to designate one (1) qualified Designated Nominee to serve on each committee of the Board.  The parties agree that Robert Longnecker shall be an initial Designated Nominee.   Cove Street Capital intends to designate a second Designated Nominee within 30 days after the date of this Agreement, subject to extension by Cove Street Capital.  The Company shall use its best efforts to ensure that the Company’s director’s and officer’s insurance covers the Designated Nominees as directors and shall propose a director’s compensation program that, in each case, is commensurate with market standards.  At any time that less than two (2) Designated Nominees are seated on the Board, the Company and the Board shall maintain a vacancy or vacancies on the Board for such Designated Nominee(s) and shall use their best efforts and take such actions during the Representation Period (as defined below) as may be necessary to ensure that the Designated Nominees are duly seated at all times.  If the size of the Board is expanded, for any reason, the Cove Street Capital shall have the right to designate additional Board nominees in order to maintain its proportionate representation as of the Closing Date.   The rights under this paragraph shall continue for as long as the Cove Street Capital and its affiliates collectively beneficially own at least 5% of the Company’s outstanding common stock (the “Representation Period”).  Each of the Purchasers other than Cove Street Capital acknowledges and agrees that the terms and conditions of this Section 4.1 inure solely to the benefit of Cove Street Capital and no other Purchaser shall have or be entitled to exercise any of the rights granted to Cove Street Capital under this Section 4.1.  Only Cove Street Capital, acting in its sole and absolute discretion, shall have the power hereunder to designate a Designated Nominee.  Each other Purchaser hereby further acknowledges and agrees that only Cove Street Capital and Company shall have the power to, and only the concurrence of Cover Street Capital and the Company shall be required to, enter into an effective waiver, amendment or modification of this Section 4.1.  In furtherance of the 

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foregoing, each Purchaser other than Cove Street Capital hereby waives any right that it may otherwise have in equity, at law or by contract to consent to a waiver, amendment or modification under this Section 4.1.

4.2Warrants.  Concurrent with the Closing, the Company shall issue and deliver to each of the Purchasers named on Schedule II a warrant or warrants in substantially the form attached here to as EXHIBIT B (the “Warrant”) exercisable for the number of shares of the Company’s Common Stock set forth opposite such Purchaser’s name on Schedule II with an exercise price per share as set forth on Schedule II hereto.  Each Warrant shall be issued to such parties and in such amounts as are designated by the Purchaser consistently with Schedule II prior to the Closing Date.

Section 5.Conditions Precedent to Obligations of the Company.  The obligation of the Company to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each of the following conditions; provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Purchaser with prior written notice thereof:

5.1Delivery of Exchange Consideration.  The Purchaser shall have delivered to the Company the Exchange Consideration;

5.2No Prohibition.  No order of any court, arbitrator or governmental or regulatory authority shall be in effect which purports to enjoin or restrain any of the transactions contemplated by this Agreement;

5.3Representations.  The representations and warranties of the Purchaser contained in Section 3 shall be true and correct in all material respects (other than representations and warranties which are already qualified as to materiality, which shall be true and correct in all respects) as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date; and

Section 6.Conditions Precedent to Obligations of the Purchaser.  The obligation of the Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each of the following conditions; provided that these conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser, on behalf of itself, at any time in its sole discretion by providing the Company with prior written notice thereof:

6.1Delivery.  The Company shall have delivered or caused to be delivered to the Purchaser the items set forth in Section 1.3(a); 

6.2No Prohibition.  No order of any court, arbitrator, or governmental or regulatory authority shall be in effect which purports to enjoin or restrain any of the transactions contemplated by this Agreement;

6.3Representations.  The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects (other than representations and warranties which are already qualified as to materiality, which shall be true and correct in all 

13

respects) as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date; and

6.4Credit Facilities.  

6.4.1The Senior Credit Facility shall be, or concurrently will be, in form and substance acceptable to Purchaser in its sole discretion, in full force and effect and the term loans to be made thereunder shall have been or concurrently will be advanced to the Company and used to repay the Existing Facility and a complete set of documentation evidencing the Senior Credit Facility shall have been or concurrently will be delivered to Purchaser.

6.4.2The entire outstanding balance due, save and except for the Participations issued thereunder, under the Existing Facility shall have been or currently will be  paid in full and in cash and all liens and security interests securing the Existing Facility shall have been, or concurrently will be, terminated, and Cerberus shall have, or concurrently will, deliver a customary “payoff letter” acknowledging termination of the documentation for the Existing Facility and payment in full of all obligations under the Existing Facility, and operatively terminating all liens and security interests securing the Existing Facility.

Section 7.[Reserved]  

Section 8.Furnishing of Information.  As long as the Purchaser owns any Notes, the Company covenants to use its best efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date of this Agreement pursuant to the Exchange Act.    

Section 9.Indemnification.  In addition to any other indemnity provided in the Exchange Documents, the Company will indemnify and hold the Purchaser and its directors, officers, stockholders, partners, employees, advisers, affiliates and agents (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Purchaser Party may suffer or incur as a result of or relating to (a) any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Exchange Document, and (b) any action instituted against a Purchaser Party in any capacity, or any of them or their respective affiliates, by any individual who is not an affiliate of such Purchaser Party, with respect to any of the transactions contemplated by this Agreement.  In addition to the indemnity contained herein, the Company will reimburse each Purchaser Party for its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred.

Section 10.Governing Law; Jurisdiction; Waiver of Jury Trial.  This Agreement shall be construed under the laws of the State of Delaware, without regard to principles of conflicts of law or choice of law that would permit or require the application of the laws of another jurisdiction.  The Company and the Purchaser hereby agree that all actions or proceedings arising directly or indirectly from or in connection with this Agreement shall be litigated only in the Superior Court 

14

of the State of California or the United States District Court for the Southern District of California located in Los Angeles County, California.  The Company and the Purchaser consent to the exclusive jurisdiction and venue of the foregoing courts and consents that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of California or the Southern District of California by generally recognized overnight courier or certified or registered mail, return receipt requested, directed to such party at its or his address set forth below (and service so made shall be deemed “personal service”) or by personal service or in such other manner as may be permissible under the rules of said courts.  THE COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.

Section 11.Counterparts.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a .pdf or other form of electronic signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a .pdf or other form of electronic signature.

Section 12.Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

Section 13.Fees and Expenses.  The Company shall promptly pay or reimburse the Purchaser upon request for the fees and expenses of legal counsel incurred by the Purchaser in connection with the transactions contemplated by this Agreement.

Section 14.Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

Section 15.Entire Agreement; Amendments.  This Agreement supersedes all other prior oral or written agreements between the Purchaser, the Company, their Affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement, the Notes and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be amended, waived or modified other than by an instrument in writing signed by the Company and the Purchaser.  Any such amendment, waiver or modification effected in accordance with this Section 15 shall be binding upon the Purchaser and each transferee of the Notes, each future holder of all such securities and the Company.

Section 16.Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by e-mail (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (c) one calendar day (excluding Saturdays, Sundays, and 

15

national banking holidays in the United States) after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.

The addresses and e-mail addresses for such communications shall be: 

If to the Company:

Cherokee Inc.

5990 Sepulveda Boulevard, Suite 600

Sherman Oaks, CA 91411 

E-mail:  henrys@cherokeeglobalbrands.com

Attn:  Henry Stupp

With a copy (which shall not constitute notice) to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 

3580 Carmel Mountain Road, Suite 300

San Diego, CA 92130 

E-mail:  smstanton@mintz.com

Attn:  Scott Stanton, Esq.

If to a Purchaser:  To the address set forth on the Purchaser’s signature page hereto;

or to such other address and/or e-mail address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change.

Section 17.Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Notes.

Section 18.No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

Section 19.Survival of Representations.  The representations, warranties and covenants of the Company and the Purchaser contained in this Agreement shall survive the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Purchaser or the Company.  The Company shall indemnify and hold harmless the Purchaser for any and all losses suffered by the Purchaser as a result of, in connection with, or relating to, any breach by the Company of any representation, warranty and/or covenant of the Company in this Agreement or in any certificate, document or other writing delivered by the Company to the Purchaser pursuant to this Agreement.

Section 20.Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in 

16

order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

[Signature Page Follows]

 

17

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

COMPANY:

CHEROKEE INC.

 

 

	
By:
	
/s/
	
Henry Stupp

	
Name:
	
 
	
Henry Stupp

	
Title:
	
 
	
Chief Executive Officer

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

Cove Street Capital, LLC

 

 

	
By:
	
/s/
	
Eugene Robin

	
Name:
	
 
	
Eugene Robin

	
Title:
	
 
	
Principal

 

Cove Street Capital Small Cap Value Fund, a series of Managed Portfolio Series, a Delaware statutory trust

 

	
By:
	
Cove Street Capital, LLC

	
 
	
Its Investment Advisor

 

	
By:
	
/s/ Eugene Robin

	
 
	
Name:
	
Eugene Robin

	
 
	
Title:
	
Principal

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

Square Deal Growth, LLC

an Oklahoma limited liability company

 

	
By:
	
Cove Street Capital, LLC

	
 
	
Its Investment Advisor

 

	
By:
	
/s/ Eugene Robin

	
 
	
Name:
	
Eugene Robin

	
 
	
Title:
	
Principal

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

Ravich Revocable Trust of 1989, a trust established by Jess M. Ravich 

 

	
By:
	
/s/
	
Jess M. Ravich

	
Name:
	
 
	
Jess M. Ravich

	
Title:
	
 
	
Trustee

 

 

	
Address:
	
149 S. Barrington Ave, #828

	
 
	
Los Angeles, CA 90049

 

 

IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above.

 

HENRY I STUPP

 

 

	
By:
	
/s/
	
Henry Stupp

	
Name:
	
 
	
 

	
Title:

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