Exhibit 10.2
EXECUTION VERSION
 
GUARANTEE AND SECURITY AGREEMENT
Dated as of
February 9, 2011
Among
NMH HOLDINGS, LLC,
NATIONAL MENTOR HOLDINGS, INC.,
THE SUBSIDIARIES OF
NATIONAL MENTOR HOLDINGS, INC.
parties hereto from time to time
and
UBS AG, STAMFORD BRANCH,
as Administrative Agent
 

 

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Table of Contents

              Page
SECTION 1. DEFINED TERMS
    1  
1.1. Definitions
    1  
1.2. Other Definitional Provisions
    6  
 
       
SECTION 2. GUARANTEE
    6  
2.1. Guarantee
    6  
2.2. Guarantee of Payment
    7  
2.3. No Limitations
    7  
2.4. Reinstatement
    8  
2.5. Agreement To Pay; Subrogation
    8  
2.6. Information
    8  
2.7. Savings
    8  
 
       
SECTION 3. GRANT OF SECURITY INTEREST
    8  
 
       
SECTION 4. REPRESENTATIONS AND WARRANTIES
    11  
4.1. Title; No Other Liens
    11  
4.2. Perfected First Priority Liens
    11  
4.3. Organizational Information
    11  
4.4. Inventory and Equipment
    11  
4.5. Investment Property
    11  
4.6. Receivables
    12  
4.7. Intellectual Property
    12  
 
       
SECTION 5. COVENANTS
    12  
5.1. Delivery of Instruments, Certificated Securities and Chattel Paper
    13  
5.2. Maintenance of Insurance
    13  
5.3. Payment of Obligations
    13  
5.4. Maintenance of Perfected Security Interest; Further Documentation
    13  
5.5. Changes in Locations, Name, etc
    14  
5.6. Investment Property
    14  
5.7. Receivables
    15  
5.8. Intellectual Property
    15  
5.9. Commercial Tort Claims
    17  
5.10. Post Default Actions
    17  
 
       
SECTION 6. REMEDIAL PROVISIONS
    17  
6.1. Certain Matters Relating to Receivables
    17  
6.2. Communications with Obligors; Grantors Remain Liable
    18  
6.3. Pledged Stock
    19  
6.4. Proceeds to be Turned Over To Administrative Agent
    20  
6.5. Application of Proceeds
    20  
6.6. Code and Other Remedies
    21  

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              Page
6.7. Deficiency
    22  
 
       
SECTION 7. THE ADMINISTRATIVE AGENT
    22  
7.1. Administrative Agent’s Appointment as Attorney-in-Fact, etc
    22  
7.2. Duty of Administrative Agent
    24  
7.3. Execution of Financing Statements
    24  
7.4. Authority of Administrative Agent
    24  
 
       
SECTION 8. INDEMNITY, SUBROGATION AND SUBORDINATION
    25  
8.1. Indemnity and Subrogation
    25  
8.2. Contribution and Subrogation
    25  
8.3. Subordination
    25  
 
       
SECTION 9. MISCELLANEOUS
    25  
9.1. Amendments in Writing
    26  
9.2. Notices
    26  
9.3. No Waiver by Course of Conduct; Cumulative Remedies
    26  
9.4. Enforcement Expenses; Indemnification
    26  
9.5. Successors and Assigns
    27  
9.6. Set-Off
    27  
9.7. Counterparts
    27  
9.8. Severability
    27  
9.9. Section Headings
    27  
9.10. Integration
    27  
9.11. GOVERNING LAW
    28  
9.12. Submission To Jurisdiction; Waivers
    28  
9.13. Acknowledgments
    28  
9.14. Additional Grantors
    29  
9.15. Authorization to Release Guarantees and Liens
    29  
9.16. Termination or Release
    29  
9.17. WAIVER OF JURY TRIAL
    30  

SCHEDULES

     
Schedule A
  Investment Property
Schedule B
  Perfection Information
Schedule C
  Jurisdictions of Organization and Chief Executive Offices
Schedule D
  Inventory and Equipment
Schedule E
  Intellectual Property
Schedule F
  Commercial Tort Claims

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GUARANTEE AND SECURITY AGREEMENT
     GUARANTEE AND SECURITY AGREEMENT, dated as of February 9, 2011, made by NMH
HOLDINGS, LLC (“Holdings”), NATIONAL MENTOR HOLDINGS, INC. (the “Borrower”) and
certain subsidiaries of NATIONAL MENTOR HOLDINGS, INC. who are or become
signatories hereto, in favor of UBS AG, STAMFORD BRANCH, as Administrative Agent
(in such capacity, the “Administrative Agent”) for the banks and other financial
institutions (the “Lenders”) from time to time parties to the Credit Agreement,
dated as of February 9, 2011 (as amended, supplemented or otherwise modified
from time to time, the “Credit Agreement”), among the Borrower, Holdings, the
Lenders and the Administrative Agent.
WITNESSETH
     WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit upon the terms and subject to the conditions
set forth therein;
     WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to make valuable transfers to one or more of the
Grantors in connection with the operation of their businesses;
     WHEREAS, the Grantors have derived and will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and
     WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligation of the Lenders to make their respective extensions
of credit to the Borrower under the Credit Agreement that the Grantors shall
have executed and delivered this Agreement to the Administrative Agent for the
ratable benefit of the Lenders;
     NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective extensions of credit to the Borrower under the Credit
Agreement, each Grantor hereby agrees with the Administrative Agent, for the
benefit of the Secured Parties, as follows:
     SECTION 1. DEFINED TERMS.
     1.1. Definitions.
     Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement, and
the following terms are used herein as defined in the New York UCC: Accounts,
Certificated Security, Chattel Paper, Commercial Tort Claim, Documents,
Equipment, Health-Care-Insurance Receivables, Instruments and Inventory.
     The following terms shall have the following meanings:
     “Agreement”: this Guarantee and Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.

 

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     “Borrower”: as defined in the Recitals.
     “Capital Stock”: any and all shares, interests, participation or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.
     “Collateral”: as defined in Section 3.
     “Collateral Account”: any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
     “Contracts”: any contract or agreement between a Grantor and any Person, or
an invoice sent or to be sent by such Grantor, pursuant to or under which a
Receivable shall arise or be created, or which evidences a Receivable.
     “Copyrights”: (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule E), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
     “Copyright Licenses”: any written agreement naming any Grantor as licensor
or licensee (including, without limitation, those listed in Schedule E),
granting any right under any Copyright, including, without limitation, the grant
of rights to manufacture, distribute, exploit and sell materials derived from
any Copyright.
     “Deposit Account”: as defined in the Uniform Commercial Code of any
applicable jurisdiction and, in any event, including, without limitation, any
demand, time, savings, passbook, lockbox account or like account maintained with
a depository institution.
     “General Intangibles”: all “general intangibles” as such term is defined in
Section 9-02(a)(42) of the New York UCC and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements, provider
numbers, certificates of need, determinations of need, statutory entitlements,
rights to participate in Third Party Payor Programs, instruments and indentures
in any form, and portions thereof, to which such Grantor is a party or under
which such Grantor has any right, title or interest or to which such Grantor or
any property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation,
(i) all rights of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such Grantor to
damages arising thereunder and (iii) all rights of such Grantor to perform and
to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a Lien pursuant to this Agreement in its right, title and
interest in such contract, agreement, instrument or indenture is not prohibited
by applicable law or such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other

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parties thereto; provided, that the foregoing limitation shall not affect,
limit, restrict or impair the grant by such Grantor of a Lien pursuant to this
Agreement in any Receivable or any money or other amounts due or to become due
under any such contract, agreement, instrument or indenture.
     “Government Receivable”: any Receivable that, consistent with the
Borrower’s past accounting practice, is initially classified as a Medicare
receivable, Medicaid receivable or CHAMPUS receivable or other government
receivable.
     “Government Receivable Accounts”: as defined in Section 6.1(c).
     “Grantors”: Holdings, the Borrower and the Subsidiary Guarantors.
     “Guarantors”: Holdings and the Subsidiary Guarantors.
     “Guarantor Obligations”: with respect to any Guarantor, all obligations and
liabilities of such Guarantor which may arise under or in connection with this
Agreement (including, without limitation, Section 2) or any other Loan Document,
any Specified Swap Agreement or any Cash Management Obligations to which such
Guarantor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by such
Guarantor pursuant to the terms of this Agreement or any other Loan Document
(including interest and fees accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower or any Guarantor, whether or not a claim
for post-filing or post-petition interest or fees is allowed in such
proceeding)).
     “Intellectual Property”: the collective reference to all rights, priorities
and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without
limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at
law or in equity for any infringement or other impairment thereof, including the
right to receive all proceeds and damages therefrom.
     “Intercompany Note”: any promissory note evidencing loans made by any
Grantor to the Borrower, Holdings or any of its Restricted Subsidiaries.
     “Investment Property”: the collective reference to (i) all “investment
property” as such term is defined in Section 9-102(a)(49) of the New York UCC
and (ii) whether or not constituting “investment property” as so defined, all
Pledged Notes, Pledged LLC Interests and all Pledged Stock. Notwithstanding
anything else herein to the contrary, the definition of “Investment Property”
shall (i) not include any Capital Stock in any Liquidating Subsidiary (until
such time, if at all, as such Liquidating Subsidiary ceases to be a Liquidating
Subsidiary in accordance with the Credit Agreement) or any Capital Stock in any
Unrestricted Subsidiary and (ii), with respect to any Non-Profit Entity, Foreign
Subsidiary, Domestic Subsidiary substantially all of whose assets consist of the
stock of Foreign Subsidiaries or Insurance Subsidiary, only constitute that
percentage of the Capital Stock of any such Subsidiary required to be pledged to
the Administrative Agent pursuant to Section 6.9(c) of the Credit Agreement.

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     “Issuers”: the collective reference to each issuer of any Investment
Property.
     “Loan Document Obligations”: the “Obligations” as defined in the Credit
Agreement.
     “New York UCC”: the Uniform Commercial Code as from time to time in effect
in the State of New York.
     “Obligations”: (i) in the case of the Borrower, the Loan Document
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
     “Patents”: (i) all letters patent of the United States, any other country
or any political subdivision thereof, all reissues and extensions thereof,
including, without limitation, any of the foregoing referred to in Schedule E,
(ii) all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule E,
and (iii) all rights to obtain any reissues or extensions of the foregoing.
     “Patent License”: all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent including, without limitation,
any of the foregoing referred to in Schedule E.
     “Pledged LLC Interests”: in each case, whether now existing or hereafter
acquired, all of each Grantor’s right, title and interest in and to:
     (a) any Issuer that is a limited liability company, but not any of such
Grantor’s obligations from time to time as a holder of interests in any such
Issuer (unless the Administrative Agent or its designee, on behalf of the
Administrative Agent and the Lenders, shall elect to become a holder of
interests in any such Issuer in connection with its exercise of remedies
pursuant to the terms hereof);
     (b) any and all moneys due and to become due such Grantor now or in the
future by way of a distribution made to such Grantor in its capacity as a holder
of interests in any such Issuer or otherwise in respect of each such Grantor’s
interest as a holder of interests in any such Issuer;
     (c) any other property of any such Issuer to which such Grantor now or in
the future may be entitled in respect of its interests in any such Issuer by way
of distribution, return of capital or otherwise;
     (d) any other claim or right which such Grantor now has or may in the
future acquire in respect of its interests in any such Issuer;
     (e) the organizational documents of any such Issuer;
     (f) all certificates, options or rights of any nature whatsoever that may
be or granted by any such Issuer to such Grantor while this Agreement is in
effect; and

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     (g) to the extent not otherwise included, all Proceeds of any or all of the
foregoing.
     Notwithstanding anything else herein to the contrary, the definition of
“Pledged LLC Interests” shall, (i) not include any Capital Stock in any
Liquidating Subsidiary (until such time, if at all, as such Liquidating
Subsidiary ceases to be a Liquidating Subsidiary in accordance with the Credit
Agreement) or any Capital Stock in any Unrestricted Subsidiary and (ii) with
respect to any Non-Profit Entity, Foreign Subsidiary, Domestic Subsidiary
substantially all of whose assets consist of the stock of Foreign Subsidiaries
or Insurance Subsidiary, only constitute that percentage of the Capital Stock of
any such Subsidiary required to be pledged to the Administrative Agent pursuant
to Section 6.9(c) of the Credit Agreement.
     “Pledged Notes”: all promissory notes listed on Schedule A, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
     “Pledged Securities”: the collective reference to the Pledged LLC
Interests, the Pledged Stock and the Pledged Notes, together with any Proceeds
thereof.
     “Pledged Stock”: the shares of capital stock comprising Capital Stock
listed on Schedule A, together with any other shares, stock certificates,
options, interests or rights of any nature whatsoever in respect of the Capital
Stock (other than Pledged LLC interests) of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect; provided,
however, the definition of “Pledged Stock” shall (i) not include any Capital
Stock of any Liquidating Subsidiary (until such time, if at all, as such
Liquidating Subsidiary ceases to be a Liquidating Subsidiary in accordance with
the Credit Agreement) or any Capital Stock of any Unrestricted Subsidiary, (ii),
with respect to any Non-Profit Entity, Foreign Subsidiary, Domestic Subsidiary
substantially all of whose assets consist of the stock of Foreign Subsidiaries
or Insurance Subsidiary, only constitute that percentage of the Capital Stock of
any such Subsidiary required to be pledged to the Administrative Agent pursuant
to Section 6.9(c) of the Credit Agreement and (iii) not include any Capital
Stock that has been released pursuant to Section 9.16.
     “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64)
of the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.
     “Receivable”: any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without
limitation, any Account and any HealthCare-Insurance Receivable).
     “Retained Rights”: with respect to any Government Receivable of a Grantor
(except to the extent the obligor thereon may be required, pursuant to a
court-ordered assignment which is valid, binding and enforceable under
applicable Medicare and Medicaid laws, rules and regulations to make payments
directly to a Person other than any applicable Grantor as the provider of

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the services giving rise thereto), the rights of such applicable Grantor to
collect and receive direct payment from the Governmental Authority obligated in
respect of such Government Receivable and, as applicable, to enforce the claim
giving rise thereto against any federal Government Authority to the extent the
retention of such rights is required by Requirements of Law; provided, however,
that even in the absence of such a court-ordered assignment, the “Retained
Rights” shall not include the right of any applicable Grantor to retain the
collections or other Proceeds on any Government Receivable once payment thereon
has been made to any applicable Grantor as the provider of the services giving
rise thereto.
     “Secured Parties”: (a) the Lenders, (b) the Administrative Agent, (c) the
Issuing Lender, (d) each counterparty to any Specified Swap Agreement, (e) each
Lender or its Affiliate or any other Person to which any Cash Management
Obligations are owed, (f) the beneficiaries of each indemnification obligation
undertaken by any Loan Party under any Loan Document and (g) the permitted
successors and assigns of each of the foregoing.
     “Securities Act”: the Securities Act of 1933, as amended.
     “Trademarks”: (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law lights related thereto,
including, without limitation, any of the foregoing referred to in Schedule E,
and (ii) the right to obtain all renewals thereof.
     “Trademark License”: any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule E.
     1.2. Other Definitional Provisions. The words “hereof,” “herein,” “hereto”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. Where the
context requires, terms relating to the Collateral or any part thereof, when
used in relation to a Grantor, shall refer to such Grantor’s Collateral or the
relevant part thereof. In addition, Section 1.2 of the Credit Agreement shall be
applicable to this Agreement.
     SECTION 2. GUARANTEE.
     2.1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the
other Guarantors and severally, as a primary obligor and not merely as a surety,
the due and punctual payment and performance of the Loan Document Obligations.
Each of the Guarantors further agrees that the Loan Document Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Loan Document Obligation. Each of the Guarantors

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waives presentment to, demand of payment from and protest to the Borrower or any
other Loan Party of any of the Loan Document Obligations, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment.
     2.2. Guarantee of Payment. Each of the Guarantors further agrees that its
guarantee hereunder constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Administrative Agent or any other Secured Party to any security held for the
payment of the Loan Document Obligations or to any balance of any deposit
account or credit on the books of the Administrative Agent or any other Secured
Party in favor of the Borrower or any other Person.
     2.3. No Limitations.
     (a) Except for termination of a Guarantor’s obligations hereunder as
expressly provided in Section 9.16, the obligations of each Guarantor hereunder
shall not be subject to any reduction, limitation, impairment or termination for
any reason, including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Loan Document Obligations or otherwise. Without limiting
the generality of the foregoing, the obligations of each Guarantor hereunder
shall not be discharged or impaired or otherwise affected by (i) the failure of
the Administrative Agent or any other Secured Party to assert any claim or
demand or to enforce any right or remedy under the provisions of any Loan
Document or otherwise; (ii) any rescission, waiver, amendment or modification
of, or any release from any of the terms or provisions of, any Loan Document or
any other agreement, including with respect to any other Guarantor under this
Agreement; (iii) the release of any security held by the Administrative Agent or
any other Secured Party for the Loan Document Obligations or any of them;
(iv) any default, failure or delay, willful or otherwise, in the performance of
the Loan Document Obligations; or (v) any other act or omission that may or
might in any manner or to any extent vary the risk of any Guarantor or otherwise
operate as a discharge of any Guarantor as a matter of law or equity (other than
the payment in full of all the Loan Document Obligations). Each Guarantor
expressly authorizes the Secured Parties to take and hold security for the
payment and performance of the Obligations, to exchange, waive or release any or
all such security (with or without consideration), to enforce or apply such
security and direct the order and manner of any sale thereof in their sole
discretion or to release or substitute any one or more other guarantors or
obligors upon or in respect of the Obligations, all without affecting the
obligations of any Guarantor hereunder.
     (b) To the fullest extent permitted by applicable law, each Guarantor
waives any defense based on or arising out of any defense of the Borrower or any
other Loan Party or the unenforceability of the Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
or any other Loan Party, other than the payment in full of all the Loan Document
Obligations. The Administrative Agent and the other Secured Parties may, at
their election, foreclose on any security held by one or more of them by one or
more judicial or nonjudicial sales, accept an assignment of any such security in
lieu of foreclosure, compromise or adjust any part of the Obligations, make any
other accommodation with the Borrower or any other Loan Party or exercise any
other right or remedy available to them against the Borrower or any other Loan
Party, without affecting or impairing in any way the liability of any

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Guarantor hereunder except to the extent the Loan Document Obligations have been
fully and paid in full. To the fullest extent permitted by applicable law, each
Guarantor waives any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other Loan Party, as the case may be, or any
security.
     2.4. Reinstatement. Each of the Guarantors agrees that its guarantee
hereunder shall continue to be effective or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any Obligation is rescinded or
must otherwise be restored by the Administrative Agent or any other Secured
Party upon the bankruptcy or reorganization of the Borrower, any other Loan
Party or otherwise.
     2.5. Agreement To Pay; Subrogation. In furtherance of the foregoing and not
in limitation of any other right that the Administrative Agent or any other
Secured Party has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Borrower or any other Loan Party to pay any Loan
Document Obligation when and as the same shall become due, whether at maturity,
by acceleration, after notice of prepayment or otherwise, each Guarantor hereby
promises to and will forthwith pay, or cause to be paid, to the Administrative
Agent for distribution to the applicable Secured Parties in cash the amount of
such unpaid Loan Document Obligation. Upon payment by any Guarantor of any sums
to the Administrative Agent as provided above, all rights of such Guarantor
against the Borrower or any other Loan Party arising as a result thereof by way
of right of subrogation, contribution, reimbursement, indemnity or otherwise
shall in all respects be subject to Section 8.
     2.6. Information. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower’s and each other Loan Party’s financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Loan Document Obligations and the nature, scope and extent of
the risks that such Guarantor assumes and incurs hereunder, and agrees that none
of the Administrative Agent or the other Secured Parties will have any duty to
advise such Guarantor of information known to it or any of them regarding such
circumstances or risks.
     2.7. Savings. In any action or proceeding involving any state corporate
limited partnership or limited liability company law, or any applicable state,
federal or foreign bankruptcy, insolvency, reorganization or other law affecting
the rights of creditors generally, if the obligations of any Guarantor under
Section 2.1 would otherwise be held or determined to be void, voidable, invalid
or unenforceable, or subordinated to the claims of any other creditors, on
account of the amount of its liability under Section 2.1, then, notwithstanding
any other provision to the contrary, the amount of such liability shall, without
any further action by such Guarantor, any Loan Party or any other person, be
automatically limited and reduced to the highest amount (after giving effect to
the right of contribution established in Section 8.2) that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
     SECTION 3. GRANT OF SECURITY INTEREST. Each Grantor hereby collaterally
assigns, pledges and grants to the Administrative Agent, for the benefit of the
Secured Parties, a

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security interest in, all of the following property now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
“Collateral”), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor’s Obligations:
     (a) all Accounts;
     (b) Letter of Credit rights;
     (c) all Chattel Paper;
     (d) all Contracts;
     (e) all Deposit Accounts;
     (f) all Documents;
     (g) all Equipment;
     (h) all General Intangibles;
     (i) all Instruments;
     (j) all Intellectual Property;
     (k) all Inventory;
     (l) all Investment Property;
     (m) all Receivables (including without limitation Government Receivables);
     (n) commercial tort claims as listed on Schedule F;
     (o) all books and records pertaining to the Collateral; and
     (p) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing;
provided, that in no event will “Collateral” be deemed to include any Retained
Rights.
     Notwithstanding the foregoing provisions of this Section 3, such grant of
security interest shall not extend to, and the term “Collateral” shall exclude
(i) Contracts, lease, licenses, Chattel Paper, Intellectual Property and other
General Intangibles, or assets subject thereto, if any, (but shall not include
the Receivables, collections and Proceeds thereof) which are now or hereafter
held by Grantor as licensee, lessee or otherwise, to the extent that (and only
for so long as) (A) such Contracts, Chattel Paper and other General Intangibles,
or assets subject thereto, if any, are not assignable or capable of being
encumbered as a matter of law or under the terms of the

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license, lease or other agreement applicable thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law, including
Sections 9-406, 9-407, 9-408 or 9-409 of the New York UCC, in respect of the
grant of a security interest hereunder), without the consent of the licensor or
lessor thereof, or other applicable party thereto and (B) such consent has not
been obtained, (ii) assets owned by any Grantor on the date hereof or hereafter
acquired and any proceeds thereof that are subject to a Lien securing a Capital
Lease Obligation or a purchase money obligation permitted to be incurred
pursuant to the Credit Agreement or any other Lien permitted by Section 7.3(g)
of the Credit Agreement to the extent and for so long as the contract or other
agreement in which such Lien is granted (or the documentation providing for such
Capital Lease Obligation or purchase money obligation) validly prohibits the
creation of any other Lien on such assets and proceeds, (iii) any property and
any person existing at the time such property or person is acquired or merged
with or into or consolidated with any Grantor that is subject to a Lien
permitted by Section 7.3(m) of the Credit Agreement to the extent and for so
long as the contract or other agreement in which such Lien is granted validly
prohibits the creation of any other Lien on such property, (iv) any
intent-to-use trademark application for which a statement of use has not been
filed and accepted with the U.S. Patent and Trademark Office or any other
Intellectual Property to the extent and for so long as creation by a Grantor of
a security interest therein would result in the loss by such Grantor of any
material rights therein, (v) the Institutional L/C Collateral Account Agreement
and the Institutional L/C Collateral Account and all funds and proceeds therein,
and any proceeds thereof prior to their receipt by any Grantor, (vi) (A) any
Capital Stock in any Liquidating Subsidiary (until such time, if at all, as such
Liquidating Subsidiary ceases to be a Liquidating Subsidiary in accordance with
the Credit Agreement) or any Capital Stock in any Unrestricted Subsidiary and
proceeds of the Capital Stock of any Unrestricted Subsidiary and (B) with
respect to any Non-Profit Entity, Foreign Subsidiary, Domestic Subsidiary
substantially all of whose assets consist of the stock of Foreign Subsidiaries
or Insurance Subsidiary, such percentage of the Capital Stock of any such
Subsidiary that is not required to be pledged to the Administrative Agent
pursuant to Section 6.9(c) of the Credit Agreement, (vii) any interest in a
joint venture or a Subsidiary that is not a Wholly-Owned Subsidiary to the
extent the granting of a security interest therein is prohibited by the terms of
the organizational documents or any shareholder or similar agreement of such
joint venture or Subsidiary, (viii) any motor vehicle or other assets subject to
certificates of title, the perfection of a security interest in which cannot be
perfected through the filing of UCC-1 financing statements under the UCC in the
relevant jurisdiction, (ix) leasehold interests in real property, (x) any assets
if, as determined by the Borrower in writing and reasonably agreed to by the
Administrative Agent, granting a security interest therein to the Administrative
Agent for the benefit of the Secured Parties would result in adverse tax
consequences to Holdings or any of its Restricted Subsidiaries, and (xii) any
asset if, in the reasonable judgment of the Administrative Agent evidenced in
writing, the burden, cost or consequences to Holdings or its Restricted
Subsidiaries of creating or perfecting such security interests in favor of the
Administrative Agent for the benefit of the Secured Parties is excessive in
relation to the benefits to be obtained therefrom by the Secured Parties.
     The Administrative Agent may grant extensions of time for the perfection of
security interests in particular assets (including extensions beyond the Closing
Date for the perfection of security interests in the assets of any Loan Party on
such date) where it reasonably determines, in consultation with the Borrower,
that perfection cannot be accomplished without undue efforts or

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expense by the time or times at which it would otherwise be required by this
Agreement or the other Loan Documents.
     SECTION 4. REPRESENTATIONS AND WARRANTIES. To induce the Administrative
Agent and the Secured Parties to make their respective extensions of credit to
the Borrower under the Credit Agreement, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
     4.1. Title; No Other Liens. Except for the security interest granted to the
Administrative Agent for the ratable benefit of the Secured Parties pursuant to
this Agreement and Permitted Liens, such Grantor owns or has a license or the
right to use each item of the Collateral free and clear of any and all Liens of
others. No financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except such
as have been filed in favor of the Administrative Agent, for the benefit of the
Secured Parties, pursuant to this Agreement, or as to which a duly authorized
termination statement relating to such UCC financing statement or other
instrument has been delivered to the Administrative Agent on the Closing Date,
Permitted Liens or as are otherwise permitted by the Credit Agreement.
     4.2. Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule B (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and, if applicable, duly executed form) and payment of all filing fees
will constitute valid perfected security interests in all of the Collateral in
which a security interest can be perfected by the filing of a financing
statement and/or the other filings and actions specified on Schedule B in favor
of the Administrative Agent, for the benefit of the Secured Parties, as
collateral security for such Grantor’s Obligations, enforceable (subject to the
effect of bankruptcy, insolvency, reorganization, receivership, moratorium and
other similar laws affecting creditors’ rights and general equitable principles
(whether considered in a proceeding in equity or at law) in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting to
purchase any Collateral from such Grantor and (b) are prior to all other Liens
on the Collateral in existence on the date hereof except for Permitted Liens.
Notwithstanding the foregoing, nothing in this Agreement shall require any
Grantor to make any filings or take any other actions to record or perfect the
Administrative Agent’s Lien on and security interest in any Intellectual
Property outside the United States.
     4.3. Organizational Information. On the date hereof, such Grantor’s
(i) chief executive office or sole place of business, (ii) exact legal name,
(iii) state of formation, organization or incorporation (as applicable) and
(iv) organizational identification number (if any) is as specified on
Schedule C.
     4.4. Inventory and Equipment. On the date hereof, the Inventory and the
material Equipment (other than mobile goods or Equipment out for repair or
refurbishment or on loan to employees) are kept at, or are in transit to, the
locations listed on Schedule D.
     4.5. Investment Property. The shares of Pledged Stock pledged by such
Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor (other than
Capital Stock in Insurance Subsidiaries, Non-Profit

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Entities, Liquidating Subsidiaries, Foreign Subsidiaries, Domestic Subsidiaries
substantially all of whose assets consist of the stock of Foreign Subsidiaries
and Unrestricted Subsidiaries not required to be pledged pursuant to the Loan
Documents). The Pledged LLC Interests pledged by the Grantors constitute all the
issued and outstanding Capital Stock of each Issuer that is a limited liability
company in which any Grantor has any right, title or interest (other than
Capital Stock in Insurance Subsidiaries, Non-Profit Entities, Liquidating
Subsidiaries, Foreign Subsidiaries, Domestic Subsidiaries substantially all of
whose assets consist of the stock of Foreign Subsidiaries and Unrestricted
Subsidiaries not required to be pledged pursuant to the Loan Documents). All the
shares of the Pledged Stock and the Pledged LLC Interests have been duly and
validly issued and in the case of the Pledged Stock are fully paid and
nonassessable. Each of the Pledged Notes constitutes the legally valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). Such
Grantor is the record and beneficial owner of, and has good and marketable title
to, the Investment Property pledged by it hereunder, free of any and all Liens
of, any other Person, except the Lien created by this Agreement and Permitted
Liens.
     4.6. Receivables. To each Grantor’s knowledge, no material amount payable
to such Grantor under or in connection with any Receivable is evidenced by any
Instrument or Chattel Paper which has not been delivered to the Administrative
Agent.
     4.7. Intellectual Property. Schedule E lists all material Intellectual
Property owned by such Grantor in its own name on the date hereof that is
registered, patented or subject to a pending application for registration or
patent (other than Internet domain names). On the date hereof, all material
Intellectual Property owned by such Grantor is valid, subsisting, unexpired and
enforceable and has not been abandoned, except, in each case, as would not
reasonably be expected to have a Material Adverse Effect, and, to such Grantor’s
knowledge, does not infringe the intellectual property rights of any other
Person. Except as set forth in Schedule E, on the date hereof, none of the
material Intellectual Property owned by such Grantor is the subject of any
licensing or franchise agreement pursuant to which such Grantor is the licensor
or franchiser. No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor’s rights in, any Intellectual Property owned by such Grantor in any
respect that could reasonably be expected to have a Material Adverse Effect. No
action or proceeding is pending, or, to the knowledge of such Grantor,
threatened, on the date hereof (i) seeking to limit, cancel or question the
validity of any material Intellectual Property owned by such Grantor or such
Grantor’s ownership interest therein, or (ii) which, if adversely determined,
would have a Material Adverse Effect on the value of any Intellectual Property
owned by such Grantor.
     SECTION 5. COVENANTS. Each Grantor covenants and agrees with the
Administrative Agent and the Secured Parties that, from and after the date of
this Agreement until the Obligations (other than obligations under or in respect
of Swap Agreements) (excluding contingent indemnity obligations) shall have been
paid in full, no Letter of Credit shall be outstanding (or shall have been cash
collateralized or replaced in a manner reasonably satisfactory to the
Administrative Agent) and the Commitments shall have terminated:

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     5.1. Delivery of Instruments, Certificated Securities and Chattel Paper. If
any material amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be promptly
delivered to the Administrative Agent, duly endorsed in a manner reasonably
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
     5.2. Maintenance of Insurance. Each Grantor or an Affiliate on behalf of
such Grantor will at all times maintain insurance, at such Grantor’s own expense
to the extent and in the manner provided in the Credit Agreement.
     5.3. Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all material taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all material claims of any kind (including, without limitation, claims
for labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, reserves in
conformity with GAAP with respect thereto have been provided on the books of
such Grantor and such proceedings would not reasonably be expected to result in
a Material Adverse Effect.
     5.4. Maintenance of Perfected Security Interest; Further Documentation.
     (a) Such Grantor shall maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in Section 4.2, and subject to the qualifications set forth in
Section 4.2, and shall take all reasonable actions necessary to defend such
security interest against the claims and demands of all Persons at any time
claiming the same or any interest therein (other than Permitted Liens or to the
extent otherwise not required herein) adverse to the Administrative Agent.
     (b) Such Grantor will furnish to the Administrative Agent from time to time
statements and schedules further identifying and describing the assets and
property which constitute Collateral of such Grantor and such other reports in
connection therewith as the Administrative Agent may reasonably request, all in
reasonable detail to the extent available.
     (c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and, if applicable, have recorded, such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction in the United States with respect to the
security interests created hereby, (ii) in the case of Investment Property and
any other relevant Collateral (excluding in any case (x) security entitlements,
securities accounts, commodity contracts, commodity accounts and (y) Deposit
Accounts), taking any actions reasonably necessary to enable the Administrative
Agent to obtain “control” (within the meaning of the applicable Uniform
Commercial Code) with respect thereto; and (iii) obtaining

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an acknowledgement, in form and substance satisfactory to the Administrative
Agent, of any bailee having possession of any of the Collateral that the bailee
holds such Collateral for the Administrative Agent.
     5.5. Changes in Locations, Name, etc. Such Grantor will not, except upon
10 days’ prior written notice to the Administrative Agent and delivery to the
Administrative Agent of all additional financing statements and other documents
reasonably requested by the Administrative Agent to maintain the validity,
perfection and priority of the security interests provided for herein:
     (i) change its jurisdiction of organization or the location of its chief
executive office or sole place of business from that referred to in Section 4.3;
     (ii) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Administrative Agent in connection
with this Agreement would become misleading; or
     (iii) change its Federal Taxpayer Identification Number or organizational
identification number.
     5.6. Investment Property.
     (a) If such Grantor shall receive any stock certificate or a certificate
evidencing membership interests or partnership interests (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock or the Pledged LLC Interests, or otherwise in respect thereof,
such Grantor shall accept the same as the agent of the Administrative Agent and
the other Secured Parties, hold the same in trust for the Administrative Agent
and the other Secured Parties and deliver the same forthwith to the
Administrative Agent in the exact form received, duly endorsed by such Grantor
to the Administrative Agent if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor to be held by
the Administrative Agent, subject to the terms hereof, as additional collateral
security for the obligations of such Grantor hereunder. Except as a result of a
transaction permitted under the Credit Agreement, (i) any sums paid upon or in
respect of such Investment Property upon the liquidation or dissolution of any
Issuer shall be paid over to the Administrative Agent to be held by it hereunder
as additional collateral security for the obligations of such Grantor hereunder,
and (ii) in case any distribution of capital shall be made on or in respect of
the Investment Property or any property shall be distributed upon or with
respect to the Investment Property pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Administrative Agent, be delivered
to the Administrative Agent to be held by it hereunder as additional collateral
security for the obligations of such Grantor hereunder. If any sums of money or
property so paid or distributed in respect of the Investment Property shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such

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money or property in trust for the Lenders, segregated from other funds of such
Grantor, as additional collateral security for the obligations of such Grantor
hereunder.
     (b) Without the prior written consent of the Administrative Agent, such
Grantor will not (i) sell, assign, transfer, exchange, or otherwise dispose of,
or grant any option with respect to, the Investment Property or Proceeds thereof
(except pursuant to a transaction permitted by the Credit Agreement) or
(ii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Investment Property or Proceeds
thereof, or any interest therein, except for the Liens created by this Agreement
or Permitted Liens.
     (c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Investment
Property issued by it and will comply with such terms insofar as such terms are
applicable to it and (ii) the terms of Sections 6.3(c) and 6.7 shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(c) or 6.7 with respect to the Investment Property issued
by it.
     5.7. Receivables.
     (a) Except as otherwise permitted in the Credit Agreement or other than in
the ordinary course of business consistent with its past practice or as such
Grantor finds appropriate in accordance with its reasonable business judgment,
such Grantor will not (i) grant any extension of the time of payment of any
material Receivable, (ii) compromise or settle any Receivable for materially
lesser amount thereof, (iii) release, wholly or partially, any Person liable for
the payment of any material Receivable, (iv) allow any credit or discount
whatsoever on any material Receivable or (v) amend, supplement or modify any
material Receivable in any manner that could materially adversely affect the
value thereof.
     5.8. Intellectual Property.
     (a) Such Grantor will (i) continue to use each material Trademark owned by
such Grantor on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to, to the extent required by applicable law, maintain such Trademark in
full force free from any claim of abandonment for non-use for so long as such
Trademark is material to the business of such Grantor, (ii) maintain as in the
past, substantially the same or higher, quality of products and services offered
under such Trademark, (iii) use such Trademark with the appropriate notice of
registration and all other notices and legends required by applicable Legal
Requirement, (iv) not adopt or use any mark which is confusingly similar or a
colorable imitation of such Trademark unless the Administrative Agent, for the
ratable benefit of the Secured Parties, shall obtain a perfected security
interest (subject to the qualifications set forth in Section 4.2) in such mark
pursuant to this Agreement, and (v) not knowingly do any act or knowingly omit
to do any act whereby such Trademark may become invalidated or materially
impaired.
     (b) Such Grantor will not knowingly do any act, or knowingly omit to do any
act, whereby any material Patent owned by such Grantor may become forfeited,
abandoned or dedicated to the public for so long as such Patent is material to
the business of such Grantor.

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     (c) Such Grantor (i) will employ each material Copyright owned by such
Grantor and (ii) will not knowingly do any act or knowingly omit to do any act
whereby any material Copyright owned by Grantor may become invalidated or
otherwise impaired for so long as such Copyright is material to the business of
the Grantor. Such Grantor will not knowingly do any act whereby any material
Copyright owned by such Grantor may fall into the public domain for so long as
such Copyright is material to the business of the Grantor.
     (d) Such Grantor will not knowingly do any act that knowingly uses any
material Intellectual Property owned by such Grantor to infringe the
intellectual property rights of any other Person.
     (e) Such Grantor will notify the Administrative Agent and the other Secured
Parties promptly, but in any event within thirty (30) days of such Grantor
having knowledge thereof, if it knows that any application or registration for
any material Intellectual Property owned by such Grantor may become forfeited,
abandoned or dedicated to the public (other than the expiration of patents at
the end of their statutory term), or of any adverse determination or development
regarding such Grantor’s ownership of, or the validity of, any material
Intellectual Property owned by such Grantor or such Grantor’s right to register
the same or to own and maintain the same (other than office actions issued in
the ordinary course of prosecution of any pending applications for patents or
applications for registration of other Intellectual Property).
     (f) Whenever such Grantor, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent within thirty Business Days after the last
day of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent’s and the
Lenders’ security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
     (g) Such Grantor will take reasonable steps to maintain each registration
of the material Intellectual Property owned by such Grantor for so long as such
Intellectual Property is material to the business of such Grantor, except as
would not reasonably be expected to have a Material Adverse Effect, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
     (h) In the event that, to the knowledge of the Grantor, any material
Intellectual Property owned by such Grantor is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Intellectual Property and (ii) if such Intellectual Property is of material
economic value to such Grantor, promptly notify the Administrative Agent after
it learns thereof and, if appropriate, sue for infringement, misappropriation or
dilution, seek injunctive relief where appropriate and seek to recover any and
all damages for such infringement, misappropriation or dilution.

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     5.9. Commercial Tort Claims. If the Grantors or any of them shall at any
time acquire a Commercial Tort Claim such Grantor(s) shall, within a reasonable
period of time, notify the Administrative Agent in writing signed of the brief
details thereof and shall grant to the Administrative Agent for the benefit of
the Secured Parties a security interest therein and in the proceeds thereof, all
on the terms of this Agreement, and in writing in form and substance reasonably
satisfactory to the Administrative Agent. This Section 5.09 shall apply only to
Commercial Tort Claims (i) that are not claims against the Administrative Agent
or any of the other Secured Parties in their capacities as such or as
Administrative Agent or Secured Parties under the Loan Documents, and (ii) as to
which the Grantor(s) holding any such claim has been advised by counsel engaged
for the purpose of prosecuting such claim that such claim is reasonably likely
to result in a judgment or negotiated settlement in excess of $300,000. The
Grantor(s) shall have sole control of all aspects of commercial tort claims that
are subject to this Section 5.09 unless and until an Event of Default has
occurred and is continuing, the Loan Document Obligations have been accelerated
and the Administrative Agent has begun exercising rights with respect to other
Collateral under this Agreement.
     5.10. Post Default Actions. If an Event of Default shall occur and be
continuing, no Grantor shall take any action which would have a Material Adverse
Effect or take any action prohibited or fail to perform any action required of
the Grantor hereunder, under the Credit Agreement or under any other Loan
Document to which such Grantor is a party.
     SECTION 6. REMEDIAL PROVISIONS.
     6.1. Certain Matters Relating to Receivables.
     (a) Subject to applicable law and contractual rights, if any, in each case
relating to confidentiality, at any time after the occurrence and during the
continuance of an Event of Default after giving prior notice to the Grantor, the
Administrative Agent shall have the right to make test verifications of the
Receivables in any manner and through any medium that it reasonably considers
advisable, and each Grantor in the name of such Grantor shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications.
     (b) The Administrative Agent hereby authorizes each Grantor to collect such
Grantor’s Receivables (except in respect of any Receivable subject to Retained
Rights to the extent not permitted by applicable law), and the Administrative
Agent may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default under Sections 8(a) or (f) of
the Credit Agreement. Except as set forth in subsection 6.1(c), if required by
the Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default under Sections 8(a) or (f) of the Credit
Agreement, any payments of Receivables, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly endorsed by such Grantor to the
Administrative Agent if required, in a Collateral Account maintained under the
sole dominion and control of the Administrative Agent as collateral security for
such Grantor’s Obligations, subject to withdrawal by the Administrative Agent
for the account of the Secured Parties in payment of such Grantor’s Obligations
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Administrative Agent and

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the other Secured Parties, segregated from other funds of such Grantor.
Notwithstanding anything to the contrary herein, the Administrative Agent shall
not assign or otherwise dispose of any Trademark owned by any Grantor without
assigning the assets and goodwill of the business associated therewith and any
such assignment shall be null and void. Each such deposit of Proceeds of
Receivables shall be accompanied by a report identifying in reasonable detail
the nature and source of the payments included in the deposit.
     (c) If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default under Sections 8(a)
or (f) of the Credit Agreement, (1) any payments of Receivables (other than
Receivables subject to Retained Rights) shall be directed by the applicable
Grantor or the Administrative Agent to be sent directly to a lockbox address
designated by the Administrative Agent and daily deposited into a lockbox
account at the Administrative Agent under the sole dominion and control of the
Administrative Agent, and (2) the applicable Grantor shall cause any payments of
Government Receivables subject to Retained Rights, when collected by any
Grantor, to be forthwith (and, in any event, within two Business Days) deposited
by such Grantor into a separate deposit account (the “Government Receivables
Account”) under the dominion and control of the Grantor, for which such Grantor
shall have delivered a standing direction to the depository holding such
applicable Government Receivables Account, directing it to sweep cash proceeds
of such Receivables daily and to wire and deposit the same into the Collateral
Account specified in Section 6.1(b) above, all to the extent not prohibited by
applicable law. It shall be an Event of Default under the Credit Agreement if
any Grantor changes such standing direction. Each such deposit of Proceeds of
Receivables subject to Retained Rights deposited in the Government Receivables
Account shall be accompanied by a report delivered to the Administrative Agent
within two Business Days after the deposit thereof into the Government
Receivables Account, identifying in reasonable detail the nature and source of
the payments included in such deposit.
     (d) Upon the occurrence and during the continuance of an Event of Default,
at the Administrative Agent’s reasonable request, each Grantor shall deliver to
the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
     6.2. Communications with Obligors; Grantors Remain Liable.
     (a) Subject to applicable law and contractual rights, if any, in each case
relating to confidentiality, at any time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent in its own name may
at any time communicate with obligors under the Receivables and parties to the
Contracts to verify with them to the Administrative Agent’s satisfaction the
existence, amount and terms of any Receivables or Contracts.
     (b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default under Section 8(a)
or (f) of the Credit Agreement, each Grantor shall notify obligors on the
Receivables (except where such Receivables are subject to Retained Rights) and
parties to the Contracts that the Receivables and the Contracts have been
assigned to the Administrative Agent for the ratable benefit of the Secured
Parties and that payments in respect thereof shall be made directly to the
Administrative Agent.

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     (c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables and Contracts to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Agreement or the
receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
     6.3. Pledged Stock.
     (a) Unless an Event of Default shall have occurred and be continuing and
the Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent’s intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all cash dividends
and other distributions paid in respect of the Pledged Stock, all payments made
in respect of the Pledged Notes and all distributions made in respect of the
Pledged LLC Interests, to the extent permitted in the Credit Agreement, and to
exercise all voting and corporate rights with respect to the Investment
Property.
     (b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give three days prior written notice of its intent to
exercise such rights to the relevant Grantor or Grantors, (i) the Administrative
Agent shall have the right to receive any and all cash dividends, payments, or
other Proceeds paid in respect of the Investment Property, to hold the same as
additional collateral security for and make application thereof to such
Grantor’s Obligations in accordance with Section 6.5, and (ii) the
Administrative Agent shall have the right to register any or all of the
Investment Property in the name of the Administrative Agent or its nominee, and
the Administrative Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Investment Property at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Administrative Agent of any right, privilege or option pertaining to such
Investment Property, and in connection therewith, the right to deposit and
deliver any and all of the Investment Property with any committee, depository,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing. Upon the cure or waiver of any Event of Default in accordance with the
Credit Agreement, (a)(i) each Grantor shall have the right to receive the
payments, proceeds, dividends, distributions, monies, compensation, property,
assets,

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instruments or rights that it would be authorized to receive and retain pursuant
to this Agreement absent an Event of Default (ii) the Administrative shall
deliver to the respective Grantor all cash and monies that such Grantor is
entitled to retain pursuant to this Agreement which have not been applied to the
repayment of the Obligations pursuant to this Agreement or the Credit Agreement
and (b) each Grantor shall have the right to exercise the voting, managerial and
other consensual rights and powers that it would otherwise be entitled to
pursuant to this Agreement absent an Event of Default and the Administrative
Agent shall (at the expense of the Borrower) cause any Investment Property
registered pursuant to clause (ii) of this Section 6.3(b) to be registered in
the name of the original Grantor in which such Investment Property was
registered prior to the Event of Default which has been cured or waived.
     (c) Each Grantor hereby authorizes and instructs each Issuer of any
Investment Property pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Investment Property directly to the Administrative Agent.
     6.4. Proceeds to be Turned Over To Administrative Agent. In addition to the
rights of the Administrative Agent and the Secured Parties specified in
Section 6.1 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor consisting
of cash, checks and other near-cash items shall be held by such Grantor in trust
for the Administrative Agent and the Secured Parties, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Administrative Agent in the exact form (except as any
Receivable subject to Retained Rights not in exact form to the extent prohibited
by applicable law, but only Proceeds in form to the extent not so prohibited)
received by such Grantor (duly endorsed by such Grantor to the Administrative
Agent, if required). All Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent in a Collateral Account maintained
under its sole dominion and control. All Proceeds while held by the
Administrative Agent in a Collateral Account (or by such Grantor in trust for
the Administrative Agent and the Secured Parties) shall continue to be held as
collateral security for all of such Grantor’s Obligations and shall not
constitute payment thereof until applied as provided in Section 6.5.
     6.5. Application of Proceeds. The proceeds received by the Administrative
Agent in respect of any sale of, collection from or other realization upon all
or any part of the Collateral pursuant to the exercise by the Administrative
Agent of its remedies shall be applied, in full or in part, together with any
other sums then held by the Administrative Agent pursuant to the Loan Documents,
promptly by the Administrative Agent as follows: first, to all fees and
reasonable costs and expenses incurred by Administrative Agent or any other
Secured Party with respect to the Credit Agreement, the other Loan Documents or
the Collateral; second, to all fees due and owing to Administrative Agent or any
other Secured Party; third, to accrued and unpaid interest on the Loan Document
Obligations; fourth, to the principal amounts of the Loan Document Obligations
outstanding; and fifth, to any other Loan Document Obligations owing to the
Administrative Agent or any other Secured Party. Any balance of such Proceeds
remaining after such

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Grantor’s Obligations (other than contingent indemnification obligations for
which no pending claim is outstanding) shall have been paid in full, no Letters
of Credit shall be outstanding (or shall have been cash collateralized or
replaced in a manner reasonably satisfactory to the Administrative Agent) and
the Commitments shall have terminated shall be turned over to whomsoever may be
lawfully entitled to receive the same.
     6.6. Code and Other Remedies.
     (a) If any Event of Default has occurred and is continuing, the
Administrative Agent, on behalf of the Secured Parties, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law (except in respect of any Receivable subject to
Retained Rights to the extent not permitted by applicable law). Without limiting
the generality of the foregoing, the Administrative Agent, without further
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below), to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived to the extent permitted by law),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker’s board or office of the Administrative Agent or any other Secured Party
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any other Secured
Party shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released.
Each Grantor further agrees, at the Administrative Agent’s request, to assemble
the Collateral and make it available to the Administrative Agent at places which
the Administrative Agent shall reasonably select, whether at such Grantor’s
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Secured Parties hereunder, including, without limitation, reasonable attorneys’
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as set forth in Section 6.5, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-615 of the New
York UCC, need the Administrative Agent account for the surplus, if any, to any
Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any other Secured Party arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least ten days before such sale or other disposition.

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     (b) If at any time when the Administrative Agent shall determine to
exercise its right to sell all or any part of the Pledged Stock pursuant to this
Section, and if such Pledged Stock or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act or the
securities laws of any state, the Administrative Agent is hereby expressly
authorized to sell such Pledged Stock or such part thereof by private sale in
such manner and under such circumstances as the Administrative Agent may deem
commercially reasonable in order that such sale may legally be effected without
such registration. The Administrative Agent shall sell all or any part of the
Pledged Stock at a price which the Administrative Agent deems commercially
reasonable under the circumstances.
     6.7. Deficiency. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay such Grantor’s Obligations and the fees and disbursements of any attorneys
employed by the Administrative Agent or any other Secured Party to collect such
deficiency.
     SECTION 7. THE ADMINISTRATIVE AGENT.
     7.1. Administrative Agent’s Appointment as Attorney-in-Fact, etc.
     (a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
     (i) in the name of such Grantor or its own name, or otherwise, take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Receivable (except
where such Receivables are subject to Retained Rights) or Contract or with
respect to, any other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys due
under any Receivable (except where such Receivables are subject to Retained
Rights) or Contract or with respect to any other Collateral whenever payable;
     (ii) in the case of any Intellectual Property owned by or licensed to the
Grantor, execute and deliver, and have recorded, any and all agreements,
instruments, documents and papers as the Administrative Agent may reasonably
request to evidence the Administrative Agent’s and the Secured Parties’ security
interest in such Intellectual Property and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby;

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     (iii) pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by the
terms of this Agreement and pay all or any part of the premiums therefor and the
costs thereof;
     (iv) execute, in connection with any sale provided for in Sections 6.6 or
6.7, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
     (v) (1) direct any party liable for any payment under any of the Collateral
(except in respect of any Receivable subject to Retained Rights) to make payment
of any and all moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral (except in respect of any Receivable subject to
Retained Rights); (3) sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against Grantors,
assignments, verifications, notices and other documents in connection with any
of the Collateral (except in respect of any Receivable subject to Retained
Rights); (4) commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral
(except in respect of any Receivable subject to Retained Rights) or any portion
thereof and to enforce any other right in respect of any Collateral (except in
respect of any Receivable subject to Retained Rights); (5) defend any suit,
action or proceeding brought against such Grantor with respect to any
Collateral; (6) settle, compromise or adjust any such suit, action or proceeding
and, in connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or
Trademark (along with the goodwill of the business to which any such Trademark
pertains), throughout the world for such term or terms, on such conditions, and
in such manner, as the Administrative Agent shall in its reasonable discretion
determine; and (8) generally, sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral (except in respect of
any Receivable subject to Retained Rights) as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes, and do,
at the Administrative Agent’s option and such Grantor’s expense, at any time, or
from time to time, all acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral (except in respect
of any Receivable subject to Retained Rights) and the Administrative Agent’s and
the Secured Parties’ security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
     Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
     (b) If any Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option during the existence
of an Event of Default, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement.

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     (c) The reasonable, out-of-pocket expenses of the Administrative Agent
incurred in connection with actions undertaken as provided in this Section 7.1
shall be payable by such Grantor to the Administrative Agent in accordance with
Section 10.5 of the Credit Agreement.
     (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
     7.2. Duty of Administrative Agent. The Administrative Agent’s sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Secured Party nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the other Secured Parties hereunder
are solely to protect the Administrative Agent’s and the Secured Parties’
interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any other Secured Party to exercise any such powers. The
Administrative Agent and the other Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to any Grantor for any act or failure to act hereunder, except
for their own gross negligence, bad faith or willful misconduct or material
breach of this Agreement or any other Loan Document.
     7.3. Execution of Financing Statements. Pursuant to the New York UCC and
any other applicable law, each Grantor authorizes the Administrative Agent to
file or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such offices as the Administrative Agent determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement; provided, that Administrative Agent shall provide the applicable
Grantor (or the Borrower) with a photocopy of any such filings. Each Grantor
authorizes the Administrative Agent to use the collateral description “all
assets of the Debtor” (as the term Debtor is defined in such financing statement
or words of similar effect). A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any jurisdiction.
     7.4. Authority of Administrative Agent. Each Grantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as

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agent for the Secured Parties with full and valid authority so to act or refrain
from acting, and no Grantor shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.
     SECTION 8. INDEMNITY, SUBROGATION AND SUBORDINATION.
     8.1. Indemnity and Subrogation. In addition to all such rights of indemnity
and subrogation as the Guarantors may have under applicable law (but subject to
Section 8.3), the Borrower agrees that (a) in the event a payment of an
obligation shall be made by any Guarantor under this Agreement, the Borrower
shall indemnify such Guarantor for the full amount of such payment and such
Guarantor shall be subrogated to the rights of the Person to whom such payment
shall have been made to the extent of such payment and (b) in the event any
assets of any Grantor shall be sold pursuant to this Agreement or any other
Security Document to satisfy in whole or in part an obligation owed to any
Secured Party, the Borrower shall indemnify such Grantor in an amount equal to
the greater of the book value or the fair market value of the assets so sold.
     8.2. Contribution and Subrogation. Each Guarantor and Grantor (a
“Contributing Party”) agrees (subject to Section 8.3) that, in the event a
payment shall be made by any other Guarantor hereunder in respect of any
Obligation or assets of any other Grantor shall be sold pursuant to any Security
Document to satisfy any Obligation owed to any Secured Party and such other
Guarantor (the “Claiming Party”) shall not have been fully indemnified by the
Borrower as provided in Section 8.1, the Contributing Party shall indemnify the
Claiming Party in an amount equal to the amount of such payment or the greater
of the book value or the fair market value of such assets, as the case may be,
in each case multiplied by a fraction of which the numerator shall be the net
worth of the Contributing Party on the date hereof and the denominator shall be
the aggregate net worth of all the Guarantors and Grantors on the date hereof
(or, in the case of any Guarantor or Grantor becoming a party hereto pursuant to
Section 9.14, the date of the supplement hereto executed and delivered by such
Guarantor or Grantor). Any Contributing Party making any payment to a Claiming
Party pursuant to this Section 8.2 shall be subrogated to the rights of such
Claiming Party under Section 8.1 to the extent of such payment.
     8.3. Subordination. (a) Notwithstanding any provision of this Agreement to
the contrary, all rights of the Guarantors and Grantors under Sections 8.1 and
8.2 and all other rights of indemnity, contribution or subrogation under
applicable law or otherwise shall be fully subordinated to the indefeasible
payment in full of the Obligations. No failure on the part of the Borrower or
any Guarantor or Grantor to make the payments required by Sections 8.1 and 8.2
(or any other payments required under applicable law or otherwise) shall in any
respect limit the obligations and liabilities of any Guarantor or Grantor with
respect to its obligations hereunder, and each Guarantor and Grantor shall
remain liable for the full amount of the obligations of such Guarantor or
Grantor hereunder.
     Each Guarantor and Grantor hereby agrees that all Indebtedness and other
monetary obligations owed by it to any other Guarantor, Grantor or any other
Subsidiary shall be fully subordinated to the payment in full of the
Obligations.
     SECTION 9. MISCELLANEOUS.

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     9.1. Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Credit Agreement.
     9.2. Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 10.2 of the Credit Agreement and shall be addressed to
such Grantor, c/o the Borrower’s address set forth in the Credit Agreement.
     9.3. No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any other Secured Party shall by any act (except by a
written instrument pursuant to Section 9.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any other
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Secured Party of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Administrative Agent or
such Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
     9.4. Enforcement Expenses; Indemnification.
     (a) Each Guarantor and Grantor agrees to pay or reimburse each Lender and
the Administrative Agent for all its reasonable, out-of-pocket costs and
expenses incurred in collecting against such Guarantor and Grantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving any rights
under this Agreement and the other Loan Documents to which such Guarantor and
Grantor is a party, including, without limitation, the reasonable fees and
disbursements of one counsel to all Lenders and of one counsel to the Agents and
of counsel to the Administrative Agent.
     (b) Each Guarantor and Grantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
     (c) Each Guarantor and Grantor agrees to pay, indemnify, and hold each
Lender and the Administrative Agent and their respective officers, directors,
employees, affiliates, agents and controlling persons (each, an “Indemnitee”)
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to such Guarantor’s and Grantor’s
Obligations under this Agreement and the other Loan Documents to which such
Guarantor or Grantor is a party to the extent the Borrower would be required to
do so under Section 10.5 of the Credit Agreement.

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     (d) The agreements in this Section 9.4 shall survive repayment of each of
the Borrower’s and the Guarantor’s Obligations and all other amounts payable
under the Loan Documents.
     9.5. Successors and Assigns. This Agreement shall be binding upon the
permitted successors and assigns of each Grantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their permitted successors and
assigns; provided that no Grantor may assign, transfer or delegate any of its
rights or obligations under this Agreement without the prior written consent of
the Administrative Agent.
     9.6. Set-Off. Each Grantor hereby irrevocably authorizes the Administrative
Agent and each Lender at any time and from time to time after the occurrence and
during the continuance of an Event of Default, without prior notice to such
Grantor, any such notice being expressly waived by such Grantor to the extent
permitted by applicable law, upon any amount becoming due and payable by such
Grantor hereunder (whether at the stated maturity of the Loan Document
Obligations, by acceleration thereof or otherwise), to set off and appropriate
and apply against such amount any and all deposits (general or special, time or
demand, provisional or final other than payroll or trust accounts), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, and whether or not fully secured, at any time held or owing by such
Lender or any branch or agency thereof to or for the credit or the account of
such Grantor, as the case may be. Each Lender agrees promptly to notify the
applicable Grantor and the Administrative Agent after any such setoff and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of the
Administrative Agent and each Lender under this Section 9.6 are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Administrative Agent or such Lender may have.
     9.7. Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
     9.8. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
     9.9. Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
     9.10. Integration. This Agreement and the other Loan Documents represent
the agreement of the Grantors, the Administrative Agent and the other Secured
Parties with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any other Secured Parties relative to subject matter hereof and thereof
not expressly set forth or referred to herein or in the other Loan Documents.

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     9.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
     9.12. Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably
and unconditionally:
     (a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
court of the United States of America for the Southern District of New York, and
appellate courts from any thereof;
     (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
     (c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
     (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
     (e) waives, to the maximum extent, not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
     9.13. Acknowledgments. Each Grantor hereby acknowledges that:
     (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
     (b) neither the Administrative Agent nor any other Secured Party has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative Agent
and other Secured Parties, on the other hand, in connection herewith or
therewith is solely that of guarantor and lender;
     (c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Grantors and the Secured Parties; and

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     (d) as between any Grantor on the one hand and the Administrative Agent or
any other Secured Party on the other band, (x) the maturity of the Loan Document
Obligations may be accelerated as provided in the Credit Agreement for the
purposes of this Agreement and the other Security Documents to which Grantor is
a party, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such Loan Document Obligations
as provided in the Credit Agreement, such Grantor’s Obligations (whether or not
due and payable) shall forthwith become due and payable by such Grantor for the
purpose of this Agreement and the other Security Documents to which it is a
party.
     9.14. Additional Grantors. Each Subsidiary of the Borrower that is required
to become a party to this Agreement pursuant to Section 6.9(c) of the Credit
Agreement shall become a Guarantor and Grantor for all purposes of this
Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.
     9.15. Authorization to Release Guarantees and Liens. Notwithstanding
anything to the contrary contained herein, the Administrative Agent is hereby
irrevocably authorized (without requirement of notice to or consent of any other
Secured Party except as expressly required by Section 10.1 of the Credit
Agreement) to take any action requested by the Grantors having the effect of
releasing any Guarantor, Collateral or Obligations to the extent necessary to
permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to in accordance with Section 10.1 of the Credit
Agreement.
     9.16. Termination or Release.
     (a) This Agreement, the Guarantees made herein, the security interest
granted hereby shall terminate when all the Loan Document Obligations (other
than Loan Document Obligations in respect of Specified Swap Agreements, Cash
Management Obligations and contingent indemnity obligations for which no claim
is pending) have been paid in full and the Lenders have no further commitment to
lend under the Credit Agreement, the exposure under the Letters of Credit has
been reduced to zero and the Issuing Lender has no further obligations to issue
Letters of Credit under the Credit Agreement.
     (b) A Subsidiary Guarantor shall automatically be released from its
obligations hereunder and the security interest in the Collateral of such
Subsidiary Guarantor shall be automatically released upon the consummation of
any transaction permitted by the Credit Agreement as a result of which such
Subsidiary Guarantor ceases to be a Subsidiary of the Borrower or is designated
as an Unrestricted Subsidiary in accordance with the Credit Agreement; provided
that the Required Lenders shall have consented to such transaction (to the
extent required by the Credit Agreement) and the terms of such consent did not
provide otherwise. The security interest in the Pledged Stock of any Subsidiary
Guarantor shall be automatically released if such Subsidiary Guarantor is
designated an Unrestricted Subsidiary in accordance with the Credit Agreement.
     (c) Holdings shall automatically be released from its obligations hereunder
subject to and pursuant to the terms of Section 10.18 of the Credit Agreement.

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     (d) Upon any sale or other transfer or disposal by any Grantor of any
Collateral that is permitted under the Credit Agreement (other than any such
transfer, sale or disposal to another Grantor), or upon the effectiveness of any
written consent to the release of the security interest granted hereby in any
Collateral pursuant to Section 10.1 of the Credit Agreement, the security
interest in such Collateral shall be automatically released.
     (e) In connection with any termination or release pursuant to paragraph
(a), (b) or (c), the Administrative Agent shall execute and deliver to any
Grantor, at such Grantor’s expense, all documents that such Grantor shall
reasonably request to evidence such termination or release and assign, transfer
and deliver to such Grantor such of the Collateral as is then being (or has
been) so sold or otherwise disposed of, or released, and as may be in the
possession of the Administrative Agent and has not theretofore been released
pursuant to this Agreement. Any execution and delivery of documents pursuant to
this Section 9.16 shall be without recourse to or warranty by the Administrative
Agent.
     9.17. WAIVER OF JURY TRIAL. EACH GUARANTOR AND GRANTOR AND, BY THEIR
ACCEPTANCE HEREOF, THE ADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES,
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
[Signature Page Follows]

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

                  NMH HOLDINGS, LLC    
 
           
 
  By:   /s/ Denis M. Holler
 
   
 
  Name:   Denis M. Holler    
 
  Title:   Executive Vice President, Chief                   Financial Officer
and Treasurer    
 
                NATIONAL MENTOR HOLDINGS, INC.    
 
           
 
  By:   /s/ Denis M. Holler
 
   
 
  Name:   Denis M. Holler    
 
  Title:   Executive Vice President, Chief                   Financial Officer
and Treasurer    
 
                CORNERSTONE LIVING SKILLS, INC.
FAMILY ADVOCACY SERVICES, LLC
FIRST STEP INDEPENDENT LIVING PROGRAM, INC.
HORRIGAN COLE ENTERPRISES, INC.
ILLINOIS MENTOR, INC.
INSTITUTE FOR FAMILY CENTERED SERVICES, INC.
LOYD’S LIBERTY HOMES, INC.
MASSACHUSETTS MENTOR, INC.
MENTOR MANAGEMENT, INC.
MENTOR MARYLAND, INC.
NATIONAL MENTOR HEALTHCARE, LLC
NATIONAL MENTOR HOLDINGS, LLC
NATIONAL MENTOR SERVICES HOLDINGS, LLC
NATIONAL MENTOR SERVICES, LLC
NATIONAL MENTOR, LLC
NEW PROVIDER, LLC
OHIO MENTOR, INC.
REM ARIZONA REHABILITATION, INC.
REM ARROWHEAD, INC.
REM CENTRAL LAKES, INC.
REM COLORADO, INC.
REM COMMUNITY OPTIONS, LLC
REM COMMUNITY PAYROLL SERVICES, LLC
REM CONNECTICUT COMMUNITY SERVICES, INC.
REM CONSULTING OF OHIO, INC.    

 

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                  REM DEVELOPMENTAL SERVICES, INC.
REM HEARTLAND, INC.
REM HENNEPIN, INC.
REM HOME HEALTH, INC.
REM INDIANA COMMUNITY SERVICES, INC.
REM INDIANA COMMUNITY SERVICES II, INC.
REM INDIANA, INC.
REM IOWA COMMUNITY SERVICES, INC.
REM IOWA, INC.
REM MANAGEMENT, INC.
REM MARYLAND, INC.
REM MINNESOTA COMMUNITY SERVICES, INC.
REM MINNESOTA, INC.
REM NEVADA, INC.
REM NEW JERSEY, INC.
REM NORTH DAKOTA, INC.
REM NORTH STAR, INC.
REM OHIO WAIVERED SERVICES, INC.
REM OHIO, INC.
REM RAMSEY, INC.
REM RIVER BLUFFS, INC.
REM SOUTH CENTRAL SERVICES, INC.
REM SOUTHWEST SERVICES, INC.
REM UTAH, INC.
REM WEST VIRGINIA, LLC
REM WISCONSIN, INC.
REM WISCONSIN II, INC.
REM WISCONSIN III, INC.
REM WOODVALE, INC.
REM, INC.
ROCKLAND CHILD DEVELOPMENT SERVICES, INC.
SOUTH CAROLINA MENTOR, INC.
TRANSITIONAL SERVICES, LLC
UNLIMITED QUEST, INC.    
 
           
 
  By:   /s/ Denis M. Holler
 
   
 
  Name:   Denis M. Holler    
 
  Title:   Executive Vice President, Chief Financial              Officer and
Treasurer    
 
                CAREMERIDIAN, LLC,
CENTER FOR COMPREHENSIVE SERVICES, INC.
LAKEVIEW BLUE RIDGE, INC.
LAKEVIEW HEALTHCARE SYSTEMS, INC.
LAKEVIEW OCEAN STATE, INC.
   

 

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                  LAKEVIEW WATERFORD, INC.
MENTOR ABI, LLC,
NEURORESTORATIVE ASSOCIATES, INC.
PROGRESSIVE LIVING UNITS SYSTEMS-NEW JERSEY, INC.
TIMBER RIDGE GROUP, INC.    
 
           
 
  By:   /s/ Denis M. Holler
 
   
 
  Name:   Denis M. Holler    
 
  Title:   Executive Vice President and Treasurer    

 

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            UBS AG, STAMFORD BRANCH, as
     Administrative Agent
      By:   /s/ Mary E. Evans         Name:   Mary E. Evans        Title:  
Associate Director, Banking Products Services, US              By:   /s/ Irja R.
Otsa         Name:   Irja R. Otsa        Title:   Associate Director, Banking
Products Services, US