EXHIBIT 10.4

 

EXECUTION VERSION

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”), dated as of February 14, 2020, by
and among the Persons listed on the signature pages hereof as “Grantors” and
those additional entities that hereafter become parties hereto by executing the
form of Joinder attached hereto as Annex 1 (each, a “Grantor” and collectively,
the “Grantors”), and GACP FINANCE CO., LLC, a Delaware limited liability company
(“GACP”), in its capacities as administrative agent and collateral agent for the
Secured Parties (in such capacities, together with its successors and permitted
assigns in such capacities, “Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain ABL Credit Agreement, dated as of February 14,
2020 (as amended, restated, supplemented, or otherwise modified from time to
time, the “Credit Agreement”), by and among FRANCHISE GROUP INTERMEDIATE HOLDCO,
LLC, a Delaware limited liability company (“Lead Borrower”), as a Borrower,
FRANCHISE GROUP MERGER SUB AF, INC., a Delaware corporation (the “Merger Sub”),
as a Borrower (which, on the Closing Date, shall be merged with and into
AMERICAN FREIGHT GROUP, INC., a Delaware corporation (“AFGI”), with AFGI
surviving such merger as a Borrower), certain other Subsidiaries of Lead
Borrower from time to time party thereto as Borrowers (collectively with Lead
Borrower and AFGI, the “Borrowers”), FRANCHISE GROUP NEW HOLDCO, LLC, a Delaware
limited liability company (“Global Parent”), as a Guarantor, certain
Subsidiaries of Lead Borrower from time to time party thereto as Guarantors, the
lenders from time to time party thereto (each of such lenders, together with its
successors and permitted assigns, is referred to hereinafter as a “Lender”) and
Agent, the Lenders have agreed to make certain financial accommodations
available to Borrowers from time to time pursuant to the terms and conditions
thereof;

 

WHEREAS, Agent has agreed to act as agent for the benefit of the Secured Parties
in connection with the transactions contemplated by the Credit Agreement and
this Agreement;

 

WHEREAS, in order to induce Agent and the Lenders to enter into the Credit
Agreement and the other Loan Documents and to extend the Loans thereunder and to
induce Agent and the Lenders to make financial accommodations to Borrowers as
provided for in the Credit Agreement and the other Loan Documents, (a) each
Grantor (other than each Borrower with respect to its own Obligations) has
agreed to guaranty the Guaranteed Obligations, and (b) each Grantor has agreed
to grant to Agent, for the benefit of the Secured Parties, a continuing security
interest in and to the Collateral in order to secure the prompt and complete
payment, observance and performance of the Secured Obligations; and

 

WHEREAS, each Grantor (other than each Parent Company and each Borrower) is an
Affiliate or a Subsidiary of Borrowers and, as such, will benefit by virtue of
the financial accommodations extended to Borrowers by Agent and the Lenders.

 

 

 

NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:

 

1.                   Definitions; Construction.

 

(a)                All initially capitalized terms used herein (including in the
preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Credit Agreement. Any terms (whether capitalized or
lower case) used in this Agreement that are defined in the Code (including,
without limitation, Account Debtor, Chattel Paper, Deposit Account, Drafts,
Documents, Farm Products, Fixtures, Instruments, Letters of Credit, Letter of
Credit Rights, Promissory Notes, Securities Account and Supporting Obligations)
shall be construed and defined as set forth in the Code unless otherwise defined
herein or in the Credit Agreement; provided, that to the extent that the Code is
used to define any term used herein and if such term is defined differently in
different Articles of the Code, the definition of such term contained in Article
9 of the Code shall govern. In addition to those terms defined elsewhere in this
Agreement, as used in this Agreement, the following terms shall have the
following definitions:

 

(i)                   “Acquisition Documents” means the Acquisition Agreement
and the other agreements, instruments and documents evidencing, or entered into
in connection with, the Acquisition or any other acquisition by a Grantor
consummated after the Closing Date.

 

(ii)                   “Administrative Agent” has the meaning specified therefor
in the recitals to this Agreement.

 

(iii)                   “AFGI” has the meaning specified therefor in the
recitals to this Agreement.

 

(iv)                    “Agent” has the meaning specified therefor in the
preamble to this Agreement.

 

(v)                   “Agreement” has the meaning specified therefor in the
preamble to this Agreement.

 

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

 

(vii)                    “Borrower” and “Borrowers” have the respective meanings
specified therefor in the recitals to this Agreement.

 

(viii)                    “Code” means the New York Uniform Commercial Code, as
in effect from time to time; provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, priority,
or remedies with respect to Agent’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies.

 

(ix)                    “Collateral” has the meaning specified therefor in
Section 2 hereof.

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(x)                   “Commercial Tort Claims” means commercial tort claims (as
that term is defined in the Code), except that it refers only to such claims
that have been asserted in judicial proceedings or are subject to mediation,
arbitration or any other proceeding and includes those commercial tort claims
listed on Schedule 1.

 

(xi)                    “Copyright Security Agreement” means each Copyright
Security Agreement executed and delivered by Grantors, or any of them, and
Agent, in substantially the form of Exhibit A.

 

(xii)                    “Copyrights” means any and all rights in any works of
authorship, including (A) copyrights and moral rights, (B) copyright
registrations and recordings thereof and all applications in connection
therewith including those listed on Schedule 2, (C) income, license fees,
royalties, damages, and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past, present, or future
infringements thereof, (D) the right to sue for past, present, and future
infringements thereof, and (E) all of each Grantor’s rights corresponding
thereto throughout the world.

 

(xiii)                    “Credit Agreement” has the meaning specified therefor
in the recitals to this Agreement.

 

(xiv)                    “De Minimis Amount” means $100,000.

 

(xv)                    “Discharge of Term Priority Obligations” means the
“Discharge of Term Priority Obligations” as defined in the Intercreditor
Agreement.

 

(xvi)                    “Equipment” means equipment (as that term is defined in
the Code).

 

(xvii)                   “Excluded Assets” has the meaning specified therefor in
Section 2 hereof.

 

(xviii)                   “GACP” has the meaning specified therefor in the
preamble to this Agreement.

 

(xix)                    “General Intangibles” means general intangibles (as
that term is defined in the Code), and includes payment intangibles, software,
contract rights (including, without limitation, rights under all sale, service,
performance, equipment or warranty contracts and under all franchise
agreements), rights to payment (including, without limitation, rights under all
sale, service, performance, equipment or warranty contracts and under all
franchise agreements), warranty claims, all know-how and warranties, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, Intellectual Property, Intellectual Property Licenses, purchase
orders, rights to payment and other rights under Acquisition Documents, rights
to payment and other rights under any royalty or licensing agreements, including
Intellectual Property Licenses and all rights to bring any causes of action for
past, present and future infringement, dilution, misappropriation, violation,
misuse or breach with respect to Intellectual Property, monies due or
recoverable from pension funds, pension plan refunds, pension plan refund
claims, insurance premium rebates, tax refunds, and tax refund claims, interests
in a partnership or limited liability company which do not constitute a security
under Article 8 of the Code, and any other personal property other than
Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods,
Investment Property, Negotiable Collateral, and oil, gas, or other minerals
before extraction.

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(xx)                    “Global Parent” has the meaning specified therefor in
the recitals to this Agreement.

 

(xxi)                    “Grantor” and “Grantors” have the respective meanings
specified therefor in the preamble to this Agreement.

 

(xxii)                   “Intellectual Property” means any and all Patents,
Copyrights, Trademarks, trade secrets, know-how, inventions (whether or not
patentable), algorithms, software programs (including source code and object
code), processes, product designs, industrial designs, blueprints, drawings,
data, customer lists, supplier and vendor lists, customer data and all other
information related to customers, route lists, supplier and vendor data and all
other information related to suppliers and vendors, pricing and cost
information, product lines, supply chain information, URLs and domain names, all
recorded data of any kind or nature (regardless of the medium of recording),
specifications, documentations, business and marketing plans and proposals,
reports, catalogs, literature, and any other forms of, and any other rights in
technology or proprietary or confidential information of any kind, including all
rights therein, goodwill and enterprise value with respect thereto, and all
applications for registration or registrations thereof.

 

(xxiii)                   “Intellectual Property Licenses” means, with respect
to any Grantor, (A) any licenses or other similar rights provided to such
Grantor in or with respect to Intellectual Property owned or controlled by any
other Person, and (B) any licenses or other similar rights provided to any other
Person in or with respect to Intellectual Property owned or controlled by such
Grantor, in each case, including (w) any agreements relating to the Licensed
Trademarks, (x) any software license agreements (other than license agreements
for commercially available off-the-shelf software that is generally available to
the public which have been licensed to a Grantor pursuant to end-user licenses),
(y) the material license agreements listed on Schedule 3, and (z) the right to
use any of the licenses or other similar rights described in this definition in
connection with the enforcement of the Secured Parties’ rights under the Loan
Documents.

 

(xxiv)                   “Inventory” means inventory (as that term is defined in
the Code).

 

(xxv)                   “Investment Property” means (A) any and all investment
property, and (B) any and all of the following (regardless of whether classified
as investment property under the Code): all Pledged Interests, Pledged Operating
Agreements, and Pledged Partnership Agreements.

 

(xxvi)                   “Joinder” means each Joinder to this Agreement executed
and delivered by Agent and each of the other parties listed on the signature
pages thereto, in substantially the form of Annex 1.

 

(xxvii)                   “Lead Borrower” has the meaning specified therefor in
the recitals to this Agreement.

 

(xxviii)                   “Lender” has the meaning specified therefor in the
recitals to this Agreement.

 

(xxix)                   “Merger Sub” has the meaning specified therefor in the
recitals to this Agreement.

 

(xxx)                   “Negotiable Collateral” means Letters of Credit,
Letter-of-Credit Rights, Instruments, Promissory Notes, Drafts and Documents.

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(xxxi)                   “Patents” means patents and patent applications,
including (A) the patents and patent applications listed on Schedule 4, (B) all
continuations, divisionals, continuations-in-part, re-examinations, reissues,
and renewals thereof and improvements thereon, (C) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past, present, or future infringements
thereof, (D) the right to sue for past, present, and future infringements
thereof, and (E) all of each Grantor’s rights corresponding thereto throughout
the world.

 

(xxxii)                   “Patent Security Agreement” means each Patent Security
Agreement executed and delivered by Grantors, or any of them, and Agent, in
substantially the form of Exhibit B.

 

(xxxiii)                   “Pledged Companies” means each Person listed on
Schedule 5 as a “Pledged Company”, together with each other Person, all or a
portion of whose Capital Stock are acquired or otherwise owned by a Grantor
after the Closing Date and is required to be pledged pursuant to Section 5.10 of
the Credit Agreement.

 

(xxxiv)                    “Pledged Interests” means all of each Grantor’s
right, title and interest in and to all of the Capital Stock now owned or
hereafter acquired by such Grantor, regardless of class or designation,
including in each of the Pledged Companies, and all substitutions therefor and
replacements thereof, all proceeds thereof and all rights relating thereto, also
including any certificates representing the Capital Stock, the right to receive
any certificates representing any of the Capital Stock, all warrants, options,
share appreciation rights and other rights, contractual or otherwise, in respect
thereof and the right to receive all dividends, distributions of income,
profits, surplus, or other compensation by way of income or liquidating
distributions, in cash or in kind, and all cash, instruments, and other property
from time to time received, receivable, or otherwise distributed in respect of
or in addition to, in substitution of, on account of, or in exchange for any or
all of the foregoing; provided, that in no event shall any Excluded Assets
constitute Pledged Interests.

 

(xxxv)                   “Pledged Interests Addendum” means a Pledged Interests
Addendum substantially in the form of Exhibit C.

 

(xxxvi)                    “Pledged Notes” means those certain promissory notes
described on Schedule 10 attached hereto, consisting of the promissory notes
required to be endorsed and delivered as of the Closing Date pursuant to Section
6(a) hereof.

 

(xxxvii)                    “Pledged Operating Agreements” means all of each
Grantor’s rights, powers, and remedies under the limited liability company
operating agreements of each of the Pledged Companies that are limited liability
companies.

 

(xxxviii)                    “Pledged Partnership Agreements” means all of each
Grantor’s rights, powers, and remedies under the partnership agreements of each
of the Pledged Companies that are partnerships.

 

(xxxix)                    “Proceeds” has the meaning specified therefor in
Section 2(r) hereof.

 

(xl)                    “PTO” means the United States Patent and Trademark
Office.

 

(xli)                    “Real Property” means any estates or interests in real
property now owned or hereafter acquired by any Grantor and the improvements
thereto.

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(xlii)                    “Record” means information that is inscribed on a
tangible medium or which is stored in an electronic or other medium and is
retrievable in perceivable form.

 

(xliii)                    “Secured Obligations” means each and all of the
following: (A) all Obligations (including any expenses, fees or interest that
accrue after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding) and (B) all Guaranteed Obligations.

 

(xliv)                   “Security Interest” has the meaning specified therefor
in Section 2 hereof.

 

(xlv)                    “Supporting Obligations” means supporting obligations
(as such term is defined in the Code), and includes letters of credit and
guaranties issued in support of Accounts, Chattel Paper, documents, General
Intangibles, instruments or Investment Property.

 

(xlvi)                   “Term Collateral Agent” has the meaning specified
therefor in the Intercreditor Agreement.

 

(xlvii)                   “Term Priority Collateral” has the meaning specified
therefor in the Intercreditor Agreement.

 

(xlviii)                   “Trademarks” means any and all trademarks, trade
names, registered trademarks, trademark applications, service marks, registered
service marks and service mark applications, including (A) the trade names,
registered trademarks, trademark applications, registered service marks and
service mark applications listed on Schedule 6, (B) all renewals thereof, (C)
all income, royalties, damages and payments now and hereafter due or payable
under and with respect thereto, including payments under all licenses entered
into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (D) the right to sue for past, present and
future infringements and dilutions thereof, (E) the goodwill of each Grantor’s
business symbolized by the foregoing or connected therewith, and (F) all of each
Grantor’s rights corresponding thereto throughout the world.

 

(xlix)                   “Trademark Security Agreement” means each Trademark
Security Agreement executed and delivered by Grantors, or any of them, and
Agent, in substantially the form of Exhibit D.

 

(l)                   “URL” means “uniform resource locator,” an internet web
address.

 

(b)                This Agreement shall be subject to the rules of construction
set forth in Section 1.03 of the Credit Agreement, and such rules of
construction are incorporated herein by this reference, mutatis mutandis.

 

(c)                All of the schedules and exhibits attached to this Agreement
shall be deemed incorporated herein by reference.

 

2.                   Grant of Security. Each Grantor hereby unconditionally
grants, assigns, and pledges to Agent, for the benefit of each of the Secured
Parties, to secure the Secured Obligations (whether now existing or hereafter
arising), a continuing security interest (hereinafter referred to as the
“Security Interest”) in all of such Grantor’s right, title, and interest in and
to the following, whether now owned or hereafter acquired or arising and
wherever located (the “Collateral”):

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(a)                all of such Grantor’s Accounts;

 

(b)                all of such Grantor’s Books;

 

(c)                all of such Grantor’s Chattel Paper;

 

(d)                all of such Grantor’s Commercial Tort Claims listed on
Schedule 1;

 

(e)                all of such Grantor’s Deposit Accounts;

 

(f)                 all of such Grantor’s Equipment;

 

(g)                all of such Grantor’s Farm Products;

 

(h)                all of such Grantor’s Fixtures;

 

(i)                 all of such Grantor’s General Intangibles;

 

(j)                 all of such Grantor’s Inventory;

 

(k)                all of such Grantor’s Investment Property;

 

(l)                 all of such Grantor’s Intellectual Property and Intellectual
Property Licenses;

 

(m)              all of such Grantor’s Negotiable Collateral (including the
Pledged Notes);

 

(n)                all of such Grantor’s Pledged Interests (including all of
such Grantor’s Pledged Operating Agreements and Pledged Partnership Agreements);

 

(o)                all of such Grantor’s Securities Accounts;

 

(p)                all of such Grantor’s Supporting Obligations;

 

(q)                all of such Grantor’s money, Cash Equivalents, or other
assets of such Grantor that now or hereafter come into the possession, custody,
or control of Agent (or its agent or designee) or any other Secured Party; and

 

(r)                 all of the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance or
Commercial Tort Claims covering or relating to any or all of the foregoing, and
any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Farm
Products, Fixtures, General Intangibles, Inventory, Investment Property,
Intellectual Property, Negotiable Collateral, Pledged Interests, Securities
Accounts, Supporting Obligations, money, or other tangible or intangible
property resulting from the sale, lease, license, exchange, collection, or other
disposition of any of the foregoing, the proceeds of any award in condemnation
with respect to any of the foregoing, any rebates or refunds, whether for taxes
or otherwise, and all proceeds of any such proceeds, or any portion thereof or
interest therein, and the proceeds thereof, and all proceeds of any loss of,
damage to, or destruction of the above, whether insured or not insured, and, to
the extent not otherwise included, any indemnity, warranty, or guaranty payable
by reason of loss or damage to, or otherwise with respect to any of the
foregoing (the “Proceeds”). Without limiting the generality of the foregoing,
the term “Proceeds” includes whatever is receivable or received when Investment
Property or proceeds are sold, exchanged, collected, or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes proceeds of
any indemnity or guaranty payable to any Grantor or any Secured Party from time
to time with respect to any of the Investment Property.

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Notwithstanding anything contained in this Agreement to the contrary, the term
“Collateral” shall not include the following (collectively, the “Excluded
Assets”): (i) motor vehicles and other assets subject to certificates of title
(except to the extent a security interest therein can be perfected by the filing
of Uniform Commercial Code financing statements); (ii) any rights or interest in
any Real Estate Asset that is not a Material Real Estate Asset; (iii) any United
States intent-to-use trademark applications to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair the validity or enforceability of such intent-to-use trademark or service
mark applications under applicable federal law; provided, that upon submission
and acceptance by the PTO of an amendment to allege use pursuant to 15 U.S.C.
Section 1060(a) (or any successor provision), such intent-to-use trademark
application shall be considered Collateral; (iv) Capital Stock in any Person,
other than any wholly-owned Subsidiary of a Grantor, to the extent a security
interest therein is not permitted by the terms of such Person’s organizational
documents or joint venture documents (it being understood that, as of the
Closing Date, no Capital Stock constitutes an Excluded Asset under this clause
(iv)) (in each case, as in effect on the date such Capital Stock was acquired),
solely to the extent that (1) such joint venture or other investment is
permitted under Section 6.07 of the Credit Agreement and (2) such restriction
was not created or entered into in contemplation of the acquisition of such
Capital Stock; provided that the exclusion in this clause (iv) shall in no way
be construed to apply to the extent that any described prohibition is
ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the Code (or any
successor provision or provisions) or other applicable law (including the
Bankruptcy Code) or applicable principles of equity; provided further, that
immediately upon the ineffectiveness (and for so long as it remains
ineffective), lapse or termination of any such restriction, the Collateral shall
include, and such Grantor shall be deemed to have granted a security interest
in, all such Capital Stock as if such restriction had never been in effect; (v)
any lease, license or other agreement to which a Grantor is a party, or any
property subject to a purchase money security interest, Capital Lease or similar
arrangement, in each case, to the extent that a grant of a security interest
therein in favor of Agent would constitute a default or forfeiture under, or
violate or invalidate, such lease, license or other agreement, or such purchase
money security interest, Capital Lease or similar arrangement, or create a right
of termination in favor of any other party thereto (other than a Grantor or a
Subsidiary of a Grantor), solely to the extent that (1) such lease, license or
other agreement, or such purchase money security interest, Capital Lease or
similar arrangement, is permitted under the Loan Documents and (2) such default,
forfeiture, prohibition, invalidation or right of termination (as applicable)
was not created in contemplation of this Agreement or any other Loan Document;
provided that the exclusion in this clause (v) shall in no way be construed to
apply to the extent that any described default, forfeiture, restriction,
prohibition, invalidation or right of termination (as applicable) is ineffective
under Section 9-406, 9-407, 9-408, or 9-409 of the Code (or any successor
provision or provisions) or other applicable law (including the Bankruptcy Code)
or applicable principles of equity; provided further, that immediately upon the
ineffectiveness (and for so long as it remains ineffective), lapse or
termination of any such default, forfeiture, prohibition, restriction,
invalidation or right of termination, the Collateral shall include, and such
Grantor shall be deemed to have granted a security interest in, all such lease,
license or other agreement, or such property subject to purchase money security
interest, Capital Lease or similar arrangement as if such default, forfeiture,
prohibition, restriction, invalidation or right of termination had never been in
effect; (vi) any property or assets with respect to which the granting of
security interests in such assets would (1) be prohibited by applicable law,
rule or regulation, (2) be prohibited under the terms of any contractual
obligation binding on the applicable Grantor at the time the applicable property
or asset was acquired (so long as such prohibition was not entered into in
contemplation of such acquisition), or (3) require the consent, approval,
license or authorization of any Person (including any Governmental Authority)
(other than a Grantor or a Subsidiary of a Grantor) (so long as such consent,
approval, license or authorization right (as applicable) was not created in
contemplation of this Agreement or any other Loan Document); provided

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that the exclusion in this clause (vi) shall in no way be construed to apply to
the extent that any described restriction, prohibition, or requirement of
consent, approval, license or authorization (as applicable) is ineffective under
Section 9-406, 9-407, 9-408, or 9-409 of the Code (or any successor provision or
provisions) or other applicable law (including the Bankruptcy Code) or
applicable principles of equity; provided further, that immediately upon the
ineffectiveness (and for so long as it remains ineffective), lapse or
termination of any such law, rule, regulation, term, prohibition, condition or
requirement, the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such property or assets as if such law,
rule, regulation, term, prohibition, condition or requirement had never been in
effect; (vii) assets located outside the United States to the extent a security
interest in such assets could reasonably be expected to result in material
adverse tax consequences to the Grantors; (viii) Excluded Accounts; (ix) any
Margin Stock; (x) Capital Stock of any Excluded Entities to the extent a pledge
thereof is prohibited by the terms of such Person’s third party Indebtedness (so
long as such prohibition was not created in contemplation of this Agreement or
any other Loan Document); provided further, that immediately upon any Subsidiary
ceasing to be an Excluded Entity, or upon the ineffectiveness (and for so long
as it remains ineffective), lapse or termination of any such prohibition, the
Collateral shall include, and such Grantor shall be deemed to have granted a
security interest in, all Capital Stock of such Subsidiary as if such Subsidiary
had never been an Excluded Entity or as if such prohibition had never been in
effect; (xi) those assets as to which Lead Borrower and the Agent mutually agree
in writing that the cost and/or burden of obtaining a grant of a Lien on such
assets to secure the Secured Obligations outweighs the benefit to the Secured
Parties; (xii) (I) Letter of Credit Rights, which individually have a value or
face amount of less than or equal to the De Minimis Amount (except to the extent
a security interest therein can be perfected by the filing of Uniform Commercial
Code financing statements) and (II) Letter of Credit Rights which individually
have a value or face amount of greater than the De Minimis Amount, which in the
aggregate at any one time for all such Letter of Credit Rights, have an
aggregate value or face amount of $500,000 or less (except to the extent a
security interest therein can be perfected by the filing of Uniform Commercial
Code financing statements); and (xiii) (I) commercial tort claims, which
individually have an aggregate amount claimed that is less than or equal to the
De Minimis Amount and (II) commercial tort claims which individually have an
aggregate amount claimed that is greater than the De Minimis Amount, which in
the aggregate at any one time for all such commercial tort claims, have an
aggregate amount claimed that is not in excess of $500,000; provided, that (A)
Excluded Assets shall not include, and the foregoing exclusions shall in no way
be construed to limit, impair, or otherwise affect any of Agent’s continuing
security interests in and liens upon any rights or interests of any Grantor in
or to, (1) monies due or to become due, or any income stream, receivables,
payment intangibles or proceeds arising, under or in connection with any of the
property or assets described in the foregoing clauses (i) through (xiii), or (2)
any proceeds from the sale, license, lease, or other disposition of any such
property or assets, in each case, other than to the extent such monies, income
stream, receivables, payment intangibles or proceeds otherwise qualify as
Excluded Assets, (B) the Proceeds of any Excluded Assets shall not constitute
Excluded Assets (unless such Proceeds otherwise qualify as Excluded Assets) and
(C) the Grantors shall from time to time at the reasonable request of Agent,
give written notice to Agent identifying in reasonable detail the Excluded
Assets and shall provide to Agent such other information regarding the Excluded
Assets as Agent may reasonably request.

 

3.                   Security for Secured Obligations. The Security Interest
created hereby secures the payment and performance of the Secured Obligations,
whether now existing or arising hereafter. Without limiting the generality of
the foregoing, this Agreement secures the payment of all amounts which
constitute part of the Secured Obligations and would be owed by Grantors, or any
of them, to the Secured Parties, or any of them, but for the fact that they are
unenforceable or not allowable (in whole or in part) as a claim in an Insolvency
Proceeding involving any Grantor due to the existence of such Insolvency
Proceeding. Further, the Security Interest created hereby encumbers each
Grantor’s right, title, and interest in all Collateral, whether now owned by
such Grantor or hereafter acquired, obtained, developed, or created by such
Grantor and wherever located.

 9 

 

4.                   Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral, including the Pledged
Operating Agreements and the Pledged Partnership Agreements, to perform all of
the duties and obligations thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by Agent or any other Secured Party of
any of the rights hereunder shall not release any Grantor from any of its duties
or obligations under such contracts and agreements included in the Collateral,
and (c) none of the Secured Parties shall have any obligation or liability under
such contracts and agreements included in the Collateral by reason of this
Agreement, nor shall any of the Secured Parties be obligated to perform any of
the obligations or duties of any Grantors thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder. Until an Event of
Default shall occur and be continuing, except as otherwise provided in this
Agreement, the Credit Agreement, or any other Loan Document, Grantors shall have
the right to possession and enjoyment of the Collateral for the purpose of
conducting their respective businesses, subject to and upon the terms hereof and
of the Credit Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, it is the intention of the parties hereto that
record and beneficial ownership of the Pledged Interests, including all voting,
consensual, dividend, and distribution rights, shall remain in the applicable
Grantor until (i) the occurrence and continuance of an Event of Default, and
(ii) Agent has notified the applicable Grantor of Agent’s election to exercise
such rights with respect to the Pledged Interests pursuant to Section 15.

 

5.                   Representations and Warranties. In order to induce Agent to
enter into this Agreement for the benefit of the Secured Parties, each Grantor
makes the following representations and warranties to Agent and the other
Secured Parties which shall be true, correct, and complete, in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof), as of the Closing Date, and shall be true,
correct, and complete, in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof), as of the
date of the making of each Loan (or other extension of credit) made thereafter,
as though made on and as of the date of such Loan (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date, in which case such representations and warranties shall be true
and correct in all material respects (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of such earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:

 

(a)                The name (within the meaning of Section 9-503 of the Code)
and jurisdiction of organization of each Grantor is set forth on Schedule 7 (as
such Schedule may be updated from time to time to reflect changes permitted
under the Loan Documents).

 

(b)                The chief executive office of each Grantor is located at the
address indicated on Schedule 7 (as such Schedule may be updated from time to
time to reflect changes permitted under the Loan Documents).

 

(c)                Each Grantor’s tax identification numbers are identified on
Schedule 7 (as such Schedule may be updated from time to time to reflect changes
permitted under the Loan Documents).

 

(d)                As of the Closing Date, no Grantor holds any Commercial Tort
Claim with an amount claimed that exceeds $250,000 individually for such
Commercial Tort Claim, except as set forth on Schedule 1.

 10 

 

(e)                [Reserved].

 

(f)                 Schedule 8 sets forth all Real Property that is a Material
Real Estate Asset owned by any of the Grantors as of the Closing Date.

 

(g)                As of the Closing Date: (i) Schedule 2 provides a complete
and correct list of all registered Copyrights and applications for registration
of Copyrights owned by any Grantor, (ii) Schedule 3 provides a complete and
correct list of all exclusive Intellectual Property Licenses with respect to
registered Copyrights entered into by any Grantor, (iii) Schedule 4 provides a
complete and correct list of all Patents owned by any Grantor and all
applications for Patents owned by any Grantor, and (iv) Schedule 6 provides a
complete and correct list of all registered Trademarks owned by any Grantor, and
all applications for registration of Trademarks owned by any Grantor.

 

(h)                (i) Except as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, to each Grantor’s
knowledge, (A) each Grantor owns or holds licenses in all Intellectual Property
that is necessary in the conduct of its business, and (B) all employees and
contractors of each Grantor who were involved in the creation or development of
any Intellectual Property for such Grantor that is necessary in the business of
such Grantor have signed agreements containing assignment of Intellectual
Property rights to such Grantor and obligations of confidentiality;

 

(ii)                   to each Grantor’s knowledge, no Person has infringed or
misappropriated or is currently infringing or misappropriating any Intellectual
Property rights owned by such Grantor, in each case, that either individually or
in the aggregate could reasonably be expected to result in a Material Adverse
Effect;

 

(iii)                   except as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, to each Grantor’s
knowledge, all registered Copyrights, registered Trademarks, and issued Patents
that are owned by such Grantor and necessary in the conduct of its business are
valid, subsisting and enforceable and in compliance with all legal requirements,
filings, and payments and other actions that are required to maintain such
Intellectual Property in full force and effect; and

 

(iv)                    except as could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, to each Grantor’s
knowledge, each Grantor has taken reasonable steps to maintain the
confidentiality of and otherwise protect and enforce its rights in all trade
secrets owned by such Grantor that are necessary in the conduct of the business
of such Grantor.

 

(i)                 This Agreement creates a valid security interest in the
Collateral of each Grantor, to the extent a security interest therein can be
created under the Code, securing the payment of the Secured Obligations. Except
to the extent a security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, all filings to perfect such
security interest have been duly taken or will have been taken upon the filing
of financing statements listing each applicable Grantor, as a debtor, and Agent,
as secured party, in the jurisdictions listed next to such Grantor’s name on
Schedule 9. Upon the making of such filings, Agent shall have a First Priority
perfected security interest in the Collateral of each Grantor to the extent such
security interest can be perfected by the filing of a financing statement under
the Code. Except to the extent a security interest in the Collateral cannot be
perfected by the filing of a Copyright Security Agreement with the United States
Copyright Office or the filing of any Patent Security Agreement or any Trademark
Security Agreement with the PTO, upon filing of any Copyright Security Agreement
with the United States Copyright Office, filing of any Patent Security Agreement
and any Trademark Security Agreement with the PTO, and the filing of appropriate
financing statements in the jurisdictions listed on Schedule 9, all action
necessary to perfect and to the extent required by this Agreement and the other
Loan Documents, protect the Security Interest in and on each Grantor’s United
States issued Patents, registered Trademarks, or registered Copyrights has been
taken and such perfected Security Interest is enforceable as such as against any
and all creditors of and purchasers from any Grantor of such Intellectual
Property. All action by any Grantor required by this Agreement and the other
Loan Documents, to protect and perfect such security interest on each item of
Collateral has been duly taken.

 11 

 

(j)                 (i) Except for the Security Interest created hereby, each
Grantor is and will at all times be the sole holder of record and the legal and
beneficial owner, free and clear of all Liens other than Permitted Liens, of the
Pledged Interests indicated on Schedule 5 as being owned by such Grantor and,
when acquired by such Grantor, any Pledged Interests acquired after the Closing
Date, (ii) all of the Pledged Interests are duly authorized, validly issued,
fully paid and non-assessable and the Pledged Interests constitute or will
constitute the percentage of the issued and outstanding Capital Stock of the
Pledged Companies of such Grantor identified on Schedule 5 as supplemented or
modified by any Pledged Interests Addendum or any Joinder to this Agreement,
(iii) such Grantor has the right and requisite authority to pledge, the
Investment Property pledged by such Grantor to Agent as provided herein, (iv)
all actions necessary to perfect and establish a First Priority Lien, or to the
extent otherwise required by this Agreement and the other Loan Documents, to
otherwise protect, Agent’s Liens in the Investment Property, and the proceeds
thereof, have been duly taken, upon (A) the execution and delivery of this
Agreement, (B) the taking of possession by Agent (or its agent or designee) of
any certificates representing the Pledged Interests, to the extent such Pledged
Interests are represented by certificates, together with undated powers (or
other documents of transfer acceptable to Agent) endorsed in blank by the
applicable Grantor, (C) the filing of financing statements in the applicable
jurisdiction set forth on Schedule 9 for such Grantor with respect to the
Pledged Interests of such Grantor that are not represented by certificates, and
(D) with respect to any Securities Accounts (other than Excluded Accounts), the
delivery of Control Agreements with respect thereto, and (v) each Grantor has
delivered to and deposited with Agent all certificates representing the Pledged
Interests owned by such Grantor to the extent such Pledged Interests are
represented by certificates, and undated powers (or other documents of transfer
acceptable to Agent) endorsed in blank with respect to such certificates. None
of the Pledged Interests owned or held by such Grantor has been issued or
transferred in violation of any securities registration, securities disclosure,
or similar laws of any jurisdiction to which such issuance or transfer may be
subject.

 

(k)                No consent, approval, authorization, or other order or other
action by, and no notice to or filing with, any Governmental Authority or any
other Person is required (i) for the grant of a Security Interest by such
Grantor in and to the Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement by such Grantor or (ii)
for the exercise by Agent of the voting or other rights provided for in this
Agreement with respect to the Investment Property or the remedies in respect of
the Collateral pursuant to this Agreement, except (A) as may be required in
connection with such disposition of Investment Property by laws affecting the
offering and sale of securities generally, (B) for consents, approvals,
authorizations, or other orders or actions that have already been obtained or
given (as applicable) and that are still in force, and (C) the filing of
financing statements and other filings necessary to perfect the Security
Interests granted hereby.

 

(l)                 As to all limited liability company or partnership
interests, issued under any Pledged Operating Agreement or Pledged Partnership
Agreement, each Grantor hereby represents and warrants that the Pledged
Interests issued pursuant to such agreement (i) are not dealt in or traded on
securities exchanges or in securities markets, (ii) do not constitute investment
company securities, and (iii) are not held by such Grantor in a Securities
Account. In addition, none of the Pledged Operating Agreements, the Pledged
Partnership Agreements, or any other agreements governing any of the Pledged
Interests issued under any Pledged Operating Agreement or Pledged Partnership
Agreement, provides that such Pledged Interests are securities governed by
Article 8 of the Uniform Commercial Code as in effect in any relevant
jurisdiction.

 12 

 

(m)              As to any Credit Card Receivables, (i) no amount payable to any
Grantor under or in connection with any Credit Card Receivable is evidenced by
any Instrument or Chattel Paper which has not been delivered to Agent to the
extent required pursuant to this Agreement, (ii) none of the obligors on any
Credit Card Receivable is a Governmental Authority, and (iii) except as would
not be reasonably expected to result in a Material Adverse Effect, there are no
facts, events or occurrences which would impair the validity of any Credit Card
Receivable, or tend to reduce the amount payable thereunder from the face amount
of the claim or invoice or statements delivered to Agent with respect thereto
(other than arising in the ordinary course of business).

 

6.                   Covenants. Each Grantor, jointly and severally, covenants
and agrees with Agent that from and after the date of this Agreement and until
the date of termination of this Agreement in accordance with Section 22:

 

(a)                Possession of Collateral. In the event that any Collateral,
including Proceeds, is evidenced by or consists of Drafts, Documents,
Certificated Securities, Promissory Notes, or tangible Chattel Paper having at
any one time an aggregate value of $1,500,000 or more for all such Drafts,
Documents, Certificated Securities, Promissory Notes, or tangible Chattel Paper,
the Grantors shall promptly (and in any event within 30 days (or such longer
period as agreed to in writing by Agent) after acquisition thereof), notify
Agent thereof, and if and to the extent that perfection or priority of Agent’s
Security Interest is dependent on or enhanced by possession, the applicable
Grantor, promptly (and in any event within five Business Days (or such longer
period as agreed to in writing by Agent)) after request by Agent, shall execute
such other documents and instruments as shall be requested by Agent or, if
applicable, endorse and deliver physical possession of such Drafts, Documents,
Certificated Securities, Promissory Notes, or tangible Chattel Paper to Agent,
together with such undated powers (or other relevant document of transfer
acceptable to Agent) endorsed in blank as shall be requested by Agent, and shall
do such other acts or things, reasonably deemed necessary or desirable by Agent
to protect Agent’s Security Interest therein, to the extent otherwise required
by this Agreement and the other Loan Documents; provided, that (x) no Grantor
shall be required to notify the Agent or endorse and/or deliver physical
possession of any Draft, Document, Certificated Security, Promissory Note or
tangible Chattel Paper to the extent the individual value of such Draft,
Document, Certificated Security, Promissory Note or tangible Chattel Paper is
less than $500,000 and (y) the Agent, in its sole discretion, may agree that
delivery of physical possession of any such Drafts, Documents, Certificated
Securities, Promissory Notes, or tangible Chattel Paper (and related documents
and instruments and endorsements, if applicable) shall not be required.

 

(b)                Chattel Paper.

 

(i)                   Promptly (and in any event within five Business Days (or
such longer period as agreed to in writing by Agent)) after request by Agent,
each Grantor shall take all steps reasonably necessary to grant Agent control of
all electronic Chattel Paper which individually has a value or face amount
greater than the De Minimis Amount in accordance with the Code and all
“transferable records” as that term is defined in Section 16 of the Uniform
Electronic Transaction Act and Section 201 of the federal Electronic Signatures
in Global and National Commerce Act as in effect in any relevant jurisdiction,
but only to the extent that the aggregate value or face amount of all such
electronic Chattel Paper equals or exceeds at any one time, $500,000; and

 

(ii)                   if any Grantor retains possession of any tangible Chattel
Paper or Instruments (which retention of possession shall be subject to the
extent permitted hereby and by the Credit Agreement), promptly upon the request
of Agent, such tangible Chattel Paper and Instruments shall be marked with the
following legend (or a similar legend as agreed to by Agent): “This writing and
the obligations evidenced or secured hereby are subject to the Security Interest
of GACP Finance Co., LLC, as Agent for the benefit of the Secured Parties”.

 13 

 

(c)                [Reserved].

 

(d)                Letter-of-Credit Rights. If the Grantors (or any of them) are
or become the beneficiary of any letters of credit which individually have a
face amount or value greater than the De Minimis Amount, then the applicable
Grantor or Grantors shall promptly (and in any event within 30 days (or such
longer period as agreed to in writing by Agent) after becoming a beneficiary),
notify Agent thereof and, promptly (and in any event within 30 days (or such
longer period as agreed to in writing by Agent)) after request by Agent, enter
into a tri-party agreement with Agent and the issuer or confirming bank with
respect to each such letter of credit assigning such Letter-of-Credit Rights to
Agent and directing all payments thereunder to the Deposit Account specified by
Agent, all in form and substance reasonably satisfactory to Agent, but only to
the extent that the aggregate value or face amount of all such letters of credit
equals or exceeds at any one time, $500,000.

 

(e)                Commercial Tort Claims. If the Grantors (or any of them)
obtain any Commercial Tort Claims which individually have a value, or involve an
asserted claim, in excess of the De Minimis Amount, then the applicable Grantor
or Grantors shall promptly (and in any event within 30 days (or such longer
period as agreed to in writing by Agent) of obtaining such Commercial Tort
Claims), notify Agent upon incurring or otherwise obtaining such any Commercial
Tort Claims and, promptly (and in any event within five Business Days (or such
longer period as agreed to in writing by Agent)) after request by Agent, amend
Schedule 1 to describe such Commercial Tort Claims in a manner that reasonably
identifies such Commercial Tort Claims and which is otherwise reasonably
satisfactory to Agent, and hereby authorizes the filing of additional financing
statements or amendments to existing financing statements describing such
Commercial Tort Claims, and agrees to do such other acts or things reasonably
deemed necessary or desirable by Agent to give Agent a First Priority perfected
security interest in any such Commercial Tort Claims but only to the extent that
the aggregate value, or asserted claims, of all such Commercial Tort Claims
exceeds at any one time, $500,000.

 

(f)                 Government Contracts. Other than Accounts and Chattel Paper
the aggregate value of which does not at any one time exceed $2,500,000 in the
aggregate for all such Accounts and Chattel Paper, if any Account or Chattel
Paper arises out of a contract or contracts with the United States of America or
any department, agency, or instrumentality thereof, Grantors shall promptly (and
in any event within 30 days (or such longer period as agreed to in writing by
Agent) of the creation thereof) notify Agent thereof and, promptly (and in any
event within 60 days (or such longer period as agreed to in writing by Agent))
after request by Agent, execute any instruments or take any steps reasonably
required by Agent in order that all moneys due or to become due under such
contract or contracts shall be assigned to Agent, for the benefit of the Secured
Parties, and shall provide written notice thereof under the Assignment of Claims
Act or other applicable law.

 

(g)                Intellectual Property.

 

(i)                   Upon the request of Agent, in order to facilitate filings
with the PTO and the United States Copyright Office, each Grantor shall execute
and deliver to Agent one or more Copyright Security Agreements, Trademark
Security Agreements, or Patent Security Agreements to further evidence Agent’s
Lien on such Grantor’s United States issued and registered Patents, Trademarks,
or Copyrights;

 14 

 

(ii)                   Each Grantor shall take such steps, in such Grantor’s
reasonable business judgment, to protect, enforce and defend, at such Grantor’s
expense, the Intellectual Property that is necessary in or material to the
conduct of such Grantor’s business, including, as applicable (A) to enforce and
defend, including, if determined to be appropriate in such Grantor’s reasonable
business judgment, promptly suing for any infringement, misappropriation, or
dilution that could reasonably and materially impact the value of any of such
Grantor’s Intellectual Property and to recover any and all damages for such
infringement, misappropriation, or dilution, and filing for opposition,
interference, and cancellation against conflicting Intellectual Property rights
of any Person, (B) to reasonably prosecute any trademark application or service
mark application that is part of the Trademarks pending as of the date hereof or
hereafter until the termination of this Agreement, (C) to reasonably prosecute
any patent application that is part of the Patents pending as of the date hereof
or hereafter until the termination of this Agreement, (D) to take commercially
reasonable actions to preserve and maintain all of such Grantor’s Trademarks,
Patents, Copyrights, Intellectual Property Licenses, and its rights therein,
including paying maintenance fees with respect thereto and filing of
applications for renewal, affidavits of use, and affidavits of
noncontestability, and (E) to require employees, consultants, and contractors of
each Grantor who were involved in the creation or development of such
Intellectual Property to sign agreements containing assignment of Intellectual
Property rights and obligations of confidentiality, except, in each case, as
could not reasonably be expected to be material and adverse to the business of
the Grantors as a whole. Except, in each case, as could not reasonably be
expected to be material and adverse to the business of the Grantors as a whole,
each Grantor further agrees not to abandon any Intellectual Property or
Intellectual Property License that is necessary in or material to the conduct of
such Grantor’s business. Each Grantor hereby agrees to take the steps described
in this Section 6(g)(ii) with respect to all new or acquired Intellectual
Property to which it or any of its Subsidiaries is now or later becomes entitled
that is necessary in or material to the conduct of such Grantor’s business;

 

(iii)                   Grantors acknowledge and agree that the Secured Parties
shall have no duties with respect to any Intellectual Property or Intellectual
Property Licenses of any Grantor. Without limiting the generality of this
Section 6(g)(iii), Grantors acknowledge and agree that no Secured Party shall be
under any obligation to take any steps necessary to preserve rights in the
Collateral consisting of Intellectual Property or Intellectual Property Licenses
against any other Person, any Secured Party may do so at its option from and
after the occurrence and during the continuance of an Event of Default, and all
expenses incurred in connection therewith (including reasonable fees and
expenses of attorneys and other professionals) shall be for the sole account of
Borrowers and shall be chargeable to the Loan Account;

 

(iv)                    On each date on which a Compliance Certificate is
required to be delivered pursuant to Section 5.01(d) of the Credit Agreement
(or, if an Event of Default has occurred and is continuing, more frequently if
requested by Agent), each Grantor shall provide Agent with a written report of
all new Patents, Trademarks or Copyrights that are registered or the subject of
pending applications for registrations, and all new exclusive Copyright Licenses
for registered Copyrights that are material to the conduct of such Grantor’s
business, in each case, which were acquired, registered, or for which
applications for registration were filed by any Grantor during the prior period
and any statement of use or amendment to allege use with respect to
intent-to-use trademark applications. In the case of such registrations or
applications therefor which were acquired by any Grantor, each such Grantor
shall file the necessary documents with the United States Copyright Office, the
PTO or the successor offices of the United States Copyright Office or the PTO,
as appropriate, identifying the applicable Grantor as the owner (or as a
co-owner thereof, if such is the case) of such Intellectual Property. In each of
the foregoing cases, the applicable Grantor shall promptly cause to be prepared,
executed, and delivered to Agent supplemental schedules to the applicable Patent
Security Agreement, Trademark Security Agreement and Copyright Security
Agreement to identify such Patent, Trademark and Copyright registrations and
applications therefor (with the exception of Trademark applications filed on an
intent-to-use basis for which no statement of use or amendment to allege use has
been filed) and such Copyright Licenses as being subject to the security
interests created thereunder;

 15 

 

(v)                   Anything to the contrary in this Agreement
notwithstanding, in no event shall any Grantor, either itself or through any
agent, employee, licensee, or designee, file an application for the registration
of any Copyright with the United States Copyright Office or any similar office
or agency in another country without giving Agent written notice thereof at
least 10 days (or such shorter period as agreed to in writing by Agent) prior to
such filing and complying with Section 6(g)(i), and if available, each such
application for registration shall be filed on an “expedited basis”. Upon
receipt from the United States Copyright Office of notice of registration of any
Copyright, each Grantor shall promptly (but in no event later than 30 days (or
such longer period as agreed to in writing by Agent) following such receipt)
notify (but without duplication of any notice required by Section 6(g)(iv))
Agent of such registration by delivering, or causing to be delivered, to Agent,
documentation sufficient for Agent to perfect Agent’s Liens on such Copyright.
If any Grantor acquires from any Person any Copyright registered with the United
States Copyright Office or an application to register any Copyright with the
United States Copyright Office, such Grantor shall promptly (but in no event
later than 30 days (or such longer period as agreed to in writing by Agent)
following such acquisition) notify Agent of such acquisition and deliver, or
cause to be delivered, to Agent, documentation sufficient for Agent to perfect
Agent’s Liens on such Copyright. In the case of such Copyright registrations or
applications therefor which were acquired by any Grantor, each such Grantor
shall promptly (but in no event later than 30 days (or such longer period as
agreed to in writing by Agent) following such acquisition) file the necessary
documents with the United States Copyright Office identifying the applicable
Grantor as the owner (or as a co-owner thereof, if such is the case) of such
Copyrights; and

 

(vi)                    Except as could not reasonably be expected to be
material and adverse to the business of the Grantors as a whole, each Grantor
shall take reasonable steps to maintain the confidentiality of, and otherwise
protect and enforce its rights in, the Intellectual Property that is necessary
in or material to the conduct of such Grantor’s business, including, as
applicable (A) protecting the secrecy and confidentiality of its confidential
information and trade secrets by having and enforcing a reasonable policy
requiring all current employees, consultants, licensees, vendors and contractors
who would reasonably be expected to have access to such information to execute
appropriate confidentiality agreements, (B) taking actions that would reasonably
be expected to ensure that no trade secret falls into the public domain, and (C)
protecting the secrecy and confidentiality of the source code of all proprietary
software programs and applications that are not publicly available and of which
it is the owner or licensee by having and enforcing a reasonable policy
requiring any licensees (or sublicensees) of such source code to enter into
license agreements with commercially reasonable use and non-disclosure
restrictions.

 

(h)                Investment Property.

 

(i)                   If any Grantor shall acquire, obtain, receive or become
entitled to receive any Pledged Interests after the Closing Date, it shall
promptly (and in any event within 30 days (or such longer period as agreed to in
writing by Agent) of acquiring or obtaining such Collateral) deliver to Agent a
duly executed Pledged Interests Addendum identifying such Pledged Interests;

 

(ii)                   Upon the occurrence and during the continuance of an
Event of Default, following the request of Agent, all sums of money and property
paid or distributed in respect of the Pledged Interests that are received by any
Grantor shall be held by the Grantors in trust for the benefit of Agent
segregated from such Grantor’s other property, and such Grantor shall deliver it
forthwith to Agent in the exact form received;

 16 

 

(iii)                   Each Grantor shall promptly deliver to Agent a copy of
each material notice or other material communication received by it in respect
of any Pledged Interests;

 

(iv)                    No Grantor shall make or consent to any amendment or
other modification or waiver with respect to any Pledged Interests, Pledged
Operating Agreement, or Pledged Partnership Agreement, or enter into any
agreement or permit to exist any restriction with respect to any Pledged
Interests, in each case, if the same is prohibited pursuant to the Loan
Documents;

 

(v)                   Each Grantor agrees that it will cooperate with Agent in
obtaining all necessary approvals and making all necessary filings under
federal, state, local, or foreign law to effect the perfection of the Security
Interest on the Investment Property or to effect any sale or transfer thereof,
in each case subject to Section 5.10 of the Credit Agreement with respect to
perfection actions (A) in any jurisdiction outside of the United States or any
state thereof and (B) under any security agreement or pledge governed by the
laws of any jurisdiction other than the United States or any state thereof;

 

(vi)                    As to all limited liability company or partnership
interests owned by such Grantor and issued under any Pledged Operating Agreement
or Pledged Partnership Agreement, each Grantor hereby covenants that the Pledged
Interests issued pursuant to such agreement (A) are not and shall not be dealt
in or traded on securities exchanges or in securities markets, (B) do not and
will not constitute investment company securities, and (C) are not and will not
be held by such Grantor in a securities account. In addition, none of the
Pledged Operating Agreements, the Pledged Partnership Agreements, or any other
agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provides or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction; and

 

(vii)                    With regard to any Pledged Interests that are not
certificated, to the extent any Grantor is an issuer of such non-certificated
Pledged Interests, such Grantor in its capacity as an issuer (i) agrees promptly
to note on its books the security interests granted to Agent and confirmed under
this Agreement, (ii) agrees that after the occurrence and during the
continuation of an Event of Default, it will comply with instructions of Agent
or its nominee with respect to the applicable Pledged Interests without further
consent by the applicable Grantor, (iii) to the extent permitted by law, agrees
that the “issuer’s jurisdiction” (as defined in Section 8-110 of the Code) is
the State of New York, (iv) agrees to notify Agent upon obtaining knowledge of
any interest in favor of any person in the applicable Pledged Interests that is
materially adverse to the interest of Agent therein, other than any Permitted
Liens and (v) waives any right or requirement at any time hereafter to receive a
copy of this Agreement in connection with the registration of any Pledged
Interests hereunder in the name of Agent or its nominee or the exercise of
voting rights by Agent or its nominee.

 

(i)                 Pledged Note. Grantors, without the prior written consent of
Agent, will not (i) waive or release the payment obligations on the maturity
date of the Pledged Note of any Person obligated under the Pledged Note or (ii)
release any material portion of the collateral securing the obligations under
the Pledged Note.

 

(j)                 Transfers and Other Liens. Grantors shall not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except as permitted by the Credit
Agreement, or (ii) create or permit to exist any Lien upon or with respect to
any of the Collateral of any Grantor, except for Permitted Liens. The inclusion
of Proceeds in the Collateral shall not be deemed to constitute Agent’s consent
to any sale or other disposition of any of the Collateral except as expressly
permitted in this Agreement or the other Loan Documents.

 17 

 

(k)                Motor Vehicles. Promptly (and in any event within twenty (20)
Business Days) after request by the Agent (or such longer period as agreed to in
writing by the Agent) with respect to all motor vehicles covered by a
certificate of title owned by any Grantor with an aggregate fair market value in
excess of $7,500,000, such Grantor shall deliver to the Agent or the Agent’s
designee, the certificates of title for all such motor vehicles (other than
certificates with respect to any motor vehicles that are subject to Permitted
Liens that are senior to the Agent’s security interest hereunder) and promptly
(and in any event within sixty (60) Business Days) after request by the Agent
(or such longer period as agreed to in writing by the Agent), such Grantor shall
take all actions necessary to cause such certificates (other than certificates
with respect to any motor vehicles that are subject to Permitted Liens that are
senior to the Agent’s security interest hereunder) to be filed (with the Agent’s
Lien noted thereon) in the appropriate state motor vehicle filing office.

 

(l)                 Name, Etc. No Grantor will change its name, chief executive
office, jurisdiction of organization or organizational identity without
providing Agent written notice thereof promptly (and in any event within 30 days
(or such longer period as agreed to in writing by Agent) after such change or,
in the case of a change in jurisdiction of organization, at least 10 days (or
such shorter period as agreed to in writing by Agent) prior to such change).

 

(m)              Credit Card Receivables.

 

(i)                   Each Grantor shall keep and maintain at its own cost and
expense complete records of each Credit Card Receivable, 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. Each Grantor shall, at such Grantor’s sole
cost and expense, upon Agent’s demand made at any time after the occurrence and
during the continuance of any Event of Default, deliver all tangible evidence of
all Credit Card Receivables, including, without limitation, all documents
evidencing such Credit Card Receivables and any books and records relating
thereto to Agent or to its representatives (copies of which evidence and books
and records may be retained by such Grantor). Upon the occurrence and during the
continuance of any Event of Default, Agent may transfer a full and complete copy
of any Grantor’s books, records, credit information, reports, memoranda and all
other writings relating to the Credit Card Receivables to and for the use by any
Person that has acquired or is contemplating acquisition of an interest in the
Credit Card Receivables or Agent’s security interest therein in accordance with
applicable Requirements of Law without the consent of any Grantor.

 

(ii)                   No Grantor shall rescind or cancel any indebtedness
evidenced by any Credit Card Receivable 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 Credit Card Receivable 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 Agent.

 

7.                   Relation to Other Security Documents. The provisions of
this Agreement shall be read and construed with the other Loan Documents
referred to below in the manner so indicated.

 

(a)                Credit Agreement. In the event of any conflict between any
provision in this Agreement and a provision in the Credit Agreement, such
provision of the Credit Agreement shall control.

 18 

 

(b)                Patent, Trademark, Copyright Security Agreements. The
provisions of the Copyright Security Agreements, Trademark Security Agreements,
and Patent Security Agreements are supplemental to the provisions of this
Agreement, and nothing contained in the Copyright Security Agreements, Trademark
Security Agreements, or the Patent Security Agreements shall limit any of the
rights or remedies of Agent hereunder. In the event of any conflict between any
provision in this Agreement and a provision in a Copyright Security Agreement,
Trademark Security Agreement or Patent Security Agreement, such provision of
this Agreement shall control.

 

(c)                Intercreditor Agreement.

 

(i)                   Notwithstanding anything herein to the contrary, the
priority of the Lien and Security Interest granted to Agent and/or the other
Secured Parties pursuant to this Agreement and the exercise of the rights and
remedies of Agent and/or the other Secured Parties hereunder are subject to the
provisions of the Intercreditor Agreement. In the event of any direct conflict
between the terms of the Intercreditor Agreement and the terms of this
Agreement, the terms of the Intercreditor Agreement shall govern and control,
except with respect to the scope of the assets included in Section 2 hereof.

 

(ii)                   Notwithstanding anything contained in this Agreement or
any other Collateral Document, to the extent that the provisions of this
Agreement (or any other Collateral Document) require the delivery of, or
granting of control over, or giving notice with respect to, any Term Priority
Collateral to Agent, then, prior to the Discharge of Term Priority Obligations,
delivery of such Collateral (or control or notice with respect thereto) may
instead be made to the Term Collateral Agent, to be held in accordance with the
GACP Facility Loan Documents and the Intercreditor Agreement, and any Grantor’s
obligations hereunder with respect to such delivery, control or notice shall be
deemed satisfied by such delivery to the Term Collateral Agent. Furthermore, at
all times prior to the Discharge of Term Priority Obligations, Agent is
authorized by the parties hereto to effect transfers of such Term Priority
Collateral at any time in its possession (and any “control” or similar
agreements with respect to such Collateral) to any Term Collateral Agent in
accordance with the Intercreditor Agreement.

 

8.                   Further Assurances.

 

(a)                Each Grantor agrees that from time to time, at its own
expense, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that Agent may reasonably request,
in order to perfect and protect the Security Interest granted hereby, to create,
perfect or protect the Security Interest purported to be granted hereby or to
enable Agent to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral.

 

(b)                Each Grantor authorizes the filing by Agent of financing or
continuation statements, or amendments thereto, and such Grantor will execute
and deliver to Agent such other instruments or notices, as Agent may reasonably
request, in order to perfect and preserve the Security Interest granted or
purported to be granted hereby, to the extent required by this Agreement or any
other Loan Document.

 

(c)                Each Grantor authorizes Agent at any time and from time to
time to file, transmit, or communicate, as applicable, financing statements and
amendments (i) describing the Collateral as “all personal property of debtor” or
“all assets of debtor” or words of similar effect, (ii) describing the
Collateral as being of equal or lesser scope or with greater detail, or (iii)
that contain any information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance. Each Grantor also hereby ratifies any
and all financing statements or amendments previously filed by Agent in any
jurisdiction.

 19 

 

(d)                Each Grantor acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with respect to
any financing statement filed in connection with this Agreement without the
prior written consent of Agent, subject to such Grantor’s rights under Section
9-509(d)(2) of the Code.

 

9.                   Agent’s Right to Perform Contracts, Exercise Rights, etc.
Upon the occurrence and during the continuance of an Event of Default, Agent (or
its designee) (a) may, to the extent permitted by law, proceed to perform any
and all of the obligations of any Grantor contained in any contract, lease, or
other agreement constituting Collateral and exercise any and all rights of any
Grantor therein contained as fully as such Grantor itself could, (b) shall, to
the extent permitted by law, have the right (subject to Section 16(b)) to use
any Grantor’s rights under Intellectual Property Licenses in connection with the
enforcement of Agent’s rights hereunder, including the right to prepare for sale
and sell any and all Inventory and Equipment now or hereafter owned by any
Grantor and now or hereafter covered by such licenses, and (c) shall have the
right to request that any Capital Stock that are pledged hereunder be registered
in the name of Agent or any of its nominees.

 

10.               Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints Agent its attorney-in-fact, with full authority in the
place and stead of such Grantor and in the name of such Grantor or otherwise, at
such time as an Event of Default has occurred and is continuing under the Credit
Agreement, to take any action and to execute any instrument which Agent may
reasonably deem necessary or advisable to accomplish the purposes of this
Agreement, including:

 

(a)                to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Accounts or any other Collateral of such Grantor;

 

(b)                to receive, indorse, and collect any drafts or other
instruments, documents, Negotiable Collateral or Chattel Paper;

 

(c)                to file any claims or take any action or institute any
proceedings which Agent may reasonably deem necessary or desirable for the
collection of any of the Collateral of such Grantor or otherwise to enforce the
rights of Agent with respect to any of the Collateral;

 

(d)                to repair, alter, or supply goods, if any, necessary to
fulfill in whole or in part the purchase order of any Person obligated to such
Grantor in respect of any Account of such Grantor;

 

(e)                to use, subject to the license granted in Section 16(b), any
Intellectual Property or Intellectual Property Licenses of such Grantor,
including but not limited to any labels, Patents, Trademarks, trade names, URLs,
domain names, industrial designs, Copyrights, or advertising matter, in
preparing for sale, advertising for sale, or selling Inventory or other
Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor; and

 

(f)                 Agent, on behalf of the Secured Parties, shall have the
right, but shall not be obligated, to bring suit in its own name to enforce the
Intellectual Property and Intellectual Property Licenses and, if Agent shall
commence any such suit, the appropriate Grantor shall, at the request of Agent,
do any and all lawful acts and execute any and all proper documents reasonably
required by Agent in aid of such enforcement.

 

To the extent permitted by law, each Grantor hereby ratifies all that such
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. This
power of attorney is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

 20 

 

11.               Agent May Perform. If any Grantor fails to perform any
agreement contained herein, Agent may itself perform, or cause performance of,
such agreement, and the reasonable expenses of Agent incurred in connection
therewith shall be payable, jointly and severally, by Grantors in accordance
with the terms of the Credit Agreement.

 

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

 

13.               Collection of Accounts, General Intangibles and Negotiable
Collateral. At any time upon the occurrence and during the continuance of an
Event of Default, Agent or Agent’s designee may (a) make direct verification
from Account Debtors with respect to any or all Accounts that are part of the
Collateral, (b) notify Account Debtors of any Grantor that the Accounts, General
Intangibles, Chattel Paper or Negotiable Collateral of such Grantor have been
assigned to Agent, for the benefit of the Secured Parties, or that Agent has a
security interest therein, or (c) collect the Accounts, General Intangibles and
Negotiable Collateral of any Grantor directly, and any reasonable collection
costs and expenses shall constitute part of such Grantor’s Secured Obligations
under the Loan Documents.

 

14.               Disposition of Pledged Interests by Agent. None of the Pledged
Interests existing as of the date of this Agreement are, and other than to the
extent hereafter disclosed, none of the Pledged Interests hereafter acquired on
the date of acquisition thereof will be, registered or qualified under the
various federal or state securities laws of the United States and to the extent
not so registered or qualified, disposition thereof after an Event of Default
has occurred and is continuing may be restricted to one or more private (instead
of public) sales in view of the lack of such registration. Each Grantor
understands that in connection with such disposition, Agent may approach only a
restricted number of potential purchasers and further understands that a sale
under such circumstances may yield a lower price for the Pledged Interests than
if the Pledged Interests were registered and qualified pursuant to federal and
state securities laws and sold on the open market. Each Grantor, therefore,
agrees that: (a) if Agent shall, pursuant to the terms of this Agreement, sell
or cause the Pledged Interests or any portion thereof to be sold at a private
sale, Agent shall have the right to rely upon the advice and opinion of any
nationally recognized brokerage or investment firm (but shall not be obligated
to seek such advice and the failure to do so shall not be considered in
determining the commercial reasonableness of such action) as to the best manner
in which to offer the Pledged Interest or any portion thereof for sale and as to
the best price reasonably obtainable at the private sale thereof, and (b) such
reliance shall be conclusive evidence that Agent has handled the disposition in
a commercially reasonable manner.

 

15.               Voting and Other Rights in Respect of Pledged Interests.

 

(a)                Upon the occurrence and during the continuation of an Event
of Default (i) Agent may, at its option, and in addition to all rights and
remedies available to Agent under any other agreement, at law, in equity, or
otherwise, exercise all voting rights, or any other ownership or consensual
rights (including any dividend or distribution rights) in respect of the Pledged
Interests owned by such Grantor, but under no circumstances is Agent obligated
by the terms of this Agreement to exercise such rights, and (ii) if Agent duly
exercises its right to vote any of such Pledged Interests, each Grantor hereby
appoints Agent, such Grantor’s true and lawful attorney-in-fact and IRREVOCABLE
PROXY to vote such Pledged Interests in any manner Agent deems advisable for or
against all matters submitted or which may be submitted to a vote of
shareholders, partners or members, as the case may be. The power-of-attorney and
proxy granted hereby is coupled with an interest and shall be irrevocable.

 21 

 

(b)                For so long as any Grantor shall have the right to vote the
Pledged Interests owned by it, such Grantor covenants and agrees that it will
not, without the prior written consent of Agent, vote or take any consensual
action with respect to such Pledged Interests in violation of this Agreement or
any other Loan Document.

 

16.               Remedies.

 

(a)                Upon the occurrence and during the continuance of an Event of
Default, Agent may, and, at the instruction of the Required Lenders, shall
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein, in the other Loan Documents, or otherwise available to it,
all the rights and remedies of a secured party on default under the Code or any
other applicable law. Without limiting the generality of the foregoing, each
Grantor expressly agrees that, in any such event, Agent without demand of
performance or other demand, advertisement or notice of any kind (except a
notice specified below of time and place of public or private sale) to or upon
any Grantor or any other Person (all and each of which demands, advertisements
and notices are hereby expressly waived to the maximum extent permitted by the
Code or any other applicable law), may take immediate possession of all or any
portion of the Collateral and (i) require Grantors to, and each Grantor hereby
agrees that it will at its own expense and upon request of Agent forthwith,
assemble all or part of the Collateral as directed by Agent and make it
available to Agent at one or more locations where such Grantor regularly
maintains Inventory, and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Agent’s offices or elsewhere, for cash, on credit, and upon such other
terms as Agent may deem commercially reasonable. Each Grantor agrees that, to
the extent notification of sale shall be required by law, at least ten days
notification by mail to the applicable Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification and specifically such notification shall
constitute a reasonable “authenticated notification of disposition” within the
meaning of Section 9-611 of the Code. Agent shall not be obligated to make any
sale of Collateral regardless of notification of sale having been given. Agent
may adjourn any public sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Grantor agrees that (A) the
internet shall constitute a “place” for purposes of Section 9-610(b) of the
Code, and (B) to the extent notification of sale shall be required by law,
notification by mail of the URL where a sale will occur and the time when a sale
will commence at least ten days prior to the sale shall constitute a reasonable
notification for purposes of Section 9-611(b) of the Code. Each Grantor agrees
that any sale of Collateral to a licensor pursuant to the terms of a license
agreement between such licensor and a Grantor is sufficient to constitute a
commercially reasonable sale (including as to method, terms, manner, and time)
within the meaning of Section 9-610 of the Code.

 

(b)                Agent is hereby granted a license or other right to use, upon
the occurrence and during the continuance of an Event of Default, without
liability for royalties or any other charge, each Grantor’s Intellectual
Property, including but not limited to, any labels, Patents, Trademarks, trade
names, URLs, domain names, industrial designs, Copyrights, and advertising
matter, whether owned by any Grantor or with respect to which any Grantor has
rights under license, sublicense, or other agreements (including any
Intellectual Property License), as it pertains to the Collateral, in preparing
for sale, advertising for sale and selling any Collateral, and each Grantor’s
rights under all licenses and all franchise agreements shall inure to the
benefit of Agent; provided, that such license (i) shall not violate the express
terms of any agreement between a Grantor and a third party governing the
applicable Grantor’s use of any of the foregoing Intellectual Property, or give
such third party any right of acceleration, modification or cancellation
therein, (ii) is not prohibited by any applicable Requirements of Law, and (iii)
shall be subject, in the case of Trademarks, to sufficient rights of quality
control and inspection in favor of each applicable Grantor to avoid the risk of
invalidation of such Trademarks.

 22 

 

(c)             Upon the occurrence and during the continuance of an Event of
Default, Agent may, in addition to other rights and remedies provided for
herein, in the other Loan Documents, or otherwise available to it under
applicable law and without the requirement of notice to or upon any Grantor or
any other Person (which notice is hereby expressly waived to the maximum extent
permitted by the Code or any other applicable law), (i) with respect to any
Grantor’s Deposit Accounts in which Agent’s Liens are perfected by control under
Section 9-104 of the Code, instruct the bank maintaining such Deposit Account
for the applicable Grantor to pay the balance of such Deposit Account to or for
the benefit of Agent, and (ii) with respect to any Grantor’s Securities Accounts
in which Agent’s Liens are perfected by control under Section 9-106 of the Code,
instruct the securities intermediary maintaining such Securities Account for the
applicable Grantor to (A) transfer any cash in such Securities Account to or for
the benefit of Agent, or (B) liquidate any financial assets in such Securities
Account that are customarily sold on a recognized market and transfer the cash
proceeds thereof to or for the benefit of Agent.

 

(d)                Upon the occurrence and during the continuance of an Event of
Default, any cash held by Agent as Collateral and all cash proceeds received by
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied against the Secured Obligations
in the order set forth in the Credit Agreement. In the event the proceeds of
Collateral are insufficient to satisfy all of the Secured Obligations in full,
each Grantor shall remain jointly and severally liable for any such deficiency.

 

(e)                Each Grantor hereby acknowledges that the Secured Obligations
arise out of a commercial transaction, and agrees that if an Event of Default
shall occur and be continuing Agent shall have the right to an immediate writ of
possession without notice of a hearing. Agent shall have the right to the
appointment of a receiver for the properties and assets of each Grantor, and
each Grantor hereby consents to such rights and such appointment and hereby
waives any objection such Grantor may have thereto or the right to have a bond
or other security posted by Agent.

 

17.               Remedies Cumulative. Each right, power, and remedy of Agent or
any Lender, as provided for in this Agreement or the other Loan Documents now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or the other Loan Documents now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Agent, any Lender, of any one or more
of such rights, powers, or remedies shall not preclude the simultaneous or later
exercise by Agent, such Lender of any or all such other rights, powers, or
remedies.

 

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

 23 

 

19.               Indemnity. Each Grantor agrees to indemnify Agent and the
Lenders from and against all claims, lawsuits and liabilities (including
reasonable attorneys’ fees) arising out of or resulting from this Agreement
(including enforcement of this Agreement) in accordance with and to the extent
set forth in Section 10.03 of the Credit Agreement. This provision shall survive
the termination of this Agreement and the Credit Agreement and the repayment of
the Secured Obligations.

 

20.               Merger, Amendments; Etc. THIS AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No amendment
of any provision of this Agreement shall be effective unless the same shall be
in writing and signed by Agent and each Grantor to which such amendment applies.

 

21.               Addresses for Notices. All notices and other communications
provided for hereunder shall be given in the form and manner and delivered to
Agent at its address specified in the Credit Agreement, and to any of the
Grantors at the notice address specified for Lead Borrower in the Credit
Agreement, or as to any party, at such other address as shall be designated by
such party in a written notice to the other party.

 

22.               Continuing Security Interest: Assignments under Credit
Agreement.

 

(a)                This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the Secured
Obligations have been paid in full in accordance with the provisions of the
Credit Agreement and the Commitments have expired or have been terminated, (ii)
be binding upon each Grantor, and their respective successors and assigns, and
(iii) inure to the benefit of, and be enforceable by, Agent, and its successors,
permitted transferees and permitted assigns. Without limiting the generality of
the foregoing clause (iii), any Lender may, solely in accordance with the
provisions of the Credit Agreement, assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise. Upon
payment in full of the Secured Obligations in accordance with the provisions of
the Credit Agreement and the expiration or termination of the Commitments, the
Security Interest granted hereby shall terminate and all rights to the
Collateral shall revert to Grantors or any other Person entitled thereto. At
such time, upon Lead Borrower’s request, Agent will (i) authorize the filing of
appropriate termination statements to terminate such Security Interest, (ii)
terminate all control agreements entered into pursuant to this Agreement or any
other Loan Document and (iii) return to Lead Borrower, all Collateral in Agent’s
or its agent’s possession. No transfer or renewal, extension, assignment, or
termination of this Agreement or of the Credit Agreement, any other Loan
Document, or any other instrument or document executed and delivered by any
Grantor to Agent nor any additional loans made by any Lender to any Borrower,
nor the taking of further security, nor the retaking or re-delivery of the
Collateral to Grantors, or any of them, by Agent, nor any other act of the
Secured Parties, or any of them, shall release any Grantor from any obligation,
except a release or discharge effected in accordance with the provisions of the
Credit Agreement. Agent shall not by any act, delay, omission or otherwise, be
deemed to have waived any of its rights or remedies hereunder, unless such
waiver is in writing and signed by Agent and then only to the extent therein set
forth. A waiver by Agent of any right or remedy on any occasion shall not be
construed as a bar to the exercise of any such right or remedy which Agent would
otherwise have had on any other occasion.

 24 

 

(b)                If any Secured Party repays, refunds, restores, or returns in
whole or in part, any payment or property (including any proceeds of Collateral)
previously paid or transferred to such Secured Party in full or partial
satisfaction of any Secured Obligation or on account of any other obligation
of any Loan Party under any Loan Document, because the payment, transfer, or the
incurrence of the obligation so satisfied is asserted or declared to be void,
voidable, or otherwise recoverable under any law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent transfers,
preferences, or other voidable or recoverable obligations or transfers (each, a
“Voidable Transfer”), or because such Secured Party elects to do so on the
reasonable advice of its counsel in connection with a claim that the payment,
transfer, or incurrence is or may be a Voidable Transfer, then, as to any such
Voidable Transfer, or the amount thereof that such Secured Party elects
to repay, restore, or return (including pursuant to a settlement of any claim in
respect thereof), and as to all reasonable costs, expenses, and external
attorneys’ fees of such Secured Party related thereto, (i) the liability of the
Loan Parties with respect to the amount or property paid, refunded, restored, or
returned will automatically and immediately be revived, reinstated, and restored
and will exist, and (ii) Agent’s Liens securing such liability shall be
effective, revived, and remain in full force and effect, in each case, as fully
as if such Voidable Transfer had never been made.  If, prior to any of the
foregoing, (A) Agent’s Liens shall have been released or terminated, or (B) any
provision of this Agreement shall have been terminated or cancelled, Agent’s
Liens, or such provision of this Agreement, shall be reinstated in full force
and effect and such prior release, termination, cancellation or surrender shall
not diminish, release, discharge, impair or otherwise affect the obligation of
any Loan Party in respect of such liability or any Collateral securing
such liability.

 

23.               Survival. All representations and warranties made by the
Grantors in this Agreement and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any loans, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that Agent or any Lender may have had notice or knowledge of any
Default or Event of Default or incorrect representation or warranty at the time
any credit is extended under the Credit Agreement, and shall continue in full
force and effect as long as the principal of or any accrued interest on any loan
or any fee or any other amount payable under the Credit Agreement is outstanding
and unpaid and so long as the Commitments have not expired or terminated.

 

24.               APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.

 

(a)                THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) THEREOF.

 

(b)                (I) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR
ARISING OUT OF OR RELATING HERETO, OR ANY OF THE SECURED OBLIGATIONS, MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE,
COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH
GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (W)
ACCEPTS GENERALLY AND UNCONDITIONALLY THE NON-EXCLUSIVE JURISDICTION AND VENUE
OF SUCH COURTS; (X) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (Y) AGREES THAT
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE
GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.01 OF THE CREDIT
AGREEMENT, WHICH IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE
APPLICABLE GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (Z) AGREES THAT
THE SECURED PARTIES RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.

 25 

 

(II) EACH GRANTOR HEREBY AGREES THAT PROCESS MAY BE SERVED ON IT BY CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO THE ADDRESSES PERTAINING TO IT AS SPECIFIED
IN SECTION 10.01 OF THE CREDIT AGREEMENT. ANY AND ALL SERVICE OF PROCESS AND ANY
OTHER NOTICE IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE EFFECTIVE AGAINST
ANY GRANTOR IF GIVEN BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
OR BY ANY OTHER MEANS OR MAIL WHICH REQUIRES A SIGNED RECEIPT, POSTAGE PREPAID,
MAILED AS PROVIDED ABOVE.

 

(c)                EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING HEREUNDER OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED
FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS HERETO . IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

25.               New Subsidiaries. Pursuant to Section 5.10 of the Credit
Agreement, certain Subsidiaries (whether by acquisition or creation) of Global
Parent are required to enter into this Agreement by executing and delivering in
favor of Agent a Joinder to this Agreement in substantially the form of Annex 1.
Upon the execution and delivery of Annex 1 by any such new Subsidiary, such
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any
instrument adding an additional Grantor as a party to this Agreement shall not
require the consent of any Grantor hereunder. The rights and obligations of each
Grantor hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantor hereunder.

 

26.               Agent. Each reference herein to any right granted to, benefit
conferred upon or power exercisable by the “Agent” shall be a reference to
Agent, for the benefit of each Secured Party.

 26 

 

27.               Miscellaneous.

 

(a)                This Agreement is a Loan Document. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall, if requested by Agent,
deliver an original executed counterpart of this Agreement, but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Loan Document mutatis mutandis.

 

(b)                Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

 

(c)                Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.

 

(d)                Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against any Secured Party, or any Grantor, whether
under any rule of construction or otherwise. This Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to accomplish fairly the purposes and intentions
of all parties hereto.

 

[Signature pages follow]

 

 

 

 

 

 

 

 

 

 

 

 27 

 

“Grantors”   FRANCHISE GROUP NEW HOLDCO, LLC, a Delaware limited liability
company   FRANCHISE GROUP INTERMEDIATE HOLDCO, LLC, a Delaware limited liability
company                     By: /s/ Brian Kahn   By: /s/ Brian Kahn Name: Brian
Kahn   Name: Brian Kahn Title: President and Chief Executive Officer   Title:
President and Chief Executive Officer                     FRANCHISE GROUP MERGER
SUB AF, INC., a Delaware corporation   FRANCHISE GROUP NEWCO INTERMEDIATE AF,
LLC, a Delaware limited liability company                     By: /s/ Brian Kahn
  By: /s/ Brian Kahn Name: Brian Kahn   Name: Brian Kahn Title: President  
Title: President and Chief Executive Officer                     AMERICAN
FREIGHT GROUP, INC., a Delaware corporation   AMERICAN FREIGHT HOLDINGS, INC., a
Delaware corporation                     By: /s/ Brian Kahn   By: /s/ Brian Kahn
Name: Brian Kahn   Name: Brian Kahn Title: President and Chief Executive Officer
  Title: President and Chief Executive Officer                     AMERICAN
FREIGHT, INC., a Delaware corporation   AMERICAN FREIGHT MANAGEMENT COMPANY,
LLC, a Delaware limited liability company                     By: /s/ Brian Kahn
  By: /s/ Brian Kahn Name: Brian Kahn   Name: Brian Kahn Title: President and
Chief Executive Officer   Title: President and Chief Executive Officer

 

 

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

 

FRANCHISE GROUP INTERMEDIATE B, LLC, a Delaware limited liability company  
BUDDY’S NEWCO, LLC, a Delaware limited liability company                     By:
/s/ Brian Kahn   By: /s/ Michael Bennett Name: Brian Kahn   Name: Michael
Bennett Title: President and Chief Executive Officer   Title: Chief Executive
Officer                     BUDDY’S FRANCHISING AND LICENSING LLC, a Florida
limited liability company   FRANCHISE GROUP INTERMEDIATE S, LLC, a Delaware
limited liability company                     By: /s/ Michael Bennett   By: /s/
Brian Kahn Name: Michael Bennett   Name: Brian Kahn Title: Chief Executive
Officer   Title: President and Chief Executive Officer                    
FRANCHISE GROUP NEWCO S, LLC, a Delaware limited liability company   BUDDY’S
DISCOUNT OUTLET FRANCHISING, LLC, a Delaware limited liability company          
          By: /s/ Brian Kahn   By: /s/ Brian Kahn Name: Brian Kahn   Name: Brian
Kahn Title: President and Chief Executive Officer   Title: President and Chief
Executive Officer                     SEARS OUTLET STORES, L.L.C., a Delaware
limited liability company   OUTLET MERCHANDISE, LLC, a Delaware limited
liability company                     By: /s/ E.J. Bird   By: /s/ E.J. Bird
Name: E.J. Bird   Name: E.J. Bird Title: Senior Vice President   Title: Senior
Vice President and Chief Financial Officer

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

 

 

LEASING OPERATIONS, LLC, a Delaware limited liability company   FRANCHISE GROUP
INTERMEDIATE L, LLC, a Delaware limited liability company                    
By: /s/ E.J. Bird   By: /s/ Brian Kahn Name: E.J. Bird   Name: Brian Kahn Title:
Senior Vice President and Chief Financial Officer   Title: President and Chief
Executive Officer                     FRANCHISE GROUP INTERMEDIATE V, LLC, a
Delaware limited liability company   FRANCHISE GROUP NEWCO V, LLC, a Delaware
limited liability company                     By: /s/ Brian Kahn   By: /s/ Brian
Kahn Name: Brian Kahn   Name: Brian Kahn Title: President and Chief Executive
Officer   Title: President and Chief Executive Officer

 

 

 

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

 

“Agent”       GACP FINANCE CO., LLC               By:  /s/ John Ahn    Name:  
John Ahn       Its Authorized Signatory   

 

 

 

 

 

 

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]