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AMENDED AND RESTATED
BORROWER SECURITY AGREEMENT
AMENDED AND RESTATED BORROWER SECURITY AGREEMENT, dated as of October
3, 1996, between PAYLESS CASHWAYS, INC., an Iowa corporation (the "Borrower"),
and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Administrative Agent
and as Collateral Agent (in such capacities, together with any successor
administrative agent or successor collateral agent, the "Administrative Agent"
and the "Collateral Agent", respectively) for the benefit of the Secured Parties
(as hereinafter defined).
W I T N E S S E T H :
WHEREAS, pursuant to that certain Credit Agreement, dated as of
November 18, 1994, as amended and restated pursuant to that certain Amended and
Restated Credit Agreement, dated as of November 20, 1995 (the "Existing Credit
Agreement"), among the Borrower, the Administrative Agent, the Collateral Agent,
The Bank of Nova Scotia, NationsBank of Texas, N.A. and Bank of America National
Trust and Savings Association, as Co-Agents (in such capacity, the "Co-Agents"),
Canadian Imperial Bank of Commerce, as letter of credit bank (together with any
Lender (as defined in the Credit Agreement referred to below) which is a
commercial bank and is designated as the Letter of Credit Bank in accordance
with the Credit Agreement (as hereinafter defined), the Letter of Credit Bank )
and the Restructuring Lenders, (as defined in the Credit Agreement hereinafter
referred to) the Restructuring Lenders and the Letter of Credit Bank severally
agreed to restructure and extend credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower and the Merchandise Letter of Credit Bank (as
defined in the Credit Agreement) are parties to the Letter of Credit Issuance
and Reimbursement Agreement, dated as of November 18, 1994, as amended (as such
agreement may be amended, supplemented, otherwise modified or replaced from time
to time with the consent of the Majority Lenders (as defined in the Credit
Agreement), the "Merchandise Letter of Credit Facility"), pursuant to which the
Merchandise Letter of Credit Bank makes available to the Borrower up to
$15,000,000 of commercial letters of credit at any one time outstanding (the
"Merchandise Letters of Credit");
WHEREAS, the Borrower and the Hedging Bank (as defined in the Credit
Agreement) are parties to that certain ISDA Master Agreement, dated as of May
22, 1995, together with all schedules executed in connection therewith (as
amended, modified and supplemented from time to time, the "Hedging Agreement");
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WHEREAS, the Borrower has existing cash management arrangements with
the Existing Cash Management Banks (as defined in the Credit Agreement) and is
entering into a new cash management arrangement for its primary cash management
operations with the New Cash Management Bank (as defined in the Credit
Agreement);
WHEREAS, the Borrower has an existing $500,000 foreign currency
exchange line with the Foreign Exchange Bank (as defined in the Credit
Agreement);
WHEREAS, the Borrower and the Collateral Agent are parties to that
certain Borrower Security Agreement, dated as of November 18, 1994 (the
"Existing Security Agreement"), pursuant to which the Borrower has granted to
the Collateral Agent a security interest in certain of the Borrower's assets to
secure all of the Existing Obligations (as defined in the Credit Agreement);
WHEREAS, contemporaneously herewith, the Administrative Agent, the
Collateral Agent, the Co-Agents, the Letter of Credit Bank, and the Lenders are
entering into an Amended and Restated Credit Agreement, dated as of the date
hereof (as amended, amended and restated, modified and supplemented from time to
time, the "Credit Agreement"), pursuant to which, inter alia, the Swingline
Lenders (as defined in the Credit Agreement) have agreed to make a $60,000,000
senior secured swingline revolving loan facility available to the Borrower, and
the Restructuring Lenders (as defined in the Credit Agreement) have agreed to
restructure the Existing Obligations, in each case, upon the terms and subject
to the conditions set forth therein;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement that the Borrower shall have executed and delivered to the Collateral
Agent this Amended and Restated Security Agreement (as amended, modified and
supplemented from time to time, this "Security Agreement") for the benefit of
the Secured Parties;
NOW, THEREFORE, in consideration of the premises and (i) to induce the
Administrative Agent, the Collateral Agent, the Co-Agents, the Letter of Credit
Bank and the Lenders to enter into the Credit Agreement, (ii) to induce the
Lenders to make and continue their respective loans, and for the Letter of
Credit Bank to continue to issue, and for the Lenders to continue to participate
in, the letters of credit (the "Bank Letters of Credit ) provided for under the
Credit Agreement, (iii) in connection with the Merchandise Letter of Credit
Bank's continued issuance of the Merchandise Letters of Credit provided for
under the Merchandise Letter of Credit Facility, (iv) to induce the New Cash
Management Bank and the Existing Cash Management Banks to continue to provide
their respective cash management services for the Borrower's cash management
operations, (v) to induce the Foreign Exchange Bank to continue to provide a
foreign exchange line, and (vi) for other
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good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower hereby agrees with the Collateral Agent and the
Administrative Agent, for the benefit of the Secured Parties as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms which are
defined in the Credit Agreement and used herein are so used as so defined; and
the following terms shall have the following meanings:
"Account" means any right to payment for goods sold or leased
or for services rendered which is not evidenced by an Instrument or
Chattel Paper, whether or not it has been earned by performance.
"Chattel Paper" means a writing or writings (including,
without limitation, one or more Instruments) which evidence both a
monetary obligation and a security interest in or a lease of specific
goods (other than a vessel).
"Code" means the Uniform Commercial Code as from time to time
in effect in the State of New York.
"Collateral" shall have the meaning assigned to it in Section
2 hereof.
"Contractor Receivables" means those certain commercial credit
accounts sold by the Borrower and its Subsidiaries (including any
documents, instruments, chattel paper or intangibles evidencing any
such transferred receivable or the transaction giving rise thereto) (i)
pursuant to the terms of the GE Credit Program Documents or (ii) to any
other Person pursuant to any similar contractual arrangement (but in
such case solely to the extent such an arrangement is permitted by
Section 8.16 of the Credit Agreement).
"Contracts" means all contracts of the Borrower listed on
Schedule I hereto and any interest rate swap, cap or other interest
rate protection arrangement, as the same may from time to time be
amended, supplemented or otherwise modified, including, without
limitation, (a) all rights of the Borrower to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights
of the Borrower to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of the Borrower to perform and to
exercise all remedies thereunder.
"Document" means a document of title (as defined in the UCC as
defined in the Credit Agreement) and a receipt in the nature of a
warehouse receipt issued for goods stored under a statute requiring a
bond against withdrawal or a license for the issuance of such receipts.
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"Equipment" means Goods which are used or bought for use
primarily in business.
"Farm Products" means crops or livestock or supplies used or
produced in farming operations or if they are products of crops or
livestock in their unmanufactured states and if they are in the
possession of a debtor engaged in raising, fattening, grazing or other
farming operations.
"Fixtures" means goods which have become so related to
particular real estate that an interest in them arises under real
estate law.
"GECC" means General Electric Credit Corporation, a New York
corporation.
"GECC Receivables" means receivables (i) payable to the
Borrower and its Subsidiaries by Monogram or GECC pursuant to the terms
of the GE Credit Program Documents arising out of private label credit
card sales or commercial credit account sales of merchandise or
services made by the Borrower and its Subsidiaries or (ii) payable to
or purchased by any other Person pursuant to any similar contractual
arrangement (but in such case solely to the extent such an arrangement
is permitted by Section 8.16 of the Credit Agreement).
"GE Credit Program Documents" means (a) the Monogram Credit
Card Bank of Georgia Program Agreement, dated as of November 27, 1989,
between the Borrower, Somerville and Monogram, together with any
agreements entered into by the Borrower and Monogram, or any affiliate
of Monogram, in replacement of such agreement, as such agreement or any
such replacement agreement has been or may hereafter be amended,
restated, supplemented or modified from time to time; and (b) the
Commercial Credit Account Purchase and Service Program Agreement, dated
as of April 8, 1991, between the Borrower and GECC, as amended and
restated by the Amended and Restated Commercial Credit Account Purchase
and Service Program Agreement, effective as of November 28, 1993,
together with any agreements entered into by the Borrower and GECC, or
any affiliate of GECC, in replacement of such agreement, as such
agreement or any such replacement agreement has been or may hereafter
be further amended, restated, supplemented or modified from time to
time.
"General Intangibles" means any personal property (including
things in action) other than Accounts, Chattel Paper, Documents, Goods,
Instruments and money (as defined in the UCC).
"Goods" means all things which are movable at the time a
security interest in them attaches or which are Fixtures but does not
include money (as defined in the UCC), Accounts,
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Chattel Paper, Documents, General Intangibles, Instruments or minerals
or the like before extraction.
"Instrument" means a negotiable instrument (as defined in the
UCC) or a certificated security (as defined in the UCC) or any other
writing which evidences a right to the payment of money and is not
itself a security agreement or lease and is of a type which is in the
ordinary course of business transferred by delivery with any necessary
indorsement or assignment.
"Inventory" means all goods and merchandise now owned or
hereafter acquired by the Borrower (wherever located, whether in the
possession of the Borrower or of a bailee or other person for sale,
storage, transit, processing, use or otherwise, consisting of whole
goods, components, supplies, materials, returned or repossessed goods
or goods consigned by the Borrower to a third party) which are held for
sale or lease or to be furnished (or have been furnished) under any
contract of service or which are raw materials, work in process,
finished goods or materials used or consumed in the Borrower's business
or processed by or on behalf of the Borrower.
"Keeper" has the meaning set forth in Section 9(b) hereof.
"Liened Trademarks" has the meaning set forth in Section 5(q)
hereof.
"Louisiana Collateral" has the meaning set forth in Section
9(b) hereof.
"Monogram" means Monogram Credit Card Bank of Georgia, a
Georgia banking corporation.
"Monogram Receivables" means all obligations now or hereafter
owing to, and all rights now or hereafter acquired by, Monogram arising
out of any of the private label credit card sales referred to in clause
(i) of the definition of "GECC Receivables."
"Obligations" means (i) the unpaid principal amount of the
Loans and Reimbursement Obligations, (ii) interest (including, without
limitation, interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and interest
accruing at the then applicable rate provided in the Credit Agreement
or other applicable agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Borrower) on the Loans, the
Reimbursement Obligations and on all other
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obligations and liabilities secured hereby and (iii) all other
obligations and liabilities of the Borrower to the Secured Parties,
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, the Notes, the Bank
Letters of Credit, the Merchandise Letter of Credit Facility, the
Merchandise Letters of Credit, this Security Agreement, the other
Credit Documents, the Hedging Agreement, the Cash Management
Obligations, the Foreign Exchange Obligations, and any other document
made, delivered or given in connection therewith or herewith, in each
case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to any of the Secured
Parties that are required to be paid by the Borrower pursuant to the
terms of the Credit Agreement, the Merchandise Letter of Credit
Facility, this Security Agreement, the other Credit Documents, the
Hedging Agreement, the agreements in respect of the Cash Management
Obligations, the Foreign Exchange Obligations or any other Credit
Document) or otherwise.
"Permitted Liens" means the Liens set forth on Schedule II
hereto.
"Proceeds" means whatever is received upon the sale, exchange,
collection or other disposition of Collateral or proceeds of Collateral
and includes (without limitation) insurance payable by reason of loss
or damage to Collateral.
"Secured Parties" means the Collateral Agent, the
Administrative Agent, the Co-Agents, the Lenders, the Letter of Credit
Bank, the Hedging Bank, the Foreign Exchange Bank, the Existing Cash
Management Banks, the New Cash Management Bank and the Merchandise
Letter of Credit Bank.
"Trademark License" means any agreement, written or oral,
providing for the grant by or to the Borrower of any right to use any
Trademark.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers
owned by the Borrower, and the goodwill associated therewith, now
existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
whether 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, or otherwise and
(b) all renewals thereof.
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"Vehicles" means all cars, trucks, trailers, construction and
earth moving equipment and other vehicles covered by a certificate of
title law of any state and, in any event, shall include, without
limitation, the vehicles set forth on that certain Car and Light Truck
Inventory list on Schedule V hereto and that certain Delivery Truck
Fleet Inventory list on Schedule V hereto (collectively, the "Vehicle
Lists") and all tires and other appurtenances to any of the foregoing.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Security Agreement shall refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement, and section and paragraph references are to this Security Agreement
unless otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) The Collateral Agent acknowledges that, for purposes of this
Security Agreement, (i) the private label credit card sales and commercial
account sales referred to in clause (i) of the definition of "GECC Receivables"
constitute extensions of credit directly from Monogram to cardholders or true
sales of accounts and indebtedness from the Borrower to GECC, (ii) the Borrower
has no right, title or interest in or to any Monogram Receivables or Contractor
Receivables, except to the extent Borrower purchases such receivables pursuant
to the terms of the GE Credit Program Documents and (iii) except to the extent
so purchased by the Borrower, no Monogram Receivable or Contractor Receivable
shall constitute Collateral (or any category of property included within the
definition thereof) for purposes of this Security Agreement. The Collateral
Agent agrees with the Borrower that neither the security interest created herein
nor any related financing statements may be assigned by the Collateral Agent
unless, prior to any such assignments, such financing statements are amended (a)
to include the definition of "GE Credit Program Documents" set forth herein, and
(b) specifically to exclude the Monogram Receivables and the Contractor
Receivables from the collateral covered by such financing statements.
2. Grant of Security Interest. (a) As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Borrower hereby
pledges, hypothecates, assigns, transfers and grants to the Collateral Agent,
for the ratable benefit of the Secured Parties as herein provided, a first
priority security interest and lien, senior to any and all other Liens (other
than any Permitted Liens which may be entitled to priority by operation of law),
in and on all of the Borrower's right, title and interest in and to the
following assets now owned
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or at any time hereafter acquired (collectively, the "Collateral"); provided,
that the Covered Obligations, the New Cash Management Obligations and the
Obligations owing to the Swingline Lenders in their capacity as such shall be
secured only by the Collateral referred to in clauses (vi) and (ix) below
(Fixtures and Inventory) and, to the extent the same relates thereto, by the
Collateral referred to in clauses (xiii), (xiv) and (xv) below (moneys and books
and records with respect to, and Proceeds and products of, Fixtures and
Inventory):
(i)all Accounts (it being agreed that no Contractor
Receivable or Monogram Receivable shall constitute
Collateral for purposes of this Security Agreement except
to the extent the Borrower purchases such receivables
pursuant to the terms of the GE Credit Program Documents
and that the security interest and lien granted hereby in
and on any Account representing a GECC Receivable shall be
subject and subordinate to perfected security interests in
or liens on such Account in favor of GECC or Monogram, as
well as to any rights of set-off or recoupment of GECC or
Monogram in respect of such Account);
(ii)all Chattel Paper;
(iii)all Contracts;
(iv)all Documents;
(v)all Equipment (including, without limitation,
mobile goods);
(vi)all Fixtures (except to the extent affixed to
properties subject to mortgages constituting Permitted
Liens) and all trade fixtures;
(vii)all General Intangibles including, without
limitation, all intercompany obligations owing to the
Borrower by any of its Subsidiaries (it being agreed that
the security interest and lien granted hereby in and on
any General Intangible representing a GECC Receivable or
other obligation of GECC or Monogram to the Borrower shall
be subject and subordinate to perfected security interests
in or liens on such General Intangible in favor of GECC or
Monogram, as well as to any rights of set-off or
recoupment of GECC or Monogram in respect of such General
Intangible);
(viii)all Instruments;
(ix)all Inventory (it being agreed that the security
interest and lien granted hereby in and on any
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Inventory constituting returned merchandise in respect of
a Contractor Receivable or a Monogram Receivable shall be
subject and subordinate to perfected security interests
in or liens on such Inventory in favor of GECC or
Monogram);
(x)all Trademark Licenses including (without
limitation) those on Schedule IV thereto;
(xi)all Trademarks, including (without limitation)
those listed on Schedule IV hereto;
(xii)all Vehicles;
(xiii)all money (including all cash and cash
equivalents and the like) whether or not held in any
deposit or other accounts;
(xiv)all books and records in whatever form in any
way pertaining to the Collateral; and
(xv)to the extent not otherwise included, all
Proceeds and products of any and all of the foregoing;
but excluding Collateral, if any, expressly subject to the liens in existence on
the date hereof granted under the Prudential Real Estate Financing or to any
Permitted Lien to the extent that the terms of the agreement granting such Lien
prohibits granting a second lien on such assets.
(b) Subject to the terms and conditions and relying on the
representations, warranties and covenants set forth herein and in the other
Credit Documents, the Existing Security Agreement is hereby amended and restated
in its entirety and each reference to this Security Agreement shall be deemed to
include a reference to the Existing Security Agreement as amended and restated
hereby. The Borrower agrees that the Liens and security interests granted under
the Existing Security Agreement, and the Borrower's obligations thereunder and
in respect thereof, are continuing, valid and enforceable and are not subject to
any defense, counterclaim, setoff or cause of action of any kind whatsoever.
3. Rights of Secured Parties; Limitations on Secured
Parties' Obligations.
(a) Borrower Remains Liable under Accounts and Contracts. Anything
herein to the contrary notwithstanding, the Borrower shall remain liable under
each of the Accounts and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Account and in
accordance with and pursuant to the terms and provisions of each such Contract.
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None of the Secured Parties shall have any obligation or liability under any
Account (or any agreement giving rise thereto) or under any Contract by reason
of or arising out of this Security Agreement or the receipt by such Secured
Party of any payment relating to such Account or Contract pursuant hereto, nor
shall any Secured Party be obligated in any manner to perform any of the
obligations of the Borrower under or pursuant to any Account (or any agreement
giving rise thereto) or under or pursuant to any Contract, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto) or under any Contract, to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
(b) Notice to Account Debtors and Contract Parties. Upon the request of
the Collateral Agent at any time after the occurrence and during the continuance
of an Event of Default, the Borrower shall notify account debtors on the
Accounts and parties to the Contracts that the Accounts and the Contracts have
been assigned to the Collateral Agent for the benefit of the Secured Parties,
and that payments in respect thereof shall be made directly to the Collateral
Agent. The Collateral Agent may in its own name or in the name of others
communicate with account debtors on the Accounts and parties to the Contracts to
verify with them to its satisfaction the existence, amount and terms of any
Accounts or Contracts.
(c) Analysis of Accounts. The Collateral Agent shall have the right to
make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Borrower shall furnish all such
assistance and information as the Collateral Agent may reasonably require in
connection therewith. At any time and from time to time, upon the Collateral
Agent's request and at the expense of the Borrower, the Borrower shall cause
independent public accountants or others satisfactory to the Collateral Agent to
furnish to the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(d) Collections on Accounts. The Collateral Agent hereby authorizes the
Borrower to collect the Accounts, and the Collateral Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Collateral Agent at any
time after the occurrence and during the continuance of an Event of Default, any
payments of Accounts, when collected by the Borrower, shall be forthwith (and,
in any event, within two Domestic Business Days) deposited by the Borrower in
the exact form received, duly indorsed by the Borrower to the Collateral Agent
if required, in a special collateral account maintained by the Collateral Agent
at its offices or at the
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offices of any Lender, subject to withdrawal by the Collateral Agent for the
account of the Secured Parties only, as hereinafter provided, and, until so
turned over, shall be held by the Borrower in trust for the Secured Parties,
segregated from other funds of the Borrower. Each deposit of any such Proceeds
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit. All Proceeds constituting
collections of Accounts while held by the Collateral Agent (or by the Borrower
in trust for the Secured Parties) shall continue to be collateral security for
all of the Obligations and shall not constitute payment thereof until applied as
hereinafter provided. At such intervals as may be agreed upon by the Borrower
and the Collateral Agent, or, if an Event of Default shall have occurred and be
continuing, at any time at the Collateral Agent's election, the Collateral Agent
shall cause the Administrative Agent to apply all or any part of the funds on
deposit in said special collateral account on account of the Obligations in such
order as is required by Section 9.2 of the Credit Agreement, and any part of
such funds which the Collateral Agent elects not to have the Administrative
Agent so apply and deems not required as collateral security for the Obligations
shall be paid over from time to time by the Collateral Agent to the Borrower or
to whomsoever may be lawfully entitled to receive the same. At the Collateral
Agent's request at any time when an Event of Default shall have occurred and be
continuing, the Borrower shall deliver to the Collateral Agent all original and
other documents evidencing, and relating to, the agreements and transactions
which gave rise to the Accounts, including, without limitation, all original
orders, invoices and shipping receipts.
4. Representations and Warranties. The Borrower hereby represents and
warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
Collateral Agent for the benefit of the Secured Parties pursuant to
this Security Agreement and the other Credit Documents and Permitted
Liens, the Borrower owns each item of the Collateral free and clear of
any and all Liens or claims of others. No effective security agreement,
financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Collateral Agent,
for the benefit of the Secured Parties pursuant to this Security
Agreement and the other Credit Documents or with respect to Permitted
Liens or other Liens permitted pursuant to Section 8.10 of the Credit
Agreement.
(b) Perfected First Priority Liens. Except with respect to any
Accounts owing from Governmental Authorities in which a security
interest cannot be perfected under the UCC, upon the filing in the
proper locations of appropriate UCC financing statements, the filing of
notices of lien or other
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documents with pertinent state motor vehicle offices (with respect to
Vehicles), the filing of this Security Agreement with the United States
Patent and Trademark Office (with respect to Trademarks) and the
transfer of possession to the Collateral Agent of any instruments or
other assets, a security interest in which must be perfected by
possession, the Liens granted pursuant to this Security Agreement (i)
constitute perfected Liens on the Collateral in favor of the Collateral
Agent, for the benefit of the Secured Parties, which are prior to all
other Liens on the Collateral (except for any Permitted Liens which may
be entitled to priority by operation of law) created or allowed by the
Borrower and in existence on the date hereof and (ii) are enforceable
as prior perfected Liens against all creditors of and purchasers from
the Borrower (other than purchasers of Inventory sold in the ordinary
course of the Borrower's business and other than unrelated third party
purchasers with respect to other asset dispositions permitted by
Section 8.11 of the Credit Agreement) and against any owner or
purchaser of the real property where any of the Inventory or Equipment
is located and any present or future creditor of the Borrower (other
than any holder of a purchase money lien on Inventory permitted by
Section 8.10(viii) of the Credit Agreement), or such owner or
purchaser, obtaining a Lien on such real property.
(c) Accounts. Any amount which is at any time represented by
the Borrower to the Lenders as owing by each account debtor in respect
of any Account constituting part of the Collateral will at such time be
the correct amount actually owing by such account debtor thereunder. No
amount payable to the Borrower under or in connection with any Account
is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Collateral Agent. As of the Closing Date, the Borrower
keeps its records concerning all the Accounts at the locations listed
on Schedule III hereto.
(d) Contracts. No consent of any party (other than the
Borrower) to any Contract is required, or purports to be required, in
connection with the execution, delivery and performance of this
Security Agreement. To the best of the Borrower's knowledge after due
inquiry, each contract is in full force and effect and constitutes a
valid and legally enforceable obligation of the parties thereto, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally, and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law). No
consent or authorization of, filing with or other act by or in respect
of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of
the Contracts by the Borrower, or to the best of the
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Borrower's knowledge after due inquiry, any other party thereto, other
than those which have been duly obtained, made or performed, are in
full force and effect and do not subject the scope of any such Contract
to any material adverse limitation, either specific or general in
nature. Neither the Borrower nor (to the best of the Borrower's
knowledge after due inquiry) any other party to any Contract is in
default or is likely to become in default in the performance or
observance of any of the terms thereof. The Borrower has fully
performed all its obligations to date under each Contract. The right,
title and interest of the Borrower in, to and under each Contract are
not, to the best of the Borrower's knowledge after due inquiry, subject
to any defense, offset, counterclaim or claim which would materially
adversely affect the value of such Contract as Collateral, nor have any
of the foregoing been asserted or alleged against the Borrower as to
any Contract. The Borrower has delivered to the Collateral Agent a
complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto. No amount payable to the
Borrower under or in connection with any Contract is evidenced by any
Instrument or Chattel Paper which has not been delivered to the
Collateral Agent.
(e) Equipment and Inventory. As of the Closing Date, the
Equipment and Inventory is kept at the locations listed on Schedule III
hereto.
(f) Chief Executive Office. The Borrower's chief executive
office and chief place of business is located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(g) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(h) Trademarks. Schedule IV hereto includes all Trademarks and
Trademark Licenses owned by the Borrower in its own name as of the
Closing Date, and the Borrower shall not sell Inventory under any other
Trademark without providing the Collateral Agent 30 days' prior written
notice of its intention to do so. To the best of the Borrower's
knowledge after due inquiry, each such Trademark is valid, subsisting,
unexpired, enforceable and has not been abandoned. Except as set forth
on Schedule IV hereto, none of such Trademarks is the subject of any
licensing or franchise agreement. No holding, decision or judgment has
been rendered by any Governmental Authority which would limit, cancel
or question the validity of any such Trademark or the Borrower's
ownership thereof. No action or proceeding is pending (i) seeking to
limit, cancel or question the validity of any such Trademark, or (ii)
which, if adversely determined, would have a material
14
adverse effect on the value of any such Trademark or the Borrower's
ownership thereof.
(i) Vehicles. The Vehicle Lists together constitute a
substantially complete and correct list of all Vehicles owned by the
Borrower as of the Closing Date.
(j) Governmental Obligors. On the Closing Date, less than
$1,000,000 of the Accounts of the Borrower are owed to the Borrower by
obligors which are Governmental Authorities.
(k) Bank Accounts. Schedule III sets forth the location of
each cash concentration account and all significant operating accounts
and demand deposit accounts used for paying and receiving purposes in
the ordinary course of the Borrower's business.
The foregoing representations and warranties set forth in this Section 4 shall
survive (i) the execution and delivery of this Security Agreement, (ii) and the
making and/or continuing of the Loans or the issuance of the Bank Letters of
Credit or the Merchandise Letters of Credit and (iii) the termination of the
Merchandise Letter of Credit Facility, the Hedging Agreement, the cash
management arrangements with the New Cash Management Bank and the Existing Cash
Management Banks, the foregoing exchange arrangements with the Foreign Exchange
Bank and the Commitments, and shall be deemed to be repeated and confirmed on
the date of the making of each Revolving Loan or Swingline Loan or the issuance
of each Bank Letter of Credit and each Merchandise Letter of Credit and each
time additional Collateral becomes pledged hereunder.
5. Covenants. The Borrower covenants and agrees with the Collateral
Agent for the benefit of the Secured Parties that, from and after the date of
this Security Agreement until the payment in full in cash and the performance of
all Obligations, the expiration or cancellation of all of the Bank Letters of
Credit and the Merchandise Letters of Credit and the termination of the
Merchandise Letter of Credit Facility, the Hedging Agreement, the cash
management arrangements with the New Cash Management Bank and the Existing Cash
Management Banks, the foreign exchange arrangements with the Foreign Exchange
Bank and the Commitments:
(a) Further Documentation; Pledge of Instruments and Chattel
Paper. At any time and from time to time, upon the request of the
Collateral Agent, and at the sole expense of the Borrower, the Borrower
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Collateral Agent may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform
15
Commercial Code as then in effect in any jurisdiction with respect to
the Liens created hereby. The Borrower also hereby authorizes the
Collateral Agent to file any such financing or continuation statement
without the signature of the Borrower to the extent permitted by
applicable law; provided, that the Collateral Agent delivers to the
Borrower a copy of each financing or continuation statement so filed
promptly after the filing thereof. A carbon, photographic or other
reproduction of this Security Agreement shall be sufficient as a
financing statement for filing in any jurisdiction. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be immediately delivered to the Collateral Agent,
duly endorsed in a manner satisfactory to the Collateral Agent, to be
held as Collateral pursuant to this Security Agreement.
(b) Indemnification. The Borrower agrees to pay, and to save,
indemnify and keep the Secured Parties and their respective directors,
officers, employees, attorneys, experts, and agents harmless from, any
and all liabilities, costs and expenses (including, without limitation,
legal fees and expenses), losses or damages (i) with respect to, or
resulting from, any delay by the Borrower in paying, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay by the Borrower in complying with any
Requirement of Law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Security
Agreement, including the fees and disbursements of counsel and of any
other experts, which any of the Secured Parties or their respective
directors, officers, employees, attorneys, experts or agents may incur
in connection with (w) the administration or enforcement of this
Security Agreement, including such expenses as are incurred to preserve
the value of the Collateral and the validity, perfection, rank and
value of any Liens granted hereunder, (x) the collection, sale or other
disposition of any of the Collateral, (y) the exercise by the
Administrative Agent or the Collateral Agent of any of the rights
conferred upon it hereunder or (z) any Default or Event of Default, but
excluding any such liabilities, costs and expenses, losses or damages
incurred solely by reason of the gross negligence or willful misconduct
of the party seeking to be indemnified as determined by a final order
or judgment of a court of competent jurisdiction.
In any suit, proceeding or action brought by any of the Secured Parties
under any Account or Contract for any sum owing thereunder, or to
enforce any provisions of any Account or Contract, the Borrower agrees
to pay, and will save, indemnify and keep such Secured Party and its
directors,
16
officers, employees, attorneys, experts and agents harmless from and
against, all liabilities, costs and expenses (including, without
limitation, legal fees and expenses), losses or damages suffered by
reason of any defense, set-off, counterclaim, recoupment or reduction
or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Borrower of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any
time owing to or in favor of such account debtor or obligor or its
successors from the Borrower or any of its Subsidiaries, but excluding
any such liabilities, costs and expenses, losses or damages incurred
solely by reason of the gross negligence or willful misconduct of the
party seeking to be indemnified as determined by a final order or
judgment of a court of competent jurisdiction.
Any amount due hereunder which is not paid on demand shall bear
interest at a rate equal to the sum of 2% plus the CIBC Alternate Base
Rate in effect at such time.
The agreements of the Borrower contained in this Section 5(b) shall
survive the payment and performance of the Obligations and the
termination of the security interests granted hereby. All of the
Borrower's obligations to indemnify each Secured Party and its
directors, officers, employees, attorneys, experts and agents hereunder
shall (without duplication) be in addition to, and shall not limit in
any way, the Borrower's indemnification obligations contained in the
Credit Agreement. Without limiting the foregoing, the agreements
contained in Section 5(b) of the Existing Security Agreement shall
continue in full force and effect as to matters covered thereby.
(c) Maintenance of Records. The Borrower will keep and
maintain at its own cost and expense satisfactory and complete records
with respect to the Collateral, including, without limitation, a record
of all payments received and all credits granted with respect to the
Accounts, and the Borrower shall make available any such books and
records to the Collateral Agent or to its representatives during normal
business hours at the request of the Collateral Agent.
(d) Right of Inspection. The Secured Parties shall at all
times have full and free access during normal business hours to all the
books, correspondence and records of the Borrower, and the Secured
Parties and their representatives may examine the same, take extracts
therefrom and make photocopies thereof, and the Borrower agrees to
render to the Secured Parties at the Borrower's cost and expense, such
clerical and other assistance as may be reasonably requested with
regard thereto. The Secured Parties and their representatives shall at
all times also have the right to enter into and upon any premises where
any of the Equipment
17
or the Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein.
(e) Compliance with Laws, etc. The Borrower will comply in all
respects with all Requirements of Law applicable to the Collateral or
any part thereof or to the operation of the Borrower's business except
where the necessity of compliance therewith is contested in good faith
by appropriate proceedings or where the failure to comply therewith
would not have a Materially Adverse Effect; provided, that the Borrower
must comply therewith any Requirement of Law if the failure to do so
would adversely affect the Secured Parties' rights in the Collateral or
the priority of the Collateral Agent's Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. The Borrower will
perform and comply in all material respects with all its obligations
under the Contracts and all its other contractual obligations relating
to the Collateral.
(g) Payment of Obligations. The Borrower will pay promptly
when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with
respect to the Collateral, except that no such charge need be paid if
the Borrower is permitted not to do so pursuant to the Credit
Agreement.
(h) Limitation on Liens on Collateral. The Borrower will not
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien or
claim on or to the Collateral, other than the Liens created hereby,
other than the Permitted Liens and other than as permitted pursuant to
Section 8.10 of the Credit Agreement, and will defend the right, title
and interest of the Collateral Agent and the other Secured Parties in
and to any of the Collateral against the claims and demands of all
Persons whomsoever.
(i) Limitations on Dispositions of Collateral. Except as
permitted under the Credit Agreement, the Borrower will not sell,
transfer, lease or otherwise dispose of any of the Collateral.
(j) Limitations on Modifications, Waivers, Extensions of
Contracts and Agreements Giving Rise to Accounts. The Borrower will not
(i) amend, modify, terminate or waive any provision of any Contract or
any agreement giving rise to a material Account in any manner which
could reasonably be
18
expected to adversely affect the value of such Contract or material
Account as Collateral, (ii) fail to exercise promptly and diligently
each and every substantive right which it may have under each Contract
or material Account (other than any right of termination) or (iii) fail
to deliver to the Collateral Agent a copy of each substantive demand,
notice or document received by it relating in any way to any Contract
or material Account.
(k) Limitations on Discounts, Compromises, Extensions of
Accounts. Other than in the ordinary course of business, the Borrower
will not grant any extension of the time of payment of any of the
Accounts, compromise or settle the same for less than the full amount
thereof, release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Borrower will maintain each
item of Equipment in good operating condition, ordinary wear and tear
and immaterial impairments of value and damage by the elements
excepted, and will provide all maintenance, service and repairs
necessary for such purpose.
(m) Maintenance of Insurance. The Borrower will maintain the
insurance required by Section 8.3 of the Credit Agreement.
(n) Further Identification of Collateral. The Borrower will
furnish to the Collateral 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 Collateral Agent
may reasonably request, all in reasonable detail.
(o) Notices. The Borrower will advise the Collateral Agent
promptly, in reasonable detail, at the Collateral Agent's address set
forth in the Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted pursuant to Section 8.10 of the Credit
Agreement) on, or claim asserted against, any of the Collateral and
(ii) of the occurrence of any other event which could reasonably be
expected to have an adverse effect on the value of any material portion
of the Collateral or on the Liens created hereunder.
(p) Changes in Locations, Name, etc. The Borrower will not,
unless it shall have given the Collateral Agent at least 30 days' prior
written notice thereof (i) change the location of its chief executive
office/chief place of business from that specified in Section 4(f)
hereof or remove its books and records from any location specified in
Section 4(c) hereof, (ii) permit any of the Equipment and the Inventory
to be kept in jurisdictions other than those listed on Schedule III
19
hereto or (iii) change its name (or any name under which it does
business), identity or corporate structure to such an extent that any
financing statement filed by the Collateral Agent in connection with
this Security Agreement would become seriously misleading.
(q) Trademarks.
(i) Except with respect to any Trademark that the
Borrower shall reasonably determine is of negligible economic
value to it (and so advise the Collateral Agent in writing),
the Borrower (either itself or through licensees) will, with
respect to any Trademark on which a Lien has been or shall be
created pursuant to this Agreement (a "Liened Trademark"), (i)
continue to use each Liened Trademark on each and every
trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists
in order to maintain such Liened Trademark in full force free
from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under
such Liened Trademark, (iii) employ such Liened Trademark with
the appropriate notice of registration, (iv) not adopt or use
any ▇▇▇▇ which is confusingly similar or a colorable imitation
of such Liened Trademark unless the Collateral Agent, for the
benefit of the Secured Parties, shall obtain a perfected
security interest in such ▇▇▇▇ pursuant to this Security
Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any
act whereby any Liened Trademark may become invalidated.
(ii) The Borrower will notify the Collateral Agent
immediately if it knows, or has reason to know, that any
application or registration relating to any Liened Trademark
may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark
Office or any court or tribunal in any country) regarding the
Borrower's ownership of any Liened Trademark or its right to
register the same or to keep and maintain the same.
(iii) Whenever the Borrower, either by itself or
through any agent, employee, licensee or designee, shall file
an application for the registration of any Trademark with the
United States Patent and Trademark Office or any similar
office or agency in any other country or any political
subdivision thereof, the Borrower shall report such filing to
the Collateral Agent within fifteen days
20
after the last day of the fiscal quarter in which such filing
occurs. Upon request of the Collateral Agent, the Borrower
shall execute and deliver any and all agreements, instruments,
documents, and papers as the Collateral Agent may request to
create a security interest in its favor for the benefit of the
Secured Parties in any such Trademark and the goodwill and
General Intangibles of the Borrower relating thereto or
represented thereby, and the Borrower hereby constitutes and
appoints the Collateral Agent its attorney-in-fact to execute
and file, in the event of the failure of the Borrower to do
so, all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed; such power
being coupled with an interest, it is and shall be irrevocable
until the payment in full in cash and performance of all
Obligations, the expiration or cancellation of all of the Bank
Letters of Credit and the Merchandise Letters of Credit and
the termination of the Merchandise Letter of Credit Facility,
the Hedging Agreement, the cash management arrangements with
the New Cash Management Bank and the Existing Cash Management
Banks, the foreign exchange arrangements with the Foreign
Exchange Bank and the Commitments.
(iv) The Borrower will take all reasonable and
necessary steps, including, without limitation, in any
proceeding before the United States Patent and Trademark
Office, or any similar office or agency in any other country
or any political subdivision thereof, in which the applicable
Liened Trademark is used by the Borrower, to maintain and
pursue each application (and to obtain the relevant
registration) and to maintain each registration of the Liened
Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of
incontestability.
(v) In the event that any Liened Trademark included
in the Collateral is infringed, misappropriated or diluted by
a third party, the Borrower shall promptly notify the
Collateral Agent after the Borrower learns thereof and shall,
unless the Borrower shall reasonably determine that such
Liened Trademark is of negligible economic value to the
Borrower (which determination the Borrower shall promptly
report to the Collateral Agent), promptly ▇▇▇ for
infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution, or take
such other actions as the Borrower shall reasonably deem
appropriate or the Collateral Agent may reasonably request
under the circumstances to protect such Liened Trademark.
21
(r) Vehicles. The Borrower will maintain each Vehicle in good
operating condition, ordinary wear and tear and immaterial impairments
of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose. Promptly
after the date hereof and, with respect to any Vehicles acquired by the
Borrower subsequent to the date hereof, all applications for
certificates of title indicating the Collateral Agent's first priority
Lien on the Vehicle covered by such certificate, and any other
necessary documentation, shall be filed by the Borrower in each office
in each jurisdiction which the Collateral Agent shall deem advisable to
perfect its Liens on the Vehicles. In connection with the foregoing,
the Borrower shall notify the Collateral Agent, in writing, within 30
days after the date of acquisition, of each Vehicle acquired subsequent
to the date hereof.
(s) Inventory. With respect to the Inventory: (a) the Borrower
shall at all times maintain records with respect to Inventory
reasonably satisfactory to the Collateral Agent, keeping correct and
accurate records itemizing and describing the kind, type, quality and
quantity of Inventory, the Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) the Borrower shall
conduct a physical count of the Inventory at least once each year, but
at any time or times as the Collateral Agent may request on or after an
Event of Default occurs and is continuing, and promptly following such
physical inventory shall supply the Collateral Agent with a report in
the form and with such specificity as may be reasonably satisfactory to
the Collateral Agent concerning such physical count; (c) the Borrower
shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of the Collateral
Agent, except for sales of Inventory and returns of Inventory to
vendors, in each case in the ordinary course of the Borrower's business
and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) in addition to the
requirements set forth above, upon the Collateral Agent's request, the
Borrower shall, at its expense, conduct through the Asset Support Group
or another inventory counting service reasonably acceptable to the
Collateral Agent, or shall permit the Collateral Agent to conduct (if
the Collateral Agent so elects), a physical count of the Inventory in
form, scope and methodology reasonably acceptable to the Collateral
Agent no more than once in any twelve (12) month period, but at any
time or times as the Collateral Agent may request on or after an Event
of Default occurs and is continuing, the results of which shall be
reported directly by such inventory counting service to the Collateral
Agent and the Borrower shall promptly deliver confirmation in a form
satisfactory to the Collateral Agent that appropriate adjustments have
been made to the Inventory
22
records of the Borrower to reconcile the Inventory count to the
Borrower's Inventory records; (e) the Borrower shall produce, use,
store and maintain the Inventory, with all reasonable care and caution
and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the
requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (f) the
Borrower retains all of its responsibility and liability arising from
or relating to the production, use, sale or other disposition of the
Inventory; (g) the Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or
may obligate the Borrower to repurchase such Inventory (other than in
the ordinary course of business consistent with past practices and
policies of the Borrower or current market practice); and (h) the
Borrower shall keep the Inventory in good and marketable condition.
6. Collateral Agent's Appointment as Attorney-in Fact.
(a) Powers. The Borrower hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Borrower and in the name of
the Borrower or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Security Agreement
where the Collateral Agent, in its sole discretion, determines that to do so is
necessary or appropriate to protect its interest in all or any portion of the
Collateral or the value thereof, to take any and all appropriate action and to
execute any and all documents and instruments which the Collateral Agent, in its
sole discretion determines, may be necessary or desirable to protect its
interest in all or any portion of the Collateral or the value thereof, and,
without limiting the generality of the foregoing, the Borrower hereby gives the
Collateral Agent the power and right, on behalf of the Borrower, without notice
to or assent by the Borrower, to do the following:
(i) in the case of any Account, at any time when the authority
of the Borrower to collect the Accounts has been curtailed or
terminated pursuant to the first sentence of Section 3(d) hereof, or in
the case of any other Collateral, at any time when any Event of Default
shall have occurred and is continuing, in the name of the Borrower or
its own name, or otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under any Account, Instrument, General
Intangible or Contract or with respect to any other Collateral and to
file any claim or to take any other
23
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Collateral Agent for the purpose of collecting any
and all such moneys due under any Account, Instrument, General
Intangible or Contract or with respect to any other Collateral whenever
payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral (except where the Borrower is not
required to discharge such tax or Lien pursuant to the provisions of
this Security Agreement or the Credit Agreement), to effect any repairs
or any insurance called for by the terms of this Security Agreement or
the Credit Agreement, to adjust the same and to pay all or any part of
the premiums therefor and the costs thereof; and
(iii) upon the occurrence and during the continuance of any
Event of Default, (A) to direct any party liable for any payment in
respect of or arising out of any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly to the
Collateral Agent or as the Collateral Agent shall direct; (B) to ask or
demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral and to extend the time of
payment of any or all thereof and to make any allowance and other
adjustments with reference thereto; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral;
(D) to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect any
amounts owing in respect of the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against the Borrower with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clauses (D) or (E) above and, in connection
therewith, to give such discharges or releases as the Collateral Agent
may deem appropriate; (G) to assign any Trademark (along with the
goodwill of the business to which any such Trademark pertains),
throughout the world for such term or terms, on such conditions, and in
such manner, as the Collateral Agent shall in its sole discretion
determine; (H) to set off or cause to be set off amounts in any account
maintained with any Lender or otherwise enforce rights against any of
the Collateral in the possession of any Secured Party (other than the
Merchandise Letter of
24
Credit Bank); and (I) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and to do, at the Collateral
Agent's option and the Borrower's expense, at any time, or from time to
time, all acts and things which the Collateral Agent deems necessary to
protect, preserve or realize upon the Collateral and the Collateral
Agent's Liens thereon and to effect the intent of this Security
Agreement, all as fully and effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and is and shall be irrevocable until the payment in full in cash and
performance of all Obligations, the expiration or cancellation of all of the
Bank Letters of Credit and the Merchandise Letters of Credit and the termination
of the Merchandise Letter of Credit Facility, the Hedging Agreement, the cash
management arrangements with the New Cash Management Bank and the Existing Cash
Management Banks, the foreign exchange arrangements with the Foreign Exchange
Bank, and the Commitments.
(b) Other Powers. The Borrower also authorizes the Collateral Agent, at
any time and from time to time, to execute, in connection with any sale pursuant
to Section 9 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to any of the Collateral.
(c) No Duty on Secured Parties' Part. The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties' interests
in the Collateral and shall not impose any duty upon any of the Secured Parties
to exercise any such powers. The Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to the Borrower for any liabilities, costs, expenses, losses or
damages incurred by the Borrower in connection with any act or failure to act
hereunder on their part, except to the extent arising solely from their own
gross negligence or willful misconduct as determined by a final and
non-appealable order or judgment of a court of competent jurisdiction.
7. Performance by Collateral Agent of Borrower's Obligations. If the
Borrower fails to perform or comply with any of its agreements contained herein
and the Collateral Agent, as provided for by the terms of this Security
Agreement, the Credit Agreement or any other Credit Document, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Collateral Agent incurred in
25
connection with such performance or compliance, together with interest thereon
at a rate per annum 2% above the CIBC Alternate Base Rate at the time of such
failure to perform or comply, shall be payable by the Borrower to the Collateral
Agent on demand and shall constitute Obligations secured hereby.
8. Proceeds. In addition to the rights of the Collateral Agent
specified in Section 3(d) hereof with respect to payments of Accounts, it is
agreed that if an Event of Default shall occur and be continuing (a) upon demand
by the Collateral Agent all Proceeds received by the Borrower consisting of
cash, checks and other near-cash items shall be held by the Borrower in trust
for the Secured Parties and segregated from other funds of the Borrower, and
shall, forthwith upon receipt by the Borrower, be turned over to the Collateral
Agent in the exact form received by the Borrower (duly indorsed by the Borrower
to the Collateral Agent, if required), and (b) any and all such Proceeds held or
received by the Collateral Agent (whether from the Borrower or otherwise) may,
in the sole discretion of the Collateral Agent, be held by the Collateral Agent
for the benefit of the Secured Parties as collateral security for, and/or then
or at any time thereafter be paid by the Collateral Agent to the Administrative
Agent for application against, the Obligations (whether matured or unmatured),
such application to be in such order as is required by Section 9.2 of the Credit
Agreement, subject to the Inter-Facility Agreement to the extent applicable. Any
balance of such Proceeds remaining, after the payment in full in cash and the
performance of all Obligations, the expiration or cancellation of all of the
Bank Letters of Credit and the Merchandise Letters of Credit and the termination
of the Merchandise Letter of Credit Facility, the Hedging Agreement, the cash
management arrangements with the New Cash Management Bank and the Existing Cash
Management Banks, the foreign exchange arrangements with the Foreign Exchange
Bank and the Commitments, shall be paid over to the Borrower or to whomsoever
may be lawfully entitled to receive the same.
9. Remedies.
(a) General. If an Event of Default shall occur and be continuing, the
Collateral Agent, on behalf of the Secured Parties may exercise, in addition to
all other rights and remedies granted to it in this Security Agreement, the
Credit Agreement and in any other instrument or agreement securing, evidencing
or relating to the Obligations, all rights and remedies of a secured party under
the Uniform Commercial Code, as then in effect in the jurisdiction in which such
rights are exercised. Without limiting the generality of the foregoing, the
Collateral Agent, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Borrower or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive,
26
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of any of the Secured Parties or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but none of the Secured Parties shall incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent shall not be obligated to make any such sale
pursuant to any notice thereof, but may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be so adjourned. Any of the
Secured Parties shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, and each Secured Party (other
than the Merchandise Letter of Credit Bank) shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at such sale, to use and apply any of the
Obligations owed to such Person (or, in the case of the Collateral Agent, any or
all of the Obligations owed to the Secured Parties) as a credit on account of
the purchase price payable by such Person at such sale. Each purchaser at any
such sale shall acquire the property sold absolutely free from any claim or
right on the part of the Borrower, and the Borrower hereby waives (to the full
extent permitted by law) all rights of redemption, stay and/or appraisal which
it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. The Borrower further agrees, at the
Collateral Agent's request, to assemble the Collateral and make it available to
the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at the Borrower's premises or elsewhere. The Collateral Agent
shall, at such time or times as it determines, pay the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Secured Parties hereunder,
including, without limitation, reasonable attorneys' or other agents' fees and
disbursements, to the Administrative Agent for application to the payment in
whole or in part of the Obligations, in such order as is required by Section 9.2
of the Credit Agreement, subject to the Inter-Facility
27
Agreement to the extent applicable, and only after such application and after
the payment by the Collateral Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Collateral Agent account for the surplus, if any, to the
Borrower. To the extent permitted by applicable law, the Borrower waives all
claims, damages and demands it may acquire against any of the Secured Parties
arising out of the exercise by it of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Borrower shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to satisfy the Obligations in full and the fees and
disbursements of any attorneys or other agents employed by any of the Secured
Parties to collect such deficiency.
The Collateral Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests granted hereby and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) Louisiana Remedies. For purposes of executory process under
applicable Louisiana law (and only for such purposes), upon the occurrence and
during the continuance of an Event of Default, the Borrower hereby acknowledges
the indebtedness owed under the Obligations, CONFESSES JUDGMENT thereon and
consents that judgment be rendered and signed, whether during the court's term
or during vacation, in favor of the Collateral Agent, for the benefit of the
Secured Parties, for the full amount of the Obligations. Upon the occurrence of
an Event of Default, and in addition to all of its rights, powers and remedies
under this Security Agreement and applicable law, the Collateral Agent may, at
its option, cause all or any part of the Collateral located in Louisiana (the
"Louisiana Collateral") to be seized and sold under executory process or under
writ of fieri facias issued in execution of an ordinary judgment obtained upon
the Obligations, without appraisement to the highest bidder, for cash or under
such terms as the Collateral Agent deems acceptable. The Borrower hereby waives
all and every appraisement of the Louisiana Collateral and waives and renounces
the benefit of appraisement and the benefit of all laws relative to the
appraisement of the Louisiana Collateral seized and sold under executory or
other legal process. The Borrower agrees to waive, and does hereby specifically
waive:
(1) the benefit of appraisement provided for in Articles 2332,
2336, 2723 and 2724, Louisiana Code of Civil Procedure, and
all other laws conferring such benefits;
(2) the demand and three days delay accorded by Articles 2639 and
2721, Louisiana Code of Civil Procedure; (3) the notice of
seizure required by Articles 2293 and 2721, Louisiana Code of
Civil Procedure;
28
(4) the three days delay accorded by Articles 2331 and 2722,
Louisiana Code of Civil Procedure;
(5) the benefit of the other provisions of Articles 2331, 2722 and
2723, Louisiana Code of Civil Procedure;
(6) the benefit of the provisions of any other articles of the
Louisiana Code of Civil Procedure not specifically mentioned
above; and
(7) all rights of division and discussion with respect to the
Obligations.
Pursuant to the authority contained in La.R.S. 9:5136 through 9:5140.1, the
Borrower and the Collateral Agent do hereby expressly designate the Collateral
Agent or its designee to be keeper or receiver ("Keeper") for the benefit of the
Collateral Agent or any assignee of the Collateral Agent, such designation to
take effect immediately upon any seizure of any of the Louisiana Collateral
under writ of executory process or under writ of sequestration or fieri facias
as an incident to an action brought by the Collateral Agent. It is hereby agreed
that the Keeper shall be entitled to receive as compensation, in excess of its
reasonable costs and expenses incurred in the administration or preservation of
the Louisiana Collateral, an amount equal to the lesser of $200 per day or four
percent of the gross revenues of the Louisiana Collateral and the payment of
such fees shall be secured by the security interest in the Louisiana Collateral
granted in this Security Agreement. The designation of Keeper made herein shall
not be deemed to require Mortgagee to provoke the appointment of a Keeper.
(c) Additional Inventory Remedies. Until the payment in full in cash
and performance of all Obligations, the expiration or cancellation of all of the
Bank Letters of Credit and the Merchandise Letters of Credit and the termination
of the Merchandise Letter of Credit Facility, the Hedging Agreement, the cash
management arrangements with the New Cash Management Bank and the Existing Cash
Management Bank, the foreign exchange arrangements with the Foreign Exchange
Bank and the Commitments and at any time when an Event of Default has occurred
and is continuing: (i) the Borrower will perform any and all reasonable actions
requested by the Collateral Agent to enforce the Collateral Agent's security
interest in the Inventory and all of the Collateral Agent's rights hereunder,
such as leasing warehouses to the Collateral Agent or its designee, placing and
maintaining signs, appointing custodians, transferring Inventory to warehouses,
and delivering to the Collateral Agent warehouse receipts and documents of title
in the Collateral Agent's name; (ii) if any Inventory is in the possession or
control of any of the Borrower's
29
agents, contractors or processors or any other third party, the Borrower will
notify the Collateral Agent thereof and will notify such agents, contractors or
processors or third party of the Collateral Agent's security interest therein
and, upon request, instruct them to hold all such Inventory for the Collateral
Agent's and the Borrower's account, as their interests may appear, and subject
to the Collateral Agent's instructions; (iii) the Collateral Agent shall have
the right to hold all Inventory subject to the security interest granted
hereunder; and (iv) the Collateral Agent shall have the right to take possession
of the Inventory or any part thereof and to maintain such possession on the
Borrower's premises or to remove any or all of the Inventory to such other place
or places as the Collateral Agent desires in its sole discretion. If the
Collateral Agent exercises its right to take possession of the Inventory, the
Borrower, upon the Collateral Agent's demand, will assemble the Inventory and
make it available to the Collateral Agent at the Borrower's premises at which it
is located.
10. Limitation on Duties Regarding Preservation of Collateral. The
Collateral Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in substantially the same
manner as the Collateral Agent deals with similar property for its own account.
None of the Secured Parties, nor any of their respective directors, officers,
employees, attorneys, experts or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Borrower or otherwise. The Borrower releases
the Secured Parties and their respective directors, officers, employees,
attorneys, experts and agents from any claims, causes of action and demands at
any time arising out of or with respect to this Security Agreement, the
Collateral, and/or any actions, taken or omitted to be taken by the Collateral
Agent with respect thereto (other than any clams, causes of action and demands
arising solely from the gross negligence or willful misconduct of the party
which desires to be so released as determined by a final order or judgment of a
court of competent jurisdiction), and the Borrower hereby agrees to hold the
Secured Parties and their respective directors, officers, employees, attorneys,
experts and agents harmless from and with respect to any and all such claims,
causes of action and demands. The agreements of the Borrower contained in this
Section 10 shall survive the payment and performance of the Obligations and the
termination of the security interests granted hereby.
11. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are powers coupled with an
interest and are and shall be irrevocable until the payment in full in cash and
performance of all Obligations,
30
the expiration or cancellation of all of the Bank Letters of Credit and the
Merchandise Letters of Credit and the termination of the Merchandise Letter of
Credit Facility, the Hedging Agreement, the cash management arrangements with
the New Cash Management Bank and the Existing Cash Management Banks, the foreign
exchange arrangements with the Foreign Exchange Bank and the Commitments.
12. Severability. If any provision of this Security Agreement is
invalid and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Collateral Agent and the other Secured Parties in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
13. Section Headings. The Section headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
14. No Waiver; Cumulative Remedies; Security Interests Absolute. (a)
None of the Secured Parties shall by any act (except by a written instrument
executed and delivered in accordance with Section 15 hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by any Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which such Secured Party
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised alternatively, successively or
concurrently and are not exclusive of any rights or remedies provided by law or
at equity.
(b) All rights of the Collateral Agent and the Liens and
security interests granted under this Security Agreement, and all obligations of
the Borrower under this Security Agreement, shall be absolute and unconditional,
irrespective of any circumstance which might constitute a defense available to,
or a discharge of, the Borrower or any other obligor in respect of the
Obligations.
15. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Security Agreement
31
may be waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Borrower, the Administrative Agent and the Collateral
Agent; provided, that any provision of this Security Agreement may be waived by
the Collateral Agent or the Administrative Agent in a written letter or
agreement executed by the Collateral Agent or the Administrative Agent (as the
case may be) or by facsimile transmission from the Collateral Agent or the
Administrative Agent. Any amendment, modification or supplement of or to any
provision of this Security Agreement, any termination or waiver of any provision
of this Security Agreement and any consent to any departure by the Borrower from
the terms of any provision of this Security Agreement shall be effective only in
the specific instance and for the specific purpose for which made or given. No
notice to or demand upon the Borrower in any instance hereunder shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances. This Security Agreement shall be binding upon and shall inure to
the benefit of the Borrower and the Secured Parties and their respective
successors and assigns; provided, that the Borrower may not assign its rights
and obligations hereunder without the prior written consent of the
Administrative Agent and the Collateral Agent, each Lender and the Merchandise
Letter of Credit Bank. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES, AND BY FEDERAL LAW TO THE EXTENT APPLICABLE.
16. Notices. All notices, demands, instructions, and other
communications and distributions hereunder shall be given in accordance with
Section 11.1 of the Credit Agreement. For the purposes hereof, the addresses of
the Collateral Agent, the Administrative Agent, the Co-Agents and the other
Secured Parties (other than the Merchandise Letter of Credit Bank) shall be the
addresses in effect from time to time under the Credit Agreement and the address
of the Merchandise Letter of Credit Bank shall be the address in effect from
time to time under the Merchandise Letter of Credit Facility.
17. Authority of Collateral Agent; Co-Collateral Agents. (a) The
provisions of Section 10 of the Credit Agreement shall inure to the benefit of
the Collateral Agent in respect of this Security Agreement and shall be binding
upon the parties to the Credit Agreement in such respect. In furtherance and not
in derogation of the rights, privileges and immunities of the Collateral Agent
therein set forth:
(i) The Collateral Agent is authorized to take all such action
as is provided to be taken by it as Collateral Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein or in the Credit Agreement, the Collateral Agent shall act or refrain
from acting in accordance with written instructions from the Majority Lenders
or,
32
in the absence of such instructions, in accordance with its discretion.
(ii) The Collateral Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the security interests in and Liens on
any of the Collateral, whether impaired by operation of law or by reason of any
action or omission to act on its part hereunder. The Collateral Agent shall have
no duty to ascertain or inquire as to the performance or observance of any of
the terms of this Security Agreement by the Borrower.
(b) The Borrower acknowledges that the rights and
responsibilities of the Collateral Agent under this Security Agreement with
respect to any action taken by the Collateral Agent or the exercise or
nonexercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Security Agreement shall, as among the Secured Parties, be governed by the
Credit Agreement, the Inter-Facility Agreement to the extent applicable and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Collateral Agent and the Borrower, the Collateral
Agent shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and the
Borrower shall not be under any obligation, or entitlement, to make any inquiry
respecting such authority.
(c) At any time or times, in order to comply with any legal
requirement in any jurisdiction, the Collateral Agent may appoint another bank
or trust company or one or more other Persons, either to act as co-collateral
agent or agents, jointly with the Collateral Agent, or to act as separate
collateral agent or agents on behalf of the Secured Parties with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Collateral Agent, include provisions for the protection of
such co-collateral agent or separate collateral agent similar to the provisions
herein contained.
18. Execution in Counterparts. This Security Agreement may be executed
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Security Agreement.
19. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT HEREBY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SECURITY AGREEMENT OR THE
COLLATERAL, OR THE
33
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF OR
THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE BORROWER,
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT. THE BORROWER HEREBY
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, OF ANY FEDERAL
COURT, IN EACH CASE LOCATED IN NEW YORK COUNTY AND ANY APPELLATE COURT
THEREFROM, IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR ANY DOCUMENT OR INSTRUMENT DELIVERED
PURSUANT TO THIS SECURITY AGREEMENT OR THE COLLATERAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECURITY
AGREEMENT SHALL AFFECT ANY RIGHT THAT THE COLLATERAL AGENT OR THE ADMINISTRATIVE
AGENT OR ANY OTHER SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR THE COLLATERAL AGAINST THE
BORROWER IN THE COURTS OF ANY JURISDICTION. THE BORROWER HEREBY WAIVES THE
DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE.
20. Privity. Notwithstanding anything contained herein, in the other
Credit Documents or elsewhere to the contrary, no Merchandise Letter of Credit
Bank shall be entitled to the benefits of this Security Agreement until such
time as such Merchandise Letter of Credit Bank has agreed in writing to be bound
by the
34
terms hereof and of the Inter-Facility Agreement and to appoint the Collateral
Agent to act as collateral agent on its behalf hereunder.
IN WITNESS WHEREOF, the Borrower, the Administrative Agent and the
Collateral Agent have caused this Security Agreement to be duly executed and
delivered on and as of the date first above written in the presence of the
undersigned competent witnesses and Notary.
WITNESSES: PAYLESS CASHWAYS, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------- -----------------------------
Title: Senior Vice President
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, as Administrative
Agent and Collateral Agent
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------- -----------------------------
Title: As Agent
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Notary Public
