Exhibit 10.4

 

EXECUTION COPY

 

SECURITY AGREEMENT

 

Dated December 28, 2004

 

From

 

The Grantors referred to herein

 

as Grantors

 

to

 

WACHOVIA BANK, NATIONAL ASSOCIATION

 

as Collateral Agent

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

Section

--------------------------------------------------------------------------------

        Page

--------------------------------------------------------------------------------

Section 1.

   Grant of Security    2

Section 2.

   Security for Obligations    7

Section 3.

   Grantors Remain Liable    7

Section 4.

   Delivery and Control of Security Collateral    7

Section 5.

   Maintaining the Account Collateral    8

Section 6.

   Investing of Amounts in the Cash Concentration Account, the Collateral
Account and the L/C Collateral Account    10

Section 7.

   Release of Amounts    10

Section 8.

   Maintaining Electronic Chattel Paper, Transferable Records and
Letter-of-Credit Rights and Giving Notice of Commercial Tort Claims    11

Section 9.

   Representations and Warranties    11

Section 10.

   Further Assurances    15

Section 11.

   As to Equipment and Inventory    16

Section 12.

   Insurance    17

Section 13.

   Post-Closing Changes; Bailees; Collections on Assigned Agreements,
Receivables and Related Contracts    18

Section 14.

   As to Intellectual Property Collateral    19

Section 15.

   Voting Rights; Dividends; Etc.    21

Section 16.

   As to the Assigned Agreements    21

Section 17.

   As to Letter-of-Credit Rights    22

Section 18.

   Transfers and Other Liens; Additional Shares    23

Section 19.

   Collateral Agent Appointed Attorney-in-Fact    23

Section 20.

   Collateral Agent May Perform    23

Section 21.

   The Collateral Agent’s Duties    23

Section 22.

   Remedies    24

Section 23.

   Indemnity and Expenses    26

Section 24.

   Amendments; Waivers; Additional Grantors; Etc.    26

Section 25.

   Notices, Etc.    27

Section 26.

   Continuing Security Interest; Assignments under the Credit Agreement    27

Section 27.

   Release; Termination    27

Section 28.

   Execution in Counterparts    28

Section 29.

   The Mortgages    28

Section 30.

   Governing Law    28

 

Schedules I

   -    Location, Chief Executive Office, Place Where Agreements Are Maintained,
Type Of Organization, Jurisdiction Of Organization And Organizational
Identification Number

Schedule II

   -    Pledged Equity and Pledged Debt

Schedule III

   -    Assigned Agreements

Schedule IV

   -    Locations of Equipment and Inventory

Schedule V

   -    Changes in Name, Location, Etc.

Schedule VI

   -    Patents, Trademarks and Trade Names, Copyrights and IP Agreements

Schedule VII

   -    Commercial Tort Claims

Schedule VIII

   -    Letters of Credit

 

i

--------------------------------------------------------------------------------

Exhibits

         

Exhibit A

   -    Form of Security Agreement Supplement

Exhibit B

   -    Form of Account Control Agreement (Deposit Account/Securities Account)

Exhibit C

   -    Form of Consent and Agreement

Exhibit D

   -    Form of Securities Account Control Agreement

Exhibit E

   -    Form of Commodity Account Control Agreement

Exhibit F

   -    Form of Intellectual Property Security Agreement

Exhibit G

   -    Form of Intellectual Property Security Agreement Supplement

Exhibit H

   -    Form of Consent to Assignment of Letter of Credit Rights

 

ii

--------------------------------------------------------------------------------

 

SECURITY AGREEMENT

 

SECURITY AGREEMENT dated December 28, 2004 made by LANDRY’S RESTAURANTS, INC., a
Delaware corporation (the “Borrower”), the other Persons listed on the signature
pages hereof and the Additional Grantors (as defined in Section 24) (the
Borrower, the Persons so listed and the Additional Grantors being, collectively,
the “Grantors”), to WACHOVIA BANK, NATIONAL ASSOCIATION, as collateral agent (in
such capacity, together with any successor collateral agent appointed pursuant
to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral
Agent”) for the Secured Parties (as defined in the Credit Agreement).

 

PRELIMINARY STATEMENTS.

 

The Borrower has entered into a Credit Agreement dated as of December 28, 2004
(said Agreement, as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the “Credit
Agreement”) with the Lender Parties and the Agents (each as defined therein).

 

Pursuant to the Credit Agreement, the Grantors are entering into this Agreement
in order to grant to the Collateral Agent for the ratable benefit of the Secured
Parties a security interest in the Collateral (as hereinafter defined).

 

Each Grantor is the owner of the shares of stock or other Equity Interests (the
“Initial Pledged Equity”) set forth opposite such Grantor’s name on and as
otherwise described in Part I of Schedule II hereto and issued by the Persons
named therein and of the indebtedness (the “Initial Pledged Debt”) set forth
opposite such Grantor’s name on and as otherwise described in Part II of
Schedule II hereto and issued by the obligors named therein.

 

Each Grantor may, from time to time, have security entitlements (the “Pledged
Security Entitlements”) with respect to financial assets (the “Pledged Financial
Assets”) that are credited from time to time to its securities accounts (each, a
“Securities Account”).

 

Each Grantor may, from time to time, have rights in and to commodity contracts
(the “Pledged Commodity Contracts”) that are carried from time to time in its
commodities accounts (each, a “Commodity Account”).

 

The Borrower has opened a collateral deposit account, Account No. 2000022994286
(the “Collateral Account”), with the Collateral Agent at its office at 301 South
College Street, Charlotte, North Carolina, 28288 in the name of the Collateral
Agent and under the sole control and dominion of the Collateral Agent and
subject to the terms of this Agreement.

 

The Borrower has opened a l/c collateral deposit account, Account No.
2000022994273 (the “L/C Collateral Account”), with the Collateral Agent at its
office at 301 South College Street, Charlotte, North Carolina, 28288, in the
name of the Collateral Agent and under the sole control and dominion of the
Collateral Agent and subject to the terms of this Agreement.

 

The Borrower has opened or may hereafter open a cash concentration deposit
account (the “Cash Concentration Account”) with Collateral Agent at its office
at 301 South College Street, Charlotte, North Carolina, 28288, in the name of
the Borrower and under the sole dominion and control of the Collateral Agent and
subject to the terms of this Agreement.

 

1

--------------------------------------------------------------------------------

Each Grantor has opened and in the future may open other deposit accounts (the
“Other Deposit Accounts”) with banks, in the name of the Borrower and subject to
the terms of this Agreement.

 

The Borrower is the beneficiary under certain letters of credit.

 

It is a condition precedent to the making of Advances and the issuance of
Letters of Credit by the Lender Parties under the Credit Agreement and the entry
into Secured Hedge Agreements by the Hedge Banks from time to time that the
Grantors shall have granted the assignment and security interest and made the
pledge and assignment contemplated by this Agreement.

 

Each Grantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Loan Documents and the Secured Hedge
Agreements.

 

Terms defined in the Credit Agreement and not otherwise defined in this
Agreement are used in this Agreement as defined in the Credit Agreement.
Further, unless otherwise defined in this Agreement or in the Credit Agreement,
terms defined in Article 8 or 9 of the UCC (as defined below) and/or in the
Federal Book Entry Regulations (as defined below) are used in this Agreement as
such terms are defined in such Article 8 or 9 and/or the Federal Book Entry
Regulations. “UCC” means the Uniform Commercial Code as in effect, from time to
time, in the State of New York; provided that, if perfection or the effect of
perfection or non-perfection or the priority of any security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, “UCC” means the Uniform
Commercial Code as in effect from time to time in such other jurisdiction for
purposes of the provisions hereof relating to such perfection, effect of
perfection or non-perfection or priority. The term “Federal Book Entry
Regulations” means (a) the federal regulations contained in Subpart B
(“Treasury/Reserve Automated Debt Entry System (TRADES)”) governing book-entry
securities consisting of U.S. Treasury bills, notes and bonds and Subpart D
(“Additional Provisions”) of 31 C.F.R. Part 357, 31 C.F.R. § 357.2, § 357.10
through § 357.15 and § 357.40 through § 357.45 and (b) to the extent
substantially identical to the federal regulations referred to in clause (a)
above (as in effect from time to time), the federal regulations governing other
book-entry securities.

 

NOW, THEREFORE, in consideration of the premises and in order to induce the
Lender Parties to make Advances and issue Letters of Credit under the Credit
Agreement and to induce the Hedge Banks to enter into Secured Hedge Agreements
from time to time, each Grantor hereby agrees with the Collateral Agent for the
ratable benefit of the Secured Parties as follows:

 

Section 1. Grant of Security. Each Grantor hereby grants to the Collateral
Agent, for the ratable benefit of the Secured Parties, a security interest in,
such Grantor’s right, title and interest in and to the following, in each case,
as to each type of property described below, whether now owned or hereafter
acquired by such Grantor, wherever located, and whether now or hereafter
existing or arising (collectively, the “Collateral”):

 

(a) all equipment in all of its forms, including, without limitation, all
machinery, tools, motor vehicles, vessels, aircraft, furniture and fixtures, and
all parts thereof and all accessions thereto and all software related thereto,
including, without limitation, software that is embedded in and is part of the
equipment (any and all such property being the “Equipment”);

 

(b) all inventory in all of its forms, including, without limitation, (i) all
raw materials, work in process, finished goods and materials used or consumed in
the manufacture, production, preparation or shipping thereof, (ii) goods in
which such Grantor has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped

 

2

--------------------------------------------------------------------------------

in transit by such Grantor), and all accessions thereto and products thereof and
documents therefor, and all software related thereto, including, without
limitation, software that is embedded in and is part of the inventory (any and
all such property being the “Inventory”);

 

(c) all accounts (including, without limitation, health-care-insurance
receivables), chattel paper (including, without limitation, tangible chattel
paper and electronic chattel paper), instruments (including, without limitation,
promissory notes), deposit accounts, letter-of-credit rights, general
intangibles (including, without limitation, payment intangibles) and other
obligations of any kind, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all supporting
obligations and in and to all security agreements, mortgages, Liens, leases,
letters of credit and other contracts securing or otherwise relating to the
foregoing property (any and all of such accounts, chattel paper, instruments,
deposit accounts, letter-of-credit rights, general intangibles and other
obligations, to the extent not referred to in clause (d), (e) or (f) below,
being the “Receivables”, and any and all such supporting obligations, security
agreements, mortgages, Liens, leases, letters of credit and other contracts
being the “Related Contracts”);

 

(d) the following (the “Security Collateral”):

 

(i) the Initial Pledged Equity and the certificates, if any, representing the
Initial Pledged Equity, and all dividends, distributions, return of capital,
cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Initial
Pledged Equity and all subscription warrants, rights or options issued thereon
or with respect thereto;

 

(ii) the Initial Pledged Debt and the instruments, if any, evidencing the
Initial Pledged Debt, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of the Initial Pledged Debt;

 

(iii) all additional shares of stock and other Equity Interests of or in any
issuer of the Initial Pledged Equity or any successor entity from time to time
acquired by such Grantor in any manner (such shares and other Equity Interests,
together with the Initial Pledged Equity, being the “Pledged Equity”), and the
certificates, if any, representing such additional shares or other Equity
Interests, and all dividends, distributions, return of capital, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
or other Equity Interests and all subscription warrants, rights or options
issued thereon or with respect thereto;

 

(iv) all additional indebtedness from time to time owed to such Grantor by any
obligor of the Initial Pledged Debt or any successor entity (such indebtedness,
together with the Initial Pledged Debt, being the “Pledged Debt”) and the
instruments, if any, evidencing such indebtedness, and all interest, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness;

 

(v) the Securities Accounts, all Pledged Security Entitlements with respect to
all Pledged Financial Assets from time to time credited to the Securities
Accounts, and all Pledged Financial Assets, and all dividends, distributions,
return of capital, interest, cash,

 

3

--------------------------------------------------------------------------------

instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Security Entitlements or such Pledged Financial Assets and all
subscription warrants, rights or options issued thereon or with respect thereto;

 

(vi) the Commodities Accounts, all Pledged Commodity Contracts from time to time
carried in the Commodities Accounts, and all value, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such Pledged Commodity Contracts;
and

 

(vii) all other investment property (including, without limitation, all (A)
securities, whether certificated or uncertificated, (B) security entitlements,
(C) securities accounts, (D) commodity contracts and (E) commodity accounts) in
which such Grantor has now, or acquires from time to time hereafter, any right,
title or interest in any manner, and the certificates or instruments, if any,
representing or evidencing such investment property, and all dividends,
distributions, return of capital, interest, distributions, value, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
investment property and all subscription warrants, rights or options issued
thereon or with respect thereto;

 

(e) each of the agreements listed on Schedule III hereto, the IP Agreements (as
hereinafter defined), and each Hedge Agreement to which such Grantor is now or
may hereafter become a party, in each case as such agreements may be amended,
amended and restated, supplemented or otherwise modified from time to time
(collectively, the “Assigned Agreements”), including, without limitation, (i)
all rights of such Grantor to receive moneys due and to become due under or
pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of such Grantor for damages arising out of or
for breach of or default under the Assigned Agreements and (iv) the right of
such Grantor to terminate the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder (all such
Collateral being the “Agreement Collateral”);

 

(f) the following (collectively, the “Account Collateral”):

 

(i) the Collateral Account, the L/C Collateral Account, the Cash Concentration
Account and the Other Deposit Accounts and all funds and financial assets from
time to time credited thereto (including, without limitation, all Cash
Equivalents), all interest, dividends, distributions, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such funds and financial assets,
and all certificates and instruments, if any, from time to time representing or
evidencing the Collateral Account, the L/C Collateral Account, the Cash
Concentration Account and the Other Deposit Accounts;

 

(ii) all promissory notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time delivered to or otherwise possessed by the
Collateral Agent for or on behalf of such Grantor, including, without
limitation, those delivered or possessed in substitution for or in addition to
any or all of the then existing Account Collateral; and

 

4

--------------------------------------------------------------------------------

(iii) all interest, dividends, distributions, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Account
Collateral; and

 

(g) the following (collectively, the “Intellectual Property Collateral”):

 

(i) all patents, patent applications, utility models and statutory invention
registrations, all inventions claimed or disclosed therein and all improvements
thereto (“Patents”);

 

(ii) all trademarks, service marks, domain names, trade dress, logos, designs,
slogans, trade names, business names, corporate names and other source
identifiers, whether registered or unregistered (provided that no security
interest shall be granted in 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 applications under applicable federal law), together, in
each case, with the goodwill symbolized thereby (“Trademarks”);

 

(iii) all copyrights, including, without limitation, copyrights in Computer
Software (as hereinafter defined), internet web sites and the content thereof,
whether registered or unregistered (“Copyrights”);

 

(iv) all computer software, programs and databases (including, without
limitation, source code, object code and all related applications and data
files), firmware and documentation and materials relating thereto, together with
any and all maintenance rights, service rights, programming rights, hosting
rights, test rights, improvement rights, renewal rights and indemnification
rights and any substitutions, replacements, improvements, error corrections,
updates and new versions of any of the foregoing (“Computer Software”);

 

(v) all confidential and proprietary information, including, without limitation,
know-how, trade secrets, manufacturing and production processes and techniques,
inventions, research and development information, databases and data, including,
without limitation, technical data, financial, marketing and business data,
pricing and cost information, business and marketing plans and customer and
supplier lists and information (collectively, “Trade Secrets”), and all other
intellectual, industrial and intangible property of any type, including, without
limitation, industrial designs and mask works;

 

(vi) all registrations and applications for registration for any of the
foregoing, including, without limitation, those registrations and applications
for registration set forth in Schedule VI hereto (as such Schedule VI may be
supplemented from time to time by supplements to this Agreement, each such
supplement being substantially in the form of Exhibit G hereto (an “IP Security
Agreement Supplement”) executed by such Grantor to the Collateral Agent from
time to time), together with all reissues, divisions, continuations,
continuations-in-part, extensions, renewals and reexaminations thereof;

 

(vii) all tangible embodiments of the foregoing, all rights in the foregoing
provided by international treaties or conventions, all rights corresponding
thereto throughout the world and all other rights of any kind whatsoever of such
Grantor accruing thereunder or pertaining thereto;

 

5

--------------------------------------------------------------------------------

(viii) all agreements, permits, consents, orders and franchises relating to the
license, development, use or disclosure of any of the foregoing to which such
Grantor, now or hereafter, is a party or a beneficiary, including, without
limitation, the agreements set forth in Schedule VI hereto (“IP Agreements”);
and

 

(ix) any and all claims for damages and injunctive relief for past, present and
future infringement, dilution, misappropriation, violation, misuse or breach
with respect to any of the foregoing, with the right, but not the obligation, to
sue for and collect, or otherwise recover, such damages;

 

(h) all commercial tort claims described in Schedule VII hereto (collectively
the “Commercial Tort Claims Collateral”);

 

(i) all books and records (including, without limitation, customer lists, credit
files, printouts and other computer output materials and records) of such
Grantor pertaining to any of the Collateral; and

 

(j) all proceeds of, collateral for, income, royalties and other payments now or
hereafter due and payable with respect to, and supporting obligations relating
to, any and all of the Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clauses (a) through (i) of this Section 1 and this clause (j)) and,
to the extent not otherwise included, all (A) payments under insurance (whether
or not the Collateral Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral, (B) tort claims, including, without
limitation, all commercial tort claims and (C) cash.

 

Notwithstanding anything contained herein to the contrary, (a) the security
interest granted under this Section 1 shall not attach to any Equity Interests
issued by any Unrestricted Subsidiary to the extent that the granting of such
security interest hereunder is prohibited by the terms of any financing
arrangement of such Unrestricted Subsidiary and, to the extent granted
hereunder, shall be subject to any Lien on such Equity Interests securing any
such financing arrangement of such Unrestricted Subsidiary and (b) in no event
shall the security interest granted under this Section 1 attach to (x) any
lease, license, contract, property rights or agreement to which any Grantor is a
party, or any of its rights or interests thereunder, if and to the extent that
(and only to the extent that) and for so long as (but only for so long as) the
grant of such security interest shall (I) give any other party to such lease,
license, contract, property rights or agreement the right to terminate any
material obligations thereunder, (II) constitute or result in the abandonment,
invalidation or unenforceability of any material right, title or interest of any
Grantor therein or (III) constitute or result in a breach or termination
pursuant to the terms of, or a default under, any such lease, license, contract,
property rights or agreement (other than to the extent that any such term would
be rendered ineffective pursuant to applicable law, including Sections 9-406,
9-407, 9-408 and 9-409 of the UCC (or any successor provision or provisions));
or (y) any shares of stock in any Subsidiary organized under the laws of any
jurisdiction other than the United States of America, any State thereof or the
District of Columbia (each, a “Foreign Subsidiary”) and acquired, owned or
otherwise held by such Grantor which, when aggregated with all other shares of
stock in such Foreign Subsidiary pledged by such Grantor, would result in more
than 66% of the shares of stock and other Equity Interests in such Foreign
Subsidiary entitled to vote (within the meaning of Treasury Regulation Section
1.956 2(c)(2) promulgated under the Internal Revenue Code) being pledged to the
Collateral Agent under this Agreement, provided that all of the shares of stock
and other Equity Interests in such Foreign Subsidiary not entitled to vote
(within the meaning of Treasury Regulation Section 1.956-2(c)(2) promulgated
under the Internal Revenue Code) shall be pledged by such Grantor hereunder. In
the event that the security interest granted under this Section 1 does not
attach to any lease, license, contract, property right or

 

6

--------------------------------------------------------------------------------

agreement to which any Grantor is a party, or any of its rights and interests
thereunder, by reason of clause (x) above, such security interest shall
immediately and automatically attach to the same, without any further action on
the part of any party hereto, at such time as the conditions described above
which caused the same to be excluded from such grant shall cease to apply
thereto.

 

Section 2. Security for Obligations. This Agreement secures, in the case of each
Grantor, the payment of all Obligations and obligations of such Grantor now or
hereafter existing under the Loan Documents and the Secured Hedge Agreements,
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, expenses or otherwise (all
such Obligations and obligations being the “Secured Obligations”).

 

Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor’s Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Collateral Agent
of any of the rights hereunder shall not release any Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) no Secured Party shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, any other Loan Document or any Secured Hedge Agreement, nor shall any
Secured Party be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

Section 4. Delivery and Control of Security Collateral. (a) All certificates or
instruments representing or evidencing Security Collateral shall be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent, provided that the Grantors shall not be
required to deliver instruments evidencing Pledged Debt so long as the aggregate
principal amount of all such Pledged Debt as to which such instruments have not
been delivered (for all Grantors, taken as a whole) does not exceed $1,000,000.
If a Default under Section 6.01(a) or (f) of the Credit Agreement or an Event of
Default has occurred and is continuing, the Collateral Agent shall have the
right, at any time in its discretion and without notice to any Grantor, (i) to
transfer to or to register in the name of the Collateral Agent or any of its
nominees any or all of the Security Collateral, subject only to the revocable
rights specified in Section 15(a), (ii) to exchange certificates or instruments
representing or evidencing Security Collateral for certificates or instruments
of smaller or larger denominations and (iii) to convert Security Collateral
consisting of financial assets credited to any Securities Account to Security
Collateral consisting of financial assets held directly by the Collateral Agent,
and to convert Security Collateral consisting of financial assets held directly
by the Collateral Agent to Security Collateral consisting of financial assets
credited to a Securities Account.

 

(b) With respect to any Security Collateral in which any Grantor has any right,
title or interest and that constitutes an uncertificated security, such Grantor
will cause the issuer thereof either (i) to register the Collateral Agent as the
registered owner of such security or (ii) to agree in an authenticated record
with such Grantor and the Collateral Agent that if a Default under Section
6.01(a) or (f) of the Credit Agreement or of an Event of Default has occurred
and is continuing, such issuer will comply with instructions with respect to
such security originated by the Collateral Agent without further consent of such
Grantor, such authenticated record to be in form and substance satisfactory to
the Collateral Agent. With respect to any Security Collateral in which any
Grantor has any right, title or interest and that is not an uncertificated
security, upon the request of the Collateral Agent, such Grantor will notify
each such issuer of Pledged Equity that such Pledged Equity is subject to the
security interest granted hereunder.

 

7

--------------------------------------------------------------------------------

(c) With respect to any Security Collateral in which any Grantor has any right,
title or interest and that constitutes a security entitlement in which the
Collateral Agent is not the entitlement holder, such Grantor will, upon request
of the Collateral Agent during the continuance of a Default under Section
6.01(a) or (f) of the Credit Agreement or an Event of Default, cause the
securities intermediary with respect to such security entitlement either (i) to
identify in its records the Collateral Agent as the entitlement holder of such
security entitlement against such securities intermediary or (ii) to agree in an
authenticated record with such Grantor and the Collateral Agent that if a
Default under Section 6.01(a) or (f) of the Credit Agreement or of an Event of
Default has occurred and is continuing, such securities intermediary will comply
with entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to which
such Grantor has a security entitlement) originated by the Collateral Agent
without further consent of such Grantor, such authenticated record to be in
substantially the form of Exhibit D hereto or otherwise in form and substance
satisfactory to the Collateral Agent (such agreement being a “Securities Account
Control Agreement”).

 

(d) With respect to any Security Collateral in which any Grantor has any right,
title or interest and that constitutes a commodity contract, such Grantor shall,
upon request of the Collateral Agent during the continuance of a Default under
Section 6.01(a) or (f) of the Credit Agreement or an Event of Default, cause the
commodity intermediary with respect to such commodity contract to agree in an
authenticated record with such Grantor and the Collateral Agent that if a
Default under Section 6.01(a) or (f) of the Credit Agreement or of an Event of
Default has occurred and is continuing, such commodity intermediary will apply
any value distributed on account of such commodity contract as directed by the
Collateral Agent without further consent of such Grantor, such authenticated
record to be in substantially the form of Exhibit E hereto or otherwise in form
and substance satisfactory to the Collateral Agent (such agreement being a
“Commodity Account Control Agreement”, and all such authenticated records,
together with all Securities Account Control Agreements being, collectively,
“Security Control Agreements”).

 

(e) No Grantor will change or add any securities intermediary or commodity
intermediary that maintains any securities account or commodity account in which
any of the Collateral is credited or carried, or change or add any such
securities account or commodity account, in each case without first complying
with the above provisions of this Section 4 in order to perfect the security
interest granted hereunder in such Collateral.

 

(f) Upon the request of the Collateral Agent at any time after a Default under
Section 6.01(a) or (f) of the Credit Agreement or of an Event of Default has
occurred and is continuing, such Grantor will notify each such issuer of Pledged
Debt that such Pledged Debt is subject to the security interest granted
hereunder and shall deliver to the Collateral Agent all instruments evidencing
such Pledged Debt.

 

Section 5. Maintaining the Account Collateral. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of Credit shall be outstanding, any Secured Hedge Agreement shall be
in effect or any Lender Party shall have any Commitment:

 

(a) Upon request of the Collateral Agent during the continuance of a Default
under Section 6.01(a) or (f) of the Credit Agreement or an Event of Default, (i)
the Borrower shall open the Cash Concentration Account (if not previously
opened), (ii) the Grantors will provide a schedule (the “Account Collateral
Schedule”) listing all the Other Deposits Accounts of the Grantors and (iii)
each Grantor will maintain all Account Collateral only with the Collateral Agent
or with banks (the “Pledged Account Banks”) that have agreed, in a record
authenticated

 

8

--------------------------------------------------------------------------------

by the Grantor, the Collateral Agent and the Pledged Account Banks, to (A)
comply with instructions originated by the Collateral Agent directing the
disposition of funds in the Account Collateral without the further consent of
the Grantor and (B) waive or subordinate in favor of the Collateral Agent all
claims of the Pledged Account Banks (including, without limitation, claims by
way of a security interest, lien or right of setoff or right of recoupment) to
the Account Collateral, which authenticated record shall be substantially in the
form of Exhibit B hereto, or shall otherwise be in form and substance
satisfactory to the Collateral Agent (the “Account Control Agreement”).

 

(b) Upon request of the Collateral Agent during the continuance of a Default
under Section 6.01(a) or (f) of the Credit Agreement or an Event of Default,
each Grantor will (i) immediately instruct each Person obligated at any time to
make any payment to such Grantor for any reason (an “Obligor”) to make such
payment to an Other Deposit Account or a Cash Concentration Account and (ii)
deposit in an Other Deposit Account or the Cash Concentration Account or pay to
the Collateral Agent for deposit in the Cash Concentration Account, at the end
of each Business Day, all proceeds of Collateral and all other cash of such
Grantor.

 

(c) Upon request of the Collateral Agent during the continuance of a Default
under Section 6.01(a) or (f) of the Credit Agreement or an Event of Default,
each Grantor will instruct each Pledged Account Bank to transfer to the Cash
Concentration Account, at the end of each Business Day, in same day funds, an
amount equal to the credit balance of each Other Deposit Account in such Pledged
Account Bank. If any Grantor shall fail to give any such instructions to any
Pledged Account Bank, the Collateral Agent may do so without further notice to
any Grantor.

 

(d) Each Grantor agrees that it will not, during the continuance of a Default
under Section 6.01(a) or (f) of the Credit Agreement or an Event of Default, add
any bank that maintains a deposit account for such Grantor or open any new
deposit account with any then existing Pledged Account Bank unless (i) the
Collateral Agent shall have received at least 10 days’ prior written notice of
such additional bank or such new deposit account and (ii) the Collateral Agent
shall have received, in the case of a bank or Pledged Account Bank that is not
the Collateral Agent, an Account Control Agreement authenticated by such new
bank and such Grantor, or a supplement to an existing Account Control Agreement
with such then existing Pledged Account Bank, covering such new deposit account
(and, upon the receipt by the Collateral Agent of such Account Control Agreement
or supplement, the Account Collateral Schedule shall be automatically amended to
include such Other Deposit Account). Each Grantor agrees that it will not,
during the continuance of a Default under Section 6.01(a) or (f) of the Credit
Agreement or an Event of Default, terminate any bank as a Pledged Account Bank
or terminate any Account Collateral, except that the Grantor may terminate an
Other Deposit Account, and terminate a bank as a Pledged Account Bank with
respect to such Other Deposit Account, if it gives the Collateral Agent at least
10 days’ prior written notice of such termination (and, upon such termination,
the Account Collateral Schedule shall be automatically amended to delete such
Pledged Account Bank and Other Deposit Account).

 

(e) If a Default under Section 6.01(a) or (f) of the Credit Agreement or an
Event of Default has occurred and is continuing, upon any termination by a
Grantor of any Other Deposit Account by such Grantor, or any Pledged Account
Bank with respect thereto, such Grantor will immediately (i) transfer all funds
and property held in such terminated Other Deposit Account to another Other
Deposit Account listed in the Account Collateral Schedule or to the Cash
Concentration Account and (ii) notify all Obligors that were making payments to
such Other Deposit Account to make all future payments to another Other Deposit
Account listed in the Account Collateral Schedule or to the Cash Concentration
Account, in each case so that the

 

9

--------------------------------------------------------------------------------

Collateral Agent shall have a continuously perfected security interest in such
Account Collateral, funds and property. Each Grantor agrees to terminate any or
all Account Collateral and Account Control Agreements upon request by the
Collateral Agent.

 

(f) So long as no Default under Section 6.01(a) or (f) of the Credit Agreement
or Event of Default exists, the Borrower may draw checks on, and otherwise
withdraw amounts from, the Cash Concentration Account and any of the Other
Deposit Accounts.

 

(g) During the continuance of a Default under Section 6.01(a) or (f) of the
Credit Agreement or an Event of Default, the Collateral Agent shall have sole
right to direct the disposition of funds with respect to each of the Cash
Concentration Account, the Collateral Account, the L/C Collateral Account and
the Other Deposit Accounts; and it shall be a term and condition of each of the
Cash Concentration Account, the Collateral Account, the L/C Collateral Account
and the Other Deposit Accounts, notwithstanding any term or condition to the
contrary in any other agreement relating to the Cash Concentration Account, the
Collateral Account, the L/C Collateral Account or the Other Deposit Accounts, as
the case may be, that no amount (including, without limitation, interest on Cash
Equivalents credited thereto) will be paid or released to or for the account of,
or withdrawn by or for the account of, the Borrower or any other Person from the
Cash Concentration Account, the Collateral Account, the L/C Collateral Account
or the Other Deposit Accounts, as the case may be.

 

(h) If a Default under Section 6.01(a) or (f) of the Credit Agreement or an
Event of Default has occurred and is continuing, the Collateral Agent may, at
any time and without notice to, or consent from, the Grantor, (i) transfer, or
direct the transfer of, funds from the Account Collateral to satisfy the
Grantor’s obligations under the Loan Documents and (ii) transfer, or direct the
transfer of, funds from the Other Deposit Accounts to the Cash Concentration
Account or from the Other Deposit Accounts and the Cash Concentration Account to
the Collateral Account.

 

Section 6. Investing of Amounts in the Cash Concentration Account, the
Collateral Account and the L/C Collateral Account. The Collateral Agent will,
subject to the provisions of Sections 5, 7 and 23, from time to time (a) invest,
or direct the applicable Pledged Account Bank to invest, amounts received with
respect to the Cash Concentration Account, the Collateral Account and the L/C
Collateral Account in such Cash Equivalents credited to (A) the Cash
Concentration Account, the Collateral Account and the L/C Collateral Account,
respectively, as the Borrower may select and the Collateral Agent may approve or
(B) in the case of Cash Equivalents consisting of Securities Collateral, a
securities account in which the Collateral Agent is the securities intermediary
or a securities account subject to a Securities Account Control Agreement, and
(b) invest interest paid on the Cash Equivalents referred to in clause (a)
above, and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold, in each case in such Cash Equivalents credited in the same manner.
Interest and proceeds that are not invested or reinvested in Cash Equivalents as
provided above shall be deposited and held in the relevant Cash Concentration
Account, Collateral Account or L/C Collateral Account.

 

Section 7. Release of Amounts. So long as no Default under Section 6.01(a) or
(f) of the Credit Agreement or Event of Default has occurred and is continuing,
the Collateral Agent will pay and release, or direct the applicable Pledged
Account Bank to pay and release, to the Borrower or at its order or, at the
request of the Borrower, to the Administrative Agent to be applied to the
Obligations of the Borrower under the Loan Documents, such amount, if any, as is
then on deposit in the Collateral Account or the L/C Collateral Account, as the
case may be, in each case to the extent permitted to be released under the terms
of the Credit Agreement.

 

10

--------------------------------------------------------------------------------

Section 8. Maintaining Electronic Chattel Paper, Transferable Records and
Letter-of-Credit Rights and Giving Notice of Commercial Tort Claims. So long as
any Advance or any other Obligation of any Loan Party under any Loan Document
shall remain unpaid, any Letter of Credit shall be outstanding (to the extent
that cash collateral has not been provided therefor pursuant to the Credit
Agreement and otherwise on terms acceptable to the Collateral Agent), any
Secured Hedge Agreement shall be in effect or any Lender Party shall have any
Commitment:

 

(a) Each Grantor will use commercially reasonable efforts to maintain all (i)
electronic chattel paper so that the Collateral Agent has control of the
electronic chattel paper in the manner specified in Section 9-105 of the UCC and
(ii) all transferable records so that the Collateral Agent has control of the
transferable records in the manner specified in Section 16 of the Uniform
Electronic Transactions Act, as in effect in the jurisdiction governing such
transferable record (“UETA”);

 

(b) Each Grantor will use commercially reasonable efforts to maintain all
letter-of-credit rights assigned to the Collateral Agent, including, without
limitation, all letter-of-credit rights associated with the letters of credit
described in Schedule, so that the Collateral Agent has control of such
letter-of-credit rights in the manner specified in Section 9-107 of the UCC,
provided that the provisions of this Section 8(b) shall not apply to letters of
credit the aggregate face amount (for all Grantors, taken as a whole) of which
does not exceed $1,000,000; and

 

(c) Each Grantor will give notice to the Collateral Agent, not more than five
Business Days after such Grantor has obtained actual knowledge thereof, of any
commercial tort claim for which a complaint has been or is likely to be filed by
or on behalf of such Grantor and which exceeds $1,000,000, and will immediately
execute or otherwise authenticate a supplement to this Agreement, and otherwise
take all necessary action, to subject such commercial tort claim to the first
priority security interest created under this Agreement.

 

Section 9. Representations and Warranties. Each Grantor represents and warrants
as follows:

 

(a) Such Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC,
is correctly set forth in Schedule 1 hereto. Such Grantor has only the trade
names, domain names and marks listed on Schedule VI hereto. Such Grantor is
located (within the meaning of Section 9-307 of the UCC) and has its chief
executive office and the office in which it maintains the original copies of
each Assigned Agreement and Related Contract to which such Grantor is a party
and all originals of all chattel paper that evidence Receivables of such
Grantor, in the state or jurisdiction set forth in Schedule I hereto. The
information set forth in Schedule I hereto with respect to such Grantor is true
and accurate in all respects. Since December 28, 1999, such Grantor has not
changed its name, location, chief executive office, place where it maintains its
agreements, type of organization, jurisdiction of organization or organizational
identification number from those set forth in Schedule I hereto except as
disclosed in Schedule V hereto.

 

(b) All of the Equipment and Inventory of such Grantor are located at the places
specified therefor in Schedule IV hereto, as such Schedule IV may be amended
from time to time pursuant to Section 11(a), other than (i) Equipment or
Inventory with an aggregate value (for all Grantors, taken as a whole) of less
than $1,000,000, (ii) Inventory in transit, (iii) Equipment or Inventory
transferred pursuant to a disposition permitted under the Credit Agreement, (iv)
mobile goods, (v) Equipment moved for repair or refurbishment, and (vi)
Inventory temporarily stored at warehouses or other similar third party
locations in the ordinary course of such Grantor’s business. All Security
Collateral consisting of certificated securities and instruments have been

 

11

--------------------------------------------------------------------------------

delivered to the Collateral Agent. Original copies of each Assigned Agreement
and all originals of all chattel paper that evidence Receivables have been
delivered to the Collateral Agent, in each case to the extent that delivery
thereof to the Collateral Agent is required under Section 4. None of the
Receivables or Agreement Collateral is evidenced by a promissory note or other
instrument that has not been delivered to the Collateral Agent, except to the
extent that such delivery is not required by Section 4 hereof.

 

(c) Such Grantor is the legal and beneficial owner of the Collateral of such
Grantor free and clear of any Lien, claim, option or right of others, except for
the security interest created under this Agreement or permitted under the Credit
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of such Collateral or listing such Grantor or
any trade name of such Grantor as debtor is on file in any recording office,
except such as may have been filed in favor of the Collateral Agent relating to
the Loan Documents or as otherwise permitted under the Credit Agreement.

 

(d) Such Grantor has exclusive possession and control of the Equipment and
Inventory other than Inventory stored at any leased premises or warehouse.

 

(e) The Pledged Equity pledged by such Grantor hereunder has been duly
authorized and validly issued and is fully paid and non-assessable. With respect
to the Pledged Equity that is an uncertificated security, such Grantor has
caused the issuer thereof either (i) to register the Collateral Agent as the
registered owner of such security or (ii) to agree in an authenticated record
with such Grantor and the Collateral Agent that upon the occurrence and during
the continuance of a Default under Section 6.01(a) or (f) of the Credit
Agreement or an Event of Default, such issuer will comply with instructions with
respect to such security originated by the Collateral Agent without further
consent of such Grantor. If such Grantor is an issuer of Pledged Equity, such
Grantor confirms that it has received notice of such security interest. The
Pledged Debt pledged by such Grantor hereunder has been duly authorized,
authenticated or issued and delivered, is the legal, valid and binding
obligation of the issuers thereof, is evidenced by one or more promissory notes
(which notes have been delivered to the Collateral Agent) and is not in material
default.

 

(f) The Initial Pledged Equity pledged by such Grantor constitutes the
percentage of the issued and outstanding Equity Interests of the issuers thereof
indicated on Schedule II hereto. The Initial Pledged Debt constitutes all of the
outstanding indebtedness owed to such Grantor by the issuers thereof and is
outstanding in the principal amount indicated on Schedule II hereto.

 

(g) All of the investment property owned by such Grantor is listed on Schedule
II hereto.

 

(h) The Assigned Agreements to which such Grantor is a party, true and complete
copies of which (other than the Hedge Agreements) have been furnished to each
Secured Party, have been duly authorized, executed and delivered by all parties
thereto, have not been amended, amended and restated, supplemented or otherwise
modified, are in full force and effect and are binding upon and enforceable
against all parties thereto in accordance with their terms. There exists no
material default under any Assigned Agreement to which such Grantor is a party
by any party thereto.

 

(i) [Intentionally Omitted].

 

(j) Except for letters of credit the aggregate face amount (for all Grantors
taken as a whole) does not exceed $1,000,000, such Grantor is not a beneficiary
or assignee under any letter

 

12

--------------------------------------------------------------------------------

of credit other than the letters of credit described in Schedule VIII hereto, as
such Schedule VIII may be amended from time to time, and legal, binding and
enforceable Consents to Assignment of Letter of Credit Rights, in the form of
the Consent to Assignment of Letter of Credit Rights attached hereto as Exhibit
H, are in effect for each such letter of credit.

 

(k) All filings and other actions (including, without limitation, actions
necessary to obtain control of Collateral as provided in Sections 9-104, 9-105,
9-106 and 9-107 of the UCC) necessary to perfect the security interest in the
Collateral of such Grantor created under this Agreement have been duly made or
taken and are in full force and effect (other than (i) the UCC financing
statements that will be filed concurrently with or immediately following the
Closing Date, (ii) the recordation of the Intellectual Property Security
Agreements referred to in Section 14(f) with the U.S. Patent and Trademark
Office and the U.S. Copyright Office (which agreements have been delivered to
the Collateral Agent for recording), (iii) the indication of the security
interest of the Collateral Agent on certificates of title with respect to
Collateral the ownership of which is evidenced by a certificate of title, and
(iv) other than actions that may be required to perfect the security interest
with respect to Intellectual Property Collateral created under the laws of
jurisdictions outside of the United States), and this Agreement creates in favor
of the Collateral Agent for the benefit of the Secured Parties a valid and,
together with such filings and other actions, perfected first priority (subject
to, in the case of Equity Interests issued by any Unrestricted Subsidiary in
which a security interest is granted hereunder, any Lien on such Equity
Interests securing any financing arrangement of such Unrestricted Subsidiary)
security interest in the Collateral of such Grantor, securing the payment of the
Secured Obligations, subject to Liens permitted under the Loan Documents.

 

(l) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for (i) the grant by such Grantor of the security interest granted
hereunder or for the execution, delivery or performance of this Agreement by
such Grantor, (ii) the perfection or maintenance of the security interest
created hereunder (including the first priority (subject to such exceptions as
set forth in Section 9(k)(iv) with respect to Equity Interests issued by
Unrestricted Subsidiaries) nature of such security interest), except for (A) the
filing of financing and continuation statements under the UCC, which financing
statements have been filed or will be duly filed immediately after the Closing
Date, (B) the recordation of the Intellectual Property Security Agreements
referred to in Section 14(f) with the U.S. Patent and Trademark Office and the
U.S. Copyright Office, which agreements have been delivered to the Collateral
Agent for recordation and are in full force and effect, (C) the indication of
the security interest of the Collateral Agent on certificates of title with
respect to Collateral the ownership of which is evidenced by a certificate of
title, and (D) the taking of appropriate actions under applicable foreign law
with respect to such Grantor’s rights in Intellectual Property Collateral
created under the laws of jurisdictions outside of the United States, or (iii)
the exercise by the Collateral Agent of its voting or other rights provided for
in this Agreement or the remedies in respect of the Collateral pursuant to this
Agreement, except (A) as may be required in connection with the disposition of
any portion of the Security Collateral by laws affecting the offering and sale
of securities generally, (B) customary procedures required by applicable law in
connection with the foreclose or otherwise realization of a security interest,
and (C) customary restrictions (to the extent enforceable under applicable law)
on the assignability of certain contract rights.

 

(m) The Inventory that has been produced or distributed by such Grantor has been
produced in compliance with all requirements of applicable law, including,
without limitation, the Fair Labor Standards Act, except to the extent that any
noncompliance would not reasonably be expected to have a Material Adverse
Effect.

 

13

--------------------------------------------------------------------------------

(n) As to itself and its Intellectual Property Collateral:

 

(i) The operation of such Grantor’s business as currently conducted or as
presently contemplated to be conducted and the use of the Intellectual Property
Collateral in connection therewith do not conflict with, infringe,
misappropriate, dilute, misuse or otherwise violate the intellectual property
rights of any third party except to the extent such infringement,
misappropriation, dilution, misuse or violation would not reasonably be expected
to have a Material Adverse Effect.

 

(ii) Such Grantor is the exclusive owner of all right, title and interest in and
to the Intellectual Property Collateral, and is entitled to use all Intellectual
Property Collateral subject only to the terms of the IP Agreements.

 

(iii) The Intellectual Property Collateral set forth on Schedule VI hereto
includes all of the patents, patent applications, domain names, trademark
registrations and applications, copyright registrations and applications and IP
Agreements owned by such Grantor.

 

(iv) The Intellectual Property Collateral is subsisting and has not been
adjudged invalid or unenforceable in whole or part, and to the best of such
Grantor’s knowledge, is valid and enforceable. Such Grantor is not aware of any
uses of any item of Intellectual Property Collateral that would be reasonably
expected to lead to such item becoming invalid or unenforceable.

 

(v) Except as set forth on Schedule VI, such Grantor has made or performed all
filings, recordings and other acts and has paid all required fees and taxes to
maintain and protect its interest in each and every item of Intellectual
Property Collateral in full force and effect throughout the world, and to
protect and maintain its interest therein including, without limitation,
recordations of any of its interests in the Patents and Trademarks with the U.S.
Patent and Trademark Office, and recordation of any of its interests in the
Copyrights with the U.S. Copyright Office. Such Grantor has used proper
statutory notice in connection with its use of each patent, trademark and
copyright in the Intellectual Property Collateral except to the extent the
failure to do so would not reasonably be expected to have a Material Adverse
Effect.

 

(vi) To the Grantor’s knowledge, no claim, action, suit, investigation,
litigation or proceeding has been asserted or is pending or threatened against
such Grantor (A) based upon or challenging or seeking to deny or restrict the
Grantor’s rights in or use of any of the Intellectual Property Collateral, (B)
alleging that the Grantor’s rights in or use of the Intellectual Property
Collateral or that any services provided by, processes used by, or products
manufactured or sold by, such Grantor infringe, misappropriate, dilute, misuse
or otherwise violate any patent, trademark, copyright or any other proprietary
right of any third party, or (C) alleging that the Intellectual Property
Collateral is being licensed or sublicensed in violation or contravention of the
terms of any license or other agreement. No Person is engaging in any activity
that infringes, misappropriates, dilutes, misuses or otherwise violates the
Intellectual Property Collateral or the Grantor’s rights in or use thereof that
would reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule VI hereto, such Grantor has not granted any license, release,
covenant not to sue, non-assertion assurance, or other right to any Person with
respect to any part of the Intellectual Property Collateral. The

 

14

--------------------------------------------------------------------------------

consummation of the transactions contemplated by the Transaction Documents will
not result in the termination or impairment of any of the Intellectual Property
Collateral.

 

(vii) With respect to each IP Agreement: (A) such IP Agreement is valid and
binding and in full force and effect and represents the entire agreement between
the respective parties thereto with respect to the subject matter thereof; (B)
such IP Agreement will not cease to be valid and binding and in full force and
effect on terms identical to those currently in effect as a result of the rights
and interest granted herein, nor will the grant of such rights and interest
constitute a breach or default under such IP Agreement or otherwise give any
party thereto a right to terminate such IP Agreement; (C) such Grantor has not
received any notice of termination or cancellation under such IP Agreement; (D)
such Grantor has not received any notice of a breach or default under such IP
Agreement, which breach or default has not been cured; (E) such Grantor has not
granted to any other third party any rights, adverse or otherwise, under such IP
Agreement; and (F) neither such Grantor nor any other party to such IP Agreement
is in breach or default thereof in any material respect, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default or permit termination, modification or acceleration under such
IP Agreement, except, in each case, to the extent that the foregoing would not
reasonably be expected to have a Material Adverse Effect.

 

(viii) To the best of such Grantor’s knowledge, (A) none of the Trade Secrets of
such Grantor has been used, divulged, disclosed or appropriated to the detriment
of such Grantor for the benefit of any other Person other than such Grantor; (B)
no employee, independent contractor or agent of such Grantor has misappropriated
any trade secrets of any other Person in the course of the performance of his or
her duties as an employee, independent contractor or agent of such Grantor; and
(C) no employee, independent contractor or agent of such Grantor is in default
or breach of any term of any employment agreement, non-disclosure agreement,
assignment of inventions agreement or similar agreement or contract relating in
any way to the protection, ownership, development, use or transfer of such
Grantor’s Intellectual Property Collateral, except, in each case, to the extent
that the foregoing would not reasonably be expected to have a Material Adverse
Effect.

 

(ix) No Grantor or Intellectual Property Collateral is subject to any
outstanding consent, settlement, decree, order, injunction, judgment or ruling
restricting the use of any Intellectual Property Collateral or that would impair
the validity or enforceability of such Intellectual Property Collateral.

 

(o) To the actual knowledge of such Grantor, such Grantor does not have any
commercial tort claims (as defined in Section 9-102(13) of the UCC) for which a
complaint has been or is likely to be filed by or on behalf of such Grantor in
an amount in excess of $1,000,000, other than those listed in Schedule VII
hereto.

 

Section 10. Further Assurances. (a) Each Grantor agrees that from time to time,
at the expense of such Grantor, such Grantor will promptly execute and deliver,
or otherwise authenticate, all further instruments and documents, and take all
further action that may be necessary or desirable, or that the Collateral Agent
may request, in order to perfect and protect any pledge or security interest
granted or purported to be granted by such Grantor hereunder or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral of such Grantor. Without limiting the generality of
the foregoing, each Grantor will promptly with respect to Collateral of such
Grantor: (i)

 

15

--------------------------------------------------------------------------------

at the request of the Collateral Agent during the continuance of a Default under
Section 6.01(a) or (f) of the Credit Agreement or an Event of Default, mark
conspicuously each document included in Inventory, each chattel paper included
in Receivables, each Related Contract, each Assigned Agreement and, at the
request of the Collateral Agent, each of its records pertaining to such
Collateral with a legend, in form and substance satisfactory to the Collateral
Agent, indicating that such document, chattel paper, Related Contract, Assigned
Agreement or Collateral is subject to the security interest granted hereby; (ii)
if any such Collateral shall be evidenced by a promissory note or other
instrument or chattel paper, deliver and pledge to the Collateral Agent
hereunder such note or instrument or chattel paper duly indorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance reasonably satisfactory to the Collateral Agent, provided that this
clause (ii) shall not apply to notes, instruments and chattel paper so long as
the aggregate principal amount (for all Grantors, taken as a whole) of all such
notes, instruments and chattel papers does not exceed $1,000,000; (iii) execute
or authenticate and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interest granted or purported to be granted by such
Grantor hereunder; (iv) deliver and pledge to the Collateral Agent for benefit
of the Secured Parties certificates representing Security Collateral that
constitutes certificated securities, accompanied by undated stock or bond powers
executed in blank; (v) except as otherwise provided herein, take all action
necessary to ensure that the Collateral Agent has control of Collateral
consisting of deposit accounts, electronic chattel paper, investment property,
letter-of-credit rights and transferable records as provided in Sections 9-104,
9-105, 9-106 and 9-107 of the UCC and in Section 16 of UETA; (vi) take all
action to ensure that the Collateral Agent’s security interest is noted on any
certificate of ownership related to any Collateral evidenced by a certificate of
ownership; (vii) use commercially reasonable efforts to cause the Collateral
Agent to be the beneficiary under all letters of credit that constitute
Collateral, with the exclusive right to make all draws under such letters of
credit, and with all rights of a transferee under Section 5-114(e) of the UCC;
and (viii) deliver to the Collateral Agent evidence that all other action that
the Collateral Agent may deem reasonably necessary or desirable in order to
perfect and protect the security interest created by such Grantor under this
Agreement has been taken.

 

(b) Each Grantor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover all assets or all personal property (or words of similar
effect) of such Grantor, in each case without the signature of such Grantor, and
regardless of whether any particular asset described in such financing
statements falls within the scope of the UCC or the granting clause of this
Agreement. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law. Each Grantor ratifies its
authorization for the Collateral Agent to have filed such financing statements,
continuation statements or amendments filed prior to the date hereof.

 

(c) Each Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Collateral Agent may reasonably request, all in reasonable detail.

 

Section 11. As to Equipment and Inventory. (a) Each Grantor will keep the
Equipment and Inventory of such Grantor (other than (i) Equipment or Inventory
with an aggregate value (for all Grantors, taken as a whole) of less than
$1,000,000, (ii) Inventory in transit, (iii) Equipment or Inventory transferred
pursuant to a disposition permitted under the Credit Agreement, (iv) mobile
goods, (v) Equipment moved for repair or refurbishment in the ordinary course of
such Grantor’s business, and (vi) Inventory temporarily stored at warehouses or
other similar third party locations) at the places therefor specified in Section
9(b) or, upon 10 Business Days’ prior written notice to the Collateral Agent, at
such

 

16

--------------------------------------------------------------------------------

other places designated by the Grantor in such notice. Upon the giving of such
notice, Schedule IV shall be automatically amended to add any new locations
specified in the notice.

 

(b) Each Grantor will cause the Equipment of such Grantor to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and will forthwith, or in the case of any loss or damage
to any of such Equipment as soon as practicable after the occurrence thereof,
make or cause to be made all repairs, replacements and other improvements in
connection therewith that are necessary or desirable to such end, except when
the failure to do so would not reasonably be expected to result in a Material
Adverse Effect. Each Grantor will promptly furnish to the Collateral Agent a
statement respecting any loss or damage exceeding $1,000,000 to any of the
Equipment or Inventory of such Grantor.

 

(c) Each Grantor will pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including, without limitation, claims for labor, materials and supplies)
against, the Equipment and Inventory of such Grantor, except to the extent
payment thereof is not required by Section 5.01(b) of the Credit Agreement or
would not reasonably be expected to result in a Material Adverse Effect. In
producing its Inventory, each Grantor will comply with all requirements of
applicable law, including, without limitation, the Fair Labor Standards Act.

 

Section 12. Insurance. (a) Each Grantor will, at its own expense, maintain
insurance with respect to the Equipment and Inventory of such Grantor in such
amounts, against such risks, in such form and with such insurers, as shall be
reasonably satisfactory to the Collateral Agent from time to time. Each policy
of each Grantor for liability insurance shall provide for all losses to be paid
on behalf of the Collateral Agent and such Grantor as their interests may
appear, and each policy for property damage insurance shall provide for all
losses (except for losses of less than $15,000,000 per occurrence so long as no
Event of Default has occurred and is continuing) to be paid directly to the
Collateral Agent to be held as Collateral (but subject to Section 12(c)) or, to
the extent required under and in accordance with the Credit Agreement, to be
applied in mandatory prepayments of the Advances. Each such policy shall in
addition (i) name such Grantor and the Collateral Agent as insured parties
thereunder (without any representation or warranty by or obligation upon the
Collateral Agent) as their interests may appear, (ii) contain the agreement by
the insurer that any loss thereunder shall be payable to the Collateral Agent
notwithstanding any action, inaction or breach of representation or warranty by
such Grantor, (iii) provide that there shall be no recourse against the
Collateral Agent for payment of premiums or other amounts with respect thereto
and (iv) provide that at least 10 days’ prior written notice of cancellation or
of lapse shall be given to the Collateral Agent by the insurer. Each Grantor
will, if so requested by the Collateral Agent, deliver to the Collateral Agent
original or duplicate policies of such insurance and, as often as the Collateral
Agent may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, each Grantor will, at the request of the
Collateral Agent, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 11 and use
commercially reasonable efforts to cause the insurers to acknowledge notice of
such assignment.

 

(b) Reimbursement under any liability insurance maintained by any Grantor
pursuant to this Section 12 may be paid directly to the Person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment or Inventory when subsection (c) of this Section 12 is not
applicable, the applicable Grantor will make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance properly received by or released to such Grantor shall be used by such
Grantor, except as otherwise required hereunder or by the Credit Agreement, to
pay or as reimbursement for the costs of such repairs or replacements.

 

17

--------------------------------------------------------------------------------

(c) So long as no Default under Section 6.01(a) or (f) of the Credit Agreement
or Event of Default shall have occurred and be continuing, all insurance
payments received by the Collateral Agent in connection with any loss, damage or
destruction of any Inventory or Equipment will be released by the Collateral
Agent to the applicable Grantor, subject to the terms and conditions of the
Credit Agreement and such other terms and conditions with respect to the release
thereof as the Collateral Agent may reasonably require. Upon the occurrence and
during the continuance of a Default under Section 6.01(a) or (f) of the Credit
Agreement or an Event of Default, all insurance payments in respect of such
Equipment or Inventory shall be paid to the Collateral Agent and shall, in the
Collateral Agent’s sole discretion, (i) be released to the applicable Grantor as
set forth in the first sentence of this subsection (c) or (ii) be held as
additional Collateral hereunder or applied as specified in Section 22(b).

 

Section 13. Post-Closing Changes; Bailees; Collections on Assigned Agreements,
Receivables and Related Contracts. (a) No Grantor will change its name, type of
organization, jurisdiction of organization, organizational identification number
or location from those set forth in Section 9(a) of this Agreement without first
giving at least 15 days’ prior written notice to the Collateral Agent and taking
all action reasonably required by the Collateral Agent for the purpose of
perfecting or protecting the security interest granted by this Agreement. Except
as otherwise specified herein, no Grantor will change the location of the
Equipment and Inventory or the place where it keeps the originals of the
Assigned Agreements and Related Contracts to which such Grantor is a party and
all originals of all chattel paper that evidence Receivables of such Grantor
from the locations therefor specified in Sections 9 (a) and 9(b) without first
giving the Collateral Agent 30 days’ prior written notice of such change. No
Grantor will become bound by a security agreement authenticated by another
Person (determined as provided in Section 9-203(d) of the UCC) without giving
the Collateral Agent 15 days’ prior written notice thereof and taking all action
reasonably required by the Collateral Agent to ensure that the perfection and
first priority nature of the Collateral Agent’s security interest in the
Collateral will be maintained. Each Grantor will hold and preserve its records
relating to the Collateral, including, without limitation, the Assigned
Agreements and Related Contracts, and will permit representatives of the
Collateral Agent at any time during normal business hours upon reasonable prior
notice to inspect and make abstracts from such records and other documents in
accordance with the terms of the Credit Agreement. If the Grantor does not have
an organizational identification number and later obtains one, it will forthwith
notify the Collateral Agent of such organizational identification number.

 

(b) During the continuance of a Default under Section 6.01(a) or (f) of the
Credit Agreement or Event of Default, if any Collateral (with an aggregate value
of $1,000,000 or more) is at any time in the possession or control of a
warehouseman, bailee or agent, each Grantor owning such Collateral (or any
portion thereof) will (i) notify such warehouseman, bailee or agent of the
security interest created hereunder, (ii) instruct such warehouseman, bailee or
agent to hold all such Collateral solely for the Collateral Agent’s account
subject only to the Collateral Agent’s instructions (which shall permit such
Collateral to be removed by such Grantor in the ordinary course of business
until the Collateral Agent notifies such warehouseman, bailee or agent that an
Event of Default has occurred and is continuing), (iii) use commercially
reasonable efforts, to cause such warehouseman, bailee or agent to authenticate
a record acknowledging that it holds possession of such Collateral for the
Collateral Agent’s benefit and shall act solely on the instructions of the
Collateral Agent without the further consent of the Grantor or any other Person,
and (iv) make such authenticated record available to the Collateral Agent.

 

(c) Except as otherwise provided in this subsection (c), each Grantor will
continue to collect, at its own expense, all amounts due or to become due such
Grantor under the Assigned Agreements, Receivables and Related Contracts. In
connection with such collections, such Grantor may take (and, at the Collateral
Agent’s direction, during the continuance of a Default under Section 6.01(a) or
(f) of the Credit Agreement or Event of Default, will take) such commercially
reasonable action as such Grantor or the Collateral Agent may deem reasonably
necessary or advisable to enforce collection of the

 

18

--------------------------------------------------------------------------------

Assigned Agreements, Receivables and Related Contracts; provided, however, that
the Collateral Agent shall have the right at any time when a Default under
Section 6.01(a) or (f) of the Credit Agreement or Event of Default exists and is
continuing, upon written notice to such Grantor of its intention to do so, to
notify the Obligors under any Assigned Agreements, Receivables and Related
Contracts of the assignment of such Assigned Agreements, Receivables and Related
Contracts to the Collateral Agent and to direct such Obligors to make payment of
all amounts due or to become due to such Grantor thereunder directly to the
Collateral Agent and, upon such notification and at the expense of such Grantor,
to enforce collection of any such Assigned Agreements, Receivables and Related
Contracts, to adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as such Grantor might have done, and to
otherwise exercise all rights with respect to such Assigned Agreements,
Receivables and Related Contracts, including, without limitation, those set
forth set forth in Section 9-607 of the UCC. After receipt by any Grantor of the
notice from the Collateral Agent referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including, without limitation,
instruments) received by such Grantor in respect of the Assigned Agreements,
Receivables and Related Contracts of such Grantor shall be received in trust for
the benefit of the Collateral Agent hereunder, shall be segregated from other
funds of such Grantor and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement) to be deposited
in the Collateral Account and either (A) released to such Grantor on the terms
set forth in Section 7 so long as no Default under Section 6.01(a) or (f) of the
Credit Agreement and no Event of Default shall be continuing or (B) if any
Default under Section 6.01(a) or (f) of the Credit Agreement or Event of Default
shall be continuing, applied as provided in Section 22(b) and (ii) such Grantor
will not adjust, settle or compromise the amount or payment of any Receivable or
amount due on any Assigned Agreement or Related Contract, release wholly or
partly any Obligor thereof, or allow any credit or discount thereon. No Grantor
will permit or consent to the subordination of its right to payment under any of
the Assigned Agreements, Receivables and Related Contracts to any other
indebtedness or obligations of the Obligor thereof.

 

Section 14. As to Intellectual Property Collateral. (a) With respect to each
item of its Intellectual Property Collateral, each Grantor agrees to take, at
its expense, all necessary steps, including, without limitation, in the U.S.
Patent and Trademark Office, the U.S. Copyright Office and any other
governmental authority, to (i) maintain the validity and enforceability of such
Intellectual Property Collateral and maintain such Intellectual Property
Collateral in full force and effect, and (ii) pursue the registration and
maintenance of each patent, trademark, or copyright registration or application,
now or hereafter included in such Intellectual Property Collateral of such
Grantor, including, without limitation, the payment of required fees and taxes,
the filing of responses to office actions issued by the U.S. Patent and
Trademark Office, the U.S. Copyright Office or other governmental authorities,
the filing of applications for renewal or extension, the filing of affidavits
under Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional,
continuation, continuation-in-part, reissue and renewal applications or
extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings, unless such Grantor has determined in accordance
with reasonable business judgment, that such material Intellectual Property
Collateral is no longer useful or of any material economic value. No Grantor
shall, without the written consent of the Collateral Agent, discontinue use of
or otherwise abandon any Intellectual Property Collateral, or abandon any right
to file an application for patent, trademark, or copyright, unless such Grantor
shall have previously determined that such use or the pursuit or maintenance of
such Intellectual Property Collateral is no longer desirable in the conduct of
such Grantor’s business and that the loss thereof would not be reasonably likely
to have a Material Adverse Effect, in which case, such Grantor will give prompt
notice of any such abandonment to the Collateral Agent.

 

(b) Each Grantor agrees promptly to notify the Collateral Agent if such Grantor
becomes aware (i) that any item of the Intellectual Property Collateral may have
become abandoned, placed in the public domain, invalid or unenforceable, or of
any adverse determination or development regarding such

 

19

--------------------------------------------------------------------------------

Grantor’s ownership of any of the Intellectual Property Collateral or its right
to register the same or to keep and maintain and enforce the same, or (ii) of
any adverse determination or the institution of any proceeding (including,
without limitation, the institution of any proceeding in the U.S. Patent and
Trademark Office or any court) regarding any item of the Intellectual Property
Collateral.

 

(c) In the event that any Grantor becomes aware that any item of the
Intellectual Property Collateral is being infringed or misappropriated by a
third party, such Grantor shall promptly notify the Collateral Agent and shall
take such actions, at its expense, as such Grantor or, if a Default under
Section 6.01(a) or (f) of the Credit Agreement or Event of Default is
continuing, the Collateral Agent deems reasonable and appropriate under the
circumstances to protect or enforce such Intellectual Property Collateral,
including, without limitation, suing for infringement or misappropriation and
for an injunction against such infringement or misappropriation.

 

(d) Each Grantor shall use proper statutory notice in connection with its use of
each item of its Intellectual Property Collateral. No Grantor shall do or permit
any act or knowingly omit to do any act whereby any of its Intellectual Property
Collateral may lapse or become invalid or unenforceable or placed in the public
domain, except as permitted in Section 14(a).

 

(e) Each Grantor shall take all commercially reasonable steps which it or, if a
Default under Section 6.01(a) or (f) of the Credit Agreement or Event of Default
is continuing, the Collateral Agent deems reasonable and appropriate under the
circumstances to preserve and protect each item of its Intellectual Property
Collateral, including, without limitation, maintaining the quality of any and
all products or services used or provided in connection with any of the
Trademarks, consistent with the quality of the products and services as of the
date hereof, and taking all steps necessary to ensure that all licensed users of
any of the Trademarks use such consistent standards of quality.

 

(f) With respect to its Intellectual Property Collateral, each Grantor agrees to
execute or otherwise authenticate an agreement, in substantially the form set
forth in Exhibit F hereto or otherwise in form and substance satisfactory to the
Collateral Agent (an “Intellectual Property Security Agreement”), for recording
the security interest granted hereunder to the Collateral Agent in such
Intellectual Property Collateral with the U.S. Patent and Trademark Office, the
U.S. Copyright Office and any other governmental authorities necessary to
perfect the security interest hereunder in such Intellectual Property
Collateral.

 

(g) Each Grantor agrees that should it obtain an ownership interest in any item
of the type set forth in Section 1(g) that is not on the date hereof a part of
the Intellectual Property Collateral (“After-Acquired Intellectual Property”)
(i) the provisions of this Agreement shall automatically apply thereto, and (ii)
any such After-Acquired Intellectual Property and, in the case of trademarks,
the goodwill symbolized thereby, shall automatically become part of the
Intellectual Property Collateral subject to the terms and conditions of this
Agreement with respect thereto. At the end of each fiscal quarter of the
Borrower, each Grantor shall give prompt written notice to the Collateral Agent
identifying the After-Acquired Intellectual Property acquired during such fiscal
quarter, and such Grantor shall execute and deliver to the Collateral Agent with
such written notice, or otherwise authenticate, an agreement substantially in
the form of Exhibit G hereto or otherwise in form and substance reasonably
satisfactory to the Collateral Agent (an “IP Security Agreement Supplement”)
covering such After-Acquired Intellectual Property which IP Security Agreement
Supplement shall be recorded with the U.S. Patent and Trademark Office, the U.S.
Copyright Office and any other governmental authorities necessary to perfect the
security interest hereunder in such After-Acquired Intellectual Property.

 

20

--------------------------------------------------------------------------------

Section 15. Voting Rights; Dividends; Etc. (a) So long as no Default under
Section 6.01(a) or (f) of the Credit Agreement or an Event of Default shall have
occurred and be continuing:

 

(i) Each Grantor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Security Collateral of such Grantor or any
part thereof for any purpose; provided, however, that such Grantor will not
exercise or refrain from exercising any such right if such action would have a
material adverse effect on the value of the Security Collateral or any part
thereof.

 

(ii) Each Grantor shall be entitled to receive and retain any and all dividends,
interest and other distributions paid in respect of the Security Collateral of
such Grantor if and to the extent that the payment thereof is not otherwise
prohibited by the terms of the Credit Agreement.

 

(iii) The Collateral Agent will execute and deliver (or cause to be executed and
delivered) to each Grantor all such proxies and other instruments as such
Grantor may reasonably request for the purpose of enabling such Grantor to
exercise the voting and other rights that it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.

 

(b) During the continuance of a Default under Section 6.01(a) or (f) of the
Credit Agreement or an Event of Default:

 

(i) All rights of each Grantor (x) to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 15(a)(i) shall, upon notice to such Grantor by the
Collateral Agent, cease and (y) to receive the dividends, interest and other
distributions that it would otherwise be authorized to receive and retain
pursuant to Section 15(a)(ii) shall automatically cease, and all such rights
shall thereupon become vested in the Collateral Agent, which shall thereupon
have the sole right to exercise or refrain from exercising such voting and other
consensual rights and to receive and hold as Security Collateral such dividends,
interest and other distributions.

 

(ii) All dividends, interest and other distributions that are received by any
Grantor contrary to the provisions of paragraph (i) of this Section 15(b) shall
be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Collateral Agent as Security Collateral in the same form as so received
(with any necessary indorsement).

 

(iii) The Collateral Agent shall be authorized to send to each Securities
Intermediary or Commodity Intermediary as defined in and under any Security
Control Agreement a Notice of Exclusive Control as defined in and under such
Security Control Agreement.

 

Section 16. As to the Assigned Agreements. (a) Each Grantor will at its expense
(unless the failure to do so would not reasonably be expected to have a Material
Adverse Effect and except to the extent otherwise permitted in the Loan
Documents):

 

(i) perform and observe all terms and provisions of the Assigned Agreements to
be performed or observed by it, maintain the Assigned Agreements to which it is
a party in full force and effect, enforce the Assigned Agreements to which it is
a party in accordance with the terms thereof and take all such action to such
end as may be requested from time to time by the Collateral Agent; and

 

(ii) if a Default under Section 6.01(a) or (f) under the Credit Agreement or an
Event of Default has occurred and is continuing, (A) use commercially reasonable
efforts to cause each party to the Assigned Agreements listed on Schedule III
hereto to which such Grantor is a party

 

21

--------------------------------------------------------------------------------

other than the Grantors to execute and deliver to such Grantor a consent, in
substantially the form of Exhibit C hereto or otherwise in form and substance
satisfactory to the Collateral Agent, to the assignment of the Agreement
Collateral to the Collateral Agent pursuant to this Agreement, (B) furnish to
the Collateral Agent promptly upon receipt thereof copies of all notices,
requests and other documents received by such Grantor under or pursuant to the
Assigned Agreements to which it is a party, and (C) from time to time (1)
furnish to the Collateral Agent such information and reports regarding the
Assigned Agreements and such other Collateral of such Grantor as the Collateral
Agent may reasonably request and (2) upon request of the Collateral Agent make
to each other party to any Assigned Agreement to which it is a party such
demands and requests for information and reports or for action as such Grantor
is entitled to make thereunder.

 

(b) Each Grantor agrees that it will not, except to the extent otherwise
permitted under the Loan Documents or the to the extent such action would not
reasonably be expected to have a Material Adverse Effect:

 

(i) cancel or terminate any Assigned Agreement to which it is a party or consent
to or accept any cancellation or termination thereof;

 

(ii) amend, amend and restate, supplement or otherwise modify any such Assigned
Agreement or give any consent, waiver or approval thereunder;

 

(iii) waive any default under or breach of any such Assigned Agreement; or

 

(iv) take any other action in connection with any such Assigned Agreement that
would impair the value of the interests or rights of such Grantor thereunder or
that would impair the interests or rights of any Secured Party.

 

(c) Each Grantor hereby consents on its behalf and on behalf of its Subsidiaries
to the assignment and pledge to the Collateral Agent for benefit of the Secured
Parties of each Assigned Agreement to which it is a party by any other Grantor
hereunder.

 

Section 17. As to Letter-of-Credit Rights. (a) Each Grantor, by granting a
security interest in its Receivables consisting of letter-of-credit rights to
the Collateral Agent, intends to (and hereby does) assign to the Collateral
Agent its rights (including its contingent rights) to the proceeds of all
Related Contracts consisting of letters of credit of which it is or hereafter
becomes a beneficiary or assignee. Each Grantor will promptly use commercially
reasonable efforts to cause the issuer of each letter of credit and each
nominated person (if any) with respect thereto to consent to such assignment of
the proceeds thereof in substantially the form of the Consent to Assignment of
Letter of Credit Rights attached hereto as Exhibit H or otherwise in form and
substance reasonably satisfactory to the Collateral Agent and deliver written
evidence of such consent to the Collateral Agent, provided that so long as no
Default under Section 6.01(a) or (f) of the Credit Agreement and an Event of
Default has occurring and is continuing, this Section 17 shall not apply to
letters of credit the aggregate face amount of which does not exceed $1,000,000
(for all Grantors taken as a whole).

 

(b) Upon the occurrence of a Default under Section 6.01(a) or (f) of the Credit
Agreement or an Event of Default, each Grantor will, promptly upon request by
the Collateral Agent, (i) notify (and such Grantor hereby authorizes the
Collateral Agent to notify) the issuer and each nominated person with respect to
each of the Related Contracts consisting of letters of credit that the proceeds
thereof have been assigned to the Collateral Agent hereunder and any payments
due or to become due in respect thereof are to be made directly to the
Collateral Agent or its designee and (ii) arrange for the Collateral Agent to
become the transferee beneficiary of such letter of credit.

 

22

--------------------------------------------------------------------------------

Section 18. Transfers and Other Liens; Additional Shares. (a) Each Grantor
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral, other than sales, assignments and
other dispositions of Collateral, and options relating to Collateral, permitted
under the terms of the Credit Agreement, or (ii) create or suffer to exist any
Lien upon or with respect to any of the Collateral of such Grantor except for
the pledge, assignment and security interest created under this Agreement and
Liens permitted under the Credit Agreement.

 

(b) Each Grantor agrees that it will (i) cause each issuer of the Pledged Equity
pledged by such Grantor not to issue any Equity Interests or other securities in
addition to or in substitution for the Pledged Equity issued by such issuer,
except to such Grantor, and (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional Equity
Interests or other securities of each issuer of the Pledged Equity.

 

Section 19. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Collateral Agent such Grantor’s attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor or otherwise, from time to time, in the Collateral Agent’s discretion,
upon the occurrence and during the continuance of a Default under Section
6.01(a) or (f) of the Credit Agreement or an Event of Default, to take any
action and to execute any instrument that the Collateral Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:

 

(a) to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 12,

 

(b) to ask for, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,

 

(c) to receive, indorse and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (a) or (b) above, and

 

(d) to file any claims or take any action or institute any proceedings that the
Collateral Agent may deem reasonably necessary or desirable for the collection
of any of the Collateral or otherwise to enforce compliance with the terms and
conditions of any Assigned Agreement or the rights of the Collateral Agent with
respect to any of the Collateral.

 

Section 20. Collateral Agent May Perform. If any Grantor fails to perform any
agreement contained herein, the Collateral Agent may, but without any obligation
to do so and without notice, itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by such Grantor under Section 23.

 

Section 21. The Collateral Agent’s Duties. (a) The powers conferred on the
Collateral Agent hereunder are solely to protect the Secured Parties’ interest
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not any Secured Party has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its

 

23

--------------------------------------------------------------------------------

possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.

 

(b) Anything contained herein to the contrary notwithstanding, the Collateral
Agent may from time to time, when the Collateral Agent deems it to be necessary,
appoint one or more subagents (each a “Subagent”) for the Collateral Agent
hereunder with respect to all or any part of the Collateral. In the event that
the Collateral Agent so appoints any Subagent with respect to any Collateral,
(i) the assignment and pledge of such Collateral and the security interest
granted in such Collateral by each Grantor hereunder shall be deemed for
purposes of this Security Agreement to have been made to such Subagent, in
addition to the Collateral Agent, for the ratable benefit of the Secured
Parties, as security for the Secured Obligations of such Grantor, (ii) such
Subagent shall automatically be vested, in addition to the Collateral Agent,
with all rights, powers, privileges, interests and remedies of the Collateral
Agent hereunder with respect to such Collateral, and (iii) the term “Collateral
Agent,” when used herein in relation to any rights, powers, privileges,
interests and remedies of the Collateral Agent with respect to such Collateral,
shall include such Subagent; provided, however, that no such Subagent shall be
authorized to take any action with respect to any such Collateral unless and
except to the extent expressly authorized in writing by the Collateral Agent.

 

Section 22. Remedies. If any Event of Default shall have occurred and be
continuing:

 

(a) The Collateral Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the UCC
(whether or not the UCC applies to the affected Collateral) and also may: (i)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Collateral Agent forthwith, assemble all or part
of the Collateral as directed by the Collateral Agent and make it available to
the Collateral Agent at a place and time to be designated by the Collateral
Agent that is reasonably convenient to both parties; (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 the Collateral Agent’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable; (iii) occupy any
premises owned or leased by any of the Grantors where the Collateral or any part
thereof is assembled or located for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to such
Grantor in respect of such occupation; and (iv) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of such Grantor to demand or otherwise require payment of any
amount under, or performance of any provision of, the Assigned Agreements, the
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to the
Assigned Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section 9-607 of
the UCC. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days’ notice to such 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. The Collateral Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Collateral Agent may adjourn any public or private 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.

 

(b) Any cash held by or on behalf of the Collateral Agent and all cash proceeds
received by or on behalf of the Collateral Agent in respect of any sale of,
collection from, or other

 

24

--------------------------------------------------------------------------------

realization upon all or any part of the Collateral may, in the discretion of the
Collateral Agent, be held by the Collateral Agent as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 23) in whole or in part by the Collateral
Agent for the ratable benefit of the Secured Parties against, all or any part of
the Secured Obligations, in the order of priority specified in Section 2.11(f)
of the Credit Agreement. Any surplus of such cash or cash proceeds held by or on
the behalf of the Collateral Agent and remaining after payment in full of all
the Secured Obligations shall be paid over to the applicable Grantor or to
whomsoever may be lawfully entitled to receive such surplus.

 

(c) All payments received by any Grantor under or in connection with any
Assigned Agreement or otherwise in respect of the Collateral shall be received
in trust for the benefit of the Collateral Agent, shall be segregated from other
funds of such Grantor and shall be forthwith paid over to the Collateral Agent
in the same form as so received (with any necessary indorsement).

 

(d) The Collateral Agent may, without notice to any Grantor except as required
by law and at any time or from time to time, charge, set-off and otherwise apply
all or any part of the Secured Obligations against any funds held with respect
to the Account Collateral or in any other deposit account.

 

(e) In the event of any sale or other disposition of any of the Intellectual
Property Collateral of any Grantor, the goodwill symbolized by any Trademarks
subject to such sale or other disposition shall be included therein, and such
Grantor shall supply to the Collateral Agent or its designee such Grantor’s
know-how and expertise, and documents and things relating to any Intellectual
Property Collateral subject to such sale or other disposition, and such
Grantor’s customer lists and other records and documents relating to such
Intellectual Property Collateral and to the manufacture, distribution,
advertising and sale of products and services of such Grantor.

 

(f) If the Collateral Agent shall determine to exercise its right to sell all or
any of the Security Collateral of any Grantor pursuant to this Section 22, each
Grantor agrees that, upon request of the Collateral Agent, such Grantor will, at
its own expense:

 

(i) execute and deliver, and cause each issuer of such Security Collateral
contemplated to be sold and the directors and officers thereof to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion of the Collateral
Agent, advisable to register such Security Collateral under the provisions of
the Securities Act of 1933 (as amended from time to time, the “Securities Act”),
to cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished and to make all amendments and supplements thereto and to the related
prospectus that, in the opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto;

 

(ii) use its best efforts to qualify the Security Collateral under the state
securities or “Blue Sky” laws and to obtain all necessary governmental approvals
for the sale of such Security Collateral, as requested by the Collateral Agent;

 

25

--------------------------------------------------------------------------------

(iii) cause each such issuer of such Security Collateral to make available to
its security holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act;

 

(iv) provide the Collateral Agent with such other information and projections as
may be necessary or, in the opinion of the Collateral Agent, advisable to enable
the Collateral Agent to effect the sale of such Security Collateral; and

 

(v) do or cause to be done all such other acts and things as may be necessary to
make such sale of such Security Collateral or any part thereof valid and binding
and in compliance with applicable law.

 

(g) The Collateral Agent is authorized, in connection with any sale of the
Security Collateral pursuant to this Section 22, to deliver or otherwise
disclose to any prospective purchaser of the Security Collateral: (i) any
registration statement or prospectus, and all supplements and amendments
thereto, prepared pursuant to subsection (f)(i) above; (ii) any information and
projections provided to it pursuant to subsection (f)(iv) above; and (iii) any
other information in its possession relating to such Security Collateral.

 

(h) Each Grantor acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Secured Parties by reason of the failure
by such Grantor to perform any of the covenants contained in subsection (f)
above and, consequently, agrees that, if such Grantor shall fail to perform any
of such covenants, it will pay, as liquidated damages and not as a penalty, an
amount equal to the value of the Security Collateral on the date the Collateral
Agent shall demand compliance with subsection (f) above.

 

Section 23. Indemnity and Expenses. (a) Each Grantor agrees to indemnify, defend
and save and hold harmless each Secured Party and each of their Affiliates and
their respective officers, directors, employees, agents and advisors (each, an
“Indemnified Party”) from and against, and shall pay on demand, any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except to the extent such claim,
damage, loss, liability or expense is found in a final, non-appealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence or willful misconduct or breach in bad faith of its
obligations hereunder.

 

(b) Each Grantor will, within five Business Days after demand, pay to the
Collateral Agent the amount of any and all reasonable expenses, including,
without limitation, the reasonable fees and expenses of its counsel and of any
experts and agents, that the Collateral Agent may incur in connection with (i)
the administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral of such Grantor, (iii) the exercise or enforcement of any of the
rights of the Collateral Agent or the other Secured Parties hereunder or (iv)
the failure by such Grantor to perform or observe any of the provisions hereof.

 

Section 24. Amendments; Waivers; Additional Grantors; Etc. (a) No amendment or
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 the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No failure on the part of the Collateral Agent or any other
Secured Party to exercise, and no

 

26

--------------------------------------------------------------------------------

delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

 

(b) Upon the execution and delivery, or authentication, by any Person of a
security agreement supplement in substantially the form of Exhibit A hereto
(each a “Security Agreement Supplement”), (i) such Person shall be referred to
as an “Additional Grantor” and shall be and become a Grantor hereunder, and each
reference in this Agreement and the other Loan Documents to “Grantor” shall also
mean and be a reference to such Additional Grantor, and each reference in this
Agreement and the other Loan Documents to “Collateral” shall also mean and be a
reference to the Collateral of such Additional Grantor, and (ii) the
supplemental schedules I-VIII attached to each Security Agreement Supplement
shall be incorporated into and become a part of and supplement Schedules I-VIII,
respectively, hereto, and the Collateral Agent may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean and
be a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.

 

Section 25. Notices, Etc. All notices and other communications provided for
hereunder shall be either (i) in writing (including telegraphic, telecopier or
telex communication) and mailed, telegraphed, telecopied, telexed or otherwise
delivered or (ii) by electronic mail (if electronic mail addresses are
designated as provided below) confirmed immediately in writing, in the case of
the Borrower or the Collateral Agent, addressed to it at its address specified
in the Credit Agreement and, in the case of each Grantor other than the
Borrower, addressed to it at its address set forth opposite such Grantor’s name
on the signature pages hereto or on the signature page to the Security Agreement
Supplement pursuant to which it became a party hereto; or, as to any party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and other communications shall, when mailed,
telegraphed, telecopied, telexed, sent by electronic mail or otherwise, be
effective when deposited in the mails, delivered to the telegraph company,
telecopied, confirmed by telex answerback, sent by electronic mail and confirmed
in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other
communications to the Collateral Agent shall not be effective until received by
the Collateral Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.

 

Section 26. Continuing Security Interest; Assignments under the Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the latest of (i)
the payment in full in cash of the Secured Obligations, (ii) the Termination
Date and (iii) the termination, expiration or cash collateralization (on terms
acceptable to the Collateral Agent) of all Letters of Credit and the termination
or expiration of all Secured Hedge Agreements, (b) be binding upon each Grantor,
its successors and assigns and (c) inure, together with the rights and remedies
of the Collateral Agent hereunder, to the benefit of the Secured Parties and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Lender Party may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitments,
the Advances owing to it and the Note or Notes, if any, held by it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender Party herein or otherwise, in
each case as provided in Section 8.07 of the Credit Agreement.

 

Section 27. Release; Termination. (a) Upon any sale, lease, transfer or other
disposition of any item of Collateral of any Grantor in accordance with the
terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Collateral Agent will, at such Grantor’s expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to

 

27

--------------------------------------------------------------------------------

evidence the release of such item of Collateral from the assignment and security
interest granted hereby; provided, however, that (i) at the time of such request
and such release no Default under Section 6.01(a) or (f) under the Credit
Agreement and no Event of Default shall have occurred and be continuing, (ii)
such Grantor shall have delivered to the Collateral Agent, at least ten Business
Days prior to the date of the proposed release, a written request for release
describing the item of Collateral and the terms of the sale, lease, transfer or
other disposition in reasonable detail, including, without limitation, the price
thereof and any expenses in connection therewith, together with a form of
release for execution by the Collateral Agent and a certificate of such Grantor
to the effect that the transaction is in compliance with the Loan Documents and
as to such other matters as the Collateral Agent may request and (iii) the
proceeds of any such sale, lease, transfer or other disposition required to be
applied, or any payment to be made in connection therewith, in accordance with
Section 2.06 of the Credit Agreement shall, to the extent so required, be paid
or made to, or in accordance with the instructions of, the Collateral Agent when
and as required under Section 2.06 of the Credit Agreement.

 

(b) Upon the latest of (i) the payment in full in cash of the Secured
Obligations, (ii) the Termination Date and (iii) the termination or expiration
(or cash collateralization on terms acceptable to the Collateral Agent) of all
Letters of Credit and all Secured Hedge Agreements, the pledge and security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantor. Upon any such termination, the Collateral
Agent will, at the applicable Grantor’s expense, execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination.

 

Section 28. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.

 

Section 29. The Mortgages. In the event that any of the Collateral hereunder is
also subject to a valid and enforceable Lien under the terms of any Mortgage and
the terms of such Mortgage are inconsistent with the terms of this Agreement,
then with respect to such Collateral, the terms of such Mortgage shall be
controlling in the case of fixtures and real estate leases, letting and licenses
of, and contracts and agreements relating to the lease of, real property, and
the terms of this Agreement shall be controlling in the case of all other
Collateral.

 

Section 30. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

28

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed
and delivered by its officer thereunto duly authorized as of the date first
above written.

 

       

LANDRY’S RESTAURANTS, INC.

            By                    

Title:

Address for Notices:

     

[NAME OF GRANTOR]

                      By                    

Title:

Address for Notices:

     

[NAME OF GRANTOR]

                      By                    

Title:

Address for Notices:

     

[NAME OF GRANTOR]

                      By                    

Title:

       

[ETC.]

 

29