Document:

ex10_2.htm

    Exhibit
10.2

    
 

    AMENDED
AND RESTATED SECURITY AGREEMENT

     

    This
AMENDED AND RESTATED
SECURITY AGREEMENT (this
“Agreement”) is dated as
of December 28, 2009 and entered into by THE TALBOTS, INC., a corporation duly
organized and validly existing under the laws of the State of Delaware (the
“Borrower”) and each
domestic Subsidiary of the Borrower listed on the signature pages hereto (the
“Subsidiary Guarantors”
and, together with the Borrower and each other entity that may become a party
hereto as an Additional Grantor after the date hereof in
accordance with Section 20 hereof a
“Grantor” and,
collectively the “Grantors”) in favor of AEON
CO., LTD., a corporation organized and existing under the laws of Japan, as
Lender under the Credit Agreement referred to below (the “Lender” and, together with its
successors and assigns, “Secured Party”).

     

    PRELIMINARY
STATEMENTS

     

    A.           Pursuant
to the Secured Revolving Loan Agreement, dated as of April 10, 2009 (as amended,
modified and supplemented, the “Existing Credit Agreement”),
between the Borrower and the Lender, the Lender made certain extensions of
credit and other financial accommodations, subject to the terms and conditions
set forth in the Existing Credit Agreement, to the Borrower.

     

    B.           The
Subsidiary Guarantors entered into and delivered the Guaranty Agreement, dated
April 10, 2009 (as amended, modified and supplemented, the “Existing Guaranty”), in favor
of Secured Party, pursuant to which each Subsidiary Guarantor guarantied the
prompt payment and performance when due of all obligations of the Borrower under
the Existing Credit Agreement and each other Loan Document (as defined
thereunder).

     

    C.           The
Grantors and the Secured Party entered into that certain Security Agreement,
dated as of April 10, 2009 (as amended, modified and supplemented, the “Existing Security Agreement”),
pursuant to which the Grantors granted a continuing Lien and security interest
to the Secured Party in the collateral described therein to secure obligations
of the Grantors under the Existing Credit Agreement and the Existing
Guaranty.

     

    D.           The
Borrower and the Lender have entered into the Amended and Restated Secured
Revolving Loan Agreement, dated as of December 28, 2009 (as amended, restated,
amended and restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”; the
terms defined therein and not otherwise defined herein being used herein as
therein defined), which amended and restated the Existing Credit
Agreement.

     

    E.           In
connection with the amendment and restatement of the Existing Credit Agreement
pursuant to the Amended and Restated Credit Agreement, the Guarantors entered
into that certain Reaffirmation Agreement to Guaranty (the “Reaffirmation”), dated as of
December 28, 2009, in favor of the Lender, pursuant to which, among other
things, each Guarantor reaffirmed its obligations under the Guaranty and
affirmed that such obligations apply to the Amended and Restated Credit
Agreement (the Existing Guaranty, as reaffirmed by the Reaffirmation, and as the
same may be further reaffirmed, amended, restated, amended and restated,
supplemented, replaced or otherwise modified from time to time, the “Guaranty”).

     

    F.           In
order to induce the Lender to enter into the Credit Agreement and the other Loan
Documents and in order to induce the Lenders to continue to make the extensions
of credit as provided for in the Credit Agreement, the Grantors have agreed to
amend and restate the Existing Security Agreement as provided
herein.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    G.           It
is the intent of the parties hereto that this Agreement amend and restate in its
entirety the Existing Security Agreement as provided for herein.

     

    NOW, THEREFORE, in
consideration of the agreements set forth herein and in the Credit Agreement and
in order to induce Lender to make Revolving Loans and other extensions of credit
under the Credit Agreement, each Grantor hereby agrees with Secured Party as
follows:

     

    
      	
              SECTION
      1.

            	
              Grant of
      Security.

            

    

     

    Each
Grantor hereby assigns to Secured Party, and hereby grants to Secured Party a
security interest in, all of such Grantor’s right, title and interest in and to
all of the personal property of such Grantor, in each case whether now or
hereafter existing, whether tangible or intangible, whether now owned or
hereafter acquired, wherever the same may be located and whether or not subject
to the Uniform Commercial Code as it exists on the date of this Agreement, or as
it may hereafter be amended in the State of New York, including the following
(the “Collateral”):

     

    (a)         all
Accounts;

     

    (b)         all
Chattel Paper;

     

    (c)         all
Money and all Deposit Accounts, together with all amounts on deposit from time
to time in such Deposit Accounts;

     

    (d)         all
Documents;

     

    (e)         all
General Intangibles, including all intellectual property, Payment Intangibles
and Software;

     

    (f)          all
Goods, including Inventory, Equipment and Fixtures;

     

    (g)         all
Instruments;

     

    (h)         all
Investment Property;

     

    (i)          all
Letter-of-Credit Rights and other Supporting Obligations;

     

    (j)          all
Records;

     

    (k)         all
Commercial Tort Claims, including those set forth on Schedule 1 annexed
hereto; and

     

    (l)          all
Proceeds and Accessions with respect to any of the foregoing Collateral.;

     

    provided, however, that (A)
“Collateral” shall not include (i) any Excluded Property (provided, further,
that if and when any property shall cease to be Excluded Property (and otherwise
constitutes Collateral at such time), such property shall be deemed at all times
from and after the date hereof to constitute Collateral) nor (ii) any Equity
Interest in Talbots Classics National Bank or Talbots Charitable Foundation,
Inc. and (B) in the case of Equity Interests in any foreign Subsidiary, the
Collateral shall be limited to 100% of the non-voting Equity Interests (if any)
and 66% of the voting Equity Interests in such foreign Subsidiary.

     

    
      
        
        

      

      
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    Each
category of Collateral set forth above shall have the meaning set forth in the
UCC (to the extent such term is defined in the UCC), it being the intention of
Grantors that the description of the Collateral set forth above be construed to
include the broadest possible range of assets.

     

    
      	
              SECTION
      2.

            	
              Security for
      Obligations.

            

    

     

    This
Agreement secures, and the Collateral is collateral security for, the prompt
payment or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, of all Secured
Obligations of each Grantor.

     

    
      	
              SECTION
      3.

            	
              Grantors Remain
      Liable.

            

    

     

    Anything
contained herein to the contrary notwithstanding, (a) each Grantor shall remain
liable under any contracts and agreements included in the Collateral, to the
extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Secured Party of any of its rights hereunder shall not release
any Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral, and (c) Secured Party shall not have any
obligation or liability under any contracts, licenses, and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party 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.

     

    
      	
              SECTION
      4.

            	
              Representations and
      Warranties.

            

    

     

    Each
Grantor represents and warrants as follows:

     

    (a)           Perfection.  The
security interests in the Collateral granted to Secured Party hereunder
constitute valid security interests in the Collateral, securing the payment of
the Secured Obligations.  Upon (i) the filing of UCC financing
statements naming each Grantor as “debtor”, naming Secured Party as “secured
party” and describing the Collateral in the filing offices with respect to such
Grantor set forth on Schedule 2 annexed
hereto, (ii) in the case of the Securities Collateral consisting of certificated
Securities or evidenced by Instruments, in addition to filing of such UCC
financing statements, delivery of the certificates representing such
certificated Securities and delivery of such Instruments to Secured Party, in
each case duly endorsed or accompanied by duly executed instruments of
assignment or transfer in blank, (iii) in the case of the Intellectual Property
Collateral constituting Copyrights, Copyright Registrations and Copyright
Rights, in addition to the filing of such UCC financing statements, the
recordation of a grant with the applicable Copyright Office, (iv) in the case of
Equipment that is covered by a certificate of title, the filing with the
registrar of motor vehicles or other appropriate authority in the applicable
jurisdiction of an application requesting the notation of the security interest
created hereunder on such certificate of title, and (v), in the case of any
Deposit Account and any Investment Property constituting a Security Entitlement,
Securities Account, Commodity Contract or Commodity Account, the execution and
delivery to Secured Party of an agreement providing for control by Secured Party
thereof, the security interests in the Collateral granted to Secured Party will
constitute perfected security interests therein prior to all other Liens (except
for Liens expressly permitted under the Credit Agreement to be prior to the
Liens in favor of the Secured Party), and all filings and other actions (to the
extent within the control of the Grantors) necessary to perfect and
protect such security interests have been, or promptly after the date hereof
will be, duly made or taken.

     

    (b)           Office Locations; Type and
Jurisdiction of Organization; Locations of Equipment and
Inventory.  Such Grantor’s name as it appears in official
filings in the jurisdiction of its organization, type of organization (i.e.
corporation, limited partnership, etc.), jurisdiction of organization, principal
place of business, chief executive office, office where such Grantor keeps its
Records regarding the Accounts, Intellectual Property and originals of Chattel
Paper, and organization number provided by the applicable Government Authority
of the jurisdiction of organization are set forth on Schedule 3 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule in connection with the addition of
Additional Grantors or in connection with changes to a Grantor’s jurisdiction of
organization permitted under the Loan documents).  All of the
Equipment and Inventory is located at the places set forth on Schedule 4 annexed
hereto, except for Inventory which, in the ordinary course of business, is (x)
in transit either (i) from a supplier to a Grantor, (ii) between the locations
set forth on Schedule
4 annexed hereto, (iii) to customers of a Grantor or (y) is located in
other retail stores or warehouses of the Borrower or its Subsidiaries to the
extent such Grantor has previously identified such location in a written
supplement to Schedule
4 to this Agreement delivered to the Secured Party.

     

    
      
        
        

      

      
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    (c)           Names.  No Grantor
(or predecessor by merger or otherwise of such Grantor) has, within the five
year period preceding the date hereof, or, in the case of an Additional Grantor,
the date of the applicable Counterpart, had a different name from the name of
such Grantor listed on the signature pages hereof, except the names set forth on
Schedule 5
annexed hereto.

     

    (d)           Delivery of Certain
Collateral.  All certificates or Instruments (excluding checks)
evidencing, comprising or representing the Collateral with a face value in
excess of $500,000 have been delivered to Secured Party duly endorsed or
accompanied by duly executed instruments of transfer or assignment in
blank.

     

    (e)           Securities
Collateral.  Schedule 6 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule) sets forth all Equity Interests in any
Subsidiary which constitutes Collateral owned by each Grantor, and the
percentage ownership in each issuer thereof;

     

    (f)           Intellectual Property
Collateral.  A true and complete list of all Trademark
Registrations and applications for any Trademark owned, held (whether pursuant
to a license or otherwise) or used by such Grantor, in whole or in part, that is
material to the business of such Grantor is set forth on Schedule 7 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule); a true and complete list of all
Patents owned, held (whether pursuant to a license or otherwise) or used by such
Grantor, in whole or in part, that is material to the business of such Grantor
is set forth on Schedule 8 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule); a true and complete list of all
Copyright Registrations and applications for Copyright Registrations held
(whether pursuant to a license or otherwise) by such Grantor, in whole or in
part, that is material to the business of such Grantor is set forth on Schedule 9 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule).

     

    (g)           Deposit Accounts, Securities
Accounts, Commodity Accounts.  Annexed hereto as (x) Schedule 10(a) (as
supplemented by the Grantors from time to time in writing to the Secured Party
referencing such Schedule), is a true and complete list of all Deposit Account
and Securities Account owned by the Borrower and the other Grantors that are
used (i) in connection with any Grantor’s revolving credit card business
(including, without limitation, the Talbots credit card) or (ii) to receive
amounts due to any Grantor from any third party credit card processor, and, in
each case, indicates the name and address of, and appropriate contact at, the
institution or intermediary at which the account is held and the account number
thereof and (y) Schedule 10(b) (as
supplemented by the Grantors from time to time in writing to the Secured Party
referencing such Schedule) lists is a true and complete list of all Deposit
Accounts, Securities Accounts and Commodity Accounts owned by each Grantor other
than those listed under Schedule 10(a), and,
in each case of Schedule 10(a) and
10(b),
indicating the name and address of, and appropriate contact at, the institution
or intermediary at which the account is held and the account number
thereof.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (h)           
Chattel
Paper.  Such Grantor has no interest in any Chattel Paper with
a face value in excess of $500,000, except as set forth in Schedule 11 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule).

     

    (i)            
Letter-of-Credit
Rights.  Such Grantor has no interest in any Letter-of-Credit
Rights, except as set forth on Schedule 12 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule).

     

    (j)            
Documents.  No
negotiable Documents with a face value in excess of $500,000 are outstanding
with respect to any of the Inventory, except as set forth on Schedule 13 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule).

     

    (k)           
Credit Card
Receivables.  Each Credit Card Receivable and all records,
papers and documents relating thereto (i) are genuine and correct and in all
material respects what they purport to be, (ii) represent the legal, valid and
binding obligation of the account debtor, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability, evidencing obligations unpaid and owed by such
account debtor, arising out of the performance of labor or services or the sale,
lease, license, assignment or other disposition and delivery of the goods or
other property listed therein or out of an advance of a loan, (iii) are in all
material respects in compliance and conform with all applicable material
federal, state and local laws and applicable laws of any relevant foreign
jurisdiction and (iv) are not evidenced by a judgment, Instrument or Chattel
Paper.

     

    (l)            
Eligible Credit Card
Receivables.   Schedule 14 annexed
hereto, is a true and accurate calculation of (i) all the Credit Card
Receivables of the Grantors on a consolidated basis for the month ended November
30, 2009 and (ii) the percentage of such Credit Card Receivables that constitute
Eligible Credit Card Receivables.

     

    (m)           Credit Card
Processors.  Schedule 15 annexed
hereto (as supplemented by the Grantors from time to time in writing to the
Secured Party referencing such Schedule), is a true and complete list of all
Persons providing credit card processing services to the Borrower or any of its
Subsidiaries, including the name and address of, and appropriate contact at,
such Person, the name of the Borrower or Subsidiaries to which such services are
provided and the merchant account number relating to such services.

     

    The representations and warranties as
to the information set forth in Schedules referred to herein are made as to each
Grantor (other than Additional Grantors) as of the date hereof and as to each
Additional Grantor as of the date of the applicable Counterpart, and, in respect
of any supplement to any Schedule provided in accordance with this Agreement or
notice delivered pursuant to Section 22 hereof,
such representations and warranties are made as of the date of such supplement
or notice.

    

    
      
        
        

      

      
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              SECTION
      5.

            	
              Further
      Assurances.

            

    

     

    (a)      Generally.  Each
Grantor agrees that from time to time, at the expense of Grantors, such Grantor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder and under the Credit
Agreement with respect to any Collateral.  Without limiting the
generality of the foregoing, each Grantor will:  (i) notify Secured
Party in writing of receipt by such Grantor of any interest in Chattel Paper
with a face amount in excess of $500,000 and at the request of Secured Party,
mark conspicuously each item of Chattel Paper and each of its records pertaining
to the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (ii) deliver to Secured Party all promissory notes and other
Instruments, in each case with a face amount in excess of $500,000, and, at the
request of Secured Party, all original counterparts of such Chattel Paper, duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Secured Party, (iii) (A) execute (if
necessary) and file such financing or continuation statements, or amendments
thereto, (B) execute and deliver, and cause to be executed and delivered,
agreements establishing that Secured Party has control of Deposit Accounts and
Investment Property of such Grantor, (C) deliver such documents, instruments,
notices (including, without limitation, Credit Card Notifications and demand
deposit account notifications satisfactory to the Secured Party), records and
consents, and take such other actions, necessary to establish that secured party
has control over electronic Chattel Paper and Letter-of-Credit Rights of such
Grantor and (D) deliver such other instruments or notices, in each case, as may
be necessary, or as Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby,
(iv) furnish to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request, all in reasonable
detail, (v) at any reasonable time, upon request by Secured Party, exhibit the
Collateral to and allow inspection of the Collateral by Secured Party, or any
agent designated by Secured Party, (viii) at Secured Party’s request, appear in
and defend any action or proceeding that may affect such Grantor’s title to or
Secured Party’s security interest in all or any part of the Collateral, and (ix)
use commercially reasonable efforts to obtain any necessary consents of third
parties to the creation and perfection of a security interest in favor of
Secured Party with respect to any Collateral.  Each Grantor hereby
authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral (including any financing statement indicating that it covers “all
assets” or “all personal property” of such Grantor) without the signature of any
Grantor.

     

    (b)      Securities
Collateral.  Without limiting the generality of the foregoing
Section 5(a),
each Grantor agrees that it will promptly (and in any event within five Business
Days) upon obtaining any additional (i) Equity Interests in any Subsidiary which
constitutes Collateral or (ii) Instruments or other evidences of Indebtedness
issued by any Grantor with a face amount in excess of $500,000, notify the
Secured Party of such additional Equity Interests or Instruments, deliver any
certificates evidencing such Equity Interests or any such Instruments to the
Secured Party, deliver a supplement to Schedule 6 to the
Secured Party and, to the extent requested by the Secured Party, execute and
deliver to Secured Party a supplement to this agreement, duly executed by such
Grantor, in respect of such additional Equity Interests or additional
Instruments; provided,
that the failure of any Grantor to execute a supplement with respect to any
additional Equity Interests or additional Instruments shall not impair the
security interest of Secured Party therein or otherwise adversely affect the
rights and remedies of Secured Party hereunder with respect
thereto.

     

    (c)      Intellectual Property
Collateral.  Each Grantor shall promptly notify Secured Party
in writing of any rights to any material Intellectual Property Collateral
acquired by such Grantor after the date hereof and promptly deliver a supplement
to Schedules 7, 8 and
9 as applicable reflecting such additional Intellectual Property
Collateral.

     

    (d)      Commercial Tort
Claims.  Grantors have no Commercial Tort Claims as of the date
hereof, except as set forth on Schedule 1 annexed
hereto.  In the event that a Grantor shall at any time after the date
hereof have any Commercial Tort Claims in excess of $500,000, such Grantor shall
promptly notify Secured Party thereof in writing, which notice shall (i) set
forth in reasonable detail the basis for and nature of such Commercial Tort
Claim and (ii) constitute an amendment to this Agreement by which such
Commercial Tort Claim shall constitute part of the Collateral.

     

    
      
        
        

      

      
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              SECTION
      6.

            	
              Certain
      Covenants of Grantors.

            

    

     

     Each
Grantor shall:

     

    (a)        not
use or permit any Collateral to be used unlawfully or in violation of any
provision of this Agreement or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral;

     

    (b)       give
Secured Party at least 30 days’ prior written notice of (i) any change in such
Grantor’s name, identity or corporate structure and (ii) any reincorporation,
reorganization or other action that results in a change of the jurisdiction of
organization of such Grantor;

     

    (c)        keep
and maintain materially complete and accurate records of the Collateral and all
parts thereof, in a manner consistent with prudent business practice, including,
without limitation, records of all payments received, all credits granted
thereon, all merchandise returned, all fees and service charges charged in
connection therewith and all other documentation relating thereto;

     

    (d)        not
(i) rescind or cancel any indebtedness constituting Credit Card Receivables or
modify any term thereof or make any adjustment with respect thereto, (ii) extend
or renew any such indebtedness or (iii) settle any dispute, claim, suit or legal
proceeding relating thereto, except, in each case, in the ordinary course of
business consistent with prudent business practice or with the written consent
of the Secured Party;

     

    (e)        not
sell, assign or otherwise transfer any Credit Card Receivables or interest
therein without the written consent of the Secured Party, except in connection
with a disposition permitted under the Credit Agreement;

     

    (f)      
  not permit the aggregate amount of Credit Card Receivables that
constitute Eligible Credit Card Receivables of the Grantors to fall below $121
million of all Credit Card Receivables of the Grantors;

     

    (g)        promptly
upon the request of the Secured Party, execute and deliver a Credit Card
Notification to each Credit Card Processor (with a certified copy to the Secured
Party);

     

    (h)        promptly
upon the establishment of any credit card processing service agreement with any
credit card processor that is not listed on Schedule 15 hereto
(as previously supplemented), provide the Secured Party an update to Schedule 15 hereto to
include each such credit card processor;

     

    
      
        
        

      

      
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    (i)         Except
as otherwise provided in this subsection (i),
continue to collect, at its own expense, all amounts due or to become due to
such Grantor under the Credit Card Receivables.  In connection with
such collections, each Grantor may take (and, upon the occurrence and during the
continuance of an Event of Default at Secured Party’s direction, shall take)
such action as such Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Credit Card
Receivables; provided, however,
that Secured Party shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default upon written notice to such
Grantor of its intention to do so, to (i) notify the account debtors or obligors
under any Credit Card Receivable of the assignment of such Credit Card
Receivable to Secured Party 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 Secured Party, (ii) notify each Person maintaining a lockbox, demand
deposit account or similar arrangement to which account debtors or obligors
under any Credit Card Receivable have been directed to make payment to remit all
amounts representing collections on checks and other payment items from time to
time sent to or deposited in such lockbox or other arrangement directly to
Secured Party, (iii) enforce collection of any such Credit Card Receivables at
the expense of Grantors, and (iv) 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 such Grantor of the notice from Secured
Party referred to in the proviso to the preceding sentence, (A) all amounts and
proceeds (including checks and other Instruments) received by such Grantor in
respect of the Credit Card Receivables shall be received in trust for the
benefit of Secured Party hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to Secured Party in the
same form as so received (with any necessary endorsement) to be held as cash
Collateral and applied as provided by Section 16 hereof,
and (B) such Grantor shall not, without the written consent of Secured Party,
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;

     

    (j)         concurrently
with the establishment of any Deposit Account or Securities Account by the
Borrower or any of its Subsidiaries (x) provide the Secured Party with the
information required under Schedule 10 hereto
for each such Deposit Account or Securities Account, (y) other than with respect
to any Excluded Deposit Account, upon the request of the Secured Party, promptly
execute and deliver, agreements granting a security interest to the Secured
Party in each such Deposit Account or Securities Account and establishing that
Secured Party has control of each such Deposit Account or Securities Account,
reasonably requested by and in form and substance reasonably satisfactory to the
Secured Party and (z) other than with respect to any Excluded Deposit Account,
to the extent such Deposit Account or Securities Account is owned by a
Subsidiary of the Borrower that is not a Grantor, upon the request of the
Secured Party, promptly cause such Subsidiary to become a party to (1) the
Guaranty by executing a Guaranty Agreement Supplement in the form provided in
the Guaranty and (2) this Agreement in accordance with Section 20
hereof;

     

    (k)        not
terminate, sell, assign or otherwise transfer any Credit Card Deposit Account or
interest therein without (i) the written consent of the Secured Party or (ii) in
connection with a disposition permitted under the Credit Agreement;
and

     

    (l)         deposit
all proceeds of any Credit Card Receivables into a Credit Card Deposit Account
(provided that
until such time as an Event of Default has occurred and is continuing, this
provisions shall not restrict the Borrower and its Subsidiaries from
transferring such proceeds to other accounts or otherwise disposing of such
proceeds, in each case, to the extent and in the manner permitted under the
Credit Agreement and the other Loan Documents).

     

    
      	
              SECTION
      7.

            	
              Special Covenants With
      Respect to Equipment and
Inventory.

            

    

     

    (a)        Each
Grantor shall, if
any Inventory is in possession or control of any of such Grantor’s agents or
processors, if the aggregate book value of all such Inventory exceeds $500,000,
and in any event upon the occurrence of an Event of Default, instruct such agent
or processor to hold all such Inventory for the account of Secured Party and
subject to the instructions of Secured Party; and

     

    (b)        if
any Inventory with an aggregate book value in excess of $500,000 (or, in the
case of Inventory located in retail stores, in excess of $1,000,000) is located
on premises leased by such Grantor, use commercially reasonable efforts to
deliver to Secured Party a fully executed landlord waiver, subordination or
collateral access agreement, in form and substance reasonably satisfactory to
Secured Party, executed by the landlord of any such premises leased or occupied
by a Grantor in favor of Secured Party.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    SECTION
8.     Special Covenants with
respect to Accounts.

     

    Except as
otherwise provided in this Section 8, each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor under the Accounts.  In connection with
such collections, each Grantor may take (and, upon the occurrence and during the
continuance of an Event of Default at Secured Party’s direction, shall take)
such action as such Grantor or Secured Party may deem necessary or advisable to
enforce collection of amounts due or to become due under the Accounts; provided, however,
that Secured Party shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default, to (i) notify the account
debtors or obligors under any Accounts of the assignment of such Accounts to
Secured Party 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 Secured
Party, (ii) notify each Person maintaining a lockbox or similar arrangement
to which account debtors or obligors under any Accounts have been directed to
make payment to remit all amounts representing collections on checks and other
payment items from time to time sent to or deposited in such lockbox or other
arrangement directly to Secured Party, (iii) enforce collection of any such
Accounts at the expense of Grantors, and (iv) adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done.  Upon the occurrence and during the
continuation of an Event of Default and upon receipt by any Grantor of notice
from Secured Party, (A) all amounts and proceeds (including checks and other
Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section 16 hereof,
and (B) such Grantor shall not, without the written consent of Secured Party,
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

     

    SECTION
9.     Special Covenants With
Respect to the Securities Collateral.

     

    (a)            Form of Securities
Collateral.  Secured Party shall have the right at any time to
exchange certificates or instruments representing or evidencing Securities
Collateral for certificates or instruments of smaller or larger
denominations.  If any Securities Collateral is not a security
pursuant to Section 8-103 of the UCC, no Grantor shall take any action that,
under such Section, converts such Securities Collateral into a security without
causing the issuer thereof to issue to it certificates or instruments evidencing
such Securities Collateral, which it shall promptly deliver to Secured
Party.

     

    (b)            Covenants.  Each
Grantor shall (i) not, except as expressly permitted by the Credit Agreement,
permit any issuer of Pledged Subsidiary Equity to merge or consolidate unless
all the outstanding Equity Interests of the surviving or resulting Person are,
upon such merger or consolidation, pledged and become Collateral hereunder and
no cash, securities or other property is distributed in respect of the
outstanding Equity Interests of any other constituent corporation; (ii) cause
each issuer of Pledged Subsidiary Equity not to issue Equity Interests in
addition to or in substitution for the Pledged Subsidiary Equity issued by such
issuer, except to such Grantor; (iii) upon its acquisition (directly or
indirectly) of any Pledged Subsidiary Equity, comply with Section 5(b); (iv)
upon its issuance of any and all Instruments or other evidences of additional
Indebtedness with a face amount in excess of $500,000, comply with Section 5(b); (v)
promptly deliver to Secured Party all written notices received by it with
respect to the Securities Collateral; (vi) at its expense (A) perform and comply
in all material respects with all terms and provisions of any agreement related
to the Securities Collateral required to be performed or complied with by it,
(B) maintain all such agreements in full force and effect and (C) enforce all
such agreements in accordance with their terms; and (vii), at the request of
Secured Party, promptly execute and deliver to Secured Party an agreement
providing for control by Secured Party of all Security Entitlements, Securities
Accounts, Commodity Contracts and Commodity Accounts of such
Grantor.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c)            Voting and
Distributions.  So long as the Lender shall have given notice
of its intent to exercise such rights at any time an Event of Default shall have
occurred and be continuing, (i) each Grantor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the Securities
Collateral or any part thereof for any purpose not prohibited by the terms of
this Agreement or the Credit Agreement; provided, no Grantor
shall exercise or refrain from exercising any such right if Secured Party shall
have notified such Grantor that, in Secured Party’s reasonable judgment, such
action would have a material adverse effect on the value of the Securities
Collateral or any part thereof; and (ii) each Grantor shall be entitled to
receive and retain any and all dividends, other distributions, principal and
interest paid in respect of the Securities Collateral.

     

    Upon the
occurrence and during the continuation of an Event of Default, (x) upon written
notice from Secured Party to any Grantor, all rights of such Grantor to exercise
the voting and other consensual rights which it would otherwise be entitled to
exercise pursuant hereto shall cease, and all such rights shall thereupon become
vested in Secured Party who shall thereupon have the sole right to exercise such
voting and other consensual rights; (y) except as otherwise specified in the
Credit Agreement, all rights of such Grantor to receive the dividends, other
distributions, principal and interest payments which it would otherwise be
authorized to receive and retain pursuant hereto shall cease, and all such
rights shall thereupon become vested in Secured Party who shall thereupon have
the sole right to receive and hold as Collateral such dividends, other
distributions, principal and interest payments; and (z) all dividends,
principal, interest payments and other distributions which are received by such
Grantor contrary to the provisions of clause (y) above shall be received in
trust for the benefit of Secured Party, shall be segregated from other funds of
such Grantor and shall forthwith be paid over to Secured Party as Collateral in
the same form as so received (with any necessary endorsements).

     

    In order
to permit Secured Party to exercise the voting and other consensual rights which
it may be entitled to exercise pursuant hereto and to receive all dividends and
other distributions which it may be entitled to receive hereunder, (I) each
Grantor shall promptly execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies, dividend payment orders and other
instruments as Secured Party may from time to time reasonably request, and (II)
without limiting the effect of clause (I) above, each Grantor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Equity and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Equity would be entitled (including giving or withholding written
consents of holders of Equity Interests, calling special meetings of holders of
Equity Interests and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Equity on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Equity or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations, the cure of such
Event of Default or waiver thereof as evidenced by a writing executed by Secured
Party.

     

    
      	
              SECTION
      10.

            	
              Special Covenants With
      Respect to the Intellectual Property
  Collateral.

            

    

     

    (a)           Except
as otherwise provided in this Section 10, each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due to such Grantor in respect of the Intellectual Property Collateral or
any portion thereof.  In connection with such collections, each
Grantor may take (and, after the occurrence and during the continuance of any
Event of Default at Secured Party’s reasonable direction, shall take) such
action as such Grantor or Secured Party may deem reasonably necessary or
advisable to enforce collection of such amounts; provided, Secured
Party shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default, to notify the obligors with respect to any
such amounts of the existence of the security interest created hereby and to
direct such obligors to make payment of all such amounts directly to Secured
Party, and, upon such notification and at the expense of such Grantor, to
enforce collection of any such amounts 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.  Upon the occurrence and during the
continuation of an Event of Default and upon receipt by any Grantor of notice
from Secured Party, (i) all amounts and proceeds (including checks and
Instruments) received by each Grantor in respect of amounts due to such Grantor
in respect of the Intellectual Property Collateral or any portion thereof shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section 16 hereof,
and (ii) such Grantor shall not adjust, settle or compromise the amount or
payment of any such amount or release wholly or partly any obligor with respect
thereto or allow any credit or discount thereon.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b)           Except
as provided herein, each Grantor shall have the right to commence and prosecute
in its own name, as real party in interest, for its own benefit and at its own
expense, such suits, proceedings or other actions for infringement, unfair
competition, dilution, misappropriation or other damage, or reexamination or
reissue proceedings as are necessary to protect the Intellectual Property
Collateral.

     

    (c)           In
addition to, and not by way of limitation of, the granting of a security
interest in the Collateral pursuant hereto, each Grantor, effective upon the
occurrence and during the continuance of an Event of Default, hereby assigns,
transfers and conveys to Secured Party the nonexclusive right and license to use
all Trademarks, tradenames, Copyrights, Patents or technical processes
(including, without limitation, the Intellectual Property Collateral) owned or
used by such Grantor that relate to the Collateral, together with any goodwill
associated therewith, all to the extent necessary to enable Secured Party to
realize on the Collateral in accordance with this Agreement and to enable any
transferee or assignee of the Collateral to enjoy the benefits of the
Collateral.  This right shall inure to the benefit of all successors,
assigns and transferees of Secured Party and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise.  Such
right and license shall be granted free of charge, without requirement that any
monetary payment whatsoever be made to such Grantor.

     

     

    
      	
              SECTION
      11.

            	
              Secured Party
      Appointed Attorney-in-Fact.

            

    

     

    Each
Grantor hereby irrevocably appoints Secured Party as such Grantor’s
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor, Secured Party or otherwise, from time to time in
Secured Party’s discretion to take any action and to execute any instrument that
Secured Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:

     

    (a)               upon
the occurrence and during the continuance of an Event of Default, to obtain and
adjust insurance required to be maintained by such Grantor or paid to Secured
Party pursuant to the Credit Agreement;

     

    (b)               upon
the occurrence and during the continuance of an Event of Default, to ask for,
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 of the
Collateral;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (c)               upon
the occurrence and during the continuance of an Event of Default, to receive,
endorse and collect any drafts or other Instruments, Documents, Chattel Paper
and other documents in connection with clauses (a) and (b) above;

     

    (d)               upon
the occurrence and during the continuance of an Event of Default, to file any
claims or take any action or institute any proceedings that Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce or protect the rights of Secured Party with respect to any
of the Collateral;

     

    (e)               to
pay or discharge taxes or Liens (other than taxes not required to be discharged
pursuant to the Credit Agreement and Liens permitted under this Agreement or the
Credit Agreement) 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 Secured Party in its sole discretion, any such payments made
by Secured Party to become obligations of such Grantor to Secured Party, due and
payable immediately without demand;

     

    (f)               upon
the occurrence and during the continuance of an Event of Default, to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral;

     

    (g)               upon
the occurrence and during the continuance of an Event of Default, generally to
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Secured Party were
the absolute owner thereof for all purposes, and to do, at Secured Party’s
option and Grantors’ expense, at any time or from time to time, all acts and
things that Secured Party deems necessary to protect, preserve or realize upon
the Collateral and Secured Party’s security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor might
do; and

     

    (h)               upon
the occurrence and during the continuance of an Event of Default, (i) endorse
and collect any cash proceeds of the Collateral and apply the proceeds of any
Collateral to the Secured Obligations, (ii) demand payment or enforce payment of
the Credit Card Receivables in the name of the Secured Party, any nominee of the
Secured Party or any Grantor and to endorse any and all checks, drafts and other
instruments for the payment of money relating to the Credit Card Receivables,
(iii) sign any Grantor’s name on any invoice or bill of lading relating to the
Credit Card Receivables, drafts against any Account Debtor of such Grantor and
assignments and verifications of receivables, (iv) exercise all of any Grantor’s
rights and remedies with respect to the collection of the Credit Card
Receivables, (v) settle, adjust or compromise any legal proceeding brought to
collect any Credit Card Receivables, (vi) prepare, file and sign any Grantor’s
name on a proof of claim in bankruptcy or similar document against any Account
Debtor of such Grantor, (vii) prepare, file and sign any Grantor’s name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Credit Card Receivables and (viii) change the address for
delivery of mail addressed to any Grantor to such address as the Secured Party
may designate to receive, open and dispose of all mail addressed to such
Grantor.

     

    All acts
of said attorney-in-fact are hereby ratified and approved by the
Grantors.  The powers conferred on the Secured Party under this Section 11 are solely
to protect the Secured Party’s interests in the Collateral and shall not impose
any duty upon the Secured Party to exercise any such powers.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
      12.

            	
              Secured Party May
      Perform.

            

    

     

    If any
Grantor fails to perform any agreement contained herein, Secured Party may
itself perform, or cause performance of, such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Grantors
under Section
17(b).

     

    
      	
              SECTION
      13.

            	
              Standard of
      Care.

            

    

     

    The
powers conferred on Secured Party hereunder are solely to protect its interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers.  Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.  Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Secured Party accords its own
property.

     

    
      	
              SECTION
      14.

            	
              Remedies.

            

    

     

    (a)        Generally.  If any
Event of Default shall have occurred and be continuing, Secured Party may,
subject to Section
19 hereof,  exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral), and also may (i)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral and all documentation related thereto as directed by Secured Party
and make it available to Secured Party at a place to be designated by Secured
Party that is reasonably convenient to both parties, (ii) enter onto the
property where any Collateral or any documentation related thereto is located
and take possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iv) take possession of any
Grantor’s premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor’s equipment for the
purpose of completing any work in process, taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, (v) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of Secured Party’s offices or
elsewhere, for cash, on credit or for future delivery, at such time or times and
at such price or prices and upon such other terms as Secured Party may deem
commercially reasonable, (vi) exercise dominion and control over, provide
instructions directing the disposition of funds, instruments, securities and
other property in and refuse to permit further withdrawals from any Deposit
Account maintained with Secured Party or any Lender and provide instructions
directing the disposition of funds in Deposit Accounts not maintained with
Secured Party or any Lender and (vii) provide entitlement orders with respect to
Security Entitlements and other Investment Property constituting a part of the
Collateral and, without notice to any Grantor, transfer to or register in the
name of Secured Party or any of its nominees any or all of the Securities
Collateral.  Secured Party or any Lender may be the purchaser of any
or all of the Collateral at any such sale and Secured Party, as agent for and
representative of Lenders (but not any Lender  in its individual
capacity unless all the Lenders shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such
sale.  Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of any Grantor, and each
Grantor hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted.  Each Grantor agrees 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

      that, to
the extent notice of sale shall be required by law, at least ten days’ notice to
such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable
notification.  Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given.  Secured
Party 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 Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree.  If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.  Each Grantor further agrees that a breach of any of the
covenants contained in this Section 14 will cause
irreparable injury to Secured Party, that Secured Party has no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section shall be specifically enforceable against
such Grantor, and each Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no default has occurred giving rise to the Secured Obligations
becoming due and payable prior to their stated maturities.

    

     

    (b)        Securities
Collateral.  Each Grantor recognizes that, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws, Secured Party may be compelled, with respect to any sale of all or any
part of the Securities Collateral conducted without prior registration or
qualification of such Securities Collateral under the Securities Act and/or such
state securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Securities Collateral for their own account, for
investment and not with a view to the distribution or resale
thereof.  Each Grantor acknowledges that any such private placement
may be at prices and on terms less favorable than those obtainable through a
sale without such restrictions (including an offering made pursuant to a
registration statement under the Securities Act) and, notwithstanding such
circumstances, each Grantor agrees that any such private placement shall not be
deemed, in and of itself, to be commercially unreasonable and that Secured Party
shall have no obligation to delay the sale of any Securities Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of sale requiring registration under the Securities Act or under applicable
state securities laws, even if such issuer would, or should, agree to so
register it.  If Secured Party determines to exercise its right to
sell any or all of the Securities Collateral, upon written request, each Grantor
shall and shall cause each issuer of any Securities Collateral to be sold
hereunder from time to time to furnish to Secured Party all such information as
Secured Party may request in order to determine the amount of Securities
Collateral which may be sold by Secured Party in exempt transactions under the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder, as the same are from time to time in effect.

     

    
      	
              SECTION
      15.

            	
              Additional Remedies
      for Intellectual Property
Collateral.

            

    

     

    (a)        Anything
contained herein to the contrary notwithstanding, upon the occurrence and during
the continuation of an Event of Default, (i) Secured Party shall have the right
(but not the obligation) to bring suit, in the name of any Grantor, Secured
Party or otherwise, to enforce any Intellectual Property Collateral, in which
event each Grantor shall, at the request of Secured Party, do any and all lawful
acts and execute any and all documents required by Secured Party in aid of such
enforcement and each Grantor shall promptly, upon demand, reimburse and
indemnify Secured Party as provided in Section 7 of the Credit Agreement and
Section 17
hereof, as applicable, in connection with the exercise of its rights under this
Section 15,
and, to the extent that Secured Party shall elect not to bring suit to enforce
any Intellectual Property Collateral as provided in this Section, each Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the Intellectual Property
Collateral by others and for that purpose agrees to use its commercially
reasonable judgment in 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

      maintaining
any action, suit or proceeding against any Person so infringing reasonably
necessary to prevent such infringement; (ii) upon written demand from Secured
Party, each Grantor shall execute and deliver to Secured Party an assignment or
assignments of the Intellectual Property Collateral and such other documents as
are necessary or appropriate to carry out the intent and purposes of this
Agreement; (iii) each Grantor agrees that such an assignment and/or recording
shall be applied to reduce the Secured Obligations outstanding only to the
extent that Secured Party (or any Lender) receives cash proceeds in respect of
the sale of, or other realization upon, the Intellectual Property Collateral;
and (iv) within five Business Days after written notice from Secured Party, each
Grantor shall make available to Secured Party, to the extent within such
Grantor’s power and authority, such personnel in such Grantor’s employ as
Secured Party may reasonably designate, by name, title or job responsibility, to
permit such Grantor to continue, directly or indirectly, to produce, advertise
and sell the products and services sold or delivered by such Grantor under or in
connection with the Trademarks, Trademark Registrations and Trademark Rights,
such persons to be available to perform their prior functions on Secured Party’s
behalf and to be compensated by Secured Party at such Grantor’s expense on a per
diem, pro-rata basis consistent with the salary and benefit structure applicable
to each as of the date of such Event of Default.

    

     

    (b)        If
(i) an Event of Default shall have occurred and, by reason of cure, waiver,
modification, amendment or otherwise, no longer be continuing, (ii) no other
Event of Default shall have occurred and be continuing, (iii) an assignment to
Secured Party of any rights, title and interests in and to the Intellectual
Property Collateral shall have been previously made, and (iv) the Secured
Obligations shall not have become immediately due and payable, upon the written
request of any Grantor, Secured Party shall promptly execute and deliver to such
Grantor such assignments as may be necessary to reassign to such Grantor any
such rights, title and interests as may have been assigned to Secured Party as
aforesaid, subject to any disposition thereof that may have been made by Secured
Party; provided, after giving effect to such reassignment, Secured Party’s
security interest granted pursuant hereto, as well as all other rights and
remedies of Secured Party granted hereunder, shall continue to be in full force
and effect; and provided further, the rights, title and interests so reassigned
shall be free and clear of all Liens other than Liens (if any) encumbering such
rights, title and interest at the time of their assignment to Secured Party and
Permitted Encumbrances.

     

    
      	
              SECTION
      16.

            	
              Application of
      Proceeds.

            

    

     

    Except as
expressly provided elsewhere in this Agreement, all proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied in the following order of
priority:

     

    FIRST:  To
the payment of all costs and expenses of such sale, collection or other
realization, including reasonable compensation to Secured Party and its agents,
advisors and counsel, and all other expenses, liabilities and advances made or
incurred by Secured Party in connection therewith, and all amounts for which
Secured Party is entitled to indemnification hereunder and all advances made by
Secured Party hereunder for the account of Grantors, and to the payment of all
costs and expenses paid or incurred by Secured Party in connection with the
exercise of any right or remedy hereunder;

     

    SECOND:  To
the payment of all other Secured Obligations (for the ratable benefit of the
holders thereof); and

     

    THIRD:  To
the payment to or upon the order of the Borrower, or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
      17.

            	
              Indemnity and
      Expenses.

            

    

     

    (a)        Grantors
jointly and severally agree to indemnify Secured Party and each
Lender  from and against any and all claims, losses and liabilities in
any way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party’s or such Lender’s gross negligence or willful
misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction.

     

    (b)        Grantors
jointly and severally agree to pay to Secured Party upon demand the amount of
any and all costs and expenses in accordance with subsection 7.1 of the Credit
Agreement.

     

    (c)        The
obligations of Grantors in this Section 17 shall
survive the termination of this Agreement and the discharge of Grantors’ other
obligations under this Agreement, the Credit Agreement and the other Loan
Documents.

     

    
      	
              SECTION
      18.

            	
              Continuing Security
      Interest; Transfer of Loans; Termination and
    Release.

            

    

     

    (a)        This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the indefeasible payment in full
in immediately available funds of the principal, interest and all other amounts
under this Credit Agreement and under any other Loan Document and the
termination of this Credit Agreement and each other Loan Document and the
cancellation or termination of the Revolving Loan Commitments, (ii) be binding
upon Grantors and their respective successors and assigns, and (iii) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns.

     

           
(b)        Upon the indefeasible payment
in full of all Secured Obligations in immediately available funds and the
cancellation or termination of the Revolving Loan Commitments, the security
interest granted hereby in the Collateral shall automatically terminate and all
rights to the Collateral shall revert to the applicable
Grantors.  Upon the sale, lease, transfer or other disposition of any
item of Collateral (including, without limitation, as a result of (x) the sale
or other transfer or disposition of the Subsidiary that owns such Collateral
other than to a Person that is, or is required to be, a Grantor or Additional
Grantor or (y) the merger, consolidation, amalgamation or dissolution of the
Subsidiary that owns such Collateral other than a merger, consolidation or
amalgamation with or a Person that is, or is required to be, a Grantor or
Additional Grantor), in each case, in accordance with the terms of the Loan
Documents, the security interest granted hereby in such item of Collateral shall
automatically terminate and all rights to such item of Collateral shall revert
to the applicable Grantors.  Upon any such release described in this
Section 18(b),
the Secured Party, at the Borrower’s expense, shall execute and deliver to such
Grantor such documents in form and substance reasonably satisfactory to Secured
Party (and without recourse to or warranty by the Secured Party) as may be
reasonably requested to evidence such release of such Collateral from the
assignment and security interest granted hereunder.

     

    
      	
              SECTION
      19.

            	
              Secured Party as
      Agent.

            

    

     

        
Secured Party has been appointed to act as Secured Party hereunder by
Lenders.  Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Sections 14 and
15 hereof in
accordance with the instructions of the Lenders.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
      20.

            	
              Additional
      Grantors.

            

    

     

        
The initial Grantors hereunder shall be the Borrower and such of the
Subsidiaries of the Borrower as are signatories hereto on the date
hereof.  From time to time subsequent to the date hereof, additional
Subsidiaries of the Borrower may become Additional Grantors, by executing a
Counterpart.  Upon delivery of any such Counterpart to Secured Party,
notice of which is hereby waived by Grantors, each such Additional Grantor shall
be a Grantor and shall be as fully a party hereto as if such Additional Grantor
were an original signatory hereto.  Each Grantor expressly agrees that
its obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of
Secured Party not to cause any Subsidiary of the Borrower to become an
Additional Grantor hereunder.  This Agreement shall be fully effective
as to any Grantor that is or becomes a party hereto regardless of whether any
other Person becomes or fails to become or ceases to be a Grantor
hereunder.

     

    
      	
              SECTION
      21.

            	
              Amendments;
      Etc.

            

    

     

        
No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Grantor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Grantors; provided this
Agreement may be modified by the execution of a Counterpart by an Additional
Grantor in accordance with Section 20 hereof and
Grantors hereby waive any requirement of notice of or consent to any such
amendment.  Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was
given.

     

    
      	
              SECTION
      22.

            	
              Notices.

            

    

     

        
Any notice or other communication herein required or permitted to be given shall
be in writing and shall be personally delivered, transmitted by postage prepaid
registered or certified mail or by overnight mail, or transmitted by telephonic
facsimile ("FAX") and electronic mail ("EMAIL") to the parties.  For
the purposes hereof, the address of (i) each Grantor shall be as set forth under
such party’s name on the signature pages hereof or, if none, as provided for in
Section 8.6 of the Credit Agreement for notices to the Borrower and (ii) Secured
Party as provided for in Section 8.6 of the Credit Agreement for notices to the
Lender, or, in each case, such other address as shall be designated by such
party in a written notice delivered to the other parties hereto from time to
time.

     

    
      	
              SECTION
      23.

            	
              Failure or Indulgence
      Not Waiver; Remedies
Cumulative.

            

    

     

        
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

     

    
      	
              SECTION
      24.

            	
              Severability.

            

    

     

        
In case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
      25.

            	
              Headings.

            

    

     

        
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.

     

    
      	
              SECTION
      26.

            	
              Governing Law; Rules
      of Construction.

            

    

     

        
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF EXCEPT TO THE
EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, IN
WHICH CASE THE LAWS OF SUCH JURISDICTION SHALL GOVERN WITH RESPECT TO THE
PERFECTION OF THE SECURITY INTEREST IN, OR THE REMEDIES WITH RESPECT TO, SUCH
PARTICULAR COLLATERAL.  The rules of construction set forth in Section
1 of the Credit Agreement shall be applicable to this Agreement mutatis
mutandis.

     

    
      	
              SECTION
      27.

            	
              Consent to
      Jurisdiction and Service of
Process.

            

    

     

    (a)           Each
Grantor hereby irrevocably agrees that any legal action or proceedings against
it with respect to this Agreement may be brought in any court of the State of
New York or any Federal Court of the United States of America located in the
City or State of New York, or both, as the Secured Party may elect, and by
execution and delivery of this Agreement each Grantor hereby submits to and
accepts with regard to any such action or proceeding service of process by the
mailing of copies thereof by registered or certified airmail, postage prepaid,
to such Grantor pursuant to Section
22.

     

    (b)           Each
Grantor hereby irrevocably waives any objection which it may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement in the State of New York and hereby further
irrevocably waives any claim that the State of New York is not a convenient
forum for any such suit, action or proceeding.

     

    (c)           To
the extent that any Grantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each Grantor hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement.

     

    
      	
              SECTION
      28.

            	
              Waiver of Jury
      Trial.

            

    

     

    EACH
GRANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH
ANY ACTION RELATED TO THIS AGREEMENT, ANY NOTE EXECUTED PURSUANT HERETO OR ANY
OTHER LOAN DOCUMENT.

     

    
      	
              SECTION
      29.

            	
              Counterparts.

            

    

     

    This
Agreement may be executed in one or more counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      	
              SECTION
      30.

            	
              Amendment and
      Restatement.

            

    

     

    This
Agreement amends and restates the Existing Security Agreement.  All
rights, benefits, indebtedness, interests, liabilities and obligations of the
parties to the Existing Security Agreement and the agreements, documents and
instruments executed and delivered in connection with the Existing Security
Agreement (collectively, the “Existing Security Documents”)
are hereby renewed, amended, restated and superseded in their entirety according
to the terms and provisions set forth in this Agreement and the other Loan
Documents.  This Agreement does not constitute, nor shall it result
in, a waiver of, or release, discharge or forgiveness of, any amount payable
pursuant to the Existing Security Documents or any indebtedness, liabilities or
obligations of the Grantors thereunder, all of which are renewed and continued
and are hereafter payable and to be performed in accordance with this Agreement
and the other Loan Documents.  Neither this Agreement nor any of the
other Loan Documents extinguishes the indebtedness or liabilities outstanding in
connection with the Existing Security Documents, nor do they constitute a
novation with respect thereto.

     

    
      	
              SECTION
      31.

            	
              Definitions.

            

    

     

    (a)               Each
capitalized term utilized in this Agreement that is not defined in the Credit
Agreement or in this Agreement, but that is defined in the UCC, including the
categories of Collateral listed in Section 1 hereof,
shall have the meaning set forth in Articles 1, 8 or 9 of the UCC.

     

    (b)               In
addition, the following terms used in this Agreement shall have the following
meanings:

     

    “Additional Grantor” means a
Subsidiary of Borrower that becomes a party hereto after the date hereof as an
additional Grantor by executing a Counterpart.

     

    “Beneficiary” means
Administrative Agent and each Lender.

     

    “Collateral” has the meaning
set forth in Section
1 hereof.

     

    “Copyright Registrations”
means all copyright registrations issued to any Grantor and applications for
copyright registration that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign countries
(including, without limitation, the registrations set forth on Schedule 9 annexed
hereto, as the same may be amended pursuant hereto from time to
time).

     

    “Copyright Rights” means all
common law and other rights in and to the Copyrights in the United States and
any state thereof and in foreign countries including all copyright licenses (but
with respect to such copyright licenses, only to the extent permitted by such
licensing arrangements), the right (but not the obligation) to renew and extend
Copyright Registrations and any such rights and to register works protectable by
copyright and the right (but not the obligation) to sue in the name of any
Grantor or in the name of Secured Party or Lenders for past, present and future
infringements of the Copyrights and any such rights.

     

    “Copyright Office” shall mean
the United States Copyright Office or any successor office or agency
thereto.

     

    “Copyrights” means all items
under copyright in various published and unpublished works of authorship
including, without limitation, computer programs, computer data bases, other
computer software layouts, trade dress, drawings, designs, writings, and
formulas (including, without limitation, the works set forth on Schedule 9 annexed
hereto, as the same may be amended pursuant hereto from time to
time).

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    “Counterpart” means a
counterpart to this Agreement entered into by a Subsidiary of Borrower pursuant
to Section 20
hereof.

     

    “Credit Agreement” has the
meaning set forth in the Preliminary Statements of this Agreement.

     

    “Credit Card Deposit Accounts”
means, collectively, each of those Deposit Accounts and Securities Accounts
listed on Schedule
10(a) hereto (as supplemented from time to time).

     

    “Credit Card Notification”
means a notification to a Credit Card Processor in substantially the form of
Exhibit A
attached hereto or otherwise in form and substance reasonably acceptable to the
Secured Party.

     

    “Credit Card Processor” means
each provider of credit card processing services listed on Schedule 15 hereto,
as supplemented from time to time.

     

    “Credit Card Receivables”
means:

     

    (a)           all
rights to payment for a monetary obligation, whether or not earned by
performance, arising out of the use of a credit or charge card or information
contained on or for the use with the card (including, without limitation, (i)
any such obligation of (x) any credit card holder, charge card holder or any
other Person or Persons directly obligated to make payments with respect to the
use of such credit or charge card or information contained on or for the use
with the card and (y) any third party credit card processor obligated to make
payments to any Grantor in connection with the use of a credit or charge card or
information contained on or for the use with the card and (ii) any periodic
finance charges, annual membership fees, annual service charges, late fees,
return check fees, account protection fees and all other similar fees and
charges whether or not such rights constitute an Account under the
UCC);

     

    (b)           all
Money, Instruments, Investment Property and other property collected on,
distributed or distributable in respect of any of the foregoing;

     

    (c)           all
amounts received pursuant to the payment of benefits under any credit life
insurance policies, credit disability or unemployment insurance policies
covering any obligor with respect to the Accounts described in clause (a) above
of such obligor; and

     

    (d)           all
books, documents, instruments and records (including electronic records)
evidencing or relating to the foregoing.

     

    “Eligible Credit Card Receivables”
means, as of any date of determination, Credit Card Receivables due to
one or more Grantors from (i) any Person directly obligated to make payments
with respect to the use of a credit card or charge card owned and serviced by a
Grantor or (ii) a major Credit Card Processor (including, but not limited to,
VISA, Mastercard, American Express, Diners Club and DiscoverCard), in each case,
as arise in the ordinary course of business of such Grantor and which have been
earned by performance and that are not excluded as ineligible by virtue of one
or more of the following criteria.  None of the following shall be
deemed to be Eligible Credit Card Receivables:

     

    any
Credit Card Receivable that:

     

    (a)           is
not payable in Dollars;

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (b)           has
an obligor who has not provided, as his/her/its most recent billing address, an
address located in the United States or its territories, possessions or military
bases;

     

    (c)           has
an obligor who has been identified by any Grantor or any Credit Card Processor
as being currently involved in a voluntary or involuntary bankruptcy
proceeding;

     

    (d)           has
been identified as an account with respect to which (i) the related card, if
any, has been lost or stolen or (ii) the related account number has been
stolen;

     

    (e)           has
been identified by any Grantor or any Credit Card Processor or the relevant
obligor as having been incurred as a result of fraud or theft;

     

    (f)          
 is past due for more than sixty (60) days from the applicable statement
date, or for such longer period(s) as may be approved by the Secured Party in
its sole discretion;

     

    (g)           conflicts,
in any material respect, with any requirements of law applicable to the
institution which owned such Credit Card Receivable at the time of its creation
or is not owing pursuant to a cardholder agreement which complies in all
material respects with all requirements of law applicable to the Borrower and
its Subsidiaries;

     

    (h)           is
subject to any material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to be
obtained, effected or given in connection with the creation of such Credit Card
Receivable or the execution, delivery and performance by any Grantor of the
cardholder agreement pursuant to which such Credit Card Receivable was created,
other than those that have been duly obtained, effected or given and are in full
force and effect as of such date of determination;

     

    (i)         
  a Grantor does not have good, valid and marketable title thereto,
free and clear of any Lien (other than Liens granted to the Secured Party
pursuant to this Agreement and Permitted Liens having priority by operation of
applicable law over the Lien of the Secured Party);

     

    (j)       
    are not subject to a valid first priority (except as
provided in clause (i) above) perfected security interest therein (and in the
proceeds thereof) in favor of the Secured Party;

     

    (k)           are
not the legal, valid and binding payment obligation of the obligor thereon,
enforceable against such obligor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors’ rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity);

     

    (l)        
   has been waived or modified other than as permitted in
accordance with the terms of the underlying credit card agreement and which
waiver or modification is reflected in the records of the Grantor owning such
Credit Card Receivable;

     

    (m)           are
disputed, or with respect to which a claim, counterclaim, offset or chargeback
(other than chargebacks in the ordinary course by the credit card processors)
has been asserted, by the related credit card processor (but only to the extent
of such dispute, counterclaim, offset or chargeback);

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (n)           at
the time of determination, the Grantor owning such Credit Card Receivable has
not satisfied all of its material obligations required to be satisfied by such
time with respect thereto;

     

    (o)           are
due from any credit card processors (other than Visa, Mastercard, American
Express, Diners Club and DiscoverCard) which the Secured Party determines to be
unlikely to be collected; or

     

    (p)           does
not constitute an "account" under and as defined in Article 9 of the
UCC.

     

    “Equity Interests” means all
shares of stock, partnership interests, interests in Joint Ventures, limited
liability company interests and all other equity interests in a Person, whether
such stock or interests are classified as Investment Property or General
Intangibles under the UCC.

     

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

     

    “Excluded Deposit Accounts”
means (a) deposit accounts or securities accounts used exclusively for payroll,
pension or other employee benefits of the Borrower or any of its Subsidiaries
and (b) deposit accounts or securities accounts of any Grantor with aggregate
balances of less than $200,000 for all such accounts referenced in this clause
(b).

     

    “Excluded Property” means,
collectively, any permit, lease, license, contract, instrument or other
agreement held by any Grantor that prohibits or requires the consent of any
Person as a condition to the creation by such Grantor of a Lien thereon, or any
permit, lease, license contract or other agreement held by any Grantor to the
extent that any law applicable thereto prohibits the creation of a Lien thereon,
but only, in each case, to the extent, and for so long as, such prohibition is
not terminated or rendered unenforceable or otherwise deemed ineffective by the
UCC; provided, however, “Excluded Property” shall not include any Proceeds,
substitutions or replacements of Excluded Property (unless such Proceeds,
substitutions or replacements would constitute Excluded Property).

     

    “Intellectual Property
Collateral” means, with respect to any Grantor all right, title and
interest (including rights acquired pursuant to a license or otherwise but only
to the extent permitted by agreements governing such license or other use) in
and to all

     

    (a)           Copyrights,
Copyright Registrations and Copyright Rights, including, without limitation,
each of the Copyrights, rights, titles and interests in and to the Copyrights,
all derivative works and other works protectable by copyright, which are
presently, or in the future may be, owned, created (as a work for hire for the
benefit of such Grantor), authored (as a work for hire for the benefit of such
Grantor), or acquired by such Grantor, in whole or in part, and all Copyright
Rights with respect thereto and all Copyright Registrations therefor, heretofore
or hereafter granted or applied for, and all renewals and extensions thereof,
throughout the world;

     

    (b)           Patents;

     

    (c)           Trademarks,
Trademark Registrations, the Trademark Rights and goodwill of such Grantor’s
business symbolized by the Trademarks and associated therewith;

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    (d)           all
trade secrets, trade secret rights, know-how, customer lists, processes of
production, ideas, confidential business information, techniques, processes,
formulas, and all other proprietary information; and

     

    (e)           all
proceeds thereof (such as, by way of example and not by limitation, license
royalties and proceeds of infringement suits).

     

    “IP Filing Office” means the
Copyright Office or the Patent and Trademark Office, as applicable.

     

    “Patents” means all patents
and patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in the
future may be, owned or held by a Grantor and all patents and patent
applications and rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in the future may be,
owned by such Grantor in whole or in part (including, without limitation, the
patents and patent applications set forth on Schedule 8 annexed
hereto), all rights (but not obligations) corresponding thereto to sue for past,
present and future infringements and all re-issues, divisions, continuations,
renewals, extensions and continuations-in-part thereof.

     

    “Patent and Trademark Office”
shall mean the United States Patent and Trademark Office or any successor office
or agency thereto.

     

    “Pledged Debt” means the
Indebtedness from time to time owed to a Grantor and issued by the obligors
named therein, the Instruments and certificates evidencing such Indebtedness and
all interest, cash or other property received, receivable or otherwise
distributed in respect of or exchanged therefor.

     

    “Pledged Equity” means all
Equity Interests now or hereafter owned by a Grantor, including all securities
convertible into, and rights, warrants, options and other rights to purchase or
otherwise acquire, any of the foregoing, including those owned on the date
hereof and set forth on Schedule 6 annexed
hereto, the certificates or other instruments representing any of the foregoing
and any interest of such Grantor in the entries on the books of any securities
intermediary pertaining thereto and all distributions, dividends and other
property received, receivable or otherwise distributed in respect of or
exchanged therefor, but excluding any Equity Interests of Foreign Subsidiaries
to the extent a security interest in such Equity Interests could reasonably be
expected to result in material adverse Tax consequences to
Borrower.

     

    “Pledged Subsidiary Debt”
means Pledged Debt owed to a Grantor by any obligor that is, or becomes, a
direct or indirect Subsidiary of such Grantor, of which such Grantor is a direct
or indirect Subsidiary or that controls, is controlled by or under common
control with such Grantor.

     

    “Pledged Subsidiary Equity”
means Pledged Equity in a Person that is, or becomes a direct Subsidiary of a
Grantor.

     

    “Secured Obligations”
means:

     

    (a)           with
respect to Borrower, all obligations and liabilities of every nature of Borrower
now or hereafter existing under or arising out of or in connection with the
Credit Agreement and the other Loan Documents; and

     

    (b)           with
respect to each Subsidiary Guarantors and each Additional Grantor, all
obligations and liabilities of every nature of such Subsidiary Guarantor and
Additional Guarantor now or hereafter existing under or arising out of or in
connection with the Guaranty (including, without limitation, the “Obligations”
(as defined in the Guaranty).

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    in each
case together with all extensions or renewals thereof, whether for principal,
interest, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from any Secured Party as a preference, fraudulent transfer or
otherwise, and all obligations of every nature of Grantors now or hereafter
existing under this Agreement (including, without limitation, interest and other
amounts that, but for the filing of a petition in bankruptcy with respect to the
Borrower or any other Grantor, would accrue on such obligations, whether or not
a claim is allowed against the Borrower or such Grantor for such amounts in the
related bankruptcy proceeding).

     

    “Securities Act” means the
Securities Act of 1933, as amended from time to time, and any successor
statute.

     

    “Securities Collateral” means,
with respect to any Grantor, the Pledged Equity, the Pledged Debt and any other
Investment Property in which such Grantor has an interest.

     

    “Trademark Registrations”
means all registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign countries
(including, without limitation, the registrations and applications set forth on
Schedule 7
annexed hereto).

     

    “Trademark Rights” means all
common law and other rights (but in no event any of the obligations) in and to
the Trademarks in the United States and any state thereof and in foreign
countries.

     

    “Trademarks” means all
trademarks, service marks, designs, logos, indicia, tradenames, trade dress,
corporate names, company names, business names, fictitious business names, trade
styles and/or other source and/or business identifiers and applications
pertaining thereto, owned by a Grantor, or hereafter adopted and used, in its
business (including, without limitation, the trademarks specifically set forth
on Schedule 7
annexed hereto).

     

    “UCC” means the Uniform
Commercial Code, as it exists on the date of this Agreement or as it may
hereafter be amended, in the State of New York.

     

    [Remainder
of page intentionally left blank]

     

     

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, Grantors
and Secured Party have caused this Agreement to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first
written above.

     

    GRANTORS:

    
       

      
        
          	 	THE
      TALBOTS, INC.	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 	/s/ Richard
      T. O’Connell, Jr.	 
	 	 	 	Name: 
      Richard T. O’Connell, Jr.	 
	 	 	 	Title: 
      Secretary	 
	 	 	 
	 	 	 	 
	 	TALBOTS
      CLASSICS, INC.	 
	 	 	 	 
	 	By: 	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 
	 	 	 	 

        

      

       

    

    
      
        	 	THE
      TALBOTS GROUP, LIMITED PARTNERSHIP	 
	 	 	 
	 	By:  The
      Talbots, Inc., its sole general partner 	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 
	 	 	 	 
	 	TALBOTS
      IMPORT, LLC	 
	 	 	 	 
	 	By: 	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 

      

    

     

    
      
        	 	TALBOTS
      INTERNATIONAL RETAILING LIMITED, INC.	 
	 	 	 	 
	 	By: 	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 

      

       

      
        
          
            	 	TALBOTS
      CLASSICS FINANCE COMPANY, INC.	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 

          

           

          
            
              
              

            

            
              
                [Amended
And Restated Security Agreement]

              

              
                

              

            

            
              
              

            

          

           

          
            	 	TALBOTS
      (U.K.) RETAILING LIMITED	 
	 	 	 	 
	 	By: 	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 

          

        

      

    

     

     

    
      
        	 	TALBOTS
      (CANADA), INC.	 
	 	 	 	 
	 	By: 	 	/s/
      Richard T. O’Connell, Jr.	 
	 	 	 	Name:
      Richard T. O’Connell, Jr.	 
	 	 	 	Title:
      Secretary	 

      

       

       

       

       

       

       

       

      
        
          
          

        

        
          
            [Amended
And Restated Security Agreement]

          

          
            

          

        

        
          
          

        

      

      

        
          	 SECURED PARTY:	 	 
	 	 	 
	 	AEON
      CO., LTD.	 
	 	 	 	 
	 	 	 	 
	 	By: 	 	/s/
      Masaaki Toyoshima	 
	 	 	 	Name:
      Masaaki Toyoshima	 
	 	 	 	Title:
      Vice President & Chief Financial Officer	 
	 	 	 	 	 
	 	Signed
      in:    	1-5-1, Nakase,
      Mihama-ku, Chiba-shi, Chiba	 
	 	 	 	261-8515
      JAPAN	 

        

         

         

         

         

         

         

      

    

     

    
      [Amended
And Restated Security Agreement]ex10_3.htm

    Exhibit 10.3

     

     

    SECOND AMENDMENT TO TERM
LOAN AGREEMENT

     

    SECOND
AMENDMENT, dated as of December 28, 2009 (this “Amendment”) to the
Term Loan Agreement, dated as of July 16, 2008 (as amended by the First
Amendment to Term Loan Agreement, dated as of March 12, 2009, and as further
amended, supplemented or otherwise modified from time to time, the “Term Loan
Agreement”), between The Talbots, Inc., a Delaware corporation (the
“Borrower”) and
Aeon (U.S.A.), Inc., a Delaware corporation (the “Lender”).

     

    WITNESSETH

     

    WHEREAS,
the parties hereto are parties to the Term Loan Agreement and wish to amend the
Term Loan Agreement;

     

    NOW,
THEREFORE, in consideration of the premises and the covenants and agreements
contained herein, the parties hereto agree as follows:

     

    1.  Defined Terms. Unless
otherwise defined herein, capitalized terms defined in the Term Loan Agreement
shall have such defined meanings when used herein.

     

    2.  Amendment to Section 1 of
the Term Loan Agreement.  Section 1 of the Term Loan Agreement
is hereby amended by:

     

    
      	
              a.  

            	
              deleting
      in its entirety the definition of “Maturity Date” and inserting in lieu
      thereof the following new definition:

               

              “Maturity Date” shall mean the earliest of (i) January 28,
      2012, or, if such day is not a Business Day, the next succeeding Business
      Day, (ii) the date of the consummation of a Qualified Transaction and
      (iii) such earlier date on which the Term Loans become due and payable and
      the commitment of the Lender to make any such Term Loans has been
      terminated or otherwise cancelled (whether at stated maturity, by
      mandatory prepayment, by acceleration or otherwise) in accordance with the
      terms hereof.

            

    

     

    
      	
              b.  

            	
              (i)
      deleting the phrase “; and” set forth in clause (f) of the definition of
      “Permitted Indebtedness”, (ii) deleting the period at the end of clause
      (g) of such definition and inserting in lieu thereof the phrase “; and”
      and (iii) inserting the following new clause (h) immediately after clause
      (g) of such definition:

               

              “(h)           Indebtedness
      under the Secured Revolving Loan Agreement in a principal amount not to
      exceed $250,000,000 and guaranties of such
  Indebtedness.”

            

    

     

    
      	
              c.  

            	
              (i)
      deleting the phrase “; and” set forth in clause (f) of the definition of
      “Permitted Liens”, (ii) deleting the period at the end of clause (g) of
      such definition and inserting in lieu thereof the phrase “; and” and (iii)
      inserting the following new clause (h) immediately after clause (g) of
      such definition:

               

              “(h)           Liens
      securing the obligations under the Secured Revolving Loan Agreement and
      any guaranties of such obligations.”

            

    

     

    
      	
              d.  

            	
              Adding
      the following new definitions in the appropriate alphabetical order in
      such Section 1:

               

              “Aeon
      Agreement” shall mean the Repurchase, Repayment and Support Agreement,
      dated as of December 8, 2009, by and between the Borrower, BPW Acquisition
      Corp., a Delaware corporation, Aeon (U.S.A.), Inc., a Delaware
      corporation, and the Lender, as amended, supplemented or otherwise
      modified from time to time.

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 

              	
                
                  “Qualified
      Transaction” shall collectively refer to (i) the merger of BPW Acquisition
      Corp. with and into Talbots Acquisition, Inc. pursuant to the terms and
      conditions of the BPW Merger Agreement and (ii) the Stock Repurchase and
      Debt Repayment (as such terms are defined in, and contemplated by, the
      Aeon Agreement); provided, such transactions, together with any concurrent
      financing, will result in sufficient net cash proceeds to the Borrower to
      enable the Borrower to repay, in full, all of its then outstanding
      obligations under the Amended and Restated Secured Revolving Loan
      Agreement, dated as of December 28, 2009 between the Borrower and Aeon
      Co., Ltd. and all then outstanding Indebtedness described in Schedule 4.17
      thereto upon the closing of such transactions.

                

                
                   

                  “Secured
      Revolving Loan Agreement” means the Amended and Restated Secured Revolving
      Loan Agreement, dated as of December 28, 2009 (as amended, supplemented or
      otherwise modified from time to time), between the Borrower and the
      Lender.

                

              

      

       

    

    3.      
 
Amendment to Section 9 of
the Term Loan Agreement.  Section 9 of the Term Loan Agreement
is hereby amended by inserting the following new Section 9.13 immediately after
Section 9.12:

     

    “9.13           Confidentiality.  The
Lender agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Affiliates and to
its and its Affiliates’ respective directors, officers, employees, agents,
advisors and representatives, in each case, who have a need to know as a result
of their being involved in the execution or performance of this agreement and
the transactions contemplated hereby (it being understood that the Persons to
whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority purporting to have jurisdiction
over it, (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to a Loan Document,
(e) in connection with the exercise of any remedies hereunder or under any other
Loan Document or any action or proceeding relating to this Credit Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section 9.13, to any Assignee of or participant in, or any
prospective Assignee of or participant in, any of its rights or obligations
under this Credit Agreement or any pledgee referred to in Section 9.3, (g) with
the consent of the Borrower or (h) to the extent such Information becomes
publicly available other than as a result of a breach of this Section or becomes
available to the Lender or any of its Affiliates on a non-confidential basis
from a source other than the Borrower.  For purposes of this Section
9.13, “Information” means
all information received from the Borrower relating to the Borrower or any
Subsidiary or their respective businesses, other than any such information that
is available to the Lender on a non-confidential basis prior to disclosure by
the Borrower or any Subsidiary.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

     

    4.            
 No other Amendments;
Confirmation. On and after the date hereof, each reference in the Credit
Agreement to “this Credit Agreement”, “hereunder”, “hereof’, “herein” or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof’ or words
of like import referring to the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended by this Amendment.  Except as
expressly set forth herein, the provisions of the Term Loan Agreement are and
shall remain in full force and effect.  The execution, delivery and
performance of this Amendment shall not constitute a waiver of any provision of,
or operate as a waiver of any right, power or remedy of the Lender under the
Credit Agreement or any of the other Loan Documents.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    5.      
 
Governing Law. This
Amendment shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.

     

    6.      
 
Counterparts. This
Amendment may be executed by the parties hereto on any number of counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. This Amendment may be delivered by facsimile or
electronic mail transmission of the relevant signature pages
hereof.

     

    [The rest of this page is
intentionally left blank]

     

     

     

     

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

     

    IN
WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and
delivered by their proper and duly authorized officers as of the day and year
first above written.

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	
              THE
      TALBOTS, INC.

                

            	 
      
	 
      	
              By:  

            	
              /s/
      Richard T. O’Connell, Jr.

            	 
      
	 
      	 
      	
              Name:  

            	
              Richard
      T. O’Connell, Jr.

            	 
      
	 
      	 
      	
              Title:  

            	
              Secretary

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Signed
      in:

            	 
      
	 
      
	 
      
	 
      
	 
      	
              AEON
      (U.S.A.), INC.

               

                

            	 
      
	 
      	
              By:  

            	
              /s/
      Isao Tsuruta

            	 
      
	 
      	 
      	
              Name:  

            	
              Isao
      Tsuruta

            	 
      
	 
      	 
      	
              Title:  

            	
              Executive
      Vice President & GM

               
      AEON (U.S.A.), Inc.

            	 
      
	
                                                                                                                        

            
	 
      	
              Signed
      in: New York, NY  

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      

    

     

     

     

    
      [Second
Amendment to Term Loan Agreement]

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