Document:

EXECUTION COPY

SECURITY AGREEMENT

SECURITY AGREEMENT, dated January 28, 2008, made by Frederick’s of Hollywood Group Inc., a New York corporation (“Grantor”), in favor of Wells Fargo Retail Finance II, LLC, a Delaware limited liability company, as arranger and agent for the Lenders (as defined below) party to the Financing Agreement referred to below (in such capacity, the “Agent”).

WITNESSETH:

WHEREAS, the Grantor, FOH Holdings, Inc., Frederick’s of Hollywood, Inc., Frederick’s of Hollywood Stores, Inc., Hollywood Mail Order, LLC (each a “Borrower”, and collectively, the “Borrowers”) the lenders from time to time party thereto (the “Lenders”) and the Agent are parties to an Amended and Restated Financing Agreement, dated as of January 28, 2008 (as amended, restated or otherwise modified from time to time, being hereinafter referred to as the “Financing Agreement”);

WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed to make certain revolving credit loans to the Borrowers (each a “Loan” and collectively, the “Loans”), and to provide a subfacility for the issuance of letters of credit for the account of the Borrowers; 

WHEREAS, it is a condition precedent to the making of any Loan or the provision of any Letter of Credit or Letter of Credit Guaranty pursuant to the Financing Agreement that Grantor shall have executed and delivered to the Agent a security agreement providing for the grant to the Agent, for the benefit of the Lenders, of a security interest in all personal property and fixtures of such Grantor;

WHEREAS, the Borrowers are mutually dependent on each other in the conduct of their respective businesses as an integrated operation, with the credit needed from time to time by Grantor often being provided through financing obtained by the other Borrowers and the ability to obtain such financing being dependent on the successful operations of all of the Borrowers as a whole; and

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

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lenders to make and maintain the Loans pursuant to the Financing Agreement and provide other financial accommodations to the Borrowers, the Grantor hereby agree with the Agent as follows:

SECTION 1. Definitions.

(a) Reference is hereby made to the Financing Agreement for a statement of the terms thereof. All terms used in this Agreement which are defined in the Financing Agreement or in Article 9 of the Uniform Commercial Code (the “Code”) as in effect from time to time in

 

 

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the State of New York and which are not otherwise defined herein shall have the same meanings herein as set forth therein.

(b) The following terms shall have the respective meanings provided for in the Code:  “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Record”, “Security Account”, “Software”, and “Supporting Obligations.”

(c) As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

“Books” means all books and records, including all Records indicating, summarizing or evidencing assets (including the Collateral) or liabilities, all Records relating to a Person’s business operations or financial condition, and all goods and General Intangibles related to such information.

“Copyright Licenses” means all licenses, contracts or other agreements, whether written or oral, naming Grantor as licensee or licensor and providing for the grant of any right to use or sell any works covered by any copyright (including, without limitation, all Copyright Licenses set forth in Schedule II hereto).

“Copyrights” means all domestic and foreign copyrights, whether registered or unregistered, including, without limitation, all copyright rights throughout the universe (whether now or hereafter arising) in any and all media (whether now or hereafter developed), in and to all original works of authorship fixed in any tangible medium of expression, acquired or used by Grantor (including, without limitation, all copyrights described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Copyright Office or in any similar office or agency of the United States or any other country or any political subdivision thereof), all reissues, divisions, continuations, continuations in
part and extensions or renewals thereof, and all income, royalties, damages and payments now and hereafter due or payable or both with respect to the foregoing, including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof, all rights to sue for past, present and future infringements or misappropriations thereof, and all other rights corresponding thereto throughout the world.

“Domain Name” means fredericks.com or any other Internet domain name by which customers of Grantor may access may access an Internet website through which Grantor conducts business.

“Hosting Agent” means any Person engaged to host or maintain any Website Collateral.

“Hosting Agreement” means any agreement between Grantor and any Hosting Agent.

 

 

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“Intellectual Property” means the Copyrights, Patents and Trademarks.

“Licenses” means (a) the Copyright Licenses, the Trademark Licenses and the Patent License, and all other license agreements and covenants not to sue with any other party with respect to any Patent, Trademark, or Copyright, along with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, royalties, damages, claims and payments now and hereafter due and/or payable to Grantor with respect thereto, including the right to recover any damages and payments for past, present and future breaches thereof, (iii) rights to sue for past, present and future breaches thereof and (iv) any other rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights throughout the world, in each case whether now owned or hereafter acquired by Grantor, and
(b) the Hosting Agreement and any other agreement relating to the Website Collateral or any Website, or both.

“Patent Licenses” means all licenses, contracts or other agreements, whether written or oral, naming Grantor as licensee or licensor and providing for the grant of any right to manufacture, use or sell any invention covered by any Patent (including, without limitation, all Patent Licenses set forth in Schedule II hereto).

“Patents” means all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how, formulae, rights of publicity and other general intangibles of like nature, now existing or hereafter acquired (including, without limitation, all domestic and foreign letters patent, design patents, utility patents, industrial designs, inventions, trade secrets, ideas, concepts, methods, techniques, processes, proprietary information, technology, know-how and formulae described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation, applications, registrations and recordings in the United States Patent and
Trademark Office, or in any similar office or agency of the United States or any other country or any political subdivision thereof), and all reissues, divisions, continuations, continuations in part and extensions or renewals thereof.

“Trademark Licenses” means all licenses, contracts or other agreements, whether written or oral, naming Grantor as licensor or licensee and providing for the grant of any right concerning any Trademark, together with any goodwill connected with and symbolized by any such trademark licenses, contracts or agreements and the right to prepare for sale or lease and sell or lease any and all Inventory now or hereafter owned by Grantor and now or hereafter covered by such licenses (including, without limitation, all Trademark Licenses described in Schedule II hereto).

“Trademarks” means all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, Domain Names and other Internet domain names, trade styles, designs, logos and other source or business identifiers and all general intangibles of like nature, now or hereafter owned, adopted, acquired or used by Grantor (including, without limitation, all domestic and foreign trademarks, service marks, collective marks, certification marks, trade names, business names, d/b/a’s, Internet domain names, trade styles, designs, logos and other source or business identifiers described in Schedule II hereto), all applications, registrations and recordings thereof (including, without limitation,

 

 

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applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof), and all reissues, extensions or renewals thereof, together with the entire product lines and goodwill of the business connected with and symbolized by the foregoing, all income, royalties, damages and payments now and hereafter due or payable or both with respect to the foregoing, including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof, all rights to sue for past, present and future infringements or misappropriations thereof, and all other rights corresponding thereto throughout the world, and all customer lists, formulae and other Records of Grantor relating to the distribution of products and services in
connection with which any of such marks are used.

“Website” means an Internet website accessible through a Domain Name, as may be modified from time to time.

“Website Collateral” means all data and content maintained by all Hosting Agents pursuant to the Hosting Agreement or any other similar agreement with any other Person.

SECTION 2. Grant of Security Interest. As collateral security for all of the Obligations (as defined in Section 3 hereof), Grantor hereby pledges and assigns to the Agent, for the benefit of the Lender Group, and grants to the Agent, for the benefit of the Lender Group, a continuing security interest in, all personal property and Fixtures of Grantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, of every kind and description, tangible or intangible (the “Collateral”), including, without limitation, the following:

(a) all Accounts;

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

(c) the Commercial Tort Claims specified on Schedule VI hereto;

(d) all Deposit Accounts, all cash, and all other property from time to time deposited therein and the monies and property in the possession or under the control of the Agent, any Lender or any Subordinated Lender, or any affiliate, representative, agent or correspondent of the Agent, such Lender or such Subordinated Lender; 

(e) all Documents;

(f) all Equipment;

(g) all Fixtures;

(h) all General Intangibles (including, without limitation, all Payment Intangibles);

(i) all Goods;

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

 

 

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(k) all Inventory;

(l) all Investment Property;

(m) all Intellectual Property and all Licenses;

(n) all Letter-of-Credit Rights;

(o) all Supporting Obligations;

(p) all other tangible and intangible personal property of Grantor (whether or not subject to the Code), including, without limitation, the Website Collateral, all bank and other accounts and all cash and all investments therein, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of Grantor described in the preceding clauses of this Section 2 (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by Grantor in respect of any of the items listed above), and all Books, correspondence, files and other Records, including, without limitation, all tapes, desks, cards, Software, data and computer programs in
the possession or under the control of Grantor or any other Person from time to time acting for Grantor that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 2 or are otherwise necessary or helpful in the collection or realization thereof; and

(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds including without limitation instruments representing obligations to pay amounts in respect of any Patents, Trademarks, Copyrights or Licenses, and products of any and all of the foregoing Collateral;

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

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

(a) the prompt payment by each Borrower, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all Obligations (as defined in the Financing Agreement), including, without limitation, (i) principal of and interest on the Revolving Loans (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Borrower, whether or not the payment of such interest is unenforceable or is not allowable due to the existence of such Insolvency Proceeding), (ii) all Reimbursement Obligations and all interest thereon (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Borrower, whether or not the payment of such
interest is unenforceable or is not allowable due to the existence of such Insolvency Proceeding), and (iii) all fees, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under any Loan Document; and

 

 

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(b) the due performance and observance by each Borrower of all of its other obligations from time to time existing in respect of the Loan Documents.

SECTION 4. Representations and Warranties. Grantor represents and warrants as follows:

(a) Schedule I hereto sets forth (i) the exact legal name of Grantor, and (ii) the organizational identification number of Grantor or states that no such organizational identification number exists. The Perfection Certificate dated January 28, 2008, a copy of which has been previously delivered to the Agent, is true and correct in all respects. 

(b) Grantor (i) is a corporation, duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization as set forth on Schedule I hereto, (ii) has all requisite power and authority to execute, deliver and perform this Agreement and each other Loan Document to be executed and delivered by it pursuant hereto and to consummate the transactions contemplated hereby and thereby, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be qualified or in good standing could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.

(c) The execution, delivery and performance by Grantor of this Agreement and each other Loan Document to which Grantor is a party or will be a party (i) have been duly authorized by all necessary action, (ii) do not and will not contravene its charter or by-laws,  or any applicable law or any contractual restriction binding on or otherwise affecting Grantor or any of its properties, (iii) do not and will not result in or require the creation of any Lien, security interest or other charge or encumbrance upon or with respect to any of its properties, and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to it or its operations or any of its
properties, except where such default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(d) This Agreement is, and each other Loan Document to which Grantor is or will be a party, when executed and delivered pursuant hereto, will be, a legal, valid and binding obligation of Grantor, enforceable against Grantor in accordance with its terms. 

(e) There is no pending or, to the knowledge of Grantor, threatened action, suit, proceeding or claim before any Governmental Authority or any arbitrator, or any order, judgment or award by any Governmental Authority or arbitrator, that may adversely affect the grant by Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral, or the exercise by the Agent of any of its rights or remedies hereunder.

(f) All taxes, assessments and other governmental charges imposed upon Grantor or any property of Grantor (including, without limitation, all federal income and social security taxes on employees’ wages) and which have become due and payable on or prior to the date hereof have been paid, except to the extent contested in good faith by proper proceedings which

 

 

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stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP.

(g) All Equipment, Fixtures, Goods and Inventory now existing are, and all Equipment, Fixtures, Goods and Inventory hereafter existing will be, located at the addresses specified therefor in Schedule III hereto. Grantor’s chief place of business and chief executive office, the place where Grantor keeps its Books and Records concerning Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in Schedule III hereto. None of the Accounts is evidenced by a Promissory Note or other Instrument. Set forth in Schedule IV hereto is a complete and accurate list, as of the date of this Agreement, of Deposit Account, Securities Account and Commodities Account of Grantor, together with the name and address of each institution at which each
such Account is maintained, the account number for each such Account and a description of the purpose of each such Account. Set forth in Schedule II hereto is (i) a complete and correct list of each trade name used by Grantor and (ii) the name of, and each trade name used by, each person from which Grantor has acquired any substantial part of the Collateral.

(h) Grantor has delivered to the Agent complete and correct copies of each License described in Schedule II hereto, including all schedules and exhibits thereto, which represents all of the Licenses existing on the date of this Agreement. Each such License sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby or the rights of Grantor or any of its Affiliates in respect thereof. Each License now existing is, and each other License will be, the legal, valid and binding obligation of the parties thereto, enforceable against such parties in accordance with its terms. No default thereunder by any
such party has occurred, nor does any defense, offset, deduction or counterclaim exist thereunder in favor of any such party, except where such default, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(i) Grantors owns and controls, or otherwise possesses adequate rights to use, all Trademarks, Patents and Copyrights, which are the only trademarks, patents, copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae, rights of publicity necessary to conduct its business in substantially the same manner as conducted as of the date hereof. Schedule II hereto sets forth a true and complete list of all Intellectual Property and Licenses owned or used by Grantor as of the date hereof. All of such Trademarks, Patents and Copyrights are subsisting and in full force and effect, have not been adjudged invalid or unenforceable, are valid and enforceable and have not been abandoned in whole or in part. Except as set forth in Schedule II, none
of such Intellectual Property is the subject of any licensing or franchising agreement. Grantor has no knowledge of any conflict with the rights of others to any Intellectual Property and, to the best knowledge of, Grantor is not now infringing or in conflict with any such rights of others in any material respect, and to the best knowledge of Grantor, no other Person is now infringing or in conflict in any material respect with any such properties, assets and rights owned or used by Grantor. Grantor has not received any notice that it is violating or has violated the trademarks, patents, copyrights, inventions, trade secrets, proprietary information and technology, know-how, formulae, rights of publicity or other

 

 

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intellectual property rights of any third party. All Equipment, including, without limitation, computers, servers, modems, monitors, printers, plotters, or memory storage devices, used in connection with the creation, design, maintenance or operation of the Websites (the “Related Equipment”) are owned by Grantors, except as otherwise set forth on Schedule III attached hereto.   

(j) Grantors is and will be at all times the sole and exclusive owners of, or otherwise have and will have adequate rights in, the Collateral free and clear of any Lien except for (i) the Liens created by this Agreement and (ii) Permitted Liens, except that any such Permitted Lien that covers any Inventory, Account, Intellectual Property or Proceeds of the foregoing is junior and subordinate of the Agent’s Lien therein. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing office except (A) such as may have been filed in favor of the Agent relating to this Agreement and (B) such as may have been filed to perfect or protect any Permitted Liens.

(k) The exercise by the Agent of any of its rights and remedies hereunder will not contravene any law or any contractual restriction binding on or otherwise affecting Grantor or any of its properties and will not result in or require the creation of any Lien upon or with respect to any of its properties.

(l) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body, or any other Person, is required for (i) the grant by Grantor, or the perfection, of the security interest purported to be created hereby in the Collateral or (ii) the exercise by the Agent of any of its rights and remedies hereunder, except (A) for the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of the financing statements described in Schedule V hereto, all of which financing statements have been duly filed and are in full force and effect, (B) with respect to the perfection of the security interest created hereby in the United States Intellectual Property, for the recording
of the appropriate Assignment for Security, substantially in the form of Exhibit A hereto, in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, (C) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and Licenses, for registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to the Intellectual Property and Licenses, (D) with respect to the perfection of the security interest created hereby in motor vehicles for which the title to such motor vehicles is governed by a certificate of title or ownership (collectively, the “Motor Vehicles”), for the submission of an appropriate application requesting that the Lien of the Agent be noted on the certificate of title or ownership, completed and authenticated by Grantor,
together with the certificate of title, with respect to each Motor Vehicle, to the appropriate state agency, (E) with respect to any action that may be necessary to obtain control in Collateral described in Sections 5(i) and 5(k) hereof, the taking of such actions and (F) the taking possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral.

(m) This Agreement creates in favor of the Agent, for the benefit of the Lender Group, a legal, valid and enforceable security interest in the Collateral, as security for the Obligations. The Agent’s having possession of all Documents, Chattel Paper, Instruments and cash constituting Collateral and obtaining control of all Collateral described in Sections 5(i) and

 

 

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5(k) hereof from time to time, the recording of the Assignments for Security executed pursuant hereto in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, and the filing of the financing statements described in Schedule V hereto and, with respect to Intellectual Property hereafter existing and not covered by an Assignment for Security, the recording in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, of appropriate instruments of assignment, result in the perfection of such security interests. Such security interests are, or in the case of Collateral in which Grantor obtains rights after the date hereof, will be, perfected, first priority security interests, subject only to the Permitted Liens (except that any such Permitted Lien that covers any Inventory, Account, Intellectual Property or
Proceeds of the foregoing shall be junior and subordinate to the Agent’s Lien therein) and the recording of such instruments of assignment. Such recordings and filings and all other action necessary or desirable to perfect and protect such security interest have been duly taken, except for (i) the Agent’s having possession of Documents, Chattel Paper, Instruments and cash constituting Collateral after the date hereof, (ii) the Agent obtaining control of any Collateral described in Sections 5(i) and 5(k) of this Agreement after the date hereof and (iii) and the other filings and recordations described in Section 4(l) hereof.

(n) Grantor does not have any Commercial Tort Claims and is not aware of any such pending claims, except for such claims described in Schedule VI.

SECTION 5. Covenants as to the Collateral. So long as any principal of or interest on any Revolving Loan, any Reimbursement Obligation, any Letter of Credit Obligation or any other Obligation (whether or not due) shall remain unpaid or any Lender shall have any Revolving Credit Commitment under the Financing Agreement, unless the Agent shall otherwise consent in writing:

(a) Further Assurances. Grantor will at its expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Agent may request in order (i) to perfect and protect the security interest purported to be created hereby; (ii) to enable the Agent to exercise and enforce its rights and remedies hereunder in respect of the Collateral; or (iii) otherwise to effect the purposes of this Agreement, including, without limitation:  (A) marking conspicuously all Chattel Paper and each License and, at the request of the Agent, each of its Records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Agent, indicating that such Chattel Paper, License or Collateral is subject to the security interest created hereby, (B) if any Account shall be evidenced by a Promissory Note or other Instrument or Chattel Paper, in a face amount exceeding $10,000, delivering and pledging to the Agent hereunder such Promissory Note, Instrument or Chattel Paper, duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Agent, (C) executing and filing (to the extent, if any, that Grantor’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, as may be necessary or desirable or that the Agent may request in order to perfect and preserve the security interest purported to be created hereby, (D) furnishing to the Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail, (E) if any Collateral shall be in the possession of a third party, notifying such Person of the Agent’s security interest created hereby and obtaining a written acknowledgment from such

 

 

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Person that such Person holds possession of the Collateral for the benefit of the Agent, which such written acknowledgement shall be in form and substance satisfactory to the Agent, (F) if at any time after the date hereof, Grantor acquires or holds any Commercial Tort Claim, immediately notifying the Agent in a writing signed by Grantor setting forth a brief description of such Commercial Tort Claim and granting to the Agent a security interest therein and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the Agent, (G) upon the acquisition after the date hereof by Grantor of any Motor Vehicle or other item of Equipment subject to a certificate of title or ownership (other than a Motor Vehicle or item of Equipment that is subject to a purchase money security interest permitted by the Financing Agreement),
cause the Agent to be listed as the lienholder on such certificate of title or ownership within sixty (60) days of the acquisition thereof, and within one hundred and twenty (120) days of the acquisition thereof deliver evidence of the same to the Agent and (H) taking all actions required by any earlier versions of the Uniform Commercial Code or by other law, as applicable, in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction.

(b) Location of Equipment and Inventory. Grantor will keep the Equipment and Inventory (other than used Equipment and Inventory sold in the ordinary course of business in accordance with Section 5(g) hereof) at the locations specified therefor in Section 4(g) hereof or, (x) upon at least thirty (30) days’ prior written notice to the Agent, (y) the delivery to the Agent of a new Schedule III hereto indicating each new location of the Equipment and Inventory, and (z) at such other locations in the continental United States as Grantor may elect, provided that (i) all action has been taken to grant to the Agent
a perfected, first priority security interest in such Equipment and Inventory (subject only to Permitted Liens), and (ii) the Agent’s rights in such Equipment and Inventory, including, without limitation, the existence, perfection and priority of the security interest created hereby in such Equipment and Inventory, are not adversely affected thereby.

(c) Condition of Equipment. Grantor will maintain or cause the Equipment to be maintained and preserved in good condition, repair and working order as when acquired and in accordance with any manufacturer’s manual, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or damage to any Equipment as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable, consistent with past practice, or which the Agent may request to such end. Grantor will promptly furnish to the Agent a statement describing in reasonable detail any loss or damage in
excess of $25,000 to any Equipment.

(d) Taxes, Etc. Grantor agrees to pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment and Inventory, except to the extent the validity thereof is being contested in good faith by proper proceedings which stay the imposition of any penalty, fine or Lien resulting from the non-payment thereof and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP.

 

 

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(e) Insurance.

(i) Grantor will, at its own expense, maintain insurance in accordance with Section 7.01(i) of the Financing Agreement and the other terms and conditions of the Financing Agreement. Each policy for liability insurance shall provide for all losses to be paid on behalf of the Agent and Grantor as their respective interests may appear, and each policy for property damage insurance shall provide for all losses to be adjusted with, and paid directly to, the Agent. Each such policy shall in addition (A) name Grantor and the Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Agent) as their interests may appear, (B) contain an agreement by the insurer that any loss thereunder shall be payable to the Agent on its own account notwithstanding any action, inaction or breach of representation or warranty by
Grantor, (C) provide that there shall be no recourse against the Agent for payment of premiums or other amounts with respect thereto and (D) provide that at least thirty (30) days’ prior written notice of cancellation, lapse, expiration or other adverse change shall be given to the Agent by the insurer. Grantor will, if so requested by the Agent, deliver to the Agent original or duplicate policies of such insurance and, as often as the Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Grantor will also, at the request of the Agent, execute and deliver instruments of assignment of such insurance policies and cause the respective insurers to acknowledge notice of such assignment.

(ii) Reimbursement under any liability insurance maintained by Grantor pursuant to this Section 5(e) may be paid directly to the Person who shall have incurred liability covered by such insurance. In the case of any loss involving damage to Equipment or Inventory any proceeds of insurance maintained by Grantor pursuant to this Section 5(e) shall be paid to the Agent as to which paragraph (iii) of this Section 5(e) is not applicable, Grantor will make or cause to be made the necessary repairs to or replacements of such Equipment or Inventory, and any proceeds of insurance maintained by Grantor pursuant to this Section 5(e) shall be paid by the Agent to Grantor as reimbursement for the costs of such repairs or replacements.

(iii) All insurance payments in respect of Equipment or Inventory shall be paid to the Agent and, (A) prior to the occurrence and continuance of a Default or Event of Default, applied in accordance with Section 2.05(c)(iii) of the Financing Agreement, and (B) upon the occurrence and during the continuance of a Default or Event of Default, applied as specified in Section 7(b) hereof.

(f) Provisions Concerning the Accounts and the Licenses.

(i) Grantor shall not, without the prior written consent of the Agent, change (A) its name, identity or organizational structure or (B) its jurisdiction of incorporation as set forth in Section 4(b) hereto. Grantor shall (x) immediately notify the Agent upon obtaining an organizational identification number, if on the date hereof Grantor did not have such identification number, and (y) keep adequate records concerning the Accounts and Chattel Paper and permit representatives of the Agent pursuant to the terms of the Financing Agreement to inspect and make abstracts from such Records and Chattel Paper.

 

 

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(ii) Grantor will, except as otherwise provided in this subsection (f), continue to collect, at its own expense, all amounts due or to become due under the Accounts. In connection with such collections, Grantor may (and, at the Agent’s direction, will) take such action as Grantor or the Agent may deem necessary or advisable to enforce collection or performance of the Accounts; provided, however, that the Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to notify the Account Debtors or obligors under any Accounts of the assignment of such Accounts to the Agent and to direct such Account Debtors or obligors to make payment of all amounts due or to become
due to Grantor thereunder directly to the Agent or its designated agent and, upon such notification and at the expense of Grantor and to the extent permitted by law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as Grantor might have done. After receipt by Grantor of a notice from the Agent that the Agent has notified, intends to notify, or has enforced or intends to enforce Grantor’s rights against the Account Debtors or obligors under any Accounts as referred to in the proviso to the immediately preceding sentence, (A) all amounts and proceeds (including Instruments) received by Grantor in respect of the Accounts shall be received in trust for the benefit of the Agent hereunder, shall be segregated from other funds of Grantor and shall be forthwith paid over to the Agent, in the same form as so received (with any necessary endorsement) to be held as cash collateral and
either (i) credited to the Loan Account so long as no Event of Default shall have occurred and be continuing or (ii) if an Event of Default shall have occurred and be continuing, applied as specified in Section 7(b) hereof, and (B) Grantor will not adjust, settle or compromise the amount or payment of any Account or release wholly or partly any Account Debtor or obligor thereof or allow any credit or discount thereon. In addition, upon the occurrence and during the continuance of an Event of Default, the Agent may (in its sole and absolute discretion) direct any or all of the banks and financial institutions with which Grantor either maintains a Deposit Account or a lockbox or deposits the proceeds of any Accounts to send immediately to the Agent by wire transfer (to such account as the Agent shall specify, or in such other manner as the Agent shall direct) all or a portion of such securities, cash, investments and other items held by such institution. Any such securities, cash,
investments and other items so received by the Agent shall (in the sole and absolute discretion of the Agent) be held as additional Collateral for the Obligations or distributed in accordance with Section 7 hereof.

(iii) Upon the occurrence and during the continuance of any breach or default under any License referred to in Schedule II hereto by any party thereto other than Grantor, (A) Grantor will, promptly after obtaining knowledge thereof, give the Agent written notice of the nature and duration thereof, specifying what action, if any, it has taken and proposes to take with respect thereto, (B) Grantor will not, without the prior written consent of the Agent, declare or waive any such breach or default or affirmatively consent to the cure thereof or exercise any of its remedies in respect thereof, and (C) Grantor will, upon written instructions from the Agent and at Grantor’s expense, take such action as the Agent may deem necessary or advisable in respect thereof.

(iv) Grantor will, at its expense, promptly deliver to the Agent a copy of each notice or other communication received by it by which any other party to any License referred to in Schedule II hereto purports to exercise any of its rights or affect any of its obligations thereunder, together with a copy of any reply by Grantor thereto.

 

 

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(v) Grantor will exercise promptly and diligently each and every right which it may have under each License (other than any right of termination) and will duly perform and observe in all respects all of its obligations under each License and will take all action necessary to maintain the Licenses in full force and effect. Grantor will not, without the prior written consent of the Agent, cancel, terminate, amend or otherwise modify in any respect, or waive any provision of, any License referred to in Schedule II hereto.

(g) Transfers and Other Liens.

(i) Except to the extent expressly permitted by the Financing Agreement, Grantor will not sell, assign (by operation of law or otherwise), lease, license, exchange or otherwise transfer or dispose of any of the Collateral.

(ii) Except to the extent expressly permitted by the Financing Agreement, Grantor will not create, suffer to exist or grant any Lien upon or with respect to any Collateral.

(h) Intellectual Property.

(i) If applicable, Grantor has duly executed and delivered the applicable Assignment for Security in the form attached hereto as Exhibit A. Grantor (either itself or through licensees) will, and will cause each licensee thereof to, take all action necessary to maintain all of the Intellectual Property in full force and effect, including, without limitation, using the proper statutory notices and markings and using the Trademarks on each applicable trademark class of goods in order to so maintain the Trademarks in full force, free from any claim of abandonment for non-use, and Grantor will not (nor permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Intellectual Property may become invalidated; provided, however, that so long as no Event of Default has occurred and is continuing, Grantor shall not have an obligation to use or to maintain any Intellectual Property (A) that relates solely to any product or work, that has been, or is in the process of being, discontinued, abandoned or terminated, (B) that is being replaced with Intellectual Property substantially similar to the Intellectual Property that may be abandoned or otherwise become invalid, so long as the failure to use or maintain such Intellectual Property does not materially adversely affect the validity of such replacement Intellectual Property and so long as such replacement Intellectual Property is subject to the Lien created by this Agreement or (C) that is substantially the same as other Intellectual Property that is in full force and effect, so long as the failure to use or maintain such Intellectual Property could not reasonably be expected to have a
Material Adverse Effect or on the validity of such replacement Intellectual Property and so long as such other Intellectual Property is subject to the Lien and security interest created by this Agreement. Grantor will not cause to be taken all necessary steps in any proceeding before the United States Patent and Trademark Office and the United States Copyright Office or any similar office or agency in any other country or political subdivision thereof to maintain each registration of the Intellectual Property (other than the Intellectual Property described in the proviso to the immediately preceding sentence), including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and payment of maintenance fees, filing fees, taxes or other governmental fees. If any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the
Grantor shall (x) upon learning of 

 

 

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such infringement, misappropriation, dilution or other violation, promptly notify the Agent and (y) to the extent the Grantor shall deem appropriate under the circumstances, promptly sue for infringement, misappropriation, dilution or other violation, seek injunctive relief where appropriate and recover any and all damages for such infringement, misappropriation, dilution or other violation, or take such other actions as the Grantor shall deem appropriate under the circumstances to protect such Intellectual Property. Grantor shall furnish to the Agent from time to time (but, unless an Event of Default has occurred and is continuing, no more frequently than quarterly) statements and schedules further identifying and describing the Intellectual Property and Licenses and such other reports in connection with the Intellectual Property and Licenses as the Agent may reasonably request, all in
reasonable detail and promptly upon request of the Agent, following receipt by the Agent of any such statements, schedules or reports, the Grantor shall modify this Agreement by amending Schedule II hereto, as the case may be, to include any Intellectual Property and License which becomes part of the Collateral under this Agreement and shall execute and authenticate such documents and do such acts as shall be necessary or, in the judgment of the Agent, desirable to subject such Intellectual Property and Licenses to the Lien and security interest created by this Agreement. Notwithstanding anything herein to the contrary, upon the occurrence and during the continuance of an Event of Default, Grantor may not abandon or otherwise permit any Intellectual Property to become invalid without the prior written consent of the Agent, and if any Intellectual Property is infringed, misappropriated, diluted or otherwise violated in any material respect by a third party, the Grantor will take such
action as the Agent shall deem appropriate under the circumstances to protect such Intellectual Property.

(ii) In no event shall Grantor, either itself or through any agent, employee, licensee or designee, file an application for the registration of any Trademark or Copyright or the issuance of any Patent with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, or in any similar office or agency of the United States or any country or any political subdivision thereof unless it gives the Agent prior written notice thereof. Upon request of the Agent, Grantor shall execute, authenticate and deliver any and all assignments, agreements, instruments, documents and papers as the Agent may reasonably request to evidence the Agent’s security interest hereunder in such Intellectual Property and the General Intangibles of Grantor relating thereto or represented thereby, and Grantor hereby appoints the Agent its
attorney-in-fact to execute and/or authenticate and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, and such power (being coupled with an interest) shall be irrevocable until the termination of all Commitments, the repayment of all of the Obligations in full and the termination of each of the Loan Documents.

(i) Deposit, Commodities and Securities Accounts. Not more than thirty (30) days after the date hereof, Grantor shall cause each bank and other financial institution referred to in Schedule VI hereto to execute and deliver to the Agent a control agreement, in form and substance satisfactory to the Agent, duly executed by Grantor and such bank or financial institution, or enter into other arrangements in form and substance satisfactory to the Agent, pursuant to which such institution shall irrevocably agree, inter alia, that (i) it will
comply at any time with the instructions originated by the Agent to such bank or financial institution directing the disposition of cash, Commodity Contracts, securities, Investment Property and other items from time to time credited to such account, without further consent of Grantor, which instructions the Agent will not give to such bank or other financial institution in the absence of a continuing Event of Default, (ii) all cash, Commodity Contracts, securities, Investment Property

 

 

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and other items of Grantor deposited with such institution shall be subject to a perfected, first priority security interest in favor of the Agent, (iii) any right of set off, banker’s Lien or other similar Lien, security interest or encumbrance shall be fully waived as against the Agent, and (iv) upon receipt of written notice from the Agent during the continuance of an Event of Default, such bank or financial institution shall immediately send to the Agent by wire transfer (to such account as the Agent shall specify, or in such other manner as the Agent shall direct) all such cash, the value of any Commodity Contracts, securities, Investment Property and other items held by it. Without the prior written consent of the Agent, Grantor shall not make or maintain any Deposit Account, Commodity Account or Securities Account except for the accounts set forth in Schedule IV hereto.
The provisions of this paragraph 5(i) shall not apply to Deposit Accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Grantor’s salaried employees. 

(j) Motor Vehicles.

(i) Grantor shall deliver to the Agent originals of the certificates of title or ownership for the Motor Vehicles owned by it with the Agent listed as lienholder.

(ii) If requested by the Agent after the occurrence and during the continuance of a Default or Event of Default, Grantor shall deliver to the Agent originals of the certificates of title or ownership for all Motor Vehicles owned by it with the Agent listed as lienholder, for the benefit of the Lender Group; provided that, the Agent shall not be required to be listed as the lienholder if the Motor Vehicle is subject to a purchase money security interest permitted by the Financing Agreement.

(iii) Grantor hereby appoints the Agent as its attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (A) executing on behalf of Grantor title or ownership applications for filing with appropriate state agencies to enable Motor Vehicles now owned or hereafter acquired by Grantor to be retitled and the Agent listed as lienholder thereof, (B) filing such applications with such state agencies, and (C) executing such other documents and instruments on behalf of, and taking such other action in the name of, Grantor as the Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, for the purpose of creating in favor of the Agent a perfected Lien on the Motor Vehicles and exercising the rights and remedies of the Agent hereunder). This appointment as
attorney-in-fact is coupled with an interest and is irrevocable until all of the Obligations are paid in full after the termination of the Revolving Credit Commitments and all Letter of Credit Obligations and the termination of the Financing Agreement and the other Loan Documents.

(iv) Any certificates of title or ownership delivered pursuant to the terms hereof shall be accompanied by odometer statements for each Motor Vehicle covered thereby.

(v) So long as no Event of Default shall have occurred and be continuing, upon the request of Grantor, the Agent shall execute and deliver to Grantor such instruments as Grantor shall reasonably request to remove the notation of the Agent as lienholder on any certificate of title for any Motor Vehicle; provided that any such instruments shall be

 

 

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delivered, and the release effective, only upon receipt by the Agent of a certificate from Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is to be sold or has suffered a casualty loss (with title thereto passing to the casualty insurance company therefor in settlement of the claim for such loss), the amount that such Grantor will receive as sale proceeds or insurance proceeds and whether or not such sale proceeds or insurance proceeds are required by Section 2.05(c)(iii) of the Financing Agreement to be paid to the Agent to be applied to the Obligations and, to the extent required by Section 2.05 of the Financing Agreement, any proceeds of such sale or casualty loss shall be paid to the Agent hereunder to be applied to the Obligations then outstanding.

(k) Control. Grantor hereby agrees to take any or all action that may be necessary or desirable or that the Agent may request in order for the Agent to obtain control in accordance with Sections 9-105 – 9-107 of the Code with respect to the following Collateral:  (i) Electronic Chattel Paper, (ii) Investment Property and (iii) Letter-of-Credit Rights.

(l) Inspection and Reporting. Grantor shall permit the Agent, or any agents or representatives thereof or such professionals or other Persons as the Agent may designate (i) to examine, inspect and make copies of and abstracts from such Grantor’s records  and books of account, (ii) to visit and inspect its properties, (iii) to verify materials, leases, notes, Accounts, Inventory and other assets of such Grantor from time to time, (iii) to conduct audits, physical counts, appraisals and/or valuations at the locations of such Grantor, in each case as provided in the Financing Agreement and (iv) to discuss such Grantor’s affairs, finances and accounts with any of its directors, officers, managerial employees, independent accountants or any of its other representatives.

(m) Websites and Website Collateral. Grantor will (i) maintain its Websites in continuous operation, providing at least its current level of functionality with respect to Grantor’s business operations, (ii) maintain the Website Collateral and Related Equipment at the Hosting Agent’s premises and, notwithstanding anything herein to the contrary, obtain the Agent’s prior written consent prior to any removal from or change in such location, (iii) permit the Agent, and cause the Hosting Agent to permit the Agent, to inspect such Website Collateral and Related Equipment at any time, (iv) promptly upon request by the Agent, cause the administrative contact for the Domain Name to be changed to a person designated by the Agent, and not permit any other change or revision in such information
without the prior written consent of the Agent, (v) maintain with the records of the applicable domain name registrar a billing contact that has a position within Grantor and has actual responsibility for taking whatever action is necessary for maintenance of such Domain Names, (vi) pay all fees and charges required for maintenance of such Domain Names at least thirty days before any such fee or charge is due, and (vii) not obtain any License, whether of Software or Intellectual Property, for use in connection with any of the Websites, without the prior written consent of the Agent. Grantor shall furnish to the Agent, promptly upon request, (A) a waiver and consent agreement executed by the Hosting Agent in connection with the Website Collateral, such waiver and consent to be in such form and upon such terms as are acceptable to the Agent, and (B) an executed Registrant Name Change Agreement (or such other document required by the applicable domain name registrar in connection with
the change of registrant for a Domain Name) providing for the naming of the Agent as registrant for each of the Domain Names, to be held in escrow by the Agent until the occurrence of an Event of Default.

 

 

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SECTION 6. Additional Provisions Concerning the Collateral.

(a) Grantor hereby (i) authorizes the Agent to file, one or more financing or continuation statements, and amendments thereto (which may identify the collateral as all assets of the Grantor (or words of similar effect) or as being of an equal or lesser scope or with greater detail), relating to the Collateral and (ii) ratifies such authorization to the extent that the Agent has filed any such financing or continuation statements, or amendments thereto, prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(b) Grantor hereby irrevocably appoints the Agent as its attorney-in-fact and proxy, with full authority in the place and stead of Grantor and in the name of Grantor or otherwise, from time to time in the Agent’s discretion, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of Grantor under Section 5 hereof), including, without limitation, (i) to obtain and adjust insurance required to be paid to the Agent pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any
drafts or other instruments, documents and chattel paper in connection with clause (i) or (ii) above, (iv) to file any claims or take any action or institute any proceedings which the Agent may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of the Agent and the Lenders with respect to any Collateral, and (v) to execute assignments, licenses and other documents to enforce the rights of the Agent and the Lenders with respect to any Collateral. This power is coupled with an interest and is irrevocable until all of the Obligations are paid in full after the termination of all Revolving Credit Commitments, and all Letter of Credit Obligations and the termination of the Financing Agreement and the other Loan Documents. 

(c) For the purpose of enabling the Agent to exercise rights and remedies hereunder, at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, Grantor hereby grants to the Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, assign, license or sublicense any of the Intellectual Property now owned or hereafter acquired by Grantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. Notwithstanding anything contained herein to the contrary, but
subject to the provisions of the Financing Agreement that limit the right of Grantor to dispose of its property and Section 5(h) hereof, so long as no Event of Default shall have occurred and be continuing, Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or take other actions with respect to the Intellectual Property in the ordinary course of its business. In furtherance of the foregoing, unless an Event of Default shall have occurred and be continuing the Agent shall from time to time, upon the request of Grantor, execute and deliver any instruments, certificates or other documents, in the form so requested, which Grantor shall have certified are appropriate (in Grantor’s judgment) to allow it to take any action permitted above (including relinquishment of the license provided pursuant to this clause (c) as to any Intellectual Property). Further, upon the

 

 

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payment in full of all of the Obligations after the cancellation or termination of the Revolving Credit Commitments and Letter of Credit Obligations and the termination of the Financing Agreement and the other Loan Documents, the Agent (subject to Section 10(e) hereof) shall release and reassign to the Grantor all of the Agent’s right, title and interest in and to the Intellectual Property, and the Licenses, all without recourse, representation or warranty whatsoever. The exercise of rights and remedies hereunder by the Agent shall not terminate the rights of the holders of any licenses or sublicenses theretofore granted by Grantor in accordance with the second sentence of this clause (c). Grantor hereby releases the Agent from any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Agent under the powers of
attorney granted herein other than actions taken or omitted to be taken through the Agent’s gross negligence or willful misconduct, as determined by a final determination of a court of competent jurisdiction. 

(d) If Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement or obligation, in the name of Grantor or the Agent, and the expenses of the Agent incurred in connection therewith shall be payable by the Grantor pursuant to Section 8 hereof and shall be secured by the Collateral.

(e) The powers conferred on the Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

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

SECTION 7. Remedies Upon Default. If any Event of Default shall have occurred and be continuing: 

(a) The Agent may exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the Code (whether or not the Code applies to the affected Collateral), and also may (i) take absolute control of the Collateral, including, without limitation, transfer into the Agent’s name or into the name of its nominee or nominees (to the extent the Agent has not theretofore done so) and thereafter receive, for the benefit of the Agent and the Lender Group, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof,
(ii) require Grantor to, and Grantor hereby agrees that it will at its expense and upon request of 

 

 

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the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place or places to be designated by the Agent that is reasonably convenient to both parties, and the Agent may enter into and occupy any premises owned or leased by Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Agent’s rights and remedies hereunder or under law, without obligation to Grantor in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable and/or (B) lease, license or dispose of the Collateral or any part thereof upon such terms as the Agent may deem commercially reasonable. Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least five (5) days’ notice to Grantor of the time and place of any public sale or the time after which any private sale or other disposition of the Collateral is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Grantor hereby waives any claims against the Agent and the Lenders arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Agent accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that Grantor may have to require that all or any part of the Collateral be marshalled upon any sale (public or private) thereof. Grantor hereby acknowledges that (i) any such sale of the Collateral by the Agent shall be made without warranty, (ii) the Agent may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii) above shall not adversely effect the commercial
reasonableness of any such sale of the Collateral. In addition to the foregoing, (i) upon written notice to Grantor from the Agent, Grantor shall cease any use of the Intellectual Property or any trademark, patent or copyright similar thereto for any purpose described in such notice; (ii) the Agent may, at any time and from time to time, upon five (5) days’ prior notice to Grantor, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine; and (iii) the Agent may, at any time, pursuant to the authority granted in Section 6 hereof (such authority being effective upon the occurrence and during the continuance of an Event of Default execute and deliver on behalf of a Grantor, one or more instruments of assignment of the Intellectual Property (or any application or
registration thereof), in form suitable for filing, recording or registration in any country.

(b) Any cash held by the Agent as Collateral and all Cash Proceeds received by the Agent in respect of any sale of or collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 8 hereof) in whole or in part by the Agent against, all or any part of the Obligations in such order as the Agent shall elect, consistent with the provisions of the Financing 

 

 

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Agreement. Any surplus of such cash or Cash Proceeds held by the Agent and remaining after payment in full of all of the Obligations after the termination of all Revolving Credit Commitments and all Letter of Credit Obligations and the termination of the Financing Agreement and the other Loan Documents shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.

(c) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Agent and the Lenders are legally entitled, the Grantor shall be liable for the deficiency, together with interest thereon at the highest rate specified in any applicable Loan Document for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs, expenses and other client charges of any attorneys employed by the Agent to collect such deficiency.

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

(e) The Agent shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Agent’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that Grantor lawfully may, Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Agent’s rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Grantor hereby irrevocably waives the benefits of all such laws.

SECTION 8. Indemnity and Expenses.

(a) Grantor agrees to indemnify and hold the Agent harmless from and against any and all claims, damages, losses, liabilities, obligations, penalties, fees, costs and expenses (including, without limitation, legal fees, costs, expenses, and disbursements of Agent’s counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting solely and directly from the Agent’s gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction. 

(b) Grantor will upon demand pay to the Agent the amount of any and all costs and expenses, including the reasonable fees, costs, expenses and disbursements of counsel for the Agent and of any experts and agents (including, without limitation, any collateral trustee which may act as agent of the Agent), which the Agent may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or 

 

 

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other modification or termination of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder, or (iv) the failure by Grantor to perform or observe any of the provisions hereof.

SECTION 9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied or delivered, if to Grantor, to it in care of the Administrative Borrower at its address specified in the Financing Agreement or as otherwise specified next to Grantor’s signature below; if to the Agent, to it at its address specified in the Financing Agreement; or as to any such Person, at such other address as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 9. All such notices and other communications shall be effective (i) if mailed, when received or three days after deposited in the mails, whichever occurs first, (ii) if telecopied, when transmitted and confirmation received, or (iii) if delivered, upon delivery.

SECTION 10. Security Interest Absolute. All rights of the Agent, the Lenders and the L/C Issuer, all Liens and all obligations of the Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Financing Agreement, any other Loan Document or any other agreement or instrument relating thereto, (b) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any departure from the Financing Agreement or any other Loan
Document, (c) any exchange or release of, or non-perfection of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations, or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any of the Borrowers in respect of the Obligations. All authorizations and agencies contained herein with respect to any of the Collateral are irrevocable and powers coupled with an interest.

SECTION 11. Miscellaneous.

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

(b) No failure on the part of the Agent to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent or any Lender provided herein and in the other Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent or any Lender under any Loan Document against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any other Loan Document against such party or against any other Person, including
but not limited to, any Borrower.

 

 

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(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(d) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the later of (A) the payment in full of the Obligations and (B) the termination of all of the Revolving Credit Commitments and Letter of Credit Obligations and the termination of the Financing Agreement and the other Loan Documents, and (ii) be binding on Grantor and all other Persons who become bound as debtor to this Agreement in accordance with §9-203(d) of the Code and shall inure, together with all rights and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent and the Lenders and their respective permitted successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately
preceding sentence, without notice to Grantor, the Agent and the Lenders may assign or otherwise transfer their rights and obligations under this Agreement and any other Loan Document, to any other Person and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Agent and the Lenders herein or otherwise. Upon any such assignment or transfer, all references in this Agreement to the Agent or any such Lender shall mean the assignee of the Agent or such Lender. None of the rights or obligations of Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Agent, and any such assignment or transfer shall be null and void.

(e) Upon the satisfaction in full of the Obligations and the termination of all of the Revolving Credit Commitments and the termination of the Financing Agreement and all Letter of Credit Obligations and the other Loan Documents, (i) this Agreement and the security interests created hereby shall terminate and all rights to the Collateral shall revert to Grantor and (ii) the Agent will, upon Grantor’s request and at Grantor’s expense, (A) return to Grantor such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and (B) execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence such termination, all without any representation, warranty or recourse whatsoever.

(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(g) Grantor hereby irrevocably and unconditionally:

(i) Submits for itself and its property in any action, suit or proceeding relating to this Agreement or any other Loan Document to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of 

 

 

-22-

 

the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts thereof;

(ii) Agrees that any such action, suit or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action, suit or proceeding in any such court or that such action, suit or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(iii) Consents to the service of any and all process in any such action, suit or proceeding by mailing (by certified or registered mail, postage prepaid and return receipt requested) or delivering a copy of such process to Grantor at its address set forth in Section 9 hereof or at such other address of which the Agent shall have been notified pursuant thereto;

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

(v) Agrees that nothing herein shall affect the right of the Agent or any Lender to effect service of process in any other manner permitted by law or shall limit the right of the Agent or any Lender to sue in any other jurisdiction; and

(vi) Waives any right it may have to claim or recover in any legal action, suit or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

(h) GRANTOR (AND BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT), THE AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.

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

(j) This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together constitute one in the same Agreement.

(k) The Agent may, in its sole and absolute discretion, enforce the provisions hereof against the Grantor without resorting to or regard to other Collateral or other sources of reimbursement for the Obligations and shall not be required to proceed against all Borrowers jointly or seek payment from the all the Borrowers or Guarantors ratably. The release or discharge of any other Borrower or Guarantor by the Agent shall not release or discharge Grantor from the obligations of such Person hereunder. 

 

 

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[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

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

 

	
                         
 	
                         
 	
                        BORROWER AND GRANTOR:
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        FREDERICK’S OF HOLLYWOOD GROUP INC.
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         /s/ Thomas Rende
 
	
                         
 	
                         
 	
                         
 	
                        Name: Thomas Rende
 Title: Chief Financial Officer
 

 

 

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SCHEDULE I

LEGAL NAME; ORGANIZATIONAL IDENTIFICATION NUMBERS; STATES OR JURISDICTION OF ORGANIZATION

 

 

Sched. I-1

 

SCHEDULE II

TRADEMARKS AND TRADEMARK LICENSES;

PATENTS AND PATENT LICENSES;

COPYRIGHTS AND COPYRIGHT LICENSES

 

 

Sched. II-1

 

SCHEDULE III

LOCATIONS OF GRANTOR

 

	
                        LOCATION 
 	
                        Description of Location (State if Location 
 (i) contains Equipment, Fixtures, Goods or Inventory, 
 (ii) is chief place of business and chief executive office, or 
 (iii) contains Books and Records concerning Accounts 
 and originals of Chattel Paper)
 

 

 

Sched. III-1

 

SCHEDULE IV

DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITIES ACCOUNTS

 

	
                        Name and Address 
 of Institution 
 Maintaining Account
 	
                         
 	
                        Account Number
 	
                         
 	
                        Type of Account
 

 

 

Sched. IV-1

 

SCHEDULE V

UCC-1 FINANCING STATEMENTS

 

 

Sched. V-1

 

SCHEDULE VI

COMMERCIAL TORT CLAIMS

 

 

Sched. VI-1

 

EXHIBIT A

ASSIGNMENT FOR SECURITY

[(TRADEMARKS)] [(PATENTS)] [(COPYRIGHTS)]

WHEREAS, ____________________ (the “Assignor”) [has adopted, used and is using, and holds all right, title and interest in and to, the trademarks and service marks listed on the annexed Schedule 1A, which trademarks and service marks are registered or applied for in the United States Patent and Trademark Office (the “Trademarks”)] [holds all right, title and interest in the letter patents, design patents and utility patents listed on the annexed Schedule 1A, which patents are issued or applied for in the United States Patent and Trademark Office (the “Patents”)] [holds all right, title and interest in the
copyrights listed on the annexed Schedule 1A, which copyrights are registered in the United States Copyright Office (the “Copyrights”)];

WHEREAS, the Assignor and certain affiliates have entered into a Security Agreement, dated January 28, 2008 (as amended or otherwise modified from time to time, the “Security Agreement”), in favor of Wells Fargo Retail Finance II, LLC, as agent for certain lenders (the “Assignee”);

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the Assignee and granted to the Assignee for the benefit of the lenders a continuing security interest in all right, title and interest of the Assignor in, to and under the [Trademarks, together with, among other things, the good-will of the business symbolized by the Trademarks] [Patents] [Copyrights] and the applications and registrations thereof, and all proceeds thereof, including, without limitation, any and all causes of action which may exist by reason of infringement thereof and any and all damages arising from past, present and future violations thereof (the “Collateral”), to secure the payment, performance and observance of the Obligations (as defined in the Security Agreement);

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell, assign, transfer and set over unto the Assignee and grants to the Assignee for the benefit of the lenders a continuing security interest in the Collateral to secure the prompt payment, performance and for the benefit of the lenders observance of the Obligations.

The Assignor does hereby further acknowledge and affirm that the rights and remedies of the Assignee with respect to the Collateral are more fully set forth in the Security Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein.

 

 

Exh. A-1

 

IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed by its officer thereunto duly authorized as of _____________ __, 20__.

  

	
                         
 	
                         
 	
                        [GRANTOR]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 Title:
 

 

 

Exh. A-2

 

 

	
                        STATE OF ____________
 	
                         
 
	
                         
 	
                        ss.:
 
	
                        COUNTY OF __________
 	
                         
 

On this ____ day of _______________, 20__, before me personally came ________________, to me known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that s/he is the ________________ of _______________________________________, a ____________________, and that he executed the foregoing instrument in the firm name of _______________________________________, and that s/he had authority to sign the same, and s/he acknowledged to me that s/he executed the same as the act and deed of said firm for the uses and purposes therein mentioned.

 

	
                         
 	
                         
 	
                         
 	
                         
 

 

 

Exh. A-3

 

SCHEDULE 1A TO ASSIGNMENT FOR SECURITY

[(TRADEMARKS AND TRADEMARK APPLICATIONS)

Trademarks and Trademark Applications Owned 

by _______________________________]

[(PATENTS AND PATENT APPLICATIONS)

Patents and Patent Applications Owned

by _______________________________]

[(COPYRIGHTS AND COPYRIGHT APPLICATIONS)

Copyrights and Copyright Applications owned

by_______________________________]

 

 

Exh. C-4

 

TABLE OF CONTENTS

 

	
                         
 	
                         
 	
                         
 	
                         
 	
                        Page
 
	
                        SECTION 1. 
 	
                         
 	
                        Definitions 
 	
                         
 	
                        1
 
	
                        SECTION 2. 
 	
                         
 	
                        Grant of Security Interest 
 	
                         
 	
                        4
 
	
                        SECTION 3. 
 	
                         
 	
                        Security for Obligations 
 	
                         
 	
                        5
 
	
                        SECTION 4. 
 	
                         
 	
                        Representations and Warranties 
 	
                         
 	
                        6
 
	
                        SECTION 5. 
 	
                         
 	
                        Covenants as to the Collateral 
 	
                         
 	
                        9
 
	
                        SECTION 6. 
 	
                         
 	
                        Additional Provisions Concerning the Collateral 
 	
                         
 	
                        17
 
	
                        SECTION 7. 
 	
                         
 	
                        Remedies Upon Default 
 	
                         
 	
                        18
 
	
                        SECTION 8. 
 	
                         
 	
                        Indemnity and Expenses 
 	
                         
 	
                        20
 
	
                        SECTION 9. 
 	
                         
 	
                        Notices, Etc 
 	
                         
 	
                        21
 
	
                        SECTION 10. 
 	
                         
 	
                        Security Interest Absolute 
 	
                         
 	
                        21
 
	
                        SECTION 11. 
 	
                         
 	
                        Miscellaneous 
 	
                         
 	
                        21EXECUTION COPY

PLEDGE AND SECURITY AGREEMENT

PLEDGE AND SECURITY AGREEMENT, dated as of January 28, 2008, by Frederick’s of Hollywood Group Inc., a New York corporation (“Pledgor”), for the benefit of Wells Fargo Retail Finance II, LLC, a Delaware limited liability company, as arranger and agent for the Lenders (as defined below) party to the Restated Financing Agreement referred to below (in such capacity, the “Agent”).

WITNESSETH:

WHEREAS, Pledgor, FOH Holdings, Inc., Frederick’s of Hollywood, Inc., Frederick’s of Hollywood Stores, Inc., and Hollywood Mail Order, LLC (collectively, the “Borrowers”), the lenders from time to time party thereto (such lenders, together with their respective successors and assigns the “Lenders”) and the Agent are parties to that certain Amended and Restated Financing Agreement, dated as of January 28, 2008 (such agreement, as amended or otherwise modified from time to time, being hereinafter referred to as the “Restated Financing Agreement”);

WHEREAS, pursuant to the terms and provisions of the Restated Financing Agreement, the Lenders have agreed to make certain revolving credit loans to the Borrowers (each a “Revolving Loan” and collectively, the “Revolving Loans”) and to provide a subfacility for the issuance of letters of credit for the account of the Borrowers; 

WHEREAS, it is a condition precedent to the making of any Revolving Loan or the provision of any Letter of Credit or Letter of Credit Guaranty pursuant to the Restated Financing Agreement that Pledgor shall execute and deliver to the Agent a pledge and security agreement providing for the pledge to the Agent, for the benefit of the Lender Group, of, and the grant to the Agent, for the benefit of the Lender Group, of a security interest in and Lien on, outstanding Capital Stock (as defined in the Restated Financing Agreement) and indebtedness from time to time owned by Pledgor;

WHEREAS, Pledgor has determined that the execution, delivery and performance of this Agreement directly benefit, and are in the best interests of, Pledgor;

NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lenders to make and maintain the Revolving Loans pursuant to the Restated Financing Agreement and provide other financial accommodations to the Borrowers, Pledgor agrees with the Agent, for the benefit of the Lender Group, as follows:

SECTION 1. Definitions. Reference is hereby made to the Restated Financing Agreement for a statement of the terms thereof. All terms used in this Agreement which are defined in the Restated Financing Agreement or in Article 8 or Article 9 of the Uniform Commercial Code currently in effect in the State of New York (the “Code”) and which are not otherwise defined herein shall have the same meanings herein as set forth therein. As used in this Agreement, “Applicable Percentage” shall mean, with respect to any pledge hereunder of voting Capital Stock issued by any Foreign Subsidiary, the greater of (x) 66% and (y) such greater
percentage that (1) could not reasonably be expected to cause the undistributed earnings of such Foreign Subsidiary as determined for United States federal income tax purposes to be 

 

 

treated as a deemed dividend to Pledgor and (2) could not reasonably be expected to cause any other adverse tax consequences to Pledgor or such Foreign Subsidiary.

SECTION 2. Pledge and Grant of Security Interest. As collateral security for all of the Obligations (as defined in Section 3 hereof), Pledgor hereby pledges and assigns to the Agent, for the benefit of the Lender Group, and grants to the Agent, for the benefit of the Lender Group, a continuing security interest in, the following (the “Pledged Collateral”):

(a) the indebtedness described in Schedule I hereto and all other indebtedness from time to time owned by Pledgor (the “Pledged Debt”), the promissory notes and other instruments evidencing the Pledged Debt and all interest, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt;

(b) the shares of stock, partnership interests, member interests and other equity interests described in Schedule II hereto (the “Pledged Shares”), whether or not evidenced or represented by any stock certificate, certificated security or other instrument, issued by the Persons described in such Schedule II (the “Existing Issuers”), the certificates representing the Pledged Shares, all options and other rights, contractual or otherwise, in respect thereof (provided that with respect to any Foreign Subsidiary, only the Applicable Percentage of all voting (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) Capital
Stock of such Foreign Subsidiary (or, if less than the Applicable Percentage, all such equity interests owned by Pledgor) shall be pledged hereunder) and all dividends, distributions, cash, instruments, investment property and other property (including, without limitation, any stock dividend and any distribution in connection with a stock split) from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares;

(c) the shares of stock, partnership interests, member interests or other equity interests at any time and from time to time acquired by Pledgor of any and all Persons now or hereafter existing (provided that with respect to any Foreign Subsidiary, only the Applicable Percentage of all voting (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) Capital Stock of such Foreign Subsidiary (or, if less than the Applicable Percentage, all such equity interests owned by Pledgor) shall be pledged hereunder), all or a portion of such stock or other equity interests which are acquired by such Person at any time (such Persons, together with the Existing Issuers, being hereinafter referred to collectively as the “Pledged Issuers” and individually as a “Pledged Issuer”), the certificates representing such shares, partnership interests, member interests or other interests, all options and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, partnership interests, member interests or other interests;

(d) all additional shares of stock, partnership interests, member interests or other equity interests from time to time acquired by Pledgor, of any Pledged Issuer (provided that with respect to any Foreign Subsidiary, only the Applicable Percentage of all voting (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) Capital Stock of such Foreign Subsidiary (or, if less than the Applicable Percentage, all such equity interests owned by Pledgor) shall be pledged hereunder), the certificates representing such additional shares, all options and other rights, 

 

 

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contractual or otherwise, in respect thereof and all dividends, distributions, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such additional shares, interests or equity;

(e) all investment property, financial assets, securities, Capital Stock, other equity interests, stock options and commodity contracts of Pledgor (provided that with respect to any Foreign Subsidiary, only the Applicable Percentage of all voting (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) Capital Stock of such Foreign Subsidiary (or, if less than the Applicable Percentage, all such equity interests owned by Pledgor) shall be pledged hereunder), all notes, debentures, bonds, promissory notes or other evidences of indebtedness of Pledgor, and all other assets now or hereafter received or receivable with respect to the foregoing;

(f) all security entitlements of Pledgor in any and all of the foregoing; and

(g) all proceeds (including proceeds of proceeds) of any and all of the foregoing;

in each case, whether now owned or hereafter acquired by Pledgor and howsoever its interest therein may arise or appear (whether by ownership, security interest, Lien, claim or otherwise).

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

(a) the prompt payment by the Borrowers and any other Loan Party, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all Obligations (as defined in the Restated Financing Agreement), including, without limitation, (i) principal of and interest on the Revolving Loans (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Borrower, whether or not the payment of such interest is unenforceable or is not allowable due to the existence of such Insolvency Proceeding), (ii) all Reimbursement Obligations and all interest thereon (including, without limitation, all interest that accrues after the commencement of any Insolvency Proceeding of any Borrower), whether or not the payment of such interest is unenforceable or is not allowable due to the existence of
such Insolvency Proceeding), and (iii) all fees, commissions, expense reimbursements, indemnifications and all other amounts due or to become due under the Restated Financing Agreement and any other Loan Document; and

(b) the due performance and observance by Borrowers and any other Loan Parties of all of their other obligations from time to time existing in respect of the Loan Documents.

SECTION 4. Delivery of the Pledged Collateral.

(a) (i) All promissory notes currently evidencing the Pledged Debt and all certificates currently representing the Pledged Shares shall be delivered to the Agent, for the benefit of the Lender Group, on or prior to the execution and delivery of this Agreement. All other promissory notes, certificates and instruments constituting Pledged Collateral from time to 

 

 

-3-

 

time or required to be pledged to the Agent, for the benefit of the Lender Group, pursuant to the terms hereof (the “Additional Collateral”) shall be delivered to the Agent promptly upon receipt thereof by or on behalf of Pledgor. All such promissory notes, certificates and instruments shall be held by or on behalf of the Agent pursuant hereto and shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers executed in blank, all in form and substance satisfactory to the Agent. If any Pledged Collateral consists of uncertificated securities, unless the immediately following sentence is applicable thereto, Pledgor shall cause the Agent (or its designated custodian, nominee or other designee), to become the
registered holder thereof, or cause each issuer of such securities to agree that it will comply with instructions originated by the Agent with respect to such securities without further consent by Pledgor. If any Pledged Collateral consists of security entitlements, Pledgor shall transfer such security entitlements to the Agent (or its designated custodian or nominee), or cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Agent without further consent by Pledgor. 

(ii) Within five (5) days of the receipt by Pledgor of any Additional Collateral, a Pledge Amendment, duly executed by Pledgor, in substantially the form of Annex I hereto (a “Pledge Amendment”) shall be delivered to the Agent, in respect of the Additional Collateral which must be pledged pursuant to this Agreement and the Restated Financing Agreement. The Pledge Amendment shall from and after delivery thereof constitute part of Schedules I and II hereto. Pledgor hereby authorizes the Agent to attach each Pledge Amendment to this Agreement and agrees that all promissory notes, certificates or instruments listed on any Pledge Amendment delivered to the Agent shall for all purposes hereunder constitute Pledged Collateral and Pledgor shall be deemed upon delivery thereof to have made the
representations and warranties set forth in Section 5 with respect to such Additional Collateral.

(b) If Pledgor shall receive, by virtue of Pledgor’s being or having been an owner of any Pledged Collateral, any (i) stock certificate (including, without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), promissory note or other instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash (except such dividends permitted to be retained by Pledgor pursuant to Section 7 hereof) or in securities or other property or (iv) dividends or other distributions in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Pledgor shall receive such stock certificate, promissory note, instrument, option, right, payment or distribution in trust for the benefit of the Agent, shall segregate it from Pledgor’s other property and shall deliver it forthwith to the Agent, for the benefit of the Lender Group, in the exact form received, with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the Agent as Pledged Collateral and as further collateral security for the Obligations.

SECTION 5. Representations and Warranties. Pledgor represents and warrants as follows:

(a) Pledgor (i) is a corporation, duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization, (ii) has all requisite power 

 

 

-4-

 

and authority to execute, deliver and perform this Agreement and each other Loan Document to be executed and delivered by it pursuant hereto and to consummate the transactions contemplated hereby and thereby, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be qualified or in good standing could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(b) The execution, delivery and performance by Pledgor of this Agreement (i) has been duly authorized by all necessary action, (ii) doed not and will not contravene its charter or by-laws, or any applicable law or any contractual restriction binding on or affecting it or any of its properties, (iii) does not and will not result in or require the creation of any Lien, security interest or other charge or encumbrance upon or with respect to any of its properties other than pursuant to this Agreement, and (iv) does not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to it or its operations or any of its properties, except where such default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

(c) The Existing Issuers set forth in Schedule II hereto are the only Subsidiaries of Pledgor existing on the date hereof. The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. All other shares of stock constituting Pledged Collateral will be duly authorized and validly issued, fully paid and nonassessable.

(d) The promissory notes currently evidencing the Pledged Debt have been, and all other promissory notes from time to time evidencing Pledged Debt, when executed and delivered, will have been, duly authorized, executed and delivered by the respective makers thereof, and all such promissory notes are or will be, as the case may be, legal, valid and binding obligations of such makers, enforceable against such makers in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws.

(e) Pledgor is and will be at all times the legal and beneficial owner of its Pledged Collateral free and clear of any Lien except for the Lien created by this Agreement and the Permitted Liens.

(f) The exercise by the Agent of any of its rights and remedies in accordance with the terms of this Agreement will not contravene any law or any contractual restriction binding on or affecting Pledgor or any of the properties of Pledgor and will not result in or require the creation of any Lien upon or with respect to any of the properties of Pledgor other than pursuant to this Agreement or the other Loan Documents.

(g) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required to be obtained or made by Pledgor for (i) the due 

 

 

-5-

 

execution, delivery and performance by Pledgor of this Agreement, (ii) the grant by Pledgor, or the perfection, of the Lien created hereby in the Pledged Collateral or (iii) the exercise by the Agent, for the benefit of the Lender Group, of any of its rights and remedies hereunder, except as may be required in connection with any sale of any Pledged Collateral by laws affecting the offering and sale of securities generally.

(h) This Agreement creates a valid Lien in favor of the Agent, for the benefit of the Lender Group, in the Pledged Collateral as security for the Obligations. The Agent’s having possession of the promissory notes evidencing the Pledged Debt, the certificates representing the Pledged Shares and all other certificates, instruments and cash constituting Pledged Collateral from time to time results in the perfection of such Lien. Such Lien is, or in the case of Pledged Collateral in which Pledgor obtains rights after the date hereof, will be, a perfected, first priority Lien, subject only to the Permitted Liens. All action necessary or desirable to perfect and protect such Lien has been duly taken, except for the Agent’s having possession of certificates, instruments and cash constituting Pledged Collateral after the date hereof.

SECTION 6. Covenants as to the Pledged Collateral. So long as any principal of or interest on any Revolving Loan, any Reimbursement Obligation, any Letter of Credit Obligation or any other Obligation (whether or not due) shall remain unpaid or any Lender shall have any Revolving Credit Commitment under the Restated Financing Agreement, Pledgor shall, unless the Agent shall otherwise consent in writing: 

(a) keep adequate records concerning the Pledged Collateral and permit the Agent or any agents, designees or representatives thereof at any time or from time to time to examine and make copies of and abstracts from such records;

(b) at Pledgor’s expense, promptly deliver to the Agent a copy of each notice or other communication received by it in respect of the Pledged Collateral;

(c) at Pledgor’s expense, defend the Agent’s right, title and security interest in and to the Pledged Collateral against the claims of any Person;

(d) at Pledgor’s expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Agent may reasonably request in order to (i) perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby, (ii) enable the Agent to exercise and enforce its rights and remedies hereunder in respect of the Pledged Collateral or (iii) otherwise effect the purposes of this Agreement, including, without limitation, delivering to the Agent, after the occurrence and during the continuation of an Event of Default, irrevocable proxies in respect of the Pledged Collateral;

(e) not sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any Pledged Collateral or any interest therein except as expressly permitted by the Restated Financing Agreement;

 

 

-6-

 

(f) not create or suffer to exist any Lien upon or with respect to any Pledged Collateral except for the Lien created hereby or for any Permitted Lien;

(g) not make or consent to any amendment or other modification or waiver with respect to any Pledged Collateral or enter into any agreement or permit to exist any restriction with respect to any Pledged Collateral other than as expressly permitted by the Restated Financing Agreement and the other Loan Documents;

(h) except as expressly permitted by the Restated Financing Agreement, not permit the issuance of (i) any additional shares of any class of Capital Stock, partnership interests, member interests or other equity of any Pledged Issuer, (ii) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or condition into, or exchangeable for, any such shares of Capital Stock or (iii) any warrants, options, contracts or other commitments entitling any Person to purchase or otherwise acquire any such shares of Capital Stock; and

(i) not take or fail to take any action which would in any manner impair the value or enforceability of the Agent’s security interest in and Lien on any Pledged Collateral.

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

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

(i) Pledgor may exercise any and all voting and other consensual rights pertaining to any Pledged Collateral for any purpose not inconsistent with the terms of this Agreement, the Restated Financing Agreement or the other Loan Documents; provided, however, that (A) Pledgor will not exercise and shall refrain from exercising any such right, as the case may be, if the Agent gives it notice that, in the Agent’s judgment, such action (or inaction) could reasonably be expected to affect adversely in any material respect the value of any Pledged Collateral or otherwise could reasonably be expected to have a Material Adverse Effect and (B) Pledgor will give the Agent at least five (5) Business Days’ notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right that could reasonably be expected to affect adversely in any
material respect the value of any Pledged Collateral or otherwise could reasonably be expected to have a Material Adverse Effect;

(ii) Pledgor may receive and retain any and all dividends, interest or other distributions paid in respect of the Pledged Collateral to the extent permitted by the Restated Financing Agreement; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of or in exchange for, any Pledged Collateral, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral, together with any dividend, interest or other distribution or payment which at the
time of such payment was not permitted by the Restated Financing Agreement, shall be, and shall forthwith be delivered to the Agent to hold as, 

 

 

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Pledged Collateral and shall, if received by Pledgor, be received in trust for the benefit of the Agent, shall be segregated from the other property or funds of Pledgor, and shall be forthwith delivered to the Agent in the exact form received with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the Agent as Pledged Collateral and as further collateral security for the Obligations; and

(iii) the Agent will execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies and other instruments as Pledgor may reasonably request for the purpose of enabling Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7 (a)(i) hereof and to receive the dividends, interest and/or other distributions which it is authorized to receive and retain pursuant to paragraph (ii) of this Section 7(a) hereof.

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

(i) all rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof, and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall thereupon become vested in the Agent which shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and interest payments;

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

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

(iv) all dividends, distributions, interest and other payments which are received by Pledgor contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the benefit of the Agent shall be segregated from other funds of Pledgor, and shall be forthwith paid over to the Agent as Pledged Collateral in the exact form received with any necessary endorsement and/or appropriate stock powers duly executed in blank, to be held by the Agent as Pledged Collateral and as further collateral security for the Obligations.

 

 

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SECTION 8. Additional Provisions Concerning the Pledged Collateral.

(a) Pledgor (i) authorizes the Agent to file any financing statements required hereunder or under any other Loan Document), and any continuation statements or amendment with respect thereto, in any appropriate filing office without the signature of Pledgor and (ii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without the signature of Pledgor prior to the date hereof. A photocopy or other reproduction of this Agreement or any financing statement covering the Pledge Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(b) Pledgor hereby irrevocably appoints the Agent Pledgor’s attorney-in-fact and proxy, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, from time to time in the Agent’s discretion, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of Pledgor under Section 7(a) hereof), including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any dividend, interest payment or other distribution in respect of any Pledged Collateral and to give full discharge for the same. This power is coupled with an interest and is irrevocable until all of the Obligations are paid in full after all Revolving Credit Commitments and Letter of Credit Obligations have been terminated.

(c) If Pledgor fails to perform any agreement or obligation contained herein, the Agent itself may perform, or cause performance of, such agreement or obligation, and the expenses of the Agent incurred in connection therewith shall be payable by Pledgor pursuant to Section 10 hereof and shall be secured by the Pledged Collateral.

(d) Other than the exercise of reasonable care to assure the safe custody of the Pledged Collateral while held hereunder, the Agent shall have no duty or liability to preserve rights pertaining thereto and shall be relieved of all responsibility for the Pledged Collateral upon surrendering it or tendering surrender of it to Pledgor. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Agent accords its own property, it being understood that the Agent shall not have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral.

(e) The powers conferred on the Agent hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Pledged Collateral in its possession and the accounting for monies actually received by it hereunder, the Agent shall have no duty as to any Pledged Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Pledged Collateral.

(f) The Agent may at any time in its discretion (i) without notice to Pledgor, transfer or register in the name of the Agent or any of its nominees any or all of the Pledged 

 

 

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Collateral, subject only to the revocable rights of Pledgor under Section 7(a) hereof, and (ii) exchange certificates or instruments constituting Pledged Collateral for certificates or instruments of smaller or larger denominations.

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

(a) The Agent may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party on default under the Code then in effect in the State of New York; and without limiting the generality of the foregoing and without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker’s board or elsewhere, at such price or prices and on such other terms as the Agent may deem commercially reasonable. Pledgor agrees that, to the extent notice of sale shall be required by law, at least five (5) days’ notice to Pledgor of the time and place of any public sale of Pledged Collateral owned by Pledgor or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to make any sale of Pledged Collateral regardless of whether or not notice of sale has been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) In the event that the Agent determines to exercise its right to sell all or any part of the Pledged Collateral pursuant to Section 9(a) hereof, Pledgor will, at Pledgor’s expense and upon request by the Agent: (i) execute and deliver, and cause each issuer of such Pledged Collateral and the directors and officers thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Agent, advisable to register such Pledged Collateral under the provisions of the Securities Act of 1933, as amended (the “Securities Act”), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto, (ii) cause each issuer of such Pledged Collateral to qualify such Pledged Collateral under the state securities or “Blue Sky” laws of each jurisdiction, and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Agent, (iii) cause each Pledged Issuer to make available to its securityholders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things as may be necessary to make such sale of such Pledged Collateral valid and binding and in compliance with applicable law. Pledgor acknowledges the impossibility of ascertaining the amount of damages which would be suffered by the
Agent by reason of the failure by Pledgor to perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if Pledgor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Pledged Collateral on the date the Agent demands compliance with this Section 9(b); provided, however, that the 

 

 

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payment of such amount shall not release Pledgor from any of its obligations under any of the other Loan Documents.

(c) Notwithstanding the provisions of Section 9(b) hereof, Pledgor recognizes that the Agent may deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any other securities constituting Pledged Collateral and that the Agent may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act. Pledgor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen bona fide offerees shall be deemed to involve a “public disposition” for the purposes of Section 9-610(c) of the Code (or any successor or similar, applicable statutory provision) as then in effect in the State of New York, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the
Agent may, in such event, bid for the purchase of such securities.

(d) Any cash held by the Agent as Pledged Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Pledged Collateral may, in the discretion of the Agent, be held by the Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 10 hereof) in whole or in part by the Agent against, all or any part of the Obligations in such order as the Agent shall elect consistent with the provisions of the Restated Financing Agreement. Any surplus of such cash or cash proceeds held by the Agent and remaining after the date all of the Obligations have been paid in full after all Revolving Credit Commitments and Letter of Credit Obligations have been terminated shall be paid over to Pledgor or to such Person as may be
lawfully entitled to receive such surplus.

(e) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Agent is legally entitled, Pledgor shall be liable for the deficiency, together with interest thereon at the highest rate specified in the Restated Financing Agreement for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees, costs and expenses of any attorneys employed by the Agent to collect such deficiency.

SECTION 10. Indemnity and Expenses.

(a) Pledgor agrees to indemnify and hold harmless the Agent (and all of its respective officers, directors, employees, attorneys, consultants and agents) from and against any 

 

 

-11-

 

and all claims, damages, losses, liabilities obligations, penalties, costs and expenses (including, without limitation, legal fees, costs, expenses and disbursements of counsel) to the extent that they arise out of or otherwise result from this Agreement (including, without limitation, enforcement of this Agreement), except, as to any such indemnified Person, claims, losses or liabilities resulting solely and directly from such Person’s gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. 

(b) Pledgor agrees to pay to the Agent upon demand the amount of any and all costs and expenses, including the fees, costs, expenses and disbursements of the Agent’s counsel and of any experts and agents, which the Agent may incur in connection with (i) the preparation, negotiation, execution, delivery, recordation, administration, amendment, waiver or other modification or termination of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder, or (iv) the failure by Pledgor to perform or observe any of the provisions hereof.

SECTION 11. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and shall be mailed (by certified mail, postage prepaid and return receipt requested), telecopied or delivered, if to Pledgor, to it at the address of the Administrative Borrower specified in the Restated Financing Agreement; if to the Agent, to it at the address specified in the Restated Financing Agreement; or as to any such Person at such other address as shall be designated by such Person in a written notice to such other Person complying as to delivery with the terms of this Section 11. All such notices and other communications shall be effective (a) if mailed (by certified mail, postage prepaid and return receipt requested), when received or three Business Days after deposit in the mails,
whichever occurs first, (b) if telecopied, when transmitted and confirmation is received, provided same is on a Business Day and, if not, on the next Business Day; or (c) if delivered, upon delivery, provided same is on a Business Day and, if not, on the next Business Day.

SECTION 12. Security Interest Absolute. All rights of the Agent, the Lenders and the L/C Issuer, all Liens and all obligations of Pledgor hereunder shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Restated Financing Agreement, any other Loan Document or any other agreement or instrument relating thereto, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any departure from the Restated Financing Agreement or any other Loan Document, (iii) any exchange or release of, or non-perfection of any Lien on, any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the
Obligations, or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of Pledgor in respect of the Obligations. All authorizations and agencies contained herein with respect to any of the Pledged Collateral are irrevocable and powers coupled with an interest.

SECTION 13. Miscellaneous.

(a) No amendment of any provision of this Agreement shall be effective unless it is in writing and signed by the Agent and Pledgor, and no waiver of any provision of this Agreement, and no consent to any departure by Pledgor therefrom, shall be effective unless 

 

 

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it is in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(b) No failure on the part of the Agent, any Lender or the L/C Issuer to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Agent, the Lenders and the L/C Issuer provided herein and in the Loan Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Agent, the Lenders and the L/C Issuer under the applicable Loan Document against any party thereto are not conditional or contingent on any attempt by the Agents, the Lenders or the L/C Issuer to exercise any of their rights under any other document against such party or against any other Person.

(c) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. 

(d) This Agreement shall create a continuing security interest in and Lien on the Pledged Collateral and shall (i) remain in full force and effect until the date the Obligations are paid in full after the termination of all of the Revolving Credit Commitments and the Letter of Credit Obligations, and (ii) be binding on Pledgor and, by its acceptance hereof, the Agent, and its respective successors and assigns, and shall inure, together with all rights and remedies of the Agent, the Lenders and the L/C Issuer hereunder, to the benefit of each of the Agent, the Lenders and the L/C Issuer and their respective successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, the Agent, the Lenders and the L/C Issuer may assign or otherwise transfer their respective rights and obligations under this Agreement and any other Loan
Document, to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Agent, the Lenders and the L/C Issuer herein or otherwise. Upon any such assignment or transfer, all references in this Agreement to the Agent or Lenders shall mean the assignee of such Agent or Lenders or the L/C Issuer. None of the rights or obligations of Pledgor hereunder may be assigned or otherwise transferred without the prior written consent of the Agent, and any such assignment or transfer shall be null and void.

(e) On the date the Obligations have been paid in full after the termination of the Revolving Credit Commitments and the Letter of Credit Obligations and the Restated Financing Agreement and the other Loan Documents have been terminated (i) this Agreement and the security interest and Lien created hereby shall terminate and all rights to the Pledged Collateral shall revert to Pledgor, and (ii) the Agent will, upon Pledgor’s request and at Pledgor’s expense, (A) return to Pledgor such of the Pledged Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and (B) execute and deliver to Pledgor, without recourse, representation or warranty, such documents as Pledgor shall reasonably request to evidence such termination.

 

 

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(f) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST AND LIEN CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(g) Pledgor hereby irrevocably and unconditionally:

(i) Submits for itself and its property in any action, suit or proceeding relating to this Agreement or any other Loan Document to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts thereof;

(ii) Agrees that any such action, suit or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action, suit or proceeding in any such court or that such action, suit or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(iii) Consents to the service of any and all process in any such action, suit or proceeding by mailing (by certified or registered mail, postage prepaid and return receipt requested) or delivering a copy of such process to Pledgor at its address set forth in Section 11 hereof or at such other address of which the Agent shall have been notified pursuant thereto; 

(iv) To the extent that Pledgor 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, Pledgor hereby irrevocably waives such immunity in respect of its obligations under this Agreement and the other Loan Documents; 

(v) Agrees that nothing herein shall affect the right of the Agent or any Lender to effect service of process in any other manner permitted by law or shall limit the right of the Agent or any Lender to sue in any other jurisdiction; and

(vi) Waives any right it may have to claim or recover in any legal action, suit or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

(h) This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be deemed an original, but all such counterparts shall constitute one and the same agreement.

(i) The Agent may, in its sole and absolute discretion, enforce the provisions hereof against Pledgor without resorting to or regard to other collateral or other sources of reimbursement for the Obligations and shall not be required to proceed against all Borrowers jointly or seek payment from the all the Borrowers or Guarantors ratably. The release or discharge of any other Borrower or Guarantor by the Agent shall not release or discharge Pledgor from the obligations of Pledgor hereunder.

 

 

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

 

	
                         
 	
                         
 	
                        PLEDGOR:
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        FREDERICK’S OF HOLLYWOOD GROUP INC.
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         /s/ Thomas Rende
 
	
                         
 	
                         
 	
                         
 	
                        Name: Thomas Rende
 Title: Chief Financial Officer
 

 

 

SCHEDULE I

TO

PLEDGE AND SECURITY AGREEMENT

PLEDGED DEBT

None.

 

 

SCHEDULE II

TO

PLEDGE AND SECURITY AGREEMENT

Pledged Shares

 

	
                        Pledgor
 	
                         
 	
                        Name of Issuer
 	
                         
 	
                        Number of Shares
 	
                         
 	
                        Class
 	
                         
 	
                        Certificate
 Number
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

 

ANNEX A

TO

PLEDGE AGREEMENT

PLEDGE AMENDMENT

This Pledge Amendment, dated _______________, is delivered pursuant to Section 4 of the Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement, dated January 28, 2008 (as amended or otherwise modified from time to time, the “Pledge Agreement”), by the undersigned in favor of Wells Fargo Retail Finance II, LLC, as agent (the “Agent”), and that the promissory notes or shares listed on this Pledge Amendment shall be hereby pledged and assigned to the Agent and become part of the Pledged Collateral referred to in such Pledge Agreement and shall secure all of the Obligations referred to in such Pledge Agreement.

Pledged Debt

 

	
                        Pledgor
 	
                         
 	
                        Name of Payee
 	
                         
 	
                        Description
 	
                         
 	
                        Principal Amount
 Outstanding as of
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

Pledged Shares

 

	
                        Pledgor
 	
                         
 	
                        Name of Issuer
 	
                         
 	
                        Number

            of Shares
 	
                         
 	
                        Class
 	
                         
 	
                        Certificate

            Number(s)
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                         
 	
                         
 	
                        [PLEDGOR]
 
	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                        By: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 Title:

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