Document:

Exhibit 10.4

 

SECURITY AGREEMENT

 

J.J. Company,
Inc., a Massachusetts corporation (the “Debtor”) having its chief
executive office and principal place of business at 4 Batterymarch Park,
Quincy, Massachusetts 02169, hereby grants to Citizens Bank of Massachusetts, a
Massachusetts banking corporation as Agent for the benefit of and on behalf of
all of the Lenders, as such term is defined in that certain Fifth Amended and
Restated Loan Agreement (collectively, the “Loan Agreement”) dated as of
June 29, 2001 as the same has been and may hereafter be amended (the “Secured
Party”), having an address at 28 State Street, Boston, Massachusetts 02109,
a first security interest in all of the Debtor’s present and future right,
title and interest in and to any and all of the following property whether now
existing or hereafter created and wherever located (all of which is hereinafter
called the “Collateral”):

 

All equipment
and fixtures, as defined in the Uniform Commercial Code (as defined below) and
all machinery, tools, parts, furniture, furnishings, motor vehicles and other
personal property, tangible or intangible, presently owned or hereafter
acquired by the Debtor, together with additions and accessions thereto and
substitutions and replacements therefor, and the products and proceeds
(including insurance and condemnation proceeds) thereof;

 

All inventory and goods as
defined in the Uniform Commercial Code (the “Uniform Comercial Code”),
whether presently owned or hereafter acquired, including, without limitation, all
inventory in the possession of others or in transit, all goods held for sale or
lease or to be furnished under contracts for service or which have been so
furnished, raw materials, work in process, and materials used or consumed or to
be used or consumed in the business of the Debtor, and completed and unshipped
merchandise, and the products and proceeds (including insurance and
condemnation proceeds) of the foregoing;

 

All accounts, chattel paper, instruments, documents and general
intangibles (except the Debtor’s general partnership interest in J. Jill, GP, a
Massachusetts general partnership), all as defined in the Uniform Commercial
Code, including those now existing and those hereafter arising or coming into
existence, and including, without limitation, all rights of payment for goods
sold or leased or services rendered, all rights of payment under contracts
whether or not currently due or not yet earned by performance and accounts
receivable arising or to arise therefrom, and all rights of the Debtor in and
to the goods represented thereby including returned and repossessed goods, and
all rights the Debtor may have or acquire for securing or enforcing the
foregoing, including, without limitation, the rights to reserves, deposits,
income tax refunds, choses in action, judgments or insurance proceeds, and the
products and proceeds of all of the foregoing;

 

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All goodwill, trade secrets, computer programs, customer lists, trade
names, trademarks, copyrights, franchises, licenses and patents and the
proceeds thereof;

 

All books and records relating to the conduct of Debtor’s business;

 

All deposit accounts maintained by the Debtor with the Secured Party or
other bank, trust company, investment firm or fund or any similar institution
or organization and the proceeds thereof;

 

Any deposits, credits,
collateral or property of the Debtor at any time now or hereafter in the
possession, custody, or control of the Secured Party or any entity under the
control of the Secured Party or any affiliate of the Secured Party or in
transit to any of them and the proceeds thereof (the “Deposits and
Securities”);

 

All investment property, including, without limitation, all financial
assets, all certificated and uncertificated securities, security entitlements,
security accounts, commodity accounts and commodity contracts;

 

The Collateral shall include, without limitation,
the following categories of assets as defined in Article 9 of the Uniform
Commercial Code: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper (whether tangible
or electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all proceeds of
any thereof, wherever located, whether now owned and hereafter acquired.  If the Debtor shall at any time acquire a
commercial tort claim, as defined in Article 9, the Debtor shall immediately
notify the Secured Party in a writing signed by the Debtor of the brief details
thereof and grant to the Secured Party in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to the Secured Party.

 

To secure the
payment and performance of all liabilities and obligations now or hereafter
owing from the Debtor to the Secured Party of whatever kind or nature, whether
or not currently contemplated at the time of this Security Agreement, whether
such obligations be direct or indirect, absolute or contingent or due or to
become due, including all obligations of the Debtor, actual or contingent, in
respect of letters of credit or Secured Partyer’s acceptances issued by the
Secured Party for the account of or guaranteed by the Debtor, and all
obligations of any partnership, trust, joint venture or any other entity
guaranteed by the Debtor, now existing or
hereafter arising, or as to

 

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which Debtor is or may become
personally liable, (the “Obligations”), which term shall include all
accrued interest and all costs and expenses, including reasonable attorney’s
fees, costs and expenses relating to the appraisal and/or valuation of assets
and all costs and expenses incurred or paid by the Secured Party in exercising,
preserving, defending, collecting, enforcing, or protecting any of its rights
under the Obligations or hereunder or with respect to the Collateral or in any
litigation arising out of the transactions evidenced by the Obligations).  Upon and after the occurrence of an Event of
Default, the Secured Party shall have the unrestricted right from time to time
to apply (or to change any application already made) the proceeds of any of the
Collateral to any Obligations, as the Secured Party, in its sole discretion,
may determine.

 

I.                                         Representations
and Warranties of Debtor

 

The Debtor hereby represents and warrants that:

 

(a)                                  Debtor
is duly organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts.  Debtor is
qualified to do business in every state in which the nature of its business
conducted or the character of its property owned in such state would require
such qualification.

 

(b)                                 Debtor
has the power to execute, deliver and perform this Security Agreement, to
borrow from the Secured Party or to guaranty to the Secured Party the
obligations of others.  The execution,
delivery and performance of this Security Agreement and any notes, guaranties
or other documents, instruments or agreements evidencing Debtor’s obligations
to the Secured Party have been duly authorized, and will not violate its
partnership agreement or other organizational documents, or any law, regulation
or court order, and will not result in a default under any agreement or
indenture to which the Debtor is a party.

 

(c)                                  Debtor
has furnished to the Secured Party such tax returns, financial statements,
including balance sheets and income statements showing profit (or loss) and
other information about the Debtor’s financial condition as the Secured Party
shall have requested.  These tax returns,
financial statements and other information fairly present the financial
condition of the Debtor for the periods then ended, reflect all known liabilities,
direct or contingent, and, if financial statements, have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis.  There has been no
material adverse change in the assets, liabilities, financial conditions,
business or prospects of Debtor since the date of any financial statements, tax
returns or other information delivered to the Secured Party.

 

(d)                                 Debtor
has good and marketable title to the property and assets which are reflected on
its financial statements, tax returns or other information.  Except as otherwise

 

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set forth on Schedule 1 annexed hereto under the
heading “Existing Liens”, all of the Collateral is owned by the Debtor
free and clear of all liens, pledges, security interests, encumbrances and
mortgages, except for liens, pledges, security interests, encumbrances or
mortgages in favor of the Secured Party. 
No effective financing statement covering the Collateral or any proceeds
thereof is on file in any public office except as disclosed in writing to the
Secured Party.

 

(e)                                  There
is no suit or proceeding at law or in equity affecting the Debtor or any of its
properties which, if adversely determined, would materially impair the rights
of the Debtor to carry on its business substantially as it is now being
conducted or would have a material adverse effect upon the financial condition
of the Debtor.  The Debtor is not a party
to any document, agreement or instrument, and is not subject to any charge,
order or other restriction, materially and adversely affecting its business,
properties, assets, operations or condition, financial or otherwise, except as
previously disclosed to the Secured Party in writing.

 

(f)                                    Debtor
has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid all taxes and other charges that are due
and payable.

 

(g)                                 Debtor
is not in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any document, agreement or
instrument to which Debtor is a party, except for minor defaults in agreements
which neither individually nor in the aggregate have a material adverse effect
on the Debtor.

 

(h)                                 Debtor
has not, during the preceding five (5) years, changed its name, been a party to
a merger, or used any other corporate or fictitious name except as previously
described to the Secured Party in writing.

 

(i)                                     The
place where Debtor keeps its records concerning the Collateral, the Debtor’s
principal place of business and the Debtor’s chief executive office is the
location set forth at the beginning of this Security Agreement.  The Collateral is now and will continue to be
kept at the location set forth at the beginning of this Security Agreement.

 

(j)                                     If
any of the Collateral is to be attached to real estate, a description of said
real estate has been or will be delivered to the Secured Party and the name and
address of each record owner has been or will be provided in writing to Secured
Party on Demand.

 

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II.                                     Covenants
of Debtor

 

The Debtor hereby agrees and covenants that:

 

(a)                                  Debtor
shall keep the Collateral free from all liens, security interests and
encumbrances except for the security interest granted herein or those
specifically permitted in writing by the Secured Party or permitted by the Loan
Agreement, and shall defend the Collateral against all claims and demands of
all persons at any time claiming any interest therein.  The Debtor shall not sell or otherwise transfer
the Collateral or any interest therein except in the ordinary course of
business.

 

(b)                                 Debtor
shall not change its name without giving the Secured Party thirty (30) days
prior written notice in which it sets forth its new name and the date on which
the new name shall first be used.  Debtor
shall maintain its principal place of business and chief executive office at
the address set forth in the beginning of this Security Agreement.  Debtor shall, at all times, keep the Secured
Party accurately informed in writing of each location where the Debtor’s assets
are kept and of each of its places of business and Debtor shall not remove any
records to another state or change the location or open or close, move or
change any existing or new place of business without giving the Secured Party
at least thirty (30) days’ prior written notice thereof.

 

(c)                                  Debtor
shall, at its expense, furnish to the Secured Party, upon the Secured Party’s
demand, such further information, shall promptly execute and deliver to the Secured
Party such financing statements and other agreements, instruments or documents,
and shall do all such acts as the Secured Party may, at any time or from time
to time, reasonably request, or as may be necessary or appropriate to establish
and maintain a valid and enforceable first security interest of the Secured
Party in the Collateral.

 

(d)                                 Debtor
shall keep the Collateral (to the extent that it consists of tangible property)
at all times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as the Secured Party may
reasonably require, including collision in the case of any motor vehicle, all
in such amounts, under such forms of policies, under such terms, for such
periods and written by such companies or underwriters as the Secured Party may
approve, which approval may not be unreasonably withheld, losses in all cases
to be payable first to the Secured Party “as its interest may appear.”  All policies of insurance shall provide for
at least thirty (30) days’ prior written notice of cancellation to the Secured
Party, and the Debtor shall furnish the Secured Party with certificates of such
insurance or other evidence satisfactory to the Secured Party as to compliance
with the provisions of this paragraph. 
Upon and after the occurrence of an Event of Default, Debtor hereby
irrevocably appoints the Secured Party to act as attorney-in-fact for the
Debtor in making, adjusting and settling claims under such policies of
insurance or endorsing the Debtor’s name on any drafts drawn by

 

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insurers of the Collateral or
any other document to effect collection; otherwise, the parties shall act by
mutual agreement to settle such claims, with the Secured Party reserving the
ultimate right to determine the application of such proceeds and settlement of
such claims.

 

(e)                                  Debtor
shall notify the Secured Party in writing promptly upon its learning of any
event, condition, loss, damage, litigation, administrative proceeding or other
circumstance which may materially and adversely affect the assets, liabilities,
financial condition, business or prospects of the Debtor or the Secured Party’s
security interest in the Collateral.

 

(f)                                    Debtor
shall keep the Collateral in good order and repair, will not waste or destroy
the Collateral or any part thereof and will not use the Collateral in violation
of any applicable statute, ordinance or policy of insurance thereon.  The Secured Party may examine and inspect the
Collateral, the Debtor’s books and records and any documents or instruments
relating to the Collateral at any reasonable time or times wherever located.

 

(g)                                 At
its option, but without obligation to do so, the Secured Party may discharge
taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral; may place and pay for insurance on the Collateral;
may order and pay for the repair, maintenance and preservation of the
Collateral; and may pay any fees for filing or recording such instruments or
documents as may be necessary or desirable to perfect the security interest
granted herein.  The Debtor agrees to
reimburse the Secured Party on demand for any payment made or any expense
incurred by the Secured Party pursuant to the foregoing authorization, and all
such payments and expenses shall constitute part of the principal amount of
Obligations (as defined in the Loan Agreement) hereby secured.

 

(h)                                 If
any part of the Collateral is a fixture, the Debtor shall, on demand, use reasonable
efforts to furnish the Secured Party with a disclaimer or release signed by all
persons having an interest in the real estate or any interest in the Collateral
which is prior to the Secured Party’s interest.

 

(i)                                     All
representations now or hereafter made by the Debtor to the Secured Party,
whether in this Security Agreement or in any supporting or supplemental
documentation or statement are, will be, and shall continue to be true and
correct in all respects.

 

III.                                 Events
of Default

 

The occurrence of any Event of Default (as defined in the Loan
Agreement) shall constitute an “Event of Default” under this Security
Agreement.

 

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IV.                                Remedies

 

Upon and after the occurrence of an Event of Default, all of the
Obligations may, at the option of the Secured Party and without demand (except
for the necessity of demand for any demand Obligation), notice or legal process
of any kind, be declared, and immediately shall become, due and payable.

 

Upon and after the occurrence of an Event of Default, the Secured Party
shall have the following additional rights and remedies:

 

(a)                                  All of the
rights and remedies of a secured party under the Uniform Commercial Code or any
other applicable law or at equity, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by law, in addition to
any other rights and remedies contained in this Security Agreement or in any
document, instrument or agreement evidencing, governing or securing the Obligations.

 

(b)                                 The
right to (i) take possession of the Collateral, without resort to legal process
and without prior notice to Debtor, and for that purpose Debtor hereby
irrevocably appoints the Secured Party its attorney-in-fact to enter upon any
premises on which the Collateral or any part thereof may be situated and remove
the Collateral therefrom, or (ii) require the Debtor to assemble the Collateral
and make it available to Secured Party in a place to be designated by the
Secured Party that is reasonably convenient to the Debtor and the Secured
Party.  The Debtor shall make available
to the Secured Party all premises, locations and facilities necessary for the
Secured Party’s taking possession of the Collateral or for removing or putting
the Collateral in saleable form.

 

(c)                                  The
right to sell or otherwise dispose of all or any part of the Collateral by
public or private sale or sales.  Unless
the Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market, the Secured Party will give the
Debtor at least ten (10) days’ prior written notice of the time and place of
any public sale thereof or of the time after which any private sale or any
other intended disposition (which may include, without limitation, a public
sale or lease of all or part of the Collateral) is to be made.  The Debtor agrees that ten (10) days is a
reasonable time for such notice.  The
Secured Party, its employees, attorneys and agents may bid and become
purchasers at any such sale, if public, and may purchase at any private sale
any of the Collateral that is of a type customarily sold on a recognized market
or which is subject to widely distributed standard price quotations.  Any public or private sale shall be free from
any right of redemption which the Debtor waives and releases.  If there is a deficiency after such sale and
the application of the net proceeds from such sale, the Debtor shall be
responsible for the same, with interest.

 

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(d)                                 The
Secured Party shall have the right (and Debtor irrevocably appoints the Secured
Party as attorney-in-fact for the Debtor for this purpose, such appointment
being coupled with an interest), without prior notice to Debtor and without
resort to legal process, to notify the persons liable for payment of the
Accounts (as defined in the Uniform Commercial Code) at any time and direct
such persons to make payments directly to the Secured Party, and to perform all
acts the Debtor could take to collect on the Account, including, but without
limitation, the right to notify postal authorities to change the address for
delivery, open mail, endorse checks, bring collection suits, and realize upon
Collateral securing the Accounts.  At the
Secured Party’s request, all bills and statements sent by the Debtor to the
persons liable for payments of the Accounts shall state that they have been
assigned to, and are solely payable to, the Secured Party, and Debtor shall
direct persons liable for the payment of the Accounts to pay directly to the
Secured Party any sums due or to become due on account thereof.

 

(e)                                  The
Secured Party may after the occurrence and during the continuance of an Event
of Default without demand or notice apply and set off any or all of the
Deposits and Securities against, any and all Obligations even though such
Obligations be unmatured, and regardless of the adequacy of any other
collateral securing such Obligations.

 

V.                                    Waivers

 

(a)                                  THE
SECURED PARTY AND DEBTOR KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND IRREVOCABLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR
AGAINST THE SECURED PARTY OR THE DEBTOR IN RESPECT OF THIS SECURITY AGREEMENT,
ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THE
OBLIGATIONS HEREBY SECURED OR THE COLLATERAL.

 

(b)                                  DEBTOR
HEREBY ACKNOWLEDGES THAT THIS SECURITY AGREEMENT IS PART OF A COMMERCIAL
TRANSACTION.

 

(c)                                  THE DEBTOR WAIVES NOTICE OF NON-PAYMENT,
DEMAND, PRESENTMENT, PROTEST OR NOTICE OF PROTEST OF THE COLLATERAL AND ALL
OTHER NOTICES, CONSENTS TO ANY RENEWALS OR EXTENSIONS OF TIME OF PAYMENT
THEREOF AND GENERALLY WAIVES ANY AND ALL SURETYSHIP DEFENSES AND DEFENSES IN
THE NATURE THEREOF.

 

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VI.                                General

 

(a)                                  No
waiver by the Secured Party of any failure to pay or perform shall be effective
unless in writing nor operate as a waiver of any other failure to pay or
perform or of the same failure to pay or perform on a future occasion, nor
shall the failure or delay of the Secured Party to exercise, or the partial
exercise of, any right, power or privilege provided for hereunder in any
circumstances preclude the full exercise of such right, power or privilege in
the same or similar circumstances in the future or the exercise of any other
right or remedy.

 

(b)                                 This
Security Agreement is intended as the final, complete and exclusive statement
of the provisions contained in this Security Agreement.  No amendment, modification, termination or
waiver of any provision of this Security Agreement or consent to any departure
by the Debtor therefrom shall, in any event, be effective unless the same shall
be in writing and signed by the Secured Party. 
Any waiver of, or consent to any departure from, any provision of this
Security Agreement shall be effective only in the specific instance of and for
the specific purpose for which it is given, and shall not be deemed to extend
to similar situations or to the same situation at a subsequent time.  No notice to or demand upon the Debtor shall
in any case entitle Debtor to any other or further notice or demand in similar
or other circumstances.

 

(c)                                  The Debtor hereby irrevocably authorizes the
Secured Party at any time and from time to time to file financing statements
and amendments thereto in such locations and offices as the Secured Party shall
deem necessary or appropriate to perfect the security interest granted herein,
which such financing statements may (a) indicate the Collateral (i) as all
assets of the Debtor or words of similar effect regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article
9 of the Uniform Commercial Code, or (ii) as being of an equal or lesser scope
or with greater detail, and (b) contain any other information required by part
5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing
office acceptance of any financing statement or amendment.  Without limiting the generality of the
foregoing, such other information may include, among other things, (i) whether
the Debtor is an organization, the type of organization and any organization
identification number issued to the Debtor, and (ii) in the case of a financing
statement filed as a fixture filing or indication Collateral as as-extracted
collateral or timber to be cut, a sufficient description of real property to
which the Collateral relates.  The Debtor
agrees to furnish such information to the Secured Party promptly upon request.  The Debtor also ratifies its authorization
for the Secured Party to have filed any like initial financing statements or
amendments thereto if filed prior to the date hereof.

 

(d)                                 All
rights of the Secured Party hereunder shall inure to the benefit of its
successors and assigns, and all obligations of the Debtor shall bind its
successors and assigns.  The Secured
Party shall have the unrestricted right at any time or from time to time, and
without the Debtor’s consent, to assign all or any portion of its rights and

 

9

 

obligations hereunder to one or
more Secured Partys or other financial institutions (each, an “Assignee”),
and the Debtor agrees that it shall execute, or cause to be executed, such
documents, including without limitation, amendments hereto and to any other documents
executed in connection herewith or pursuant hereto as the Secured Party shall
deem necessary to effect the foregoing. 
Upon the execution and delivery of appropriate assignment documentation,
amendments and any other documentation required by the Secured Party in
connection with such assignment, and the payment by Assignee of the purchase
price agreed to by the Secured Party, and such Assignee, such Assignee shall
have all of the rights and obligations of the Secured Party hereunder (and
under any and all other loan documents) to the extent that such rights and
obligations have been assigned by the Secured Party pursuant to the assignment
documentation between the Secured Party and such Assignee, and the Secured
Party shall be released from its obligations hereunder and thereunder to a
corresponding extent.

 

(e)                                  Debtor
shall pay to the Secured Party on demand any and all costs and expenses,
including reasonable attorneys’ fees, costs and expenses and all costs and
expenses incurred or paid by the Secured Party in exercising, collecting,
establishing, defending, preserving, protecting, or enforcing any of its rights
in the Collateral or under any of the Obligations.

 

(f)                                    This
Agreement and the security interest created hereby shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.

 

(g)                                 Whenever
possible, each provision of this Security Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Security Agreement shall to any extent be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Security Agreement shall not be affected.

 

(h)                                 Upon
receipt of an affidavit of an officer of the Secured Party as to the loss,
theft, destruction or mutilation of this Security Agreement, and, in the case
of any such loss, theft, destruction or mutilation, upon cancellation of such
Security Agreement, the Debtor shall issue, in lieu thereof, a replacement agreement.

 

(i)                                     Debtor
hereby acknowledges receipt of a full completed copy of this Security
Agreement.

 

 

[Remainder of page intentionally left blank.]

 

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IN WITNESS
WHEREOF, Debtor has duly authorized and executed this Agreement as an
instrument under seal as of this 27th day of December, 2004.

 

 

	
  WITNESS:

  	
   

  	
  DEBTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  J.J. COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
  /s/ Mara D. Calame

  	
   

  	
   

  	
  By:

  	
  /s/ Olga L. Conley

  	
   

  
	
   

  	
   

  	
  Name: Olga L. Conley

  
	
   

  	
   

  	
  Title: President

  
						

 

11

 

SCHEDULE 1

Existing Liens

 

None.

 

12Exhibit 10.5

 

SECURITY AGREEMENT

 

J. Jill, GP, a Massachusetts general partnership (the “Debtor”)
having its chief executive office and principal place of business at 4
Batterymarch Park, Quincy, Massachusetts 02169, hereby grants to Citizens Bank
of Massachusetts, a Massachusetts banking corporation as Agent for the benefit
of and on behalf of all of the Lenders, as such term is defined in that certain
Fifth Amended and Restated Loan Agreement (collectively, the “Loan Agreement”)
dated as of June 29, 2001 as the same has been and may hereafter be amended
(the “Secured Party”), having an address at 28 State Street, Boston,
Massachusetts 02109, a first security interest in all of the Debtor’s present
and future right, title and interest in and to any and all of the following
property whether now existing or hereafter created and wherever located (all of
which is hereinafter called the “Collateral”):

 

All equipment and fixtures, as defined in the Uniform Commercial Code
(as defined below) and all machinery, tools, parts, furniture, furnishings,
motor vehicles and other personal property, tangible or intangible, presently
owned or hereafter acquired by the Debtor, together with additions and
accessions thereto and substitutions and replacements therefor, and the products
and proceeds (including insurance and condemnation proceeds) thereof;

 

All inventory and goods as
defined in the Uniform Commercial Code (the “Uniform Comercial Code”),
whether presently owned or hereafter acquired, including, without limitation, all
inventory in the possession of others or in transit, all goods held for sale or
lease or to be furnished under contracts for service or which have been so
furnished, raw materials, work in process, and materials used or consumed or to
be used or consumed in the business of the Debtor, and completed and unshipped
merchandise, and the products and proceeds (including insurance and
condemnation proceeds) of the foregoing;

 

All accounts, chattel paper, instruments, documents and general
intangibles, as defined in the Uniform Commercial Code, including those now
existing and those hereafter arising or coming into existence, and including,
without limitation, all rights of payment for goods sold or leased or services
rendered, all rights of payment under contracts whether or not currently due or
not yet earned by performance and accounts receivable arising or to arise
therefrom, and all rights of the Debtor in and to the goods represented thereby
including returned and repossessed goods, and all rights the Debtor may have or
acquire for securing or enforcing the foregoing, including, without limitation,
the rights to reserves, deposits, income tax refunds, choses in action,
judgments or insurance proceeds, and the products and proceeds of all of the
foregoing;

 

1

 

All goodwill, trade secrets, computer programs, customer lists, trade
names, trademarks, copyrights, franchises, licenses and patents and the
proceeds thereof;

 

All books and records relating to the conduct of Debtor’s business;

 

All deposit accounts maintained by the Debtor with the Secured Party or
other bank, trust company, investment firm or fund or any similar institution
or organization and the proceeds thereof;

 

Any deposits, credits,
collateral or property of the Debtor at any time now or hereafter in the
possession, custody, or control of the Secured Party or any entity under the
control of the Secured Party or any affiliate of the Secured Party or in
transit to any of them and the proceeds thereof (the “Deposits and
Securities”);

 

All investment property, including, without limitation, all financial
assets, all certificated and uncertificated securities, security entitlements,
security accounts, commodity accounts and commodity contracts;

 

The Collateral shall include, without limitation,
the following categories of assets as defined in Article 9 of the Uniform
Commercial Code: goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper (whether tangible
or electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, general intangibles (including payment
intangibles and software), supporting obligations and any and all proceeds of
any thereof, wherever located, whether now owned and hereafter acquired.  If the Debtor shall at any time acquire a commercial
tort claim, as defined in Article 9, the Debtor shall immediately notify the
Secured Party in a writing signed by the Debtor of the brief details thereof
and grant to the Secured Party in such writing a security interest therein and
in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to the Secured Party.

 

To secure the payment and performance of all liabilities and
obligations now or hereafter owing from the Debtor to the Secured Party of
whatever kind or nature, whether or not currently contemplated at the time of
this Security Agreement, whether such obligations be direct or indirect,
absolute or contingent or due or to become due, including all obligations of
the Debtor, actual or contingent, in respect of letters of credit or Secured
Partyer’s acceptances issued by the Secured Party for the account of or
guaranteed by the Debtor, and all obligations of any partnership, trust, joint
venture or any other entity guaranteed by the Debtor, now existing or hereafter arising, or as to which Debtor is or may
become personally liable, (the “Obligations”), which term shall

 

2

 

include all accrued interest
and all costs and expenses, including reasonable attorney’s fees, costs and
expenses relating to the appraisal and/or valuation of assets and all costs and
expenses incurred or paid by the Secured Party in exercising, preserving,
defending, collecting, enforcing, or protecting any of its rights under the
Obligations or hereunder or with respect to the Collateral or in any litigation
arising out of the transactions evidenced by the Obligations).  Upon and after the occurrence of an Event of
Default, the Secured Party shall have the unrestricted right from time to time
to apply (or to change any application already made) the proceeds of any of the
Collateral to any Obligations, as the Secured Party, in its sole discretion,
may determine.

 

I.                                         Representations
and Warranties of Debtor

 

The Debtor hereby represents and warrants that:

 

(a)                                  Debtor
is duly organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts.  Debtor is
qualified to do business in every state in which the nature of its business
conducted or the character of its property owned in such state would require
such qualification.

 

(b)                                 Debtor
has the power to execute, deliver and perform this Security Agreement, to
borrow from the Secured Party or to guaranty to the Secured Party the
obligations of others.  The execution,
delivery and performance of this Security Agreement and any notes, guaranties
or other documents, instruments or agreements evidencing Debtor’s obligations
to the Secured Party have been duly authorized, and will not violate its partnership
agreement or other organizational documents, or any law, regulation or court
order, and will not result in a default under any agreement or indenture to
which the Debtor is a party.

 

(c)                                  Debtor
has furnished to the Secured Party such tax returns, financial statements,
including balance sheets and income statements showing profit (or loss) and
other information about the Debtor’s financial condition as the Secured Party
shall have requested.  These tax returns,
financial statements and other information fairly present the financial
condition of the Debtor for the periods then ended, reflect all known
liabilities, direct or contingent, and, if financial statements, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis.  There has been no
material adverse change in the assets, liabilities, financial conditions,
business or prospects of Debtor since the date of any financial statements, tax
returns or other information delivered to the Secured Party.

 

(d)                                 Debtor
has good and marketable title to the property and assets which are reflected on
its financial statements, tax returns or other information.  Except as otherwise set forth on Schedule 1 annexed hereto under the
heading “Existing Liens”, all of the

 

3

 

Collateral is owned by the
Debtor free and clear of all liens, pledges, security interests, encumbrances
and mortgages, except for liens, pledges, security interests, encumbrances or
mortgages in favor of the Secured Party. 
No effective financing statement covering the Collateral or any proceeds
thereof is on file in any public office except as disclosed in writing to the
Secured Party.

 

(e)                                  There
is no suit or proceeding at law or in equity affecting the Debtor or any of its
properties which, if adversely determined, would materially impair the rights
of the Debtor to carry on its business substantially as it is now being
conducted or would have a material adverse effect upon the financial condition
of the Debtor.  The Debtor is not a party
to any document, agreement or instrument, and is not subject to any charge,
order or other restriction, materially and adversely affecting its business,
properties, assets, operations or condition, financial or otherwise, except as
previously disclosed to the Secured Party in writing.

 

(f)                                    Debtor
has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid all taxes and other charges that are due
and payable.

 

(g)                                 Debtor
is not in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any document, agreement or
instrument to which Debtor is a party, except for minor defaults in agreements
which neither individually nor in the aggregate have a material adverse effect
on the Debtor.

 

(h)                                 Debtor
has not, during the preceding five (5) years, changed its name, been a party to
a merger, or used any other corporate or fictitious name except as previously
described to the Secured Party in writing.

 

(i)                                     The
place where Debtor keeps its records concerning the Collateral, the Debtor’s
principal place of business and the Debtor’s chief executive office is the
location set forth at the beginning of this Security Agreement.  The Collateral is now and will continue to be
kept at the location set forth at the beginning of this Security Agreement.

 

(j)                                     If
any of the Collateral is to be attached to real estate, a description of said
real estate has been or will be delivered to the Secured Party and the name and
address of each record owner will be provided in writing to Secured Party on
Demand.

 

4

 

II.                                     Covenants
of Debtor

 

The Debtor hereby agrees and covenants that:

 

(a)                                  Debtor
shall keep the Collateral free from all liens, security interests and
encumbrances except for the security interest granted herein or those
specifically permitted in writing by the Secured Party, and shall defend the
Collateral against all claims and demands of all persons at any time claiming
any interest therein.  The Debtor shall
not sell or otherwise transfer the Collateral or any interest therein except in
the ordinary course of business.

 

(b)                                 Debtor
shall not change its name without giving the Secured Party thirty (30) days
prior written notice in which it sets forth its new name and the date on which
the new name shall first be used.  Debtor
shall maintain its principal place of business and chief executive office at
the address set forth in the beginning of this Security Agreement.  Debtor shall, at all times, keep the Secured
Party accurately informed in writing of each location where the Debtor’s assets
are kept and of each of its places of business and Debtor shall not remove any
records to another state or change the location or open or close, move or
change any existing or new place of business without giving the Secured Party
at least thirty (30) days’ prior written notice thereof.

 

(c)                                  Debtor
shall, at its expense, furnish to the Secured Party, upon the Secured Party’s
demand, such further information, shall promptly execute and deliver to the
Secured Party such financing statements and other agreements, instruments or
documents, and shall do all such acts as the Secured Party may, at any time or
from time to time, reasonably request, or as may be necessary or appropriate to
establish and maintain a valid and enforceable first security interest of the
Secured Party in the Collateral.

 

(d)                                 Debtor
shall keep the Collateral (to the extent that it consists of tangible property)
at all times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as the Secured Party may
reasonably require, including collision in the case of any motor vehicle, all
in such amounts, under such forms of policies, under such terms, for such
periods and written by such companies or underwriters as the Secured Party may
approve, which approval may not be unreasonably withheld, losses in all cases
to be payable first to the Secured Party “as its interest may appear.”  All policies of insurance shall provide for
at least thirty (30) days’ prior written notice of cancellation to the Secured
Party, and the Debtor shall furnish the Secured Party with certificates of such
insurance or other evidence satisfactory to the Secured Party as to compliance
with the provisions of this paragraph. 
Upon and after the occurrence of an Event of Default, Debtor hereby
irrevocably appoints the Secured Party to act as attorney-in-fact for the
Debtor in making, adjusting and settling claims under such policies of
insurance or endorsing the Debtor’s name on any drafts drawn by

 

5

 

insurers of the Collateral or
any other document to effect collection; otherwise, the parties shall act by
mutual agreement to settle such claims, with the Secured Party reserving the
ultimate right to determine the application of such proceeds and settlement of
such claims.

 

(e)                                  Debtor
shall notify the Secured Party in writing promptly upon its learning of any
event, condition, loss, damage, litigation, administrative proceeding or other
circumstance which may materially and adversely affect the assets, liabilities,
financial condition, business or prospects of the Debtor or the Secured Party’s
security interest in the Collateral.

 

(f)                                    Debtor
shall keep the Collateral in good order and repair, will not waste or destroy
the Collateral or any part thereof and will not use the Collateral in violation
of any applicable statute, ordinance or policy of insurance thereon.  The Secured Party may examine and inspect the
Collateral, the Debtor’s books and records and any documents or instruments
relating to the Collateral at any reasonable time or times wherever located.

 

(g)                                 At
its option, but without obligation to do so, the Secured Party may discharge
taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral; may place and pay for insurance on the Collateral;
may order and pay for the repair, maintenance and preservation of the
Collateral; and may pay any fees for filing or recording such instruments or
documents as may be necessary or desirable to perfect the security interest
granted herein.  The Debtor agrees to
reimburse the Secured Party on demand for any payment made or any expense
incurred by the Secured Party pursuant to the foregoing authorization, and all
such payments and expenses shall constitute part of the principal amount of
Obligations (as defined in the Loan Agreement) hereby secured.

 

(h)                                 If
any part of the Collateral is a fixture, the Debtor shall, on demand, use
reasonable efforts to furnish the Secured Party with a disclaimer or release
signed by all persons having an interest in the real estate or any interest in
the Collateral which is prior to the Secured Party’s interest.

 

(i)                                     All
representations now or hereafter made by the Debtor to the Secured Party,
whether in this Security Agreement or in any supporting or supplemental
documentation or statement are, will be, and shall continue to be true and
correct in all respects.

 

6

 

III.                                 Events
of Default

 

The occurrence of any Event of Default (as defined in the Loan
Agreement) shall constitute an “Event of Default” under this Security
Agreement.

 

IV.                                Remedies

 

Upon and after the occurrence of an Event of Default, all of the
Obligations may, at the option of the Secured Party and without demand (except
for the necessity of demand for any demand Obligation), notice or legal process
of any kind, be declared, and immediately shall become, due and payable.

 

Upon and after the occurrence of an Event of Default, the Secured Party
shall have the following additional rights and remedies:

 

(a)                                  All of the
rights and remedies of a secured party under the Uniform Commercial Code or any
other applicable law or at equity, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by law, in addition to
any other rights and remedies contained in this Security Agreement or in any
document, instrument or agreement evidencing, governing or securing the
Obligations.

 

(b)                                 The
right to (i) take possession of the Collateral, without resort to legal process
and without prior notice to Debtor, and for that purpose Debtor hereby
irrevocably appoints the Secured Party its attorney-in-fact to enter upon any
premises on which the Collateral or any part thereof may be situated and remove
the Collateral therefrom, or (ii) require the Debtor to assemble the Collateral
and make it available to Secured Party in a place to be designated by the
Secured Party that is reasonably convenient to the Debtor and the Secured
Party.  The Debtor shall make available
to the Secured Party all premises, locations and facilities necessary for the
Secured Party’s taking possession of the Collateral or for removing or putting
the Collateral in saleable form.

 

(c)                                  The
right to sell or otherwise dispose of all or any part of the Collateral by
public or private sale or sales.  Unless
the Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market, the Secured Party will give the
Debtor at least ten (10) days’ prior written notice of the time and place of
any public sale thereof or of the time after which any private sale or any
other intended disposition (which may include, without limitation, a public
sale or lease of all or part of the Collateral) is to be made.  The Debtor agrees that ten (10) days is a
reasonable time for such notice.  The
Secured Party, its employees, attorneys and agents may bid and become
purchasers at any such sale, if public, and may purchase at any private sale
any of the Collateral that is of a type customarily sold on a recognized market
or which is subject

 

7

 

to widely distributed standard
price quotations.  Any public or private
sale shall be free from any right of redemption which the Debtor waives and
releases.  If there is a deficiency after
such sale and the application of the net proceeds from such sale, the Debtor
shall be responsible for the same, with interest.

 

(d)                                 The
Secured Party shall have the right (and Debtor irrevocably appoints the Secured
Party as attorney-in-fact for the Debtor for this purpose, such appointment
being coupled with an interest), without prior notice to Debtor and without
resort to legal process, to notify the persons liable for payment of the
Accounts (as defined in the Uniform Commercial Code) at any time and direct
such persons to make payments directly to the Secured Party, and to perform all
acts the Debtor could take to collect on the Account, including, but without
limitation, the right to notify postal authorities to change the address for
delivery, open mail, endorse checks, bring collection suits, and realize upon
Collateral securing the Accounts.  At the
Secured Party’s request, all bills and statements sent by the Debtor to the
persons liable for payments of the Accounts shall state that they have been
assigned to, and are solely payable to, the Secured Party, and Debtor shall
direct persons liable for the payment of the Accounts to pay directly to the
Secured Party any sums due or to become due on account thereof.

 

(e)                                  The
Secured Party may after the occurrence and during the continuance of an Event
of Default without demand or notice apply and set off any or all of the
Deposits and Securities against, any and all Obligations even though such
Obligations be unmatured, and regardless of the adequacy of any other collateral
securing such Obligations.

 

V.                                    Waivers

 

(a)                                  THE
SECURED PARTY AND DEBTOR KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND IRREVOCABLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR
AGAINST THE SECURED PARTY OR THE DEBTOR IN RESPECT OF THIS SECURITY AGREEMENT,
ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THE
OBLIGATIONS HEREBY SECURED OR THE COLLATERAL.

 

(b)                                  DEBTOR
HEREBY ACKNOWLEDGES THAT THIS SECURITY AGREEMENT IS PART OF A COMMERCIAL
TRANSACTION.

 

(c)                                  THE DEBTOR WAIVES NOTICE OF NON-PAYMENT,
DEMAND, PRESENTMENT, PROTEST OR NOTICE OF PROTEST OF THE COLLATERAL AND ALL
OTHER NOTICES, CONSENTS TO ANY

 

8

 

RENEWALS OR EXTENSIONS OF
TIME OF PAYMENT THEREOF AND GENERALLY WAIVES ANY AND ALL SURETYSHIP DEFENSES
AND DEFENSES IN THE NATURE THEREOF.

 

VI.                                General

 

(a)                                  No
waiver by the Secured Party of any failure to pay or perform shall be effective
unless in writing nor operate as a waiver of any other failure to pay or
perform or of the same failure to pay or perform on a future occasion, nor
shall the failure or delay of the Secured Party to exercise, or the partial
exercise of, any right, power or privilege provided for hereunder in any
circumstances preclude the full exercise of such right, power or privilege in
the same or similar circumstances in the future or the exercise of any other
right or remedy.

 

(b)                                 This
Security Agreement is intended as the final, complete and exclusive statement
of the provisions contained in this Security Agreement.  No amendment, modification, termination or
waiver of any provision of this Security Agreement or consent to any departure
by the Debtor therefrom shall, in any event, be effective unless the same shall
be in writing and signed by the Secured Party. 
Any waiver of, or consent to any departure from, any provision of this
Security Agreement shall be effective only in the specific instance of and for
the specific purpose for which it is given, and shall not be deemed to extend to
similar situations or to the same situation at a subsequent time.  No notice to or demand upon the Debtor shall
in any case entitle Debtor to any other or further notice or demand in similar
or other circumstances.

 

(c)                                  The
Debtor hereby irrevocably authorizes the Secured Party at any time and from
time to time to file financing statements and amendments thereto in such
locations and offices as the Secured Party shall deem necessary or appropriate
to perfect the security interest granted herein, which such financing
statements may (a) indicate the Collateral (i) as all assets of the Debtor or
words of similar effect regardless of whether any particular asset comprised in
the Collateral falls within the scope of Article 9 of the Uniform Commercial
Code, or (ii) as being of an equal or lesser scope or with greater detail, and
(b) contain any other information required by part 5 of Article 9 of the
Uniform Commercial Code for the sufficiency or filing office acceptance of any
financing statement or amendment. 
Without limiting the generality of the foregoing, such other information
may include, among other things, (i) whether the Debtor is an organization, the
type of organization and any organization identification number issued to the
Debtor, and (ii) in the case of a financing statement filed as a fixture filing
or indication Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates.  The Debtor agrees to furnish such information
to the Secured Party promptly upon request. 
The Debtor also ratifies its authorization for the

 

9

 

Secured Party to have filed any
like initial financing statements or amendments thereto if filed prior to the
date hereof.

 

(d)                                 All
rights of the Secured Party hereunder shall inure to the benefit of its
successors and assigns, and all obligations of the Debtor shall bind its
successors and assigns.  The Secured
Party shall have the unrestricted right at any time or from time to time, and
without the Debtor’s consent, to assign all or any portion of its rights and
obligations hereunder to one or more Secured Partys or other financial
institutions (each, an “Assignee”), and the Debtor agrees that it shall
execute, or cause to be executed, such documents, including without limitation,
amendments hereto and to any other documents executed in connection herewith or
pursuant hereto as the Secured Party shall deem necessary to effect the
foregoing.  Upon the execution and delivery
of appropriate assignment documentation, amendments and any other documentation
required by the Secured Party in connection with such assignment, and the
payment by Assignee of the purchase price agreed to by the Secured Party, and
such Assignee, such Assignee shall have all of the rights and obligations of
the Secured Party hereunder (and under any and all other loan documents) to the
extent that such rights and obligations have been assigned by the Secured Party
pursuant to the assignment documentation between the Secured Party and such
Assignee, and the Secured Party shall be released from its obligations
hereunder and thereunder to a corresponding extent.

 

(e)                                  Debtor
shall pay to the Secured Party on demand any and all costs and expenses,
including reasonable attorneys’ fees, costs and expenses and all costs and
expenses incurred or paid by the Secured Party in exercising, collecting,
establishing, defending, preserving, protecting, or enforcing any of its rights
in the Collateral or under any of the Obligations.

 

(f)                                    This
Agreement and the security interest created hereby shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts.

 

(g)                                 Whenever
possible, each provision of this Security Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Security Agreement shall to any extent be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Security Agreement shall not be affected.

 

(h)                                 Upon
receipt of an affidavit of an officer of the Secured Party as to the loss,
theft, destruction or mutilation of this Security Agreement, and, in the case
of any such loss, theft, destruction or mutilation, upon cancellation of such
Security Agreement, the Debtor shall issue, in lieu thereof, a replacement
agreement.

 

10

 

(i)                                     Debtor
hereby acknowledges receipt of a full completed copy of this Security Agreement.

 

 

[Remainder of page intentionally left blank.]

 

11

 

IN WITNESS
WHEREOF, Debtor has duly authorized and executed this Agreement as an
instrument under seal as of this 27th day of December, 2004.

 

 

	
  WITNESS:

  	
   

  	
  DEBTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  J. JILL, GP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  J.J. COMPANY, INC.

  
	
   

  	
   

  	
   

  	
  Its Managing General Partner

  
	
   

  	
   

  	
   

  
	
  /s/ Mara D. Calame

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Olga L. Conley

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Olga L. Conley

  
	
   

  	
   

  	
   

  	
  Title: President

  
							

 

12

 

SCHEDULE 1

Existing Liens

 

None.

 

13

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