AMENDED AND RESTATED SECURITY AGREEMENT by BLUEFLY, INC. as Borrower and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender Dated as of June 17, 2011 TABLE OF CONTENTS

AMENDED AND RESTATED SECURITY AGREEMENT

 

by

 

BLUEFLY, INC.

as Borrower

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

 

Dated as of June 17, 2011

 

TABLE OF CONTENTS

			Page
PREAMBLE			1
RECITALS			1
AGREEMENT			1
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1.	Definitions		2
SECTION 1.2.	Interpretation		6
SECTION 1.3.	Perfection Certificate		6
ARTICLE II
GRANT OF SECURITY AND SECURED OBLIGATIONS
SECTION 2.1.	Pledge		6
SECTION 2.2.	Secured Obligations		7
SECTION 2.3.	Security Interest		7
ARTICLE III
PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
USE OF COLLATERAL
SECTION 3.1.	Delivery of Certificated Securities Collateral		8
SECTION 3.2.	Perfection of Uncertificated Securities Collateral		8
SECTION 3.3.	Financing Statements and Other Filings; Maintenance of Perfected Security Interest		9
SECTION 3.4.	Other Actions		9
SECTION 3.5.	Supplements; Further Assurances		12
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.1.	Title		13

SECTION 4.2.	Limitation on Liens; Defense of Claims; Transferability of Collateral		13
SECTION 4.3.	Chief Executive Office; Change of Name; Jurisdiction of Organization		13
SECTION 4.4.	Location of Inventory and Equipment		14
SECTION 4.5.	Condition and Maintenance of Equipment		14
SECTION 4.6.	Due Authorization and Issuance		14
SECTION 4.7.	No Conflicts, Consents, etc.		14
SECTION 4.8.	Collateral		15
SECTION 4.9.	Insurance		15
SECTION 4.10.	Payment of Taxes; Compliance with Laws; Contested Liens; Claims		15
SECTION 4.11.	Access to Collateral, Books and Records; Other Information		16
ARTICLE V
CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL
SECTION 5.1.	Pledge of Additional Securities Collateral		16
SECTION 5.2.	Voting Rights; Distributions; etc.		16
SECTION 5.3.	Organization Documents		18
SECTION 5.4.	Defaults, Etc		18
ARTICLE VI
CERTAIN PROVISIONS CONCERNING INTELLECTUAL
PROPERTY COLLATERAL
SECTION 6.1.	Grant of License		18
SECTION 6.2.	Registrations		19
SECTION 6.3.	No Violations or Proceedings		19
SECTION 6.4.	Protection of Lender’s Security		19
SECTION 6.5.	After-Acquired Property		20
SECTION 6.6.	Modifications		20
SECTION 6.7.	Litigation		20
SECTION 6.8.	Third Party Consents		21
ARTICLE VII
CERTAIN PROVISIONS CONCERNING ACCOUNTS
SECTION 7.1.	Special Representations and Warranties		21
SECTION 7.2.	Maintenance of Records		21

SECTION 7.3.	Legend		21
SECTION 7.4.	Modification of Terms, Etc		22
SECTION 7.5.	Collection		22
ARTICLE VIII
REMEDIES
SECTION 8.1.	Remedies		22
SECTION 8.2.	Notice of Sale		24
SECTION 8.3.	Waiver of Notice and Claims		24
SECTION 8.4.	Certain Sales of Collateral		25
SECTION 8.5.	No Waiver; Cumulative Remedies		26
SECTION 8.6.	Certain Additional Actions Regarding Intellectual Property		26
SECTION 8.7.	Application of Proceeds		26
ARTICLE IX
MISCELLANEOUS
SECTION 9.1.	Concerning Lender		27
SECTION 9.2.	Lender May Perform; Lender Appointed Attorney-in-Fact		28
SECTION 9.3.	Expenses		28
SECTION 9.4.	Continuing Security Interest; Assignment		28
SECTION 9.5.	Termination; Release		28
SECTION 9.6.	Modification in Writing		29
SECTION 9.7.	Notices		29
SECTION 9.8.	GOVERNING LAW		30
SECTION 9.9.	CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL		30
SECTION 9.10.	Severability of Provisions		31
SECTION 9.11.	Execution in Counterparts; Effectiveness		31
SECTION 9.12.	No Release		31
SECTION 9.13.	Obligations Absolute		32
SECTION 9.14.	Existing Security Agreement Amended and Restated		33
SIGNATURES
EXHIBIT 1	Form of Securities Pledge Amendment
SCHEDULE I	Filings, Registrations and Recordings
SCHEDULE II	Pledged Interests

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

AMENDED AND RESTATED SECURITY AGREEMENT dated as of June 17, 2011 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Security Agreement”) made by BLUEFLY, INC., a Delaware corporation having an office at 42 West 39th Street, New York, New York 10018 (the “Borrower”), as pledgor, assignor and debtor (the Borrower, in such capacities and together with any successors in such capacities, the “Grantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, having an office at One Boston Place, 18th Floor, Boston, Massachusetts 02108, as Lender, for the ratable benefit of itself and the other Credit Parties (as defined in the Credit Agreement defined below) pursuant to the Credit Agreement, as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).

RECITALS:

 

A.          In connection with the execution and delivery of this Security Agreement, the Borrower and the Lender, among others, have entered into that certain Amended and Restated Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

B.           This Security Agreement is given by the Grantor in favor of the Lender for the benefit of the Credit Parties to secure the payment and performance of all of the Secured Obligations (as hereinafter defined).

 

C.           It is a condition to the obligations of the Lender to make the Loans under the Credit Agreement and a condition to the L/C Issuer issuing Letters of Credit under the Credit Agreement that the Grantor execute and deliver the applicable Loan Documents, including this Security Agreement.

 

AGREEMENT:

 

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor and the Lender hereby agree as follows:

 

 

 

 

(a)          Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC.

(b)          Capitalized terms used but not otherwise defined herein that are defined in

the Credit Agreement shall have the meanings given to them in the Credit Agreement.

 

(c)          The following terms shall have the following meanings:

 

“Borrower” shall have the meaning assigned to such term in the Preamble hereof.

 

“Claims” shall mean any and all property taxes and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and all claims (including, without limitation, landlords’, carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and other claims arising by operation of applicable Law) against, all or any portion of the Collateral.

 

“Collateral” shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

“Control” shall mean (i) in the case of each DDA, “control,” as such term is defined in Section 9-104 of the UCC, and (ii) in the case of any security entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

 

“Control Agreements” shall mean, collectively, the Blocked Account Agreements and the Securities Account Control Agreements.

 

“Copyrights” shall mean, collectively, with respect to the Grantor, all copyrights (whether statutory or common Law, whether established or registered in the United States or any other country or any political subdivision thereof whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by the Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to the Grantor, including, without limitation, the registrations and applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.

“Credit Agreement” shall have the meaning assigned to such term in Recital A hereof.

 

 

 

“Excluded Property” shall mean the following:

 

(a)          any license, permit or lease held by the Grantor (i) that validly prohibits the creation by the Grantor of a security interest therein or thereon or (ii) to the extent that applicable Law prohibits the creation of a security interest therein or thereon;

 

(b)         any Intellectual Property Collateral consisting of intent-to-use trademark applications, for which the creation by the Grantor of a security interest therein is prohibited without the consent of third party or by applicable Law;

 

provided, however, that in each case described in clauses (a) and (b) of this definition, such property shall constitute “Excluded Property” only to the extent and for so long as such license, permit, lease or applicable Law validly prohibits the creation of a Lien on such property in favor of the Lender and, upon the termination of such prohibition (howsoever occurring), such property shall cease to constitute “Excluded Property”; provided further, that “Excluded Property” shall not include the right to receive any proceeds arising therefrom or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC or any Proceeds, substitutions or replacements of any Excluded Property (unless such Proceeds, substitutions or replacements would otherwise constitute Excluded Property).

 

 “Goodwill” shall mean, collectively, with respect to the Grantor, the goodwill connected with the Grantor’s business including, without limitation, (i) all goodwill connected with the use of and symbolized by any of the Intellectual Property Collateral in which the Grantor has any interest, (ii) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions, methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential information and the right to limit the use or disclosure thereof by any Person, pricing and cost information, business and marketing plans and proposals, consulting agreements, engineering contracts and such other assets which relate to such goodwill and (iii) all product lines of the Grantor’s business.

 

“Grantor” shall have the meaning assigned to such term in the Preamble hereof.

 

“Intellectual Property Collateral” shall mean, collectively, the Patents, Trademarks, Copyrights, Licenses and Goodwill.

 

“Letters of Credit” unless the context otherwise requires, shall have the meaning given to such term in the UCC.

 

 

 

“Patents” shall mean, collectively, with respect to the Grantor, all patents issued or assigned to and all patent applications made by the Grantor (whether established or registered or recorded in the United States or any other country or any political subdivision thereof), including, without limitation, those patents, patent applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

 

“Perfection Certificate” shall mean that certain perfection certificate dated as of the date hereof, executed and delivered by the Grantor in favor of the Lender for the benefit of the Credit Parties, and each other Perfection Certificate (which shall be in form and substance reasonably acceptable to the Lender) executed and delivered by the applicable loan party in favor of the Lender for the benefit of the Credit Parties contemporaneously with the execution and delivery of a joinder agreement executed in accordance with Section 6.12 of the Credit Agreement, in each case, as the same may be amended, amended and restated, restated, supplemented or otherwise modified from time to time in accordance with the Credit Agreement.

 

“Pledged Interests” shall mean, collectively, with respect to the Grantor, all Equity Interests in any issuer now existing or hereafter acquired or formed, including, without limitation, all Equity Interests of such issuer described in Schedule II hereof and all Equity Interests in any successor corporation or interests or certificates of any successor limited liability company, partnership or other entity owned by the Grantor formed by or resulting from any consolidation, merger or amalgamation in which any Person listed in Section I of the Information Certificate is not the surviving entity, together with all rights, privileges, authority and powers of the Grantor relating to such Equity Interests issued by any such issuer or any such successor Person under the Organization Documents of any such issuer or any such successor Person, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Grantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, from time to time acquired by the Grantor in any manner, and all other Investment Property owned by the Grantor; provided, however, that to the extent applicable,

 

 

“Secured Obligations” shall mean the Obligations; provided, however, that Other Liabilities shall be Secured Obligations solely to the extent that there is sufficient Collateral following satisfaction of the Obligations described in clause (a) of the definition of Obligations.

 

“Securities Account Control Agreement” shall mean an agreement in form and substance satisfactory to the Lender with respect to any Securities Account of the Grantor.

 

“Securities Act” means the Securities Exchange Act of 1934 and the applicable regulations promulgated by the Securities and Exchange Commission pursuant to such Act.

 

“Securities Collateral” shall mean, collectively, the Pledged Interests and the Distributions.

 

“Security Agreement” shall have the meaning assigned to such in the Preamble hereof.

 

“Trademarks” shall mean, collectively, with respect to the Grantor, all trademarks (including service marks), slogans, logos, certification marks, trade dress, uniform resource locations (URLs), domain names, corporate names and trade names, whether registered or unregistered, owned by or assigned to the Grantor and all registrations and applications for the foregoing (whether statutory or common Law and whether established or registered in the United States or any other country or any political subdivision thereof), including, without limitation, the registrations and applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the Commonwealth of Massachusetts; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the Commonwealth of Massachusetts, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

 

SECTION 1.2.      Interpretation.  The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Security Agreement.

  

SECTION 1.3.      Perfection Certificate. The Lender and the Grantor agree that the Perfection Certificate, and all schedules, amendments and supplements thereto are and shall at all times remain a part of this Security Agreement.

 

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1.      Pledge; Grant of Security Interest.  As collateral security for the payment and performance in full of all the Secured Obligations, the Grantor hereby pledges and grants to the Lender for its benefit and for the benefit of the other Credit Parties, a lien on and security interest in and to all of the right, title and interest of the Grantor in, to and under all personal property and interests in such personal property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the “Collateral”), including, without limitation:

 

(i)

all Accounts;

 

(ii)

all Goods, including Equipment, Inventory and Fixtures;

 

(iii)

all Documents, Instruments and Chattel Paper;

 

(iv)

all Letters of Credit and Letter-of-Credit Rights;

 

(v)

all Securities Collateral;

 

(vi)

all Investment Property;

 

(vii)

all Intellectual Property Collateral;

 

(viii)

all Commercial Tort Claims, including, without limitation, those described in Section V of the Perfection Certificate;

 

(ix)

all General Intangibles;

 

(x)

all Deposit Accounts;

 

(xi)

all Supporting Obligations;

 

(xii)

all books and records relating to the Collateral; and

 

 

(xiii)

to the extent not covered by clauses (i) through (xii) of this sentence, all other personal property of the Grantor, whether tangible or intangible and all Proceeds and products of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Grantor from time to time with respect to any of the foregoing.

 

Notwithstanding anything to the contrary contained in clauses (i) through (xiii) above, the security interest created by this Security Agreement shall not extend to, and the term “Collateral” shall not include, any Excluded Property and the Grantor shall from time to time at the request of the Lender give written notice to the Lender identifying in reasonable detail the Excluded Property and shall provide to the Lender such other information regarding the Excluded Property as the Lender may reasonably request.

 

SECTION 2.2.      Secured Obligations.  This Security Agreement secures, and the Collateral is collateral security for, the payment and performance in full when due of the Secured Obligations.

 

SECTION 2.3.      Security Interest.  (a)  The Grantor hereby irrevocably authorizes the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including, without limitation, (i) whether the Grantor is an organization, the type of organization and any organizational identification number issued to the Grantor, (ii) a description of the Collateral as “all assets of the Grantor, wherever located, whether now owned or hereafter acquired” and (iii) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Collateral relates.  The Grantor agrees to provide all information described in the immediately preceding sentence to the Lender promptly upon request.

 

(b)          The Grantor hereby ratifies its prior authorization for the Lender to file in any relevant jurisdiction any financing statements or amendments thereto relating to the Collateral if filed prior to the date hereof.

 

(c)          The Grantor hereby further authorizes the Lender to file filings

with the United States Patent and Trademark Office and United States Copyright Office (or any successor office or any similar office in any other country) or other necessary documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by the Grantor hereunder in any Intellectual Property Collateral, without the signature of the Grantor, and naming the Grantor, as debtor, and the Lender, as secured party.

 

 

ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF COLLATERAL

 

SECTION 3.1.      Delivery of Certificated Securities Collateral.  The Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Securities Collateral in existence on the date hereof have been delivered to the Lender in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank and that the Lender has a perfected first priority security interest therein.  The Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing Securities Collateral acquired by the Grantor after the date hereof, shall promptly (and in any event within three (3) Business Days) upon receipt thereof by the Grantor be delivered to and held by or on behalf of the Lender pursuant hereto.  All certificated Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Lender.  The Lender shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Lender or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder.  In addition, the Lender shall have the right with written notice to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations, accompanied by instruments of transfer or assignment and letters of direction duly executed in blank.

 

SECTION 3.2.      Perfection of Uncertificated Securities Collateral.  The Grantor represents and warrants that the Lender has a perfected first priority security interest in all uncertificated Pledged Interests pledged by it hereunder that is in existence on the date hereof and that the applicable Organization Documents do not require the consent of the other shareholders, members, partners or other Person to permit the Lender or its designee to be substituted for the Grantor as a shareholder, member, partner or other equity owner, as applicable, thereto.  The Grantor hereby agrees that if any of the Pledged Interests are at any time not evidenced by certificates of ownership, then the Grantor shall, to the extent permitted by applicable Law and upon the request of the Lender, cause such pledge to be recorded on the equityholder register or the books of the issuer, execute customary pledge forms or other documents necessary or reasonably requested to complete the pledge and give the Lender the right to transfer such Pledged Interests under the terms hereof and, provide to the Lender an opinion of counsel, in form and substance reasonably satisfactory to the Lender, confirming such pledge and perfection thereof.

 

 

 

 

SECTION 3.4.      Other Actions.  In order to further evidence the attachment, perfection and priority of, and the ability of the Lender to enforce, the Lender’s security interest in the Collateral, the Grantor represents, warrants and agrees, in each case at the Grantor’s own expense, with respect to the following Collateral that:

 

(a)          Instruments and Tangible Chattel Paper.  As of the date hereof (i) no amount payable under or in connection with any of the Collateral is evidenced by any Instrument or Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper listed in Section III. D. of the Perfection Certificate and (ii) each Instrument and each item of Tangible Chattel Paper listed in Section III. D. of the Perfection Certificate, to the extent requested by the Lender, has been properly endorsed, assigned and delivered to the Lender, accompanied by instruments of transfer or assignment and letters of direction duly executed in blank.  If any amount payable under or in connection with any of the Collateral shall be evidenced by any Instrument or Tangible Chattel Paper, the Grantor shall forthwith endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer or assignment duly executed in blank as the Lender may reasonably request from time to time.

 

 

(b)        Investment Property.  (i) As of the date hereof (1) it has no Securities Accounts other than those listed in Section III.B. of the Perfection Certificate, (2) it does not hold, own or have any interest in any certificated securities or uncertificated securities other than those constituting Pledged Interests with respect to which the Lender has a perfected first priority security interest in such Pledged Interests, and (3) it has entered into a duly authorized, executed and delivered Securities Account Control Agreement with respect to each Securities Account listed in Section III.B. of the Perfection Certificate with respect to which the Lender has a perfected first priority security interest in such Securities Accounts by Control.

 

 

 

 

(c)        Electronic Chattel Paper and Transferable Records.  As of the date hereof no amount payable under or in connection with any of the Collateral is evidenced by any Electronic Chattel Paper or any “transferable record” (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction).  If any amount payable under or in connection with any of the Collateral shall be evidenced by any Electronic Chattel Paper or any transferable record, the Grantor shall promptly notify the Lender thereof and shall take such action as the Lender may reasonably request to vest in the Lender control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Lender agrees with the Grantor that the Lender will arrange, pursuant to procedures reasonably satisfactory to the Lender and so long as such procedures will not result in the Lender’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(d)        Letter-of-Credit Rights.  If the Grantor is at any time a beneficiary under a Letter of Credit now or hereafter issued in favor of the Grantor, (which, for the avoidance of doubt, shall not include any Letter of Credit issued pursuant to the Credit Agreement), the Grantor shall promptly notify the Lender thereof and the Grantor shall, at the request of the Lender, pursuant to an agreement in form and substance reasonably satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Lender of, and to pay to the Lender, the proceeds of, any drawing under the Letter of Credit or (ii) arrange for the Lender to become the beneficiary of such Letter of Credit, with the Lender agreeing, in each case, that the

 

 

(e)          Commercial Tort Claims.   As of the date hereof it holds no Commercial Tort Claims other than those listed in Section V of the Perfection Certificate.  If the Grantor shall at any time hold or acquire a Commercial Tort Claim, the Grantor shall immediately notify the Lender in writing signed by the Grantor of the brief details thereof and grant to the Lender in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance reasonably satisfactory to the Lender.

 

SECTION 3.5.      Supplements; Further Assurances.  The Grantor shall take such further actions, and execute and deliver to the Lender such additional assignments, agreements, supplements, powers and instruments, as the Lender may in its reasonable judgment deem necessary or appropriate, wherever required by Law, in order to perfect, preserve and protect the security interest in the Collateral as provided herein and the rights and interests granted to the Lender hereunder, to carry into effect the purposes hereof or better to assure and confirm unto the Lender or permit the Lender to exercise and enforce its rights, powers and remedies hereunder with respect to any Collateral.  Without limiting the generality of the foregoing, the Grantor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Lender from time to time upon reasonable request such lists, descriptions and designations of the Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments.  If an Event of Default has occurred and is continuing, the Lender may institute and maintain, in its own name or in the name of the Grantor, such suits and proceedings as the Lender may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Collateral.  All of the foregoing shall be at the sole cost and expense of the Grantor.  The Grantor and the Lender acknowledge that this Security Agreement is intended to grant to the Lender for the benefit of the Credit Parties a security interest in and Lien upon the Collateral and shall not constitute or create a present assignment of any of the Collateral.

 

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

In addition to, and without limitation of, each of the representations, warranties and covenants set forth in the Credit Agreement and the other Loan Documents, the Grantor represents, warrants and covenants as follows:

 

 

SECTION 4.1.      Title.  No 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 have been filed in favor of the Lender pursuant to this Security Agreement or as are permitted by the Credit Agreement.  No Person other than the Lender has control or possession of all or any part of the Collateral, except as permitted by the Credit Agreement.

 

SECTION 4.2.      Limitation on Liens; Defense of Claims; Transferability of Collateral.  The Grantor is as of the date hereof, and, as to Collateral acquired by it from time to time after the date hereof, the Grantor will be, the sole direct and beneficial owner of all Collateral pledged by it hereunder free from any Lien or other right, title or interest of any Person other than the Liens and security interest created by this Security Agreement and Permitted Encumbrances.  The Grantor shall, at its own cost and expense, defend title to the Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Lender and the priority thereof against all claims and demands of all Persons, at its own cost and expense, at any time claiming any interest therein adverse to the Lender or any other Credit Party other than (i) with respect to claims or demands regarding priority of Liens, Permitted Encumbrances having priority by operation of applicable Law, and (ii) with respect to all other claims and demands, Permitted Encumbrances.  There is no agreement, and the Grantor shall not enter into any agreement or take any other action, that would restrict the transferability of any of the Collateral or otherwise impair or conflict with the Grantor’s obligations or the rights of the Lender hereunder.

 

SECTION 4.3.      Chief Executive Office; Change of Name; Jurisdiction of Organization.  (a)  The exact legal name, type of organization, jurisdiction of organization, federal taxpayer identification number, organizational identification number and chief executive office of the Grantor is indicated next to its name in Sections I.A. and I.B. of the Perfection Certificate.  The Grantor shall furnish to the Lender prompt written notice of any change in (i) its corporate name, (ii) the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) its identity or type of organization or corporate structure, (iv) its federal taxpayer identification number or organizational identification number or (v) its jurisdiction of organization (in each case, including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction).  The Grantor agrees (A) not to effect or permit any such change unless all filings have been made under the UCC or otherwise that are required in order for the Lender to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral (subject to, with respect to priority, Permitted Encumbrances having priority by operation of applicable Law) and (B) to take all action reasonably satisfactory to the Lender to maintain the perfection and priority of the security interest of the Lender for the benefit of the Credit Parties in the Collateral intended to be granted hereunder.  The Grantor agrees to promptly provide the Lender with certified Organization Documents reflecting any of the changes described in the preceding sentence.

 

 

 

SECTION 4.4.      Location of Inventory and Equipment.  As of the Closing Date, all Equipment and Inventory of the Grantor is located at the chief executive office or such other location listed in Schedule 5.08(b)(1) and Schedule 5.08(b)(2) of the Credit Agreement.

 

SECTION 4.5.      Condition and Maintenance of Equipment.  The Equipment of the Grantor is in good repair, working order and condition, reasonable wear and tear excepted.  The Grantor shall cause the Equipment to be maintained and preserved in good repair, working order and condition, reasonable wear and tear excepted, and shall as quickly as commercially reasonable make or cause to be made all repairs, replacements and other improvements which are necessary in the conduct of the Grantor’s business.

 

SECTION 4.6.      Due Authorization and Issuance.  All of the Pledged Interests have been, and to the extent any Pledged Interests are hereafter issued, such shares or other equity interests will be, upon such issuance, duly authorized, validly issued and, to the extent applicable, fully paid and non-assessable.  All of the Pledged Interests have been fully paid for, and there is no amount or other obligation owing by the Grantor to any issuer of the Pledged Interests in exchange for or in connection with the issuance of the Pledged Interests or the Grantor’s status as a partner or a member of any issuer of the Pledged Interests, other than those expressly set forth in the Organization Documents of the issuer of such Pledged Interests as in effect as of the date hereof.

 

SECTION 4.7.      No Conflicts, Consents, etc.  No consent of any party (including, without limitation, equity holders or creditors of the Grantor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required (A) for the grant of the security interest by the Grantor of the Collateral pledged by it pursuant to this Security Agreement or for the execution, delivery or performance hereof by the Grantor, (B) for the exercise by the Lender of the voting or other rights provided for in this Security Agreement or (C) for the exercise by the Lender of the remedies in respect of the Collateral pursuant to this Security Agreement except, in each case, for such consents which have been obtained prior to the date hereof.  Following the occurrence and during the continuation of an Event of Default, if the Lender desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Security Agreement and determines it necessary to obtain any approvals or consents of any Governmental

 

 

 

SECTION 4.8.      Collateral.  All information set forth herein, including the schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Credit Party in connection with this Security Agreement, in each case, relating to the Collateral, is accurate and complete in all material respects.  The Collateral described on the schedules annexed hereto or in the Perfection Certificate constitutes all of the material property of such type of Collateral owned or held by the Grantor.

 

SECTION 4.9.      Insurance.  The Grantor shall (i) maintain or shall cause to be maintained such insurance as is required pursuant to Section 6.07 of the Credit Agreement; (ii) maintain such other insurance as may be required by applicable Law; and (iii) furnish to the Lender, upon written request, full information as to the insurance carried.  The Grantor hereby irrevocably makes, constitutes and appoints the Lender (and all officers, employees or agents designated by the Lender) as the Grantor’s true and lawful agent (and attorney-in-fact), exercisable only after the occurrence and during the continuance of an Event of Default, for the purpose of making, settling and adjusting claims in respect of the Collateral under policies of insurance, endorsing the name of the Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto.  In the event that the Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating thereto, the Lender may, without waiving or releasing any obligation or liability of the Grantor hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Lender deems advisable.  All sums disbursed by the Lender in connection with this SECTION 4.9, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantor to the Lender and shall be additional Secured Obligations secured hereby.

SECTION 4.10.    Payment of Taxes; Compliance with Laws; Contested Liens; Claims.  The Grantor represents and warrants that all Claims imposed upon or assessed against the Collateral have been paid and discharged except to the extent such Claims constitute a Lien not yet due and payable or a Permitted Encumbrance.  The Grantor shall comply with all applicable Law relating to the Collateral the failure to comply with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  The Grantor may at its own expense contest the validity, amount or applicability of any Claims so long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Credit Agreement.  Notwithstanding the foregoing provisions of this SECTION 4.10, no contest of any such obligation may be pursued by the Grantor if such contest would expose the Lender or any other Credit Party to (i) any possible criminal liability or (ii) any additional civil liability

 

 

 

 

SECTION 4.11.    Access to Collateral, Books and Records; Other Information.  Without limitation or duplication of the provisions of Section 6.10 of the Credit Agreement, upon reasonable prior request to the Grantor, the Lender, its agents, accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours, all of the Collateral including, without limitation, all of the books, correspondence and records of the Grantor relating thereto.  The Lender and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Grantor agrees to render to the Lender, at the Grantor’s cost and expense, such clerical and other assistance as may be reasonably requested by the Lender with regard thereto.  The Grantor shall, at any and all times, within a reasonable time after written request by the Lender, furnish or cause to be furnished to the Lender, in such manner and in such detail as may be reasonably requested by the Lender, additional information with respect to the Collateral.

 

ARTICLE V

 

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

SECTION 5.1.      Pledge of Additional Securities Collateral.  The Grantor shall, upon obtaining any Pledged Interests of any Person required to be pledged hereunder, accept the same in trust for the benefit of the Lender and forthwith deliver to the Lender a pledge amendment, duly executed by the Grantor, in substantially the form of Exhibit 1 annexed hereto (each, a “Pledge Amendment”), and the certificates and other documents required under SECTION 3.1 and SECTION 3.2 hereof in respect of the additional Pledged Interests which are to be pledged pursuant to this Security Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Interests.  The Grantor hereby authorizes the Lender to attach each Pledge Amendment to this Security Agreement and agrees that all Pledged Interests listed on any Pledge Amendment delivered to the Lender shall for all purposes hereunder be considered Collateral.

 

SECTION 5.2.      Voting Rights; Distributions; etc.

 

 

 

SECTION 5.3.       Organization Documents.  The Grantor has delivered to the Lender true, correct and complete copies of its Organization Documents.  The Organization Documents are in full force and effect.  The Grantor will not terminate or agree to terminate any Organization Documents or make any amendment or modification to any Organization Documents (including electing to treat any Pledged Interests of the Grantor as a security under Section 8-103 of the UCC) except to the extent permitted pursuant to the Credit Agreement.

 

SECTION 5.4.      Defaults, Etc.  The Grantor is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which the Grantor is a party relating to the Pledged Interests pledged by it, and the Grantor is not in violation of any other provisions of any such agreement to which the Grantor is a party, or otherwise in default or violation thereunder, other than any such violation which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  No Securities Collateral pledged by the Grantor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against the Grantor by any Person with respect thereto, and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the Organization Documents and certificates, if any, delivered to the Lender) which evidence any Pledged Interests of the Grantor.

 

ARTICLE VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

 

SECTION 6.1.      Grant of License.  Without limiting the rights of Lender as the holder of a Lien on the Intellectual Property Collateral, for the purpose of enabling the Lender, during the continuance of an Event of Default, to exercise rights and remedies under Article VIII hereof at such time as the Lender shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Grantor hereby grants to the Lender, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty, rent or other compensation to the Grantor) to use, assign, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by the Grantor and to occupy any Real Property owned or leased by the Grantor, wherever the same may be located, including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof.

 

 

SECTION 6.2.      Registrations.  Except pursuant to licenses and other user agreements entered into by the Grantor in the ordinary course of business, on and as of the date hereof (i) the Grantor owns/or and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any material Copyright, Patent or Trademark listed in Section IV of the Perfection Certificate, and (ii) all registrations listed in Section IV of the Perfection Certificate are valid and in full force and effect.

 

SECTION 6.3.      No Violations or Proceedings.  To the Grantor’s knowledge, on and as of the date hereof, there is no violation by others of any right of the Grantor with respect to any Copyright, Patent or Trademark listed in Section IV of the Perfection Certificate, respectively, pledged by it under the name of the Grantor, except any such violations that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 6.4.      Protection of Lender’s Security.  On a continuing basis, the Grantor shall, at its sole cost and expense, (i) promptly following its becoming aware thereof, notify the Lender of (A) any adverse determination in any proceeding in the United States Patent and Trademark Office or the United States Copyright Office with respect to any Patent, Trademark or Copyright necessary for the conduct of business of the Grantor or (B) the institution of any proceeding or any adverse determination in any federal, state or local court or administrative body regarding the Grantor’s claim of ownership in or right to use any of the Intellectual Property Collateral material to the use and operation of the Collateral, its right to register such Intellectual Property Collateral or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect the Intellectual Property Collateral necessary for the conduct of business of the Grantor, (iii) not permit to lapse or become abandoned any Intellectual Property Collateral necessary for the conduct of business of the Grantor, and not settle or compromise any pending or future litigation or administrative proceeding with respect to such Intellectual Property Collateral, in each case except as shall be consistent with commercially reasonable business judgment, (iv) upon the Grantor’s obtaining knowledge thereof, promptly notify the Lender in writing of any event which may be reasonably expected to materially and adversely affect the value or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Collateral, the ability of the Grantor or the Lender to dispose of the Intellectual Property Collateral or any portion thereof or the rights and remedies of the Lender in relation thereto including, without limitation, a levy or threat of levy or any legal process against the Intellectual Property Collateral or any material portion thereof, (v) not license the Intellectual Property Collateral other than licenses entered into by the Grantor in, or incidental to, the ordinary course of business, or amend or permit the amendment of any of the material licenses in a manner that materially and adversely affects the right to receive payments thereunder, or in any manner that would materially impair the value of the Intellectual Property Collateral or the Lien on and security interest in the Intellectual Property Collateral intended to be granted to the Lender for the benefit of the Credit Parties, without the consent of the Lender, (vi) until the Lender exercises its rights to make collection, diligently keep adequate records respecting the Intellectual Property Collateral and (vii) furnish to the Lender from time to time upon the Lender’s reasonable request therefor detailed statements and

 

 

SECTION 6.5.      After-Acquired Property.  If the Grantor shall, at any time before this Security Agreement shall have been terminated in accordance with SECTION 9.5(a), (i) obtain any rights to any additional Intellectual Property Collateral or (ii) become entitled to the benefit of any additional Intellectual Property Collateral or any renewal or extension thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property Collateral, or any improvement on any Intellectual Property Collateral, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this SECTION 6.5 with respect to the Grantor shall automatically constitute Intellectual Property Collateral if such would have constituted Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this Security Agreement without further action by any party.  With respect to any federally registered Intellectual Property Collateral, the Grantor shall, no less frequently than once per Fiscal Quarter, (a) provide to the Lender a written notice of all of the foregoing items enumerated in clause (i) or (ii) of this SECTION 6.5 occurring during the immediately preceding Fiscal Quarter, and (b) confirm the attachment of the Lien and security interest created by this Security Agreement to any rights described in clauses (i) and (ii) of the immediately preceding sentence of this SECTION 6.5 by execution of an instrument in form reasonably acceptable to the Lender.

 

SECTION 6.6.      Modifications.  The Grantor authorizes the Lender to modify this Security Agreement by amending Section IV of the Perfection Certificate to include any Intellectual Property Collateral acquired or arising after the date hereof of the Grantor including, without limitation, any of the items listed in SECTION 6.5 hereof.

 

SECTION 6.7.      Litigation.  Unless there shall occur and be continuing any Event of Default, the Grantor shall have the right to commence and prosecute in its own name, as the party in interest, for its own benefit and at the sole cost and expense of the Grantor, such applications for protection of the Intellectual Property Collateral and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value or other damage as are necessary to protect the Intellectual Property Collateral.  Upon the occurrence and during the continuance of any Event of Default, the Lender shall have the right but shall in no way be obligated to file applications for protection of the Intellectual Property Collateral and/or bring suit in the name of the Grantor, the Lender or the other Credit Parties to enforce the Intellectual Property Collateral and any license thereunder.  In the event of such suit, the Grantor shall, at the reasonable request of the Lender, do any and all lawful acts and execute any and all documents requested by the Lender in aid of such enforcement and the Grantor shall promptly reimburse and indemnify the Lender, as the case may be, for all costs and expenses incurred by the Lender in the exercise of its rights under this SECTION 6.7 in accordance with SECTION 9.3 hereof.  In the event that the Lender shall elect not to bring suit to enforce the

 

 

SECTION 6.8.      Third Party Consents.  The Grantor shall use commercially reasonable efforts to obtain the consent of third parties to the extent such consent is necessary or desirable to create a valid, perfected security interest in favor of the Lender in any Intellectual Property Collateral.

 

ARTICLE VII

 

CERTAIN PROVISIONS CONCERNING ACCOUNTS

 

SECTION 7.1.      Special Representations and Warranties.  As of the time when each of its Accounts is included in the Borrowing Base as an Eligible Credit Card Receivable the Grantor shall be deemed to have represented and warranted that such Account and all records, papers and documents relating thereto (i) are genuine and correct and in all material respects what they purport to be, (ii) represent the legal, valid and binding obligation of the account debtor, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability, evidencing indebtedness unpaid and owed by such account debtor, arising out of the performance of labor or services or the sale, lease, license, assignment or other disposition and delivery of the goods or other property listed therein or out of an advance or a loan, and (iii) are in all material respects in compliance and conform with all applicable material federal, state and local Laws and applicable Laws of any relevant foreign jurisdiction.

 

SECTION 7.2.      Maintenance of Records.  The Grantor shall keep and maintain at its own cost and expense materially complete records of each Account, in a manner consistent with prudent business practice, including, without limitation, records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto.  The Grantor shall, at the Grantor’s sole cost and expense, upon the Lender’s demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible evidence of Accounts, including, without limitation, all documents evidencing Accounts and any books and records relating thereto to the Lender or to its representatives (copies of which evidence and books and records may be retained by the Grantor).  Upon the occurrence and during the continuance of any Event of Default, the Lender may transfer a full and complete copy of the Grantor’s books, records, credit information, reports, memoranda and all other writings relating to the Accounts to and for the use by any Person that has acquired or is

 

 

SECTION 7.3.      Legend.  The Grantor shall legend, at the request of the Lender made at any time after the occurrence and during the continuance of any Event of Default and in form and manner reasonably satisfactory to the Lender, the Accounts and the other books, records and documents of the Grantor evidencing or pertaining to the Accounts with an appropriate reference to the fact that the Accounts have been collaterally assigned to the Lender for the benefit of the Credit Parties and that the Lender has a security interest therein.

 

SECTION 7.4.      Modification of Terms, Etc.  The Grantor shall not rescind or cancel any indebtedness evidenced by any Account or modify any term thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with prudent business practice, or extend or renew any such indebtedness except in the ordinary course of business consistent with prudent business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Account or interest therein except in the ordinary course of business consistent with prudent business practice or in accordance with the Credit Agreement without the prior written consent of the Lender.

 

SECTION 7.5.      Collection.  The Grantor shall cause to be collected from the account debtor of each of the Accounts, as and when due in the ordinary course of business consistent with prudent business practice (including, without limitation, Accounts that are delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Account, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account.  The costs and expenses (including, without limitation, attorneys’ fees) of collection, in any case, whether incurred by the Grantor, the Lender or any other Credit Party, shall be paid by the Grantor.

 

ARTICLE VIII

REMEDIES

 

SECTION 8.1.      Remedies.   Upon the occurrence and during the continuance of any Event of Default the Lender may, from time to time in respect of the Collateral, in addition to the other rights and remedies provided for herein, under applicable Law or otherwise available to it:

 

 

SECTION 8.2.      Notice of Sale.  The Grantor acknowledges and agrees that, to the extent notice of sale or other disposition of Collateral shall be required by applicable Law and unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Lender shall provide the Grantor such advance notice as may be practicable under the circumstances), ten (10) days’ prior notice to the Grantor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters.  No notification need be given to the Grantor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying (as permitted under Law) any right to notification of sale or other intended disposition.

 

SECTION 8.3.      Waiver of Notice and Claims.  The Grantor hereby waives, to the fullest extent permitted by applicable Law, notice or judicial hearing in connection with the Lender’s taking possession or the Lender’s disposition of any of the Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which the Grantor would otherwise have under law, and the Grantor hereby further waives, to the fullest extent permitted by applicable Law:  (i) all damages occasioned by such taking of possession, (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Lender’s rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable Law.  The Lender shall not be liable for any incorrect or improper

 

 

SECTION 8.4.      Certain Sales of Collateral.

 

 

 

 

 

SECTION 8.6.      Certain Additional Actions Regarding Intellectual Property.  If any Event of Default shall have occurred and be continuing, upon the written demand of Lender, the Grantor shall execute and deliver to Lender an assignment or assignments of the registered Patents, Trademarks and/or Copyrights and such other documents as are necessary or appropriate to carry out the intent and purposes hereof to the extent such assignment does not result in any loss of rights therein under applicable Law.  Within five (5) Business Days of written notice thereafter from Lender, the Grantor shall make available to Lender, to the extent within the Grantor’s power and authority, such personnel then in the Grantor’s employ as Lender may reasonably designate to permit the Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold by the Grantor under the registered Patents, Trademarks and/or Copyrights, and such Persons shall be available to perform their prior functions on Lender’s behalf.

 

SECTION 8.7.      Application of Proceeds.  The proceeds received by the Lender in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Lender of its remedies shall be applied, together with any other sums then held by the Lender pursuant to this Security Agreement, in accordance with and as set forth in Section 8.03 of the Credit Agreement.

 

 

 

 

 

SECTION 9.3.      Expenses.  The Grantor will upon demand pay to the Lender the amount of any and all amounts required to be paid pursuant to Section 9.04 of the Credit Agreement.

 

SECTION 9.4.      Continuing Security Interest; Assignment.  This Agreement shall create a continuing security interest in the Collateral and shall (i) be binding upon the Grantor, its successors and assigns, and (ii) inure, together with the rights and remedies of the Lender hereunder, to the benefit of the Lender and the other Credit Parties and each of their respective successors, transferees and assigns.  No other Persons (including, without limitation, any other creditor of the Grantor) shall have any interest herein or any right or benefit with respect hereto.  Without limiting the generality of the foregoing clause (ii), any Credit Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Credit Party, herein or otherwise, subject, however, to the provisions of the Credit Agreement.

 

SECTION 9.5.      Termination; Release.

 

 

SECTION 9.6.      Modification in Writing.  No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Grantor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by the Lender and the Grantor.  Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Grantor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Security Agreement or any other document evidencing the Secured Obligations, no notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances.

 

SECTION 9.7.      Notices.  Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to the Grantor, addressed to it at the address of the Borrower set forth in the Credit Agreement and as to the Lender, addressed to it at the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other parties hereto complying as to delivery with the terms of this SECTION 9.7.

 

 

SECTION 9.8.      GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

SECTION 9.9.      CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

 

(a)        THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE DISTRICT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MASSACHUSETTS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  THE GRANTOR 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 OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE GRANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(b)        THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  THE GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(c)        THE GRANTOR AGREES THAT ANY ACTION COMMENCED BY THE GRANTOR ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY OR ANY FEDERAL COURT

 

 

 

(d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.7.  NOTHING IN THIS SECURITY AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)        EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.10.    Severability of Provisions.  Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

SECTION 9.11.    Execution in Counterparts; Effectiveness.  This Security Agreement may be executed in any number of counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Security Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Security Agreement.

 

SECTION 9.12.    No Release.  Nothing set forth in this Security Agreement shall relieve the Grantor from the performance of any term, covenant, condition or agreement on the Grantor’s part to be performed or observed under or in respect of any of the Collateral or from any liability to any Person under or in respect of any of the Collateral or shall impose any obligation on the Lender or any other Credit Party to perform or observe any such term, covenant, condition or agreement on the Grantor’s part to be so performed or observed or shall impose any liability on the Lender or any other Credit Party for any act or omission on the part

 

 

 

 

SECTION 9.13.    Obligations Absolute.  All obligations of the Grantor hereunder shall be absolute and unconditional irrespective of:

 

(i)       any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Grantor;

 

(ii)      any lack of validity or enforceability of the Credit Agreement or any other Loan Document, or any other agreement or instrument relating thereto;

 

(iii)     any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other Loan Document or any other agreement or instrument relating thereto;

 

(iv)     any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations;

 

(v)      any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement or any other Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of SECTION 9.6 hereof; or

 

(vi)      any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Grantor (other than the termination of this Security Agreement in accordance with SECTION 9.5(a) hereof).

 

 

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

IN WITNESS WHEREOF, the Grantor and the Lender have caused this Security Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written.

 

BLUEFLY, INC., as Grantor
By:	/ s / Kara B. Jenny
Name:	Kara B. Jenny
Title:	Chief Financial Officer and Secretary

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender
By:	/ s / Michele L. Ayou
Name:	Michele L. Ayou
Title:	Authorized Signatory

 

EXHIBIT 1

 

[Form of]

 

SECURITIES PLEDGE AMENDMENT

 

This Securities Pledge Amendment, dated as of _________, is delivered pursuant to SECTION 5.1 of that certain Amended and Restated Security Agreement (as amended, amended and restated, restated, supplemented or otherwise modified from time to time, the “Security Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of June 17, 2011, made by BLUEFLY, INC., a Delaware corporation having an office at 42 West 39th Street, New York, New York 10018 (the “Borrower”), as pledgor, assignor and debtor (the Borrower, in such capacities and together with any successors in such capacities, the “Grantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, having an office at One Boston Place, 18th Floor, Boston, Massachusetts 02108, as Lender, for the ratable benefit of itself and the other Credit Parties (as defined in the Credit Agreement referred to in the Security Agreement) pursuant to the Credit Agreement, as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).  The undersigned hereby agrees that this Securities Pledge Amendment may be attached to the Security Agreement and that the Pledged Interests listed on this Securities Pledge Amendment shall be deemed to be and shall become part of the Collateral and shall secure all Secured Obligations.

 

PLEDGED INTERESTS

 

 

BLUEFLY, INC., as Grantor
By:
	Name:
	Title:

 

AGREED TO AND ACCEPTED:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

 

 

SCHEDULE I

 

Filings, Registrations and Recordings

 

1.           UCC-1 Financing Statement filed with Secretary of State of State of Delaware

2.           Grant of Security Interest in United States Trademarks filed with United States Patent and Trademark Office

 

SCHEDULE II

 

Pledged Interests