Exhibit 10.2

 

GUARANTEE AND COLLATERAL AGREEMENT

 

GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 25, 2003, made by each
of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the “Grantors”), in favor of BANK ONE, NA, as
Administrative Agent (in such capacity, the “Administrative Agent”) for the
banks and other financial institutions (the “Lenders”) from time to time parties
to the Credit Agreement, dated as of November 25, 2003 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among DEPARTMENT 56, INC. (the “Borrower”), the Lenders and the Administrative
Agent.

 

W I T N E S S E T H :

 

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to
make extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein;

 

WHEREAS, the Borrower is a member of an affiliated group of companies that
includes each other Grantor;

 

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement
will be used in part to enable the Borrower to make valuable transfers to one or
more of the other Grantors in connection with the operation of their respective
businesses;

 

WHEREAS, the Borrower and the other Grantors are engaged in related businesses,
and each Grantor will derive substantial direct and indirect benefit from the
making of the extensions of credit under the Credit Agreement; and

 

WHEREAS, it is a condition precedent to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Credit Agreement
that the Grantors shall have executed and delivered this Agreement to the
Administrative Agent for the ratable benefit of the Lenders;

 

NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:

 

SECTION 1. DEFINED TERMS

 

1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement, and the following terms are used herein as defined in the New
York UCC: Certificated Security, Uncertificated Security, Chattel Paper,
Instruments, Investment Property and General Intangibles.

 

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

 

“Agreement” means this Guarantee and Collateral Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time.

 

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“Borrower Obligations” means the collective reference to all Secured
Obligations.

 

“Collateral” is defined in Section 3.

 

“Collateral Account” means any collateral account established by the
Administrative Agent as provided in Section 6.2.

 

“Foreign Subsidiary” means any Subsidiary organized under the laws of any
jurisdiction outside the United States of America.

 

“Foreign Subsidiary Voting Stock” means the voting Capital Stock of any Foreign
Subsidiary.

 

“Guarantor Obligations” means, with respect to any Guarantor, all obligations
and liabilities of such Guarantor which may arise under or in connection with
this Agreement (including, without limitation, Section 2 hereof) or any other
Loan Document to which such Guarantor is a party and all Rate Management
Obligations of such Guarantor, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all reasonable and documented fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by such Guarantor pursuant to the terms of this Agreement or
any other Loan Document).

 

“Guarantors” means the collective reference to each Grantor other than the
Borrower.

 

“Issuers” means the collective reference to each Subsidiary of a Grantor which
is an issuer of any Pledged Stock.

 

“New York UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
security interests in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, “New York UCC” means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection or
availability of such remedy.

 

“Obligations” means (i) in the case of the Borrower, the Borrower Obligations,
and (ii) in the case of each Guarantor, its Guarantor Obligations.

 

“Permitted Liens” means Liens permitted by Sections 7.3(a) and (g) of the Credit
Agreement.

 

“Pledged Stock” means the shares of Capital Stock listed on Schedule 2, together
with any other shares, stock certificates, options or rights of any nature
whatsoever in respect of the Capital Stock of each Issuer that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect,
including, without limitation, any Investment Property and/or General
Intangibles comprising or arising out of any of the foregoing; provided that in
no event shall Foreign Subsidiary Voting Stock with more than 65% of the total
combined voting power of all classes of stock entitled to vote of any Foreign
Subsidiary be required to be pledged hereunder.

 

“Proceeds” means all “proceeds” as such term is defined in Section 9-102(a)(64)
of the New York UCC.

 

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“Securities Act” means the Securities Act of 1933, as amended.

 

1.2 Other Definitional Provisions. (a) The words “hereof,” “herein”, “hereto”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.

 

(b) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

 

(c) Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Grantor, shall refer to such Grantor’s
Collateral or the relevant part thereof.

 

SECTION 2. GUARANTEE

 

2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the
ratable benefit of the Lenders and, to the extent provided herein, their
Affiliates, and their respective successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Borrower when due
(whether at the stated maturity, by acceleration or otherwise) of the Borrower
Obligations.

 

(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).

 

(c) Each Guarantor agrees that the Borrower Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any Lender hereunder.

 

(d) The guarantee contained in this Section 2 shall remain in full force and
effect until all the Borrower Obligations and the obligations of each Guarantor
under the guarantee contained in this Section 2 shall have been satisfied by
payment in full, no LC Obligations shall be outstanding and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrower may be free from any Borrower Obligations;
provided, however, that any Guarantor shall be released from its obligations
hereunder if such Guarantor pursuant to a transaction permitted under the Credit
Agreement, ceases to be a Subsidiary of the Borrower.

 

(e) No payment made by the Borrower, any of the Guarantors, any other guarantor
or any other Person or received or collected by the Administrative Agent or any
Lender from the Borrower, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder, each of
which shall, notwithstanding any such payment (other than any payment made by
such Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until the Borrower Obligations are paid in full, no LC
Obligations shall be outstanding and the Commitments are terminated.

 

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2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that
a Guarantor shall have paid more than its proportionate share of any payment
made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against each other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor’s right of contribution
shall be subject to the terms and conditions of Section 2.3.  The  provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.

 

2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder
or any set-off or application of funds of any Guarantor by the Administrative
Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Borrower or any
other Guarantor or any collateral security or guarantee or right of offset held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
the Administrative Agent and the Lenders by the Borrower on account of the
Borrower Obligations are paid in full, no LC Obligations shall be outstanding
and the Commitments are terminated.  If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Borrower Obligations shall not have been paid in full, such amount shall be held
by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.

 

2.4 Amendments, etc. with Respect to the Borrower Obligations.  Each Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Borrower Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender and any of the Borrower Obligations continued, and the Borrower
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Administrative Agent or any Lender, and the Credit Agreement and the other
Loan Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent (or the Required Lenders or all Lenders, as
the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released.  Neither the Administrative Agent
nor any Lender shall have any obligation to protect, secure, perfect or insure
any Lien at any time held by it as security for the Borrower Obligations or for
the guarantee contained in this Section 2 or any property subject thereto.

 

The Administrative Agent or any Lender may, from time to time, at its sole
discretion and without notice to any Guarantor (or any of them), take any or all
of the following actions:  (a) retain or obtain a security interest in any
property to secure any of the Secured Obligations or any obligation hereunder;
provided that nothing in this Agreement shall constitute or require a grant of
any such security interest other than in respect of the Collateral, (b) retain
or obtain the primary or secondary obligation of

 

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any obligor or obligors, in addition to the undersigned, with respect to any of
the Secured Obligations, (c) extend or renew any of the Secured Obligations for
one or more periods (whether or not longer than the original period), alter or
exchange any of the Secured Obligations, or release or compromise any obligation
of any of the undersigned hereunder or any obligation of any nature of any other
obligor with respect to any of the Secured Obligations, (d) release any guaranty
or right of offset or its security interest in, or surrender, release or permit
any substitution or exchange for, all or any part of any property securing any
of the Secured Obligations or any obligation hereunder, or extend or renew for
one or more periods (whether or not longer than the original period) or release,
compromise, alter or exchange any obligations of any nature of any obligor with
respect to any such property, and (e) resort to the undersigned (or any of them)
for payment of any of the Secured Obligations when due, whether or not the
Administrative Agent or such Lender shall have resorted to any property securing
any of the Secured Obligations or any obligation hereunder or shall have
proceeded against any other of the undersigned or any other obligor primarily or
secondarily obligated with respect to any of the Secured Obligations.

 

2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the Lenders,
on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2.  Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default, dishonor or nonpayment and all other notices whatsoever to or upon
the Borrower or any of the Guarantors with respect to the Borrower Obligations.

 

2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Borrower Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as  though such payments had not been made.  In the event that any payment,
or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be
paid to the Administrative Agent without set-off or counterclaim in Dollars at
the office of the Administrative Agent set forth on the signature page of the
Credit Agreement.

 

SECTION 3. GRANT OF SECURITY INTEREST

 

Each Grantor hereby assigns and transfers to the Administrative Agent, and
hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders and, to the extent provided herein, their Affiliates, and their
respective successors, indorsees, transferees and assigns, a continuing security
interest in, all Pledged Stock now owned or at any time hereafter acquired by
such Grantor or in which such Grantor now has or at any time in the future may
acquire any right, title or interest and all Proceeds thereof (collectively, the
“Collateral”), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor’s Obligations.

 

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SECTION 4. REPRESENTATIONS AND WARRANTIES

 

To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor, hereby represents and warrants
to the Administrative Agent and each Lender that:

 

4.1 Title; No Other Liens. Except for Permitted Liens, such Grantor owns each
item of the Collateral free and clear of any and all Liens or claims of others. 
No financing statement or other public notice with respect to all or any part of
the Collateral has been authorized and is on file or of record in any public
office, except such as have been filed in favor of the Administrative Agent, for
the ratable benefit of the Lenders, pursuant to this Agreement.

 

4.2 Perfected First Priority Liens.  Upon the execution and delivery of this
Agreement and (a) in the case of Pledged Stock that constitutes Certificated
Securities (as defined in the New York UCC), when stock certificates
representing such Pledged Stock are delivered to the Administrative Agent
together with undated stock powers covering such certificates executed in blank,
the Grantors have granted to the Administrative Agent a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the Proceeds thereof, as security for the Obligations, in
each case prior and superior in right to any other Person or Lien (except
Permitted Liens, and subject, in the case of Proceeds, to the applicable
limitations under Section 9-315 of the New York UCC) and (b) in the case of the
Pledged Stock of Department 56 Minnesota, LLC, and any items that become Pledged
Stock after the Closing Date that will constitute General Intangibles or
Uncertificated Securities (as defined in the New York UCC) when financing
statements in appropriate form are filed in the offices specified on Schedule 3
and, in the case of Uncertificated Securities, the Administrative Agent has
obtained “control” (within the meaning of the New York UCC) of such
Uncertificated Securities, the Grantors have granted to the Administrative Agent
a fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in such Collateral and the Proceeds thereof, as
security for the Obligations, in each case prior and superior in any right to
any other Person or Lien (except, Permitted Liens, and subject, in the case of
Proceeds to the applicable limitations under Section 9-315 of the New York
UCC).  Schedule 3 specifies the locations in which to file the financing
statements which may perfect a legal, valid and enforceable security interest
granted under this Agreement in the Investment Property pursuant to
Section 9-305(c) of the New York UCC.

 

4.3 Chief Executive Office. On the date hereof, such Grantor’s exact legal name,
jurisdiction of organization, organizational identification number (if any), and
the location of such Grantor’s chief executive office or sole place of business
are specified on Schedule 4.

 

4.4 Pledged Stock.  (a) The shares of Pledged Stock pledged by such Grantor
hereunder constitute all the issued and outstanding shares of all classes of the
Capital Stock of each Issuer owned by such Grantor or, in the case of Foreign
Subsidiary Voting Stock, if less, Foreign Subsidiary Voting Stock with 65% of
the total combined voting power of all classes of stock entitled to vote of each
relevant Issuer.

 

(b) All the shares of the Pledged Stock have been duly and validly issued and
are fully paid and nonassessable.

 

(c) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Stock pledged by it hereunder, free of any and
all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.

 

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SECTION 5. COVENANTS

 

Each Grantor covenants and agrees with the Administrative Agent and the Lenders
that, from and after the date of this Agreement until the Obligations shall have
been paid in full, no LC Obligations shall be outstanding and the Commitments
shall have terminated:

 

5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. During
the continuance of any Default, if any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any Instrument,
Certificated Security or Chattel Paper, such Instrument, Certificated Security
or Chattel Paper shall be immediately delivered to the Administrative Agent,
duly indorsed in a manner satisfactory to the Administrative Agent, to be held
as Collateral pursuant to this Agreement.

 

5.2 Payment of Obligations. Such Grantor will pay and discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all material taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind against or with respect to the Collateral, except that no
such charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.

 

5.3 Maintenance of Perfected Security Interest; Further Documentation.  (a) Such
Grantor shall take such actions to maintain the security interests created by
this Agreement as perfected security interests having at least the priority
described in Section 4.2 as shall be requested by the Administrative Agent or as
otherwise required by the terms of this Agreement and shall defend such security
interests against the claims and demands of all Persons whomsoever.  Each
Grantor will make no assignment, pledge, hypothecation or transfer of, or create
or permit to exist any security interest in or other Lien on, the Collateral,
other than Permitted Liens.

 

(b) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, (i) filing any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby and
(ii) in the case of Pledged Stock, taking any actions necessary to enable the
Administrative Agent to obtain “control” (within the meaning of the applicable
Uniform Commercial Code) with respect thereto, to the extent control may be
obtained under the applicable Uniform Commercial Code.

 

5.4 Changes In Locations, Name, Etc. Such Grantor will not, except upon 15 days’
prior written notice to the Administrative Agent and delivery to the
Administrative Agent of all additional financing statements and other documents
reasonably requested by the Administrative Agent to maintain the validity,
perfection and priority of the security interests provided for herein:

 

(i) change its jurisdiction of organization or the location of its chief
executive office or sole place of business from that referred to in Section 4.3;
or

 

(ii) change its name, identity or corporate structure.

 

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5.5 Notices. Such Grantor will advise the Administrative Agent and the Lenders
promptly, in reasonable detail, of:

 

(a) any Lien (other than Permitted Liens) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and

 

(b) the occurrence of any other event which could reasonably be expected to have
a material adverse effect on the aggregate value of the Collateral, taken as a
whole, or on the security interests created hereby.

 

5.6 Pledged Stock.  (a) If such Grantor shall become entitled to receive or
shall receive any certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any Pledged Stock, or otherwise in respect thereof, such
Grantor shall accept the same as the agent of the Administrative Agent and the
Lenders, hold the same in trust for the Administrative Agent and the Lenders and
deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by such Grantor to the Administrative Agent, if
required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor and with, if the Administrative Agent so
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations. Any
sums paid upon or in respect of the Pledged Stock upon any liquidation or
dissolution of any Issuer not permitted under the Credit Agreement shall be paid
over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations. In case any property consisting of
ownership interests in any Person shall be distributed upon or with respect to
the Pledged Stock pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, such property
so distributed shall, unless otherwise subject to a perfected security interest
in favor of the Administrative Agent, be delivered to the Administrative Agent
to be held by it hereunder as additional collateral security for the
Obligations. If any such property so distributed in respect of the Pledged Stock
shall be received by such Grantor, such Grantor shall, until such property is
delivered to the Administrative Agent, hold such property in trust for the
Lenders, segregated from other property of such Grantor, as additional
collateral security for the Obligations.

 

(b) Without the prior written consent of the Administrative Agent, such Grantor
will not (i) vote to enable, or take any other action to permit, any Issuer to
issue any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity interests of any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Stock or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Pledged Stock or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement or (iv)
enter into any agreement or undertaking restricting the right or ability of such
Grantor or the Administrative Agent to sell, assign or transfer any of the
Pledged Stock or Proceeds thereof.

 

(c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i)
it will be bound by the terms of this Agreement relating to the Pledged Stock
issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.6(a) with
respect to the Pledged Stock issued by it and (iii) the terms of Section 6.1(c)
shall apply to it, mutatis mutandis, with respect to all actions that may be
required of it pursuant to Section 6.1(c) with respect to the Pledged Stock
issued by it.

 

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SECTION 6. REMEDIAL PROVISIONS

 

6.1 Pledged Stock. (a) Unless a Default shall have occurred and be continuing
and the Administrative Agent shall have given notice to the relevant Grantor of
the Administrative Agent’s intent to exercise its corresponding rights pursuant
to Section 6.1(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock, in each case paid in the normal course of
business of the relevant Issuer and consistent with past practice, to the extent
permitted in the Credit Agreement, and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, however, that no vote shall
be cast or corporate right exercised or other action taken which could
reasonably be expected to impair the value of the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.

 

(b) If a Default shall occur and be continuing and the Administrative Agent
shall give notice of its intent to exercise such rights to the relevant Grantor
or Grantors, (i) the Administrative Agent shall have the right to receive any
and all cash dividends and distributions, payments or other Proceeds paid in
respect of the Pledged Stock and make application thereof to the Obligations in
such order as the Administrative Agent may determine, and (ii) if so elected by
the Administrative Agent, any or all of the Pledged Stock shall be registered in
the name of the Administrative Agent or its nominee, and the Administrative
Agent or its nominee may thereafter exercise (x) all voting, corporate and other
rights pertaining to such Pledged Stock at any meeting of equityholders of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or other structure
of any Issuer, or upon the exercise by any Grantor or the Administrative Agent
of any right, privilege or option pertaining to such Pledged Stock, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Administrative Agent may
determine), all without liability (except as required by applicable law) except
to account for property actually received by it, but the Administrative Agent
shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.

 

(c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged
Stock pledged by such Grantor hereunder to (i) comply with any written
instruction timely received by it from the Administrative Agent in writing that
(x) states that a Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement and the authority of an equityholder
of the Issuer, without any other or further instructions from such Grantor, and
each Grantor agrees that each Issuer shall be fully protected in so complying,
and (ii) unless otherwise expressly permitted hereby, pay any dividends,
distributions or other payments with respect to the Pledged Stock directly to
the Administrative Agent.

 

6.2 Proceeds To Be Turned Over To Administrative Agent. If a Default shall occur
and be continuing, and a Grantor has been so notified in writing by the
Administrative Agent, all Proceeds received by such Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be maintained by the
Administrative Agent in a collateral account held by the Administrative Agent or
pursuant to which it has

 

9

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obtained “control” (within the meaning of the applicable Uniform Commercial
Code) (a “Collateral Account”). All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 6.3.

 

6.3 Application of Proceeds.

 

At such intervals as may be agreed upon by the Borrower and the Administrative
Agent, or, if a Default shall have occurred and be continuing, at any time at
the Administrative Agent’s election, the Administrative Agent may apply all or
any part of Proceeds held in any Collateral Account in payment of due and
payable Obligations in such order as the Administrative Agent may elect, and any
part of such funds which the Administrative Agent elects not so to apply shall
be paid over from time to time by the Administrative Agent to the applicable
Grantor or to whomsoever may be lawfully entitled to receive the same. Any
balance of such Proceeds remaining after the Obligations shall have been paid in
full, no LC Obligations shall be outstanding and the Commitments shall have
terminated shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive the same.

 

6.4 Code and Other Remedies.

 

                If a Default shall occur and be continuing, the Administrative
Agent, on behalf of the Lenders, may exercise, in addition to all other rights
and remedies granted to them in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable law. 
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker’s board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk. 
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released.  Each Grantor further agrees, at the Administrative
Agent’s request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably
select, whether at such Grantor’s premises or elsewhere.  The Administrative
Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 6.4, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or safekeeping of any
of the Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys’ fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Administrative Agent may elect, and
only after such application and after the payment by the Administrative Agent of
any other amount required by any provision of law, including, without
limitation, Sections 9-610 and 9-615 of the New York UCC, need the
Administrative Agent account for the surplus, if any, to any Grantor.  To the
extent permitted by applicable law, each Grantor waives all claims, damages and
demands it may acquire against the Administrative Agent or any Lender arising
out of the exercise by them of any rights hereunder.  If any

 

10

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notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 15
days before such sale or other disposition.

 

6.5 Deficiency.

 

Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay the Obligations
in full and the reasonable and documented fees and disbursements of any
attorneys employed by the Administrative Agent or any Lender to collect such
deficiency.

 

SECTION 7. THE ADMINISTRATIVE AGENT

 

7.1 Administrative Agent’s Appointment As Attorney-In-Fact, Etc.

 

(a) Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the  generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:

 

(i) in the name of such Grantor or its own name, or otherwise, take possession
of and indorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due with respect to any other Collateral
and file any claim or take any other  action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due with respect to any other
Collateral whenever payable;

 

(ii) pay or discharge taxes and Liens levied or placed on or threatened against
the Collateral;

 

(iii) execute, in connection with any sale provided for in Section 6.4, any
indorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

 

(iv) (1) direct any party liable for any payment under any of the Collateral to
make payment of any and all moneys due or to become due thereunder directly to
the Administrative Agent or as the Administrative Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (3) sign and indorse any assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral;
(5) defend any suit, action or proceeding brought against such Grantor with
respect to any Collateral; (6) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the Administrative Agent may reasonably deem appropriate; (7) vote
any right or interest with respect to any Pledged Stock; and (8) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option and such Grantor’s expense, at any time, or from
time to time, all acts and things which the Administrative Agent deems necessary
to protect, preserve or realize upon the Collateral and the Administrative
Agent’s and the Lenders’ security interests

 

11

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therein and to effect the intent of  this Agreement, all as fully and
effectively as such Grantor might do.  Anything in this Section 7.1(a) to the
contrary notwithstanding, the Administrative Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section 7.1
unless a Default shall have occurred and be continuing.

 

(b) If any Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.

 

(c) The expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 7.1, together with interest thereon at a
rate per annum equal to the highest rate per annum at which interest would then
be payable on any category of past due Floating Rate Loans under the Credit
Agreement, from the date of payment by the Administrative Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Administrative Agent on demand.

 

(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

 

7.2 Duty of Administrative Agent.  The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Administrative Agent deals with
similar property for its own account.  Neither the Administrative Agent any
Lender nor any of their respective officers, directors, employees or agents
shall be liable for any failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent’s
and the Lenders’ interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.

 

7.3 Financing Statements.  Each Grantor authorizes the Administrative Agent to
file or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such offices as the Administrative Agent determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement.

 

7.4 Authority of Administrative Agent. Each Grantor acknowledges that the rights
and responsibilities of the Administrative Agent under this Agreement with
respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

 

12

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SECTION 8. MISCELLANEOUS

 

8.1 Amendments in Writing.  None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified except in accordance
with Section 9.2 of the Credit Agreement.

 

8.2 Notices. All notices, requests and demands to or upon the Administrative
Agent or any Grantor hereunder shall be effected in the manner provided for in
Section 14.1 of the Credit Agreement; provided that any such notice, request or
demand to or upon any Guarantor shall be addressed to such Guarantor at its
notice address set forth on Schedule 1.

 

8.3 No Waiver by Course of Conduct; Cumulative Remedies.

 

Neither the Administrative Agent nor any Lender shall by any act (except by a
written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default. No failure to exercise, or any delay in exercising,
on the part of the Administrative Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Administrative Agent or such Lender would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

 

8.4 Enforcement Expenses; Indemnification.

 

(a) Each Guarantor agrees to pay or reimburse each Lender and the Administrative
Agent for all its costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 hereof or otherwise
enforcing or preserving any rights under this Agreement and the other Loan
Documents to which such Guarantor is a party, including, without limitation, the
reasonable and documented fees and disbursements of counsel to each Lender and
of counsel to the Administrative Agent.

 

(b) Each Guarantor agrees to pay, and to save the Administrative Agent and the
Lenders harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of its Collateral
or in connection with any of the transactions contemplated by this Agreement.

 

(c) Each Guarantor agrees to pay, and to save the Administrative Agent and the
Lenders harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to Section 10.6 of the Credit Agreement.

 

(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.

 

8.5 Successors and Assigns.  This Agreement shall be binding upon the successors
and assigns of

 

13

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each Grantor and shall inure to the benefit of the Administrative Agent and the
Lenders and their successors and assigns; provided that no Grantor may assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of the Administrative Agent.

 

8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative Agent
and each Lender at any time and from time to time while a Default shall have
occurred and be continuing, without notice to such Grantor or any other Grantor,
any such notice being expressly waived by each Grantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the
Administrative Agent or such Lender to or for the credit or the account of such
Grantor, or any part thereof in such amounts as the Administrative Agent or such
Lender may elect, against and on account of the due and payable obligations of
such Grantor to the Administrative Agent or such Lender hereunder, as the
Administrative Agent or such Lender may elect, whether or not the Administrative
Agent or any Lender has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The
Administrative Agent and each Lender shall notify such Grantor promptly of any
such set-off and the application made by the Administrative Agent or such Lender
of the proceeds thereof, provided that the failure to give such notice shall not
affect the validity of such set-off and application.  The rights of the
Administrative Agent and each Lender under this Section 8.6 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent or such Lender may have.

 

8.7 Counterparts.  This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

 

8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

8.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction thereof or
be taken into consideration in the interpretation hereof.

 

8.10 Integration. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Administrative Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.

 

8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

8.12 SUBMISSION TO JURISDICTION; WAIVERS. EACH GRANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN NEW YORK, NEW YORK

 

14

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IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE
ADMINISTRATIVE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT
OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN
A COURT IN NEW YORK, NEW YORK.  EACH GRANTOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION
OR PROCEEDING REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

 

8.13 Acknowledgments.

 

Each Grantor hereby acknowledges that:

 

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents to which it is a party;

 

(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Grantors, on the one hand, and the Administrative Agent and the Lenders, on
the other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

 

(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Grantors and the Lenders.

 

8.14 Additional Grantors.

 

Each Material Subsidiary of the Borrower that is required to become a party to
this Agreement pursuant to Section 6.9 of the Credit Agreement shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of a joinder agreement in the form of Annex 1 hereto.

 

8.15 Releases.

 

(a) At such time as the Loans, the Reimbursement Obligations and the other
Obligations shall have been paid in full, the Commitments have been terminated
and no LC Obligations shall be outstanding, the Collateral shall be released
from the Liens created hereby, and this Agreement and all obligations (other
than those expressly stated to survive such termination) of the Administrative
Agent and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. At the request and sole expense of any
Grantor following any such termination, the Administrative Agent shall deliver
to such

 

15

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Grantor any Collateral held by the Administrative Agent hereunder, and execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.

 

(b) If any of the Collateral shall be sold, transferred or otherwise disposed of
by any Grantor in a transaction permitted by the Credit Agreement, or if such
Grantor becomes a Subsidiary that is not a Material Subsidiary and is not
required to be a Material Subsidiary to satisfy the requirements of such
definition and upon delivery to the Administrative Agent of reasonably detailed
calculations demonstrating that such Subsidiary is not a Material Subsidiary and
is not required to be a Material Subsidiary in order to satisfy the requirements
of such definition, then the Administrative Agent, at the request and sole
expense of such Grantor, shall execute and deliver to such Grantor all releases
or other documents reasonably necessary or desirable for the release of the
Liens created hereby on such Collateral.  At the request and sole expense of the
Borrower, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that the Capital Stock of such Subsidiary Guarantor shall
be sold, transferred or otherwise disposed of in a transaction permitted by the
Credit Agreement; provided that the Borrower shall have delivered to the
Administrative Agent, at least ten Business Days prior to the  date of the
proposed release, a written request for release identifying the relevant
Subsidiary Guarantor, together with a certification by the Borrower stating that
such transaction is in compliance with the Credit Agreement and the other Loan
Documents.

 

8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.

 

8.17 Obligations and Liens Absolute and Unconditional.  Each Grantor understands
and agrees that the obligations of each Grantor under this Agreement shall be
construed as a continuing, absolute and unconditional without regard to (a) the
validity or enforceability of any Loan Document, any of the Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
any Grantor or any other Person against the Administrative Agent or any Lender,
or (c) any other circumstance whatsoever (with or without notice to or knowledge
of any Grantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of any Grantor for the Obligations, in bankruptcy
or in any other instance.  When making any demand hereunder or otherwise
pursuing its rights and remedies hereunder against any Grantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on or otherwise pursue such rights and remedies as it may
have against any other Grantor or any other Person or against any collateral
security or guaranty for the Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to make any
such demand, to pursue such other rights or remedies or to collect any payments
from any other Grantor or any other Person or to realize upon any such
collateral security or guaranty or to exercise any such right of offset, or any
release of any other Grantor or any other Person or any such collateral
security, guaranty or right of offset, shall not relieve any Grantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against any Grantor.  For the purposes hereof
“demand” shall include the commencement and continuance of any legal
proceedings.

 

[signature page follows]

 

16

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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.

 

 

DEPARTMENT 56, INC.

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

Executive Vice President and CFO

 

 

 

 

 

D 56, INC.

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

Executive Vice President and Chief Financial Officer

 

 

 

 

 

CAN 56, INC.

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

President and Treasurer

 

 

 

 

 

FL 56 INTERMEDIATE CORP.

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

Vice President and Treasurer

 

 

 

 

 

AXIS HOLDINGS CORPORATION

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

Vice President

 

 

 

 

 

DEPARTMENT 56 RETAIL, INC.

 

 

 

 

 

 

 

By:

/s/ Timothy Schugel

 

 

Title:

Vice President and Treasurer

 

 

Acknowledged and Agreed:

 

BANK ONE, NA,

 

as Administrative Agent

 

 

 

By:

/s/ Anthony W. Bartell

 

Title:

Vice President

 

 

Signature Page to

Guarantee and Collateral Agreement

 

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Annex 1

 

FORM OF JOINDER TO GUARANTEE AND COLLATERAL AGREEMENT

 

This JOINDER AGREEMENT (this “Agreement”) dated as of [                ] is
executed by the undersigned for the benefit of Bank One, NA, as the
Administrative Agent (the “Administrative Agent”) in connection with that
certain Guarantee and Collateral Agreement dated as of November 25, 2003 among
the Grantors party thereto in favor of the Administrative Agent (as amended,
restated, supplemented or modified from time to time, the “Guarantee and
Collateral Agreement”).  Capitalized terms not otherwise defined herein are
being used herein as defined in the Guarantee and Collateral Agreement.

 

Each Person signatory hereto is required to execute this Agreement pursuant to
Section 8.14 of the Guarantee and Collateral Agreement.

 

In consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each signatory hereby
agrees as follows:

 

1.                                       Each such Person assumes all the
obligations of a [Grantor and/or a Guarantor] under the Guarantee and Collateral
Agreement and agrees that such person or entity is a [Grantor and/or a
Guarantor] and bound as a [Grantor and/or a Guarantor] under the terms of the
Guarantee and Collateral Agreement, as if it had been an original signatory to
such agreement.  [In furtherance of the foregoing, such Person hereby assigns,
pledges and grants to the Administrative Agent a security interest in all of its
right, title and interest in and to the Collateral owned thereby to secure the
Obligations.]

 

2.                                       [[Schedules 1, 2, 3 and 4 of the
Guarantee and Collateral Agreement are hereby amended to add the information
relating to each such Person set out on Schedules 1, 2, 3 and 4 respectively,
hereof.]  Each such Person hereby makes to the Administrative Agent the
representations and warranties set forth in the Guarantee and Collateral
Agreement applicable to such Person [and the applicable Collateral and confirms
that such representations and warranties are true and correct after giving
effect to such amendment to such Schedules.]]

 

3.                                       [In furtherance of its obligations
under Section 5.3 of the Guarantee and Collateral Agreement, each such Person
agrees to deliver to the Administrative Agent such UCC financing statements,
certificates in respect of Pledged Stock, control agreements and other
documentation as the Administrative Agent (or its successors or assigns) may
require to evidence, protect and perfect the Liens created by the Guarantee and
Collateral Agreement, as modified hereby, in accordance with Section 5.3 of the
Guarantee and Collateral Agreement.  Each such Person acknowledges the
authorizations given to the Administrative Agent under the Guarantee and
Collateral Agreement.]

 

4.                                       Each such Person’s address for notices
under the Guarantee and Collateral Agreement shall be as set forth on
Schedule 1.

 

5.                                       This Agreement shall be deemed to be
part of, and a modification to, the Guarantee and Collateral Agreement and shall
be governed by all the terms and provisions of the Guarantee and Collateral
Agreement, with respect to the modifications intended to be made to such
agreement, which terms are incorporated herein by reference, are ratified and
confirmed and shall continue in full force and effect as valid and binding
agreements of each such person or entity enforceable against such person or
entity.  Each such Person hereby waives notice of the Administrative Agent’s

 

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acceptance of this Agreement.  Each such Person will deliver an executed
original of this Agreement to the Administrative Agent.

 

[add signature block for each new Grantor]

 

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