Exhibit 10.2

SECURITY AND PLEDGE AGREEMENT

THIS SECURITY AND PLEDGE AGREEMENT (this “Agreement”) is entered into as of
[__________ __], 2016 among GOOD TIMES RESTAURANTS INC., a Nevada corporation
(the “Borrower”), the other parties identified as “Grantors” on the signature
pages hereto and such other parties that may become “Grantors” hereunder after
the date hereof (together with the Borrower, each individually a “Grantor”, and
collectively, the “Grantors”) and CADENCE BANK, NATIONAL ASSOCIATION, in its
capacity as administrative agent (in such capacity, the “Administrative Agent”)
for the Secured Parties.

RECITALS

WHEREAS, pursuant to that certain Credit Agreement, dated as of the date hereof
(as amended, modified, extended, restated, renewed, replaced, or supplemented
from time to time, the “Credit Agreement”) among the Borrower, the Guarantors
party thereto, the Lenders from time to time party thereto and the
Administrative Agent, the Lenders have agreed to make Loans and issue Letters of
Credit upon the terms and subject to the conditions set forth therein; and

WHEREAS, this Agreement is required by the terms of the Credit Agreement.

NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1.          Definitions.
 
(a)          Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.

(b)          The rules of construction in Section 1.02 of the Credit Agreement
are incorporated herein mutatis mutandis.

(c)          The following terms shall have the meanings set forth in the UCC
(defined below):  Accession, Account, Account Debtor, Adverse Claim,
As-Extracted Collateral, Certificated Security, Chattel Paper, Commercial Tort
Claim, Consumer Goods, Deposit Account, Document, Electronic Chattel Paper,
Equipment, Farm Products, Financial Asset, Fixtures, General Intangible, Goods,
Instrument, Inventory, Investment Company Security, Investment Property,
Letter-of-Credit Right, Manufactured Home, Payment Intangible, Proceeds,
Securities Account, Securities Intermediary, Security, Software, Supporting
Obligation and Tangible Chattel Paper.

(d)        In addition, the following terms shall have the meanings set forth
below:
 
“Collateral” has the meaning provided in Section 2 hereof.

“Control” means the manner in which “control” is achieved under the UCC with
respect to any Collateral for which the UCC specifies a method of achieving
“control”.

“Copyright License” means any agreement now or hereafter in existence, providing
for the grant by, or to, any Grantor of any rights (including, without
limitation, the grant of rights for a party to be designated as an author or
owner and/or to enforce, defend, use, display, copy, manufacture, distribute,
exploit and sell, make derivative works, and require joinder in suit and/or
receive assistance from another party) covered in whole or in part by a
Copyright.
 
 
 

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“Copyrights” means, collectively, all of the following of any Grantor: (i) all
copyrights, works protectable by copyright, copyright registrations and
copyright applications anywhere in the world, (ii) all derivative works,
counterparts, extensions and renewals of any of the foregoing, (iii) all income,
royalties, damages and payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past, present and future infringements,
violations or misappropriations of any of the foregoing, (iv) the right to sue
for past, present and future infringements, violations or misappropriations of
any of the foregoing and (v) all rights corresponding to any of the foregoing
throughout the world.

“Excluded Account” means Deposit Accounts (a) established and used (and at all
times will be used) solely for the purpose of paying current payroll obligations
of any Grantor (and which do not (and will not at any time) contain any deposits
other than those necessary to fund current payroll), in each case in the
ordinary course of business, (b) maintained (and at all times will be
maintained) solely in connection with an employee benefit plan, but solely to
the extent that all funds on deposit therein are solely held for the benefit of,
and owned by, employees of any Grantor (and will continue to be so held and
owned) pursuant to such plan, (c) deposits in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security, or (d)  having a balance at any time not in excess of $250,000
individually or $1,000,000 in the aggregate with any depositary institution.

“Intellectual Property” means, collectively, all of the following of any
Grantor: (i)  all systems software and applications software (including source
code and object code), all documentation for such software, including, without
limitation, user manuals, flowcharts, functional specifications, operations
manuals, and all formulas, processes, ideas and know-how embodied in any of the
foregoing, (ii) concepts, discoveries, improvements and ideas, know-how,
technology, reports, design information, trade secrets, practices,
specifications, test procedures, maintenance manuals, research and development,
inventions (whether or not patentable), blueprints, drawings, data, customer
lists, catalogs, and all physical embodiments of any of the foregoing, (iii)
Patents and Patent Licenses, Copyrights and Copyright Licenses, Trademarks and
Trademark Licenses and (iv) other agreements with respect to any rights in any
of the items described in the foregoing clauses (i), (ii), and (iii).

“Issuer” means the issuer of any Pledged Equity.

“Patent License” means any agreement, now or hereafter in existence, providing
for the grant by, or to, any Grantor of any rights (including, without
limitation, the right for a party to be designated as an owner and/or to
enforce, defend, make, have made, make improvements, manufacture, use, sell,
import, export, and require joinder in suit and/or receive assistance from
another party) covered in whole or in part by a Patent.

“Patents” means collectively, all of the following of any Grantor: (i) all
patents, all inventions and patent applications anywhere in the world, (ii) all
improvements, counterparts, reissues, divisional, re-examinations, extensions,
continuations (in whole or in part) and renewals of any of the foregoing and
improvements thereon, (iii) all income, royalties, damages or payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including, without limitation, damages or payments for past,
present or future infringements, violations or misappropriations of any of the
foregoing, (iv) the right to sue for past, present and future infringements,
violations or misappropriations of any of the foregoing and (v) all rights
corresponding to any of the foregoing throughout the world.

 
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“Pledged Equity” means, with respect to each Grantor, (i) 100% of the issued and
outstanding Equity Interests of each Domestic Subsidiary of the Borrower that is
directly owned by such Grantor and (ii) 65% (or such greater percentage that,
due to a change in an applicable Law after the date hereof, (A) could not
reasonably be expected to cause the undistributed earnings of such Foreign
Subsidiary as determined for United States federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary’s United States parent
and (B) could not reasonably be expected to cause any material adverse tax
consequences) of the issued and outstanding Equity Interests entitled to vote
(within the meaning of Treas. Reg. Section 1.956‑2(c)(2)) and 100% of the issued
and outstanding Equity Interests not entitled to vote (within the meaning of
Treas. Reg. Section 1.956‑2(c)(2)) in each Foreign Subsidiary of the Borrower
that is directly owned by such Grantor, including the Equity Interests of the
Subsidiaries owned by such Grantor as set forth on Schedule 5.20(f) to the
Credit Agreement (as updated from time to time in accordance with the Credit
Agreement), in each case together with the certificates (or other agreements or
instruments), if any, representing such shares, and all options and other
rights, contractual or otherwise, with respect thereto, including, but not
limited to, the following:

(1)          all Equity Interests representing a dividend thereon, or
representing a distribution or return of capital upon or in respect thereof, or
resulting from a stock split, revision, reclassification or other exchange
therefor, and any subscriptions, warrants, rights or options issued to the
holder thereof, or otherwise in respect thereof; and

(2)          in the event of any consolidation or merger involving any Issuer
and in which such Issuer is not the surviving Person, all shares of each class
of the Equity Interests of the successor Person formed by or resulting from such
consolidation or merger, to the extent that such successor Person is a direct
Subsidiary of a Grantor.

“Trademark License” means any agreement, now or hereafter in existence,
providing for the grant by, or to, any Grantor of any rights in (including,
without limitation, the right for a party to be designated as an owner and/or to
enforce, defend, use, mark, police, and require joinder in suit and/or receive
assistance from another party) covered in whole, or in part, by a Trademark.

“Trademarks” means, collectively, all of the following of any Grantor: (i) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, internet domain names, trade styles, service marks,
logos, other business identifiers, whether registered or unregistered, all
registrations and recordings thereof, and all applications in connection
therewith (other than each United States application to register any trademark
or service mark prior to the filing under applicable Law of a verified statement
of use for such trademark or service mark) anywhere in the world, (ii) all
counterparts, extensions and renewals of any of the foregoing, (iii) all income,
royalties, damages and payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past, present or future infringements,
violations, dilutions or misappropriations of any of the foregoing, (iv) the
right to sue for past, present or future infringements, violations, dilutions or
misappropriations of any of the foregoing and (v) all rights corresponding to
any of the foregoing (including the goodwill) throughout the world.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
state of New York except as such term may be used in connection with the
perfection of the Collateral and then the applicable jurisdiction with respect
to such affected Collateral shall apply.

“USPTO” means the United States Patent and Trademark Office.
 
 
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“Vehicles” means all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title under the laws of
any state, all tires and all other appurtenances to any of the foregoing.

“Work” means any work that is subject to copyright protection pursuant to Title
17 of the United States Code.

1.          Grant of Security Interest in the Collateral.  To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Grantor hereby grants to the Administrative Agent, for the benefit of the
Secured Parties, a continuing security interest in, and a right to set off
against, any and all right, title and interest of such Grantor in and to all of
the following, whether now owned or existing or owned, acquired, or arising
hereafter (collectively, the “Collateral”):  (a) all Accounts;  (b) all cash,
currency and Cash Equivalents; (c) all Chattel Paper (including Electronic
Chattel Paper and Tangible Chattel Paper); (d) those certain Commercial Tort
Claims set forth on Schedule 5.20(e) to the Credit Agreement (as updated from
time to time in accordance with the Credit Agreement); (e) all Deposit Accounts;
(f) all Documents; (g) all Equipment; (h) all Fixtures; (i) all General
Intangibles; (j) all Goods; (k) all Instruments; (l)  all Intellectual Property;
(m) all Inventory; (n) all Investment Property; (o) all Payment Intangibles; (p)
all Letter-of-Credit Rights; (q) all Pledged Equity; (r) all Securities
Accounts; (s) all Software; (t) all Supporting Obligations; (u) all Vehicles;
(v) all books and records pertaining to the Collateral; (w) all Accessions and
all Proceeds and products of any and all of the foregoing and (x) all other
personal property of any kind or type whatsoever now or hereafter owned by such
Grantor or as to which such Grantor now or hereafter has the power to transfer
interest therein.

Notwithstanding anything to the contrary contained herein, the security
interests granted under this Agreement shall not extend to (a) Excluded Property
or (b) any General Intangible, permit, lease, license, contract or other
Instrument of a Grantor to the extent the grant of a security interest in such
General Intangible, permit, lease, license, contract or other Instrument in the
manner contemplated by this Agreement, under the terms thereof or under
applicable Law, is prohibited and would result in the termination thereof or
give the other parties thereto the right to terminate, accelerate or otherwise
alter such Grantor’s rights, titles and interests thereunder (including upon the
giving of notice or the lapse of time or both); provided, further that (i) any
such limitation described in the foregoing clause (b) on the security interests
granted hereunder shall only apply to the extent that  any such prohibition or
right to terminate or accelerate or alter the Grantor’s rights could not be
rendered ineffective pursuant to the UCC or any other applicable Law (including
Debtor Relief Laws) or principles of equity and (ii) in the event of the
termination or elimination of any such prohibition or right or the requirement
for any consent contained in any applicable Law, General Intangible, permit,
lease, license, contract or other Instrument, to the extent sufficient to permit
any such item to become Collateral hereunder, or upon the granting of any such
consent, or waiving or terminating any requirement for such consent, a security
interest in such General Intangible, permit, lease, license, contract or other
Instrument shall be automatically and simultaneously granted hereunder and shall
be included as Collateral hereunder.

The Grantors and the Administrative Agent, on behalf of the Secured Parties,
hereby acknowledge and agree that the security interest created hereby in the
Collateral (a) constitutes continuing collateral security for all of the Secured
Obligations, whether now existing or hereafter arising and (b) is not to be
construed as an assignment of any Intellectual Property.

2.          Representations and Warranties.  Each Grantor hereby represents and
warrants to the Administrative Agent, for the benefit of the Secured Parties,
that until the Facility Termination Date, that:
 
 
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(a)          Ownership.  Each Grantor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same. 
There exists no Adverse Claim with respect to the Pledged Equity of such
Grantor.

(b)          Security Interest/Priority.  This Agreement creates a valid
security interest in favor of the Administrative Agent, for the benefit of the
Secured Parties, in the Collateral of such Grantor and, when properly perfected
by filing, shall constitute a valid and perfected, first priority security
interest in such Collateral (including all uncertificated Pledged Equity
consisting of partnership or limited liability company interests that do not
constitute Securities), to the extent such security interest can be perfected by
filing under the UCC, free and clear of all Liens except for Permitted Liens. 
No Grantor has authenticated any agreement authorizing any secured party
thereunder to file a financing statement, except to perfect Permitted Liens. 
The taking possession by the Administrative Agent of the certificated securities
(if any) evidencing the Pledged Equity and all other Instruments constituting
Collateral will perfect and establish the first priority of the Administrative
Agent’s security interest in all the Pledged Equity evidenced by such
certificated securities and such Instruments.

(c)          Types of Collateral.  None of the Collateral consists of, or is the
Proceeds of, (i) As-Extracted Collateral, (ii) Consumer Goods, (iii) Farm
Products, (iv) Manufactured Homes and (v) standing timber.

(d)          Equipment and Inventory.  With respect to any Equipment and/or
Inventory of a Grantor, each such Grantor has exclusive possession and control
of such Equipment and Inventory of such Grantor except for (i) Equipment leased
by such Grantor as a lessee, (ii) Equipment or Inventory in transit with common
carriers or (iii) Equipment and/or Inventory in the possession or control of a
warehouseman, bailee or any agent or processor of such Grantor to the extent
such Grantor has complied with Section 4(d).  No Inventory of a Grantor is held
by a Person other than a Grantor pursuant to consignment, sale or return, sale
on approval or similar arrangement.  Collateral consisting of Inventory is of
good and merchantable quality, free from defects.  None of such Inventory is
subject to any licensing, Patent, Trademark, trade name or Copyright with any
Person that restricts any Grantor’s ability to use, manufacture, lease, sell or
otherwise dispose of such Inventory.  The completion of the manufacturing
process of such Inventory by a Person other than the applicable Grantor would be
permitted under any contract to which such Grantor is a party or to which the
Inventory is subject.

(e)          Authorization of Pledged Equity.  All Pledged Equity (i) is duly
authorized and validly issued, (ii) is fully paid and, to the extent applicable,
nonassessable and is not subject to the preemptive rights of any Person, (iii)
is beneficially owned as of record by a Grantor and (iv) constitutes all the
issued and outstanding shares of all classes of the equity of such Issuer issued
to such Grantor.

(f)          No Other Equity Interests, Instruments, Etc.   As of the Closing
Date, (i) no Grantor owns any certificated Equity Interests in any Subsidiary
that are required to be pledged and delivered to the Administrative Agent
hereunder except as set forth on Schedule 5.20(f) to the Credit Agreement (as
updated from time to time in accordance with the Credit Agreement), and (ii) no
Grantor holds any Instruments, Documents or Tangible Chattel Paper required to
be pledged and delivered to the Administrative Agent pursuant to Section 4(b)(i)
other than as set forth on Schedule 5.20(c) to the Credit Agreement.  All such
certificated securities, Instruments, Documents and Tangible Chattel Paper have
been delivered to the Administrative Agent to the extent (A) requested by the
Administrative Agent or (B) as required by the terms of this Agreement and the
other Loan Documents.
 
 
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(g)          Partnership and Limited Liability Company Interests.  Except as
previously disclosed to the Administrative Agent, none of the Collateral
consisting of an interest in a partnership or a limited liability company (i) is
dealt in or traded on a securities exchange or in a securities market, (ii) by
its terms expressly provides that it is a Security governed by Article 8 of the
UCC, (iii) is an Investment Company Security, (iv) is held in a Securities
Account or (v) constitutes a Security or a Financial Asset.

(h)          Contracts; Agreements; Licenses.  No Grantor has any material
contracts, agreements or licenses which are non-assignable by their terms, or as
a matter of law, or which prevent the granting of a security interest therein.

(i)          Consents; Etc.  No approval, consent, exemption, authorization or
other action by, notice to, or filing with, any Governmental Authority or any
other Person (including, without limitation, any stockholder, member or creditor
of such Grantor), is necessary or required for (i) the grant by such Grantor of
the security interest in the Collateral granted hereby or for the execution,
delivery or performance of this Agreement by such Grantor, (ii) the perfection
of such security interest (to the extent such security interest can be perfected
by filing under the UCC, the granting of control (to the extent required under
Section 4(b) hereof) or by filing an appropriate notice with the USPTO or the
United States Copyright Office) or (iii) the exercise by the Administrative
Agent or the Secured Parties of the rights and remedies provided for in this
Agreement (including, without limitation, as against any Issuer), except for
(A) the filing or recording of UCC financing statements, (B) the filing of
appropriate notices with the USPTO and the United States Copyright Office,
(C) obtaining control to perfect the Liens created by this Agreement (to the
extent required under Section 4(b) hereof), (D) such actions as may be required
by Laws affecting the offering and sale of securities, (E) such actions as may
be required by applicable foreign Laws affecting the pledge of the Pledged
Equity of Foreign Subsidiaries, (F) consents, authorizations, filings or other
actions which have been obtained or made, and (G) as may be required with
respect to motor vehicles registered under a certificate of title.

(j)          Commercial Tort Claims.  As of the Closing Date, no Grantor has any
Commercial Tort Claims seeking damages in excess of $250,000 other than as set
forth on Schedule 5.20(e) to the Credit Agreement (as updated from time to time
in accordance with the Credit Agreement).

(k)          Copyrights, Patents and Trademarks.  To the best of each Grantor’s
knowledge:

(i)          All Intellectual Property of such Grantor is valid, subsisting,
unexpired, enforceable and has not been abandoned.

(ii)         No holding, decision or judgment has been rendered by any
Governmental Authority that would limit, cancel or question the validity of any
Intellectual Property of any Grantor.

(iii)        All applications pertaining to the Copyrights, Patents and
Trademarks of each Grantor have been duly and properly filed, and all
registrations or letters pertaining to such Copyrights, Patents and Trademarks
have been duly and properly filed and issued.

(iv)        No Grantor has made any assignment or agreement in conflict with the
security interest in the Intellectual Property of any Grantor hereunder.
 
 
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(v)         Each Grantor and each of its Subsidiaries, own, or possess the right
to use, all of the Intellectual Property that is reasonably necessary for the
operation of their respective businesses, without conflict with the rights of
any other Person.

(vi)        No proceeding, claim or litigation regarding any of the foregoing is
pending or, to the best knowledge of such Grantor, threatened, which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
 
3.          Covenants. Each Grantor covenants that until the Facility
Termination Date, that such Grantor shall:

(a)          Maintenance of Perfected Security Interest; Further Information.

(i)  Maintain the security interest created by this Agreement as a first
priority perfected security interest (subject only to Permitted Liens) and shall
defend such security interest against the claims and demands of all Persons
whomsoever (other than the holders of Permitted Liens).

(ii)  From time to time furnish to the Administrative Agent upon the
Administrative Agent’s or any Lender’s reasonable request, statements and
schedules further identifying and describing the assets and property of such
Grantor and such other reports in connection therewith as the Administrative
Agent or such Lender may reasonably request, all in reasonable detail.

(b) Perfection through Possession and Control.

(i)  If any amount in excess of $250,000 payable under or in connection with any
of the Collateral shall be or become evidenced by any Instrument or Tangible
Chattel Paper or Supporting Obligation, or if any property constituting
Collateral shall be stored or shipped subject to a Document, ensure that such
Instrument, Tangible Chattel Paper, Supporting Obligation or Document is either
in the possession of such Grantor at all times or, if requested by the
Administrative Agent to perfect its security interest in such Collateral, is
delivered to the Administrative Agent duly endorsed in a manner satisfactory to
the Administrative Agent.  Such Grantor shall ensure that any Collateral
consisting of Tangible Chattel Paper is marked with a legend acceptable to the
Administrative Agent indicating the Administrative Agent’s security interest in
such Tangible Chattel Paper.

(ii)  Deliver to the Administrative Agent promptly upon the receipt thereof by
or on behalf of a Grantor, all certificates and instruments constituting
Certificated Securities or Pledged Equity.  Prior to delivery to the
Administrative Agent, all such certificates constituting Pledged Equity shall be
held in trust by such Grantor for the benefit of the Administrative Agent
pursuant hereto.  All such certificates representing Pledged Equity shall be
delivered in suitable form for transfer by delivery or shall be accompanied by
duly executed instruments of transfer or assignment in blank, substantially in
the form provided in Exhibit A hereto or other form acceptable to the
Administrative Agent.

(iii)  If any Collateral shall consist of Deposit Accounts (other than any
Excluded Accounts or any Deposit Account maintained with Cadence Bank),
Electronic Chattel Paper, Letter-of-Credit Rights, Securities Accounts or
uncertificated Investment Property, execute and deliver (and, with respect to
any Collateral consisting of a Securities Account or uncertificated Investment
Property, cause the Securities Intermediary or the Issuer, as applicable, with
respect to such Investment Property to execute and deliver) to the
Administrative Agent all control agreements, assignments, instruments or other
documents, in each case, only to the extent requested by the Administrative
Agent for the purposes of obtaining and maintaining Control of such Collateral.
 
 
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(c)          Filing of Financing Statements, Notices, etc.  Each Grantor shall
execute and deliver to the Administrative Agent and/or file such agreements,
assignments or instruments (including affidavits, notices, reaffirmations and
amendments and restatements of existing documents, as the Administrative Agent
may reasonably request) and do all such other things as the Administrative Agent
may reasonably deem necessary or appropriate (i) to assure to the Administrative
Agent its security interests hereunder, including (A) such instruments as the
Administrative Agent may from time to time reasonably request in order to
perfect and maintain the security interests granted hereunder in accordance with
the UCC, including, without limitation, financing statements (including
continuation statements), (B) with regard to Copyrights, a Notice of Grant of
Security Interest in Copyrights substantially in the form of Exhibit B or other
form acceptable to the Administrative Agent, (C) with regard to Patents, a
Notice of Grant of Security Interest in Patents for filing with the USPTO
substantially in the form of Exhibit C or other form acceptable to the
Administrative Agent and (D) with regard to Trademarks, a Notice of Grant of
Security Interest in Trademarks for filing with the USPTO substantially in the
form of Exhibit D or other form acceptable to the Administrative Agent, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise protect
and assure the Administrative Agent of its rights and interests hereunder. 
Furthermore, each Grantor also hereby irrevocably makes, constitutes and
appoints the Administrative Agent, its nominee or any other person whom the
Administrative Agent may designate, as such Grantor’s attorney in fact with full
power and for the limited purpose to prepare and file (and, to the extent
applicable, sign) in the name of such Grantor any financing statements, or
amendments and supplements to financing statements, renewal financing
statements, notices or any similar documents which in the Administrative Agent’s
reasonable discretion would be necessary or appropriate in order to perfect and
maintain perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable until the
Facility Termination Date.  Each Grantor hereby agrees that a carbon,
photographic or other reproduction of this Agreement or any such financing
statement is sufficient for filing as a financing statement by the
Administrative Agent without notice thereof to such Grantor wherever the
Administrative Agent may in its sole discretion desire to file the same.

(d)          Collateral Held by Warehouseman, Bailee, etc.
 
(i)          Upon the request of the Administrative Agent, if any Collateral is
at any time in the possession or control of a warehouseman, bailee or any agent
or processor of such Grantor and the Administrative Agent so requests, (A)
notify such Person in writing of the Administrative Agent’s security interest
for the benefit of the Secured Parties in such Collateral, (B) instruct such
Person to hold all such Collateral for the Administrative Agent’s account and
subject to the Administrative Agent’s instructions and (C) unless otherwise
consented to in writing by the Administrative Agent, obtain (1) a written
acknowledgment from such Person that it is holding such Collateral for the
benefit of the Administrative Agent and (2) such other documentation required by
the Administrative Agent (including, without limitation, subordination and
access agreements).

(ii)          Upon the request of the Administrative Agent, perfect and protect
such Grantor’s ownership interests in all Inventory stored with a consignee
against creditors of the consignee by filing and maintaining financing
statements against the consignee reflecting the consignment arrangement filed in
all appropriate filing offices, providing any written notices required by the
UCC to notify any prior creditors of the consignee of the consignment
arrangement, and taking such other actions as may be appropriate to perfect and
protect such Grantor’s interests in such inventory under Section 2-326, Section
9-103, Section 9-324 and Section 9-505 of the UCC or otherwise, which such
financing statements filed pursuant to this Section shall be assigned to the
Administrative Agent, for the benefit of the Secured Parties.
 
 
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(e)          Commercial Tort Claims.  Execute and deliver such statements,
documents and notices and do and cause to be done all such things as may be
required by the Administrative Agent, or required by Law to create, preserve,
perfect and maintain the Administrative Agent’s security interest in any
Commercial Tort Claims seeking damages in excess of $250,000 initiated by or in
favor of any Grantor.

(f)          Inventory.  With respect to the Inventory of each Grantor:

(i)          At all times maintain inventory records reasonably satisfactory to
the Administrative Agent.

(ii)          Produce, use, store and maintain the Inventory with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with applicable Laws (including the requirements of the
Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations
and orders related thereto).
 
(g)          Books and Records.  Mark its books and records (and shall cause the
Issuer of the Pledged Equity of such Grantor to mark its books and records) to
reflect the security interest granted pursuant to this Agreement.

(h)          Nature of Collateral.  At all times maintain the Collateral as
personal property and not affix any of the Collateral to any real property in a
manner which would change its nature from personal property to real property or
a Fixture to real property, unless the Administrative Agent shall have a
perfected Lien on such Fixture or real property.

(i)          Issuance or Acquisition of Equity Interests in Partnerships or
Limited Liability Companies.

(i)          Not without executing and delivering, or causing to be executed and
delivered, to the Administrative Agent such agreements, documents and
instruments as the Administrative Agent may reasonably require, issue or acquire
any Pledged Equity consisting of an interest in a partnership or a limited
liability company that (A) is dealt in or traded on a securities exchange or in
a securities market, (B) by its terms expressly provides that it is a Security
governed by Article 8 of the UCC, (C) is an investment company security, (D) is
held in a Securities Account or (E) constitutes a Security or a Financial Asset.

(ii)          Without the prior written consent of the Administrative Agent, no
Grantor will (A) vote to enable, or take any other action to permit, any
applicable Issuer to issue any Investment Property or Equity Interests
constituting partnership or limited liability company interests, except for
those additional Investment Property or Equity Interests constituting
partnership or limited liability company interests that will be subject to the
security interest granted herein in favor of the Secured Parties, or (B) enter
into any agreement or undertaking, except in connection with a Disposition
permitted under Section 7.05 of the Credit Agreement, restricting the right or
ability of such Grantor or the Administrative Agent to sell, assign or transfer
any Investment Property or Pledged Equity or Proceeds thereof.  The Grantors
will defend the right, title and interest of the Administrative Agent in and to
any Investment Property and Pledged Equity against the claims and demands of all
Persons whomsoever.
 
 
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(iii)          If any Grantor shall become entitled to receive or shall receive
(A) any Certificated Securities (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
ownership interests of any Issuer, whether in addition to, in substitution of,
as a conversion of, or in exchange for, any Investment Property, or otherwise in
respect thereof, or (B) any sums paid upon or in respect of any Investment
Property upon the liquidation or dissolution of any Issuer, such Grantor shall
accept the same as the agent of the Secured Parties, hold the same in trust for
the Secured Parties, segregated from other funds of such Grantor, and promptly
deliver the same to the Administrative Agent, on behalf of the Secured Parties,
in accordance with the terms hereof.

(j) Intellectual Property.

 
(i)          Not do any act or omit to do any act whereby any material Copyright
may become invalidated and (A) not do any act, or omit to do any act, whereby
any material Copyright may become injected into the public domain; (B) notify
the Administrative Agent immediately if it knows that any material Copyright may
become injected into the public domain or of any materially adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any court or tribunal in the United
States or any other country) regarding a Grantor’s ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall deem
appropriate under the circumstances, to maintain and pursue each application
(and to obtain the relevant registration) of each material Copyright owned by a
Grantor and to maintain each registration of each material Copyright owned by a
Grantor including, without limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Administrative Agent of any material
infringement, misappropriation, dilution or impairment of any Copyright of a
Grantor of which it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright, including,
where appropriate, the bringing of suit for infringement, dilution or impairment
or seeking injunctive relief and seeking to recover any and all damages for such
infringement, misappropriation, dilution or impairment.

(ii)          Not make any assignment or agreement in conflict with the security
interest in the Copyrights of each Grantor hereunder (except as permitted by the
Credit Agreement).

(iii)         (A) Continue to use each material Trademark 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 maintain such Trademark
in full force free from any claim of abandonment for non-use, (B) maintain as in
the past the quality of products and services offered under such Trademark, (C)
employ such Trademark with the appropriate notice of registration, if
applicable, (D) not adopt or use any mark that is confusingly similar or a
colorable imitation of such Trademark unless the Administrative Agent, for the
benefit of the Secured Parties, shall obtain a perfected security interest in
such mark pursuant to this Agreement, and (E) not (and not permit any licensee
or sublicensee thereof to) do any act or omit to do any act whereby any such
Trademark may become invalidated.
 
 
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(iv)        Not do any act, or omit to do any act, whereby any material Patent
may become abandoned or dedicated.

(v)         Notify the Administrative Agent and the Secured Parties immediately
if it knows that any application or registration relating to any material Patent
or Trademark may become abandoned or dedicated, or of any materially adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the USPTO or any
court or tribunal in any country) regarding such Grantor’s ownership of any
Patent or Trademark or its right to register the same or to keep and maintain
the same.

(vi)        Take all reasonable and necessary steps, including, without
limitation, in any proceeding before the USPTO, or any similar office or agency
in any other country or any political subdivision thereof, to maintain and
pursue each application (and to obtain the relevant registration) and to
maintain each registration of each material Patent and Trademark, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.

(vii)       Promptly notify the Administrative Agent and the Secured Parties
after it learns that any material Patent or Trademark included in the Collateral
is infringed, misappropriated, diluted or impaired by a third party and promptly
sue for infringement, misappropriation, dilution or impairment, to seek
injunctive relief where appropriate and to recover any and all damages for such
infringement, misappropriation, dilution  or impairment, or to take such other
actions as it shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.

(viii)      Not make any assignment or agreement in conflict with the security
interest in the Patents or Trademarks of each Grantor hereunder (except as
permitted by the Credit Agreement).

(ix)         Grant to the Administrative Agent a royalty free license to use
such Grantor’s Intellectual Property in connection with the enforcement of the
Administrative Agent’s rights hereunder, but only to the extent any license or
agreement granting such Grantor rights in such Intellectual Property do not
prohibit such use by the Administrative Agent.

Notwithstanding the foregoing, the Grantors may, in their reasonable business
judgment, fail to maintain, pursue, preserve or protect any Copyright, Patent or
Trademark which is not material to their businesses.

4.          Authorization to File Financing Statements.  Each Grantor hereby
authorizes the Administrative Agent to prepare and file such financing
statements (including continuation statements) or amendments thereof or
supplements thereto or other instruments as the Administrative Agent may from
time to time deem necessary or appropriate in order to perfect and maintain the
security interests granted hereunder in accordance with the UCC, which such
financing statements may describe the Collateral in the same manner as described
herein or may contain an indication or description of Collateral that describes
such property in any other manner as the Administrative Agent may determine, in
its sole discretion, is necessary, advisable or prudent to ensure the perfection
of the security interest in the Collateral granted herein, including, without
limitation, describing such property as “all assets, whether now owned or
hereafter acquired” or “all personal property, whether now owned or hereafter
acquired.”
 
 
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5.          Advances.  On failure of any Grantor to perform any of the covenants
and agreements contained herein or in any other Loan Document, the
Administrative Agent may, at its sole option and in its sole discretion, perform
the same and in so doing may expend such sums as the Administrative Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures which the
Administrative Agent may make for the protection of the security hereof or which
may be compelled to make by operation of Law.  All such sums and amounts so
expended shall be repayable by the Grantors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the Default Rate.  No such performance of any covenant
or agreement by the Administrative Agent on behalf of any Grantor, and no such
advance or expenditure therefor, shall relieve the Grantors of any Default or
Event of Default.  The Administrative Agent may make any payment hereby
authorized in accordance with any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by a Grantor
in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
 
 
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6.          Remedies.
 
(a)          General Remedies.  Upon the occurrence of an Event of Default and
during continuation thereof, the Administrative Agent on behalf of the Secured
Parties shall have, in addition to the rights and remedies provided herein, in
the Loan Documents, in any other documents relating to the Secured Obligations,
or by any applicable Law (including, but not limited to, levy of attachment,
garnishment and the rights and remedies set forth in the UCC of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a secured
party under the UCC (regardless of whether the UCC is the law of the
jurisdiction where the rights and remedies are asserted and regardless of
whether the UCC applies to the affected Collateral), and further, the
Administrative Agent may, with or without judicial process or the aid and
assistance of others, (i) enter on any premises on which any of the Collateral
may be located and, without resistance or interference by the Grantors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Grantors to assemble and make available to the
Administrative Agent at the expense of the Grantors any Collateral at any place
and time designated by the Administrative Agent which is reasonably convenient
to both parties, (iv) remove any Collateral from any such premises for the
purpose of effecting sale or other disposition thereof, and/or (v) without
demand and without advertisement, notice, hearing or process of law, all of
which each of the Grantors hereby waives to the fullest extent permitted by Law,
at any place and time or times, 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 any or all
Collateral held by or for it at public or private sale (which in the case of a
private sale of Pledged Equity, shall be to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution or
resale thereof), at any exchange or broker’s board or elsewhere, by one or more
contracts, in one or more parcels, for money, upon credit or otherwise, at such
prices and upon such terms as the Administrative Agent deems advisable, in its
sole discretion (subject to any and all mandatory legal requirements). Each
Grantor acknowledges that any such private sale may be at prices and on terms
less favorable to the seller than the prices and other terms which might have
been obtained at a public sale and, notwithstanding the foregoing, agrees that
such private sale shall be deemed to have been made in a commercially reasonable
manner and, in the case of a sale of Pledged Equity, that the Administrative
Agent shall have no obligation to delay sale of any such securities for the
period of time necessary to permit the Issuer of such securities to register
such securities for public sale under the Securities Act of 1933.  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 applicable Law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold.  Neither the Administrative Agent’s compliance with
applicable Law nor its disclaimer of warranties relating to the Collateral shall
be considered to adversely affect the commercial reasonableness of any sale.  To
the extent the rights of notice cannot be legally waived hereunder, each Grantor
agrees that any requirement of reasonable notice shall be met if such notice,
specifying the place of any public sale or the time after which any private sale
is to be made, is personally served on or mailed, postage prepaid, to the
Borrower in accordance with the notice provisions of Section 11.02 of the Credit
Agreement at least 10 days before the time of sale or other event giving rise to
the requirement of such notice.  Each Grantor further acknowledges and agrees
that any offer to sell any Pledged Equity which has been (A) publicly advertised
on a bona fide basis in a newspaper or other publication of general circulation
in the financial community of New York, New York (to the extent that such offer
may be advertised without prior registration under the Securities Act of 1933),
or (B) made privately in the manner described above shall be deemed to involve a
“public sale” under the UCC, notwithstanding that such sale may not constitute a
“public offering” under the Securities Act of 1933, and the Administrative Agent
may, in such event, bid for the purchase of such securities.  The Administrative
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given.  To the extent permitted by
applicable Law, any Secured Party may be a purchaser at any such sale.  To the
extent permitted by applicable Law, each of the Grantors hereby waives all of
its rights of redemption with respect to any such sale.  Subject to the
provisions of applicable Law, the Administrative Agent may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
to the extent permitted by Law, be made at the time and place to which the sale
was postponed, or the Administrative Agent may further postpone such sale by
announcement made at such time and place.  To the extent permitted by applicable
Law, each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent or any Secured Party arising out of the exercise by
them of any rights hereunder except to the extent any such claims, damages or
demands result solely from the gross negligence or willful misconduct of the
Administrative Agent or any other Secured Party as determined by a final
non-appealable judgment of a court of competent jurisdiction, in each case
against whom such claim is asserted.  Each Grantor agrees that the internet
shall constitute a “place” for purposes of Section 9-610(b) of the UCC and that
any sale of Collateral to a licensor pursuant to the terms of a license
agreement between such licensor and a Grantor is sufficient to constitute a
commercially reasonable sale (including as to method, terms, manner, and time)
within the meaning of Section 9-610 of the UCC.
 

(b) Remedies Relating to Accounts.

 
(i)          During the continuation of an Event of Default, whether or not the
Administrative Agent has exercised any or all of its rights and remedies
hereunder, (A) promptly upon the request of the Administrative Agent, each
Grantor  shall notify (such notice to be in form and substance satisfactory to
the Administrative Agent) its Account Debtors and parties to the Material
Contracts subject to a security interest hereunder that such Accounts and the
Material Contracts have been assigned to the Administrative Agent, for the
benefit of the Secured Parties, instruct all account debtors to remit all
payments in respect of Accounts to a mailing location selected by the
Administrative Agent and (B) the Administrative Agent shall have the right to
enforce any Grantor’s rights against its customers and account debtors, and the
Administrative Agent or its designee may notify any Grantor’s customers and
account debtors that the Accounts of such Grantor have been assigned to the
Administrative Agent or of the Administrative Agent’s security interest therein,
and may (either in its own name or in the name of a Grantor or both) demand,
collect (including without limitation by way of a lockbox arrangement), receive,
take receipt for, sell, sue for, compound, settle, compromise and give
acquittance for any and all amounts due or to become due on any Account, and, in
the Administrative Agent’s discretion, file any claim or take any other action
or proceeding to protect and realize upon the security interest of the Secured
Parties in the Accounts.
 
 
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(ii)          Each Grantor acknowledges and agrees that the Proceeds of its
Accounts remitted to or on behalf of the Administrative Agent in accordance with
the provisions hereof shall be solely for the Administrative Agent’s own
convenience and that such Grantor shall not have any right, title or interest in
such Accounts or in any such other amounts except as expressly provided herein. 
Neither the Administrative Agent nor the Secured Parties shall have any
liability or responsibility to any Grantor for acceptance of a check, draft or
other order for payment of money bearing the legend “payment in full” or words
of similar import or any other restrictive legend or endorsement or be
responsible for determining the correctness of any remittance.

(iii)         During the continuation of an Event of Default, (A) the
Administrative Agent shall have the right, but not the obligation, to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the Grantors shall furnish all such
assistance and information as the Administrative Agent may require in connection
with such test verifications, (B) upon the Administrative Agent’s request and at
the expense of the Grantors, the Grantors shall cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts and (C) the
Administrative Agent in its own name or in the name of others may communicate
with account debtors on the Accounts to verify with them to the Administrative
Agent’s satisfaction the existence, amount and terms of any Accounts.
 
(c)          Investment Property/Pledged Equity.  Upon the occurrence of an
Event of Default and during the continuation thereof:  the Administrative Agent
shall have the right to receive any and all cash dividends, payments or
distributions made in respect of any Investment Property or Pledged Equity or
other Proceeds paid in respect of any Investment Property or Pledged Equity, and
any or all of any Investment Property or Pledged Equity may, at the option of
the Administrative Agent, be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (i) all voting, corporate and other rights pertaining to such
Investment Property, or any such Pledged Equity at any meeting of shareholders,
partners or members of the relevant Issuers or otherwise and (ii) any and all
rights of conversion, exchange and subscription and any other rights, privileges
or options pertaining to such Investment Property or Pledged Equity 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 or Pledged
Equity upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate, partnership or limited liability company
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 or Pledged Equity, and in connection therewith, the right to
deposit and deliver any and all of the Investment Property or Pledged Equity
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except 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 the Administrative Agent and
the other Secured Parties shall not be responsible for any failure to do so or
delay in so doing.  In furtherance thereof, each Grantor hereby authorizes and
instructs each Issuer with respect to any Collateral consisting of Investment
Property and/or Pledged Equity to (A) comply with any instruction received by it
from the Administrative Agent in writing that (1) states that an Event of
Default has occurred and is continuing and (2) 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 following receipt of such notice and prior to notice that such Event
of Default is no longer continuing, and (B) except as otherwise expressly
permitted hereby, pay any dividends, distributions or other payments with
respect to any Investment Property or Pledged Equity directly to the
Administrative Agent.  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 this Section 7, each Grantor shall be permitted to receive
all cash dividends, payments or other distributions made in respect of any
Investment Property and any Pledged Equity, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
other corporate, company and partnership rights with respect to any Investment
Property and Pledged Equity to the extent not inconsistent with the terms of
this Agreement and the other Loan Documents.
 
 
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(d)         Access.  In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuance thereof, the
Administrative Agent shall have the right to enter and remain upon the various
premises of the Grantors without cost or charge to the Administrative Agent, and
use the same, together with materials, supplies, books and records of the
Grantors for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise.  In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.  If the Administrative Agent exercises its right to take possession
of the Collateral, each Grantor shall also at its expense perform any and all
other steps reasonably requested by the Administrative Agent to preserve and
protect the security interest hereby granted in the Collateral, such as placing
and maintaining signs indicating the security interest of the Administrative
Agent, appointing overseers for the Collateral and maintaining inventory
records.

(e)          Nonexclusive Nature of Remedies.  Failure by the Administrative
Agent or the Secured Parties to exercise any right, remedy or option under this
Agreement, any other Loan Document, any other document relating to the Secured
Obligations, or as provided by Law, or any delay by the Administrative Agent or
the Secured Parties in exercising the same, shall not operate as a waiver of any
such right, remedy or option.  No waiver hereunder shall be effective unless it
is in writing, signed by the party against whom such waiver is sought to be
enforced and then only to the extent specifically stated, which in the case of
the Administrative Agent or the Secured Parties shall only be granted as
provided herein.  To the extent permitted by Law, neither the Administrative
Agent, the Secured Parties, nor any party acting as attorney for the
Administrative Agent or the Secured Parties, shall be liable hereunder for any
acts or omissions or for any error of judgment or mistake of fact or law other
than their gross negligence or willful misconduct hereunder as determined by a
final non-appealable judgment of a court of competent jurisdiction.  The rights
and remedies of the Administrative Agent and the Secured Parties under this
Agreement shall be cumulative and not exclusive of any other right or remedy
which the Administrative Agent or the Secured Parties may have.
 
 
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(f)          Retention of Collateral.  In addition to the rights and remedies
hereunder, the Administrative Agent may, in compliance with Sections 9-620 and
9-621 of the UCC or otherwise complying with the requirements of applicable Law
of the relevant jurisdiction, accept or retain the Collateral in satisfaction of
the Secured Obligations.  Unless and until the Administrative Agent shall have
provided such notices, however, the Administrative Agent shall not be deemed to
have retained any Collateral in satisfaction of any Secured Obligations for any
reason.

(g)          Waiver; Deficiency.  Each Grantor hereby waives, to the extent
permitted by applicable Laws, all rights of redemption, appraisement, valuation,
stay, extension or moratorium now or hereafter in force under any applicable
Laws in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof.  In the event that the
proceeds of any sale, collection or realization are insufficient to pay all
amounts to which the Administrative Agent or the Secured Parties are legally
entitled, the Grantors shall be jointly and severally liable for the deficiency,
together with interest thereon at the Default Rate, together with the costs of
collection and the fees, charges and disbursements of counsel.  Any surplus
remaining after the full payment and satisfaction of the Secured Obligations
shall be returned to the Grantors or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
 
(h)          Registration Rights.
 
(i)  If the Administrative Agent shall determine that in order to exercise its
right to sell any or all of the Collateral it is necessary or advisable to have
such Collateral registered under the provisions of the Securities Act (any such
Collateral, the “Restricted Securities Collateral”), the relevant Grantor will
cause each applicable Issuer (and the officers and directors thereof) that is a
Grantor or a Subsidiary of a Grantor to (A) execute and deliver all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register such Restricted Securities Collateral, or that portion thereof to be
sold, under the provisions of the Securities Act, (B) use its commercially
reasonable efforts to cause the registration statement relating thereto to
become effective and to remain effective for a period of one year from the date
of the first public offering of such Restricted Securities Collateral, or that
portion thereof to be sold, and (C) make all amendments thereto and/or to the
related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto.  Each Grantor agrees to cause each applicable
Issuer (and the officers and directors thereof) to comply with the provisions of
the securities or “Blue Sky” laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its security
holders, as soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of the Securities Act.

(ii)  Each Grantor agrees to use its commercially reasonable efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Restricted Securities Collateral valid and
binding and in compliance with any and all other applicable Laws.  Each Grantor
further agrees that a breach of any of the covenants contained in this Section 7
will cause irreparable injury to the Administrative Agent and the other Secured
Parties, that the Administrative Agent and the other Secured Parties have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
 
 
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7.          Rights of the Administrative Agent.
 
(a)          Power of Attorney.  In addition to other powers of attorney
contained herein, each Grantor hereby designates and appoints the Administrative
Agent, on behalf of the Secured Parties, and each of its designees or agents, as
attorney-in-fact of such Grantor, irrevocably and with power of substitution,
with authority to take any or all of the following actions upon the occurrence
and during the continuance of an Event of Default:

(i)          to demand, collect, settle, compromise, adjust, give discharges and
releases, all as the Administrative Agent may reasonably determine;

(ii)          to commence and prosecute any actions at any court for the
purposes of collecting any Collateral and enforcing any other right in respect
thereof;

(iii)         to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Administrative Agent
may deem reasonably appropriate;

(iv)         to receive, open and dispose of mail addressed to a Grantor and
endorse checks, notes, drafts, acceptances, money orders, bills of lading,
warehouse receipts or other instruments or documents evidencing payment,
shipment or storage of the goods giving rise to the Collateral of such Grantor
on behalf of and in the name of such Grantor, or securing, or relating to such
Collateral;

(v)          to sell, assign, transfer, make any agreement in respect of, or
otherwise deal with or exercise rights in respect of, any Collateral or the
goods or services which have given rise thereto, as fully and completely as
though the Administrative Agent were the absolute owner thereof for all
purposes;

(vi)         to adjust and settle claims under any insurance policy relating
thereto;

(vii)        to execute and deliver all assignments, conveyances, statements,
financing statements, continuation financing statements, security agreements,
affidavits, notices and other agreements, instruments and documents that the
Administrative Agent may determine necessary in order to perfect and maintain
the security interests and liens granted in this Agreement and in order to fully
consummate all of the transactions contemplated herein;

(viii)       to institute any foreclosure proceedings that the Administrative
Agent may deem appropriate;

(ix)         to sign and endorse any drafts, assignments, proxies, stock powers,
verifications, notices and other documents relating to the Collateral;

(x)          to exchange any of the Pledged Equity or other property upon any
merger, consolidation, reorganization, recapitalization or other readjustment of
the Issuer thereof and, in connection therewith, deposit any of the Pledged
Equity with any committee, depository, transfer agent, registrar or other
designated agency upon such terms as the Administrative Agent may reasonably
deem appropriate;

 
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(xi)         to vote for a shareholder resolution, or to sign an instrument in
writing, sanctioning the transfer of any or all of the Pledged Equity into the
name of the Administrative Agent or one or more of the Secured Parties or into
the name of any transferee to whom the Pledged Equity or any part thereof may be
sold pursuant to Section 7 hereof;

(xii)        to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;

(xiii)       to direct any parties liable for any payment in connection with any
of the Collateral to make payment of any and all monies due and to become due
thereunder directly to the Administrative Agent or as the Administrative Agent
shall direct;

(xiv)       to receive payment of and receipt for any and all monies, claims,
and other amounts due and to become due at any time in respect of or arising out
of any Collateral;

(xv)        in the case of any Intellectual Property, execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the security interests created
hereby in such Intellectual Property and the goodwill and General Intangibles of
such Grantor relating thereto or represented thereby; and

(xvi)       do and perform all such other acts and things as the Administrative
Agent may reasonably deem to be necessary, proper or convenient in connection
with the Collateral.
 
This power of attorney is a power coupled with an interest and shall be
irrevocable until the Facility Termination Date.  The Administrative Agent shall
be under no duty to exercise or withhold the exercise of any of the rights,
powers, privileges and options expressly or implicitly granted to the
Administrative Agent in this Agreement, and shall not be liable for any failure
to do so or any delay in doing so.  The Administrative Agent shall not be liable
for any act or omission or for any error of judgment or any mistake of fact or
law in its individual capacity or its capacity as attorney-in-fact except acts
or omissions resulting from its gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction.  This power of attorney is conferred on the Administrative Agent
solely to protect, preserve and realize upon its security interest in the
Collateral and shall not impose any duty upon the Administrative Agent or any
other Secured Party to exercise any such powers.
 
(b)          Assignment by the Administrative Agent. The Administrative Agent
may from time to time assign the Secured Obligations to a successor
Administrative Agent appointed in accordance with the Credit Agreement, and such
successor shall be entitled to all of the rights and remedies of the
Administrative Agent under this Agreement in relation thereto.

(c)          The Administrative Agent’s Duty of Care.  Other than the exercise
of reasonable care to assure the safe custody of the Collateral while being held
by the Administrative Agent hereunder, the Administrative Agent shall have no
duty or liability to preserve rights pertaining thereto, it being understood and
agreed that the Grantors shall be responsible for preservation of all rights in
the Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Grantors.  The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own property, which shall be no
less than the treatment employed by a reasonable and prudent agent in the
industry, it being understood that the Administrative Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any of the Collateral.  In the event of a public or
private sale of Collateral pursuant to Section 7 hereof, the Administrative
Agent shall have no responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Collateral, whether or not the Administrative Agent has or is
deemed to have knowledge of such matters, or (ii) taking any steps to clean,
repair or otherwise prepare the Collateral for sale.
 
 
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(d)          Liability with Respect to Accounts.  Anything herein to the
contrary notwithstanding, each of the Grantors shall remain liable under each of
the Accounts 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 to each such Account.  Neither the Administrative Agent
nor any Secured Party shall have any obligation or liability under any Account
(or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Administrative Agent or any Secured Party of any
payment relating to such Account pursuant hereto, nor shall the Administrative
Agent or any Secured Party be obligated in any manner to perform any of the
obligations of a Grantor under or pursuant to any Account (or any agreement
giving rise thereto), 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 under any Account (or any agreement giving rise
thereto), 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.
 
(e)          Releases of Collateral.

(i)          If any Collateral shall be sold, transferred or otherwise disposed
of by any Grantor in a transaction permitted by the Credit Agreement, then the
Administrative Agent, at the request and sole expense of such Grantor, shall
promptly execute and deliver to such Grantor all releases and other documents,
and take such other action, reasonably necessary for the release of the Liens
created hereby or by any other Collateral Document on such Collateral.

(ii)          The Administrative Agent may release any of the Pledged Equity
from this Agreement or may substitute any of the Pledged Equity for other
Pledged Equity without altering, varying or diminishing in any way the force,
effect, lien, pledge or security interest of this Agreement as to any Pledged
Equity not expressly released or substituted, and this Agreement shall continue
as a first priority lien on all Pledged Equity not expressly released or
substituted.

8.          Application of Proceeds.  After the exercise of remedies provided
for in Section 8.02 of the Credit Agreement (or after the Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in Section
8.02 of the Credit Agreement) any payments in respect of the Secured Obligations
and any proceeds of the Collateral, when received by the Administrative Agent or
any Secured Party in cash or Cash Equivalents will be applied in reduction of
the Secured Obligations in the order set forth in the Credit Agreement.
 
 
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9.          Continuing Agreement.
 
(a)          This Agreement shall remain in full force and effect until the
Facility Termination Date, at which time this Agreement shall be automatically
terminated (other than obligations under this Agreement which expressly survive
such termination) and the Administrative Agent shall, upon the request and at
the expense of the Grantors, forthwith release all of its liens and security
interests hereunder and shall execute and deliver all UCC termination statements
and/or other documents reasonably requested by the Grantors evidencing such
termination.

(b)          This Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of
any of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Administrative Agent or any Secured Party as a preference,
fraudulent conveyance or otherwise under any Debtor Relief Law, all as though
such payment had not been made; provided that in the event payment of all or any
part of the Secured Obligations is rescinded or must be restored or returned,
all reasonable costs and expenses (including without limitation any reasonable
legal fees and disbursements) incurred by the Administrative Agent or any
Secured Party in defending and enforcing such reinstatement shall be deemed to
be included as a part of the Secured Obligations.
 
10.          Amendments; Waivers; Modifications, etc.  This Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.01 of the Credit Agreement.

11.          Successors in Interest.  This Agreement shall be binding upon each
Grantor, its successors and assigns and shall inure, together with the rights
and remedies of the Administrative Agent and the Secured Parties hereunder, to
the benefit of the Administrative Agent and the Secured Parties and their
successors and permitted assigns.

12.          Notices.  All notices required or permitted to be given under this
Agreement shall be in conformance with Section 11.02 of the Credit Agreement;
provided that notices and communications to the Grantors shall be directed to
the Grantors, at the address of the Borrower set forth in Section 11.02 of the
Credit Agreement.

13.          Counterparts.  This Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument.  It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.  Delivery of an executed counterpart of a
signature page of this Agreement by fax transmission or other electronic mail
transmission (e.g. “pdf” or “tif”) shall be effective as delivery of a manually
executed counterpart of this Agreement.  Without limiting the foregoing, to the
extent a manually executed counterpart is not specifically required to be
delivered, upon the request of any party, such fax transmission or electronic
mail transmission shall be promptly followed by such manually executed
counterpart.

14.          Headings.  The headings of the sections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.

15.          Governing Law; Submission to Jurisdiction; Venue; WAIVER OF JURY
TRIAL.  The terms of Sections 11.14 and 11.15 of the Credit Agreement with
respect to governing law, submission to jurisdiction, venue and waiver of jury
trial are incorporated herein by reference, mutatis mutandis, and the parties
hereto agree to such terms.

 
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16.          Severability.  If any provision of this Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

17.          Entirety.  This Agreement, the other Loan Documents and the other
documents relating to the Secured Obligations represent the entire agreement of
the parties hereto and thereto, and supersede all prior agreements and
understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Loan Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.

18.          Other Security.  To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by a Grantor), or by a
guarantee, endorsement or property of any other Person, then the Administrative
Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Administrative
Agent shall have the right, in its sole discretion, to determine which rights,
security, liens, security interests or remedies the Administrative Agent shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or the Secured
Obligations or any of the rights of the Administrative Agent or the Secured
Parties under this Agreement, under any other of the Loan Documents or under any
other document relating to the Secured Obligations.

19.          Joinder.  At any time after the date of this Agreement, one or more
additional Persons may become party hereto by executing and delivering to the
Administrative Agent a Joinder Agreement in the form of Exhibit C to the Credit
Agreement or such other form acceptable to the Administrative Agent. 
Immediately upon such execution and delivery of such Joinder Agreement (and
without any further action), each such additional Person will become a party to
this Agreement as an “Grantor” and have all of the rights and obligations of a
Grantor hereunder and this Agreement and the schedules hereto shall be deemed
amended by such Joinder Agreement.

20.          Consent of Issuers of Pledged Equity.  Any Loan Party that is an
Issuer hereby acknowledges, consents and agrees to the grant of the security
interests in such Pledged Equity by the applicable Grantors pursuant to this
Agreement, together with all rights accompanying such security interest as
provided by this Agreement and applicable Law, notwithstanding any
anti-assignment provisions in any operating agreement, limited partnership
agreement or similar organizational or governance documents of such Issuer.

21.          Joint and Several Obligations of Grantors.

(a)          Each of the Grantors is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by the
Lenders under the Credit Agreement, for the mutual benefit, directly and
indirectly, of each of the Grantors and in consideration of the undertakings of
each of the Grantors to accept joint and several liability for the obligations
of each of them.

(b)          Each of the Grantors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a primary obligor,
joint and several liability with the other Grantors with respect to the payment
and performance of all of the Secured Obligations, it being the intention of the
parties hereto that (i) all the Secured Obligations shall be the joint and
several obligations of each of the Grantors without preferences or distinction
among them and (ii) a separate action may be brought against each Grantor to
enforce this Agreement whether or not the Borrower, any other Grantor or any
other person or entity is joined as a party.
 
 
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(c)          Notwithstanding any provision to the contrary contained herein, in
any other of the Loan Documents, to the extent the obligations of a Grantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Grantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation,
Debtor Relief Laws).

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

23.          Injunctive Relief.

(a)          Each Grantor recognizes that, in the event such Grantor fails to
perform, observe or discharge any of its obligations or liabilities under this
Agreement or any other Loan Document, any remedy of law may prove to be
inadequate relief to the Administrative Agent and the other Secured Parties. 
Therefore, each Grantor agrees that the Administrative Agent and the other
Secured Parties, at the option of the Administrative Agent and the other Secured
Parties, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

(b)          The Administrative Agent, the other Secured Parties and each
Grantor hereby agree that no such Person shall have a remedy of punitive or
exemplary damages against any other party to a Loan Document and each such
Person hereby waives any right or claim to punitive or exemplary damages that
they may now have or may arise in the future in connection with any dispute
under this Agreement or any other Loan Document, whether such dispute is
resolved through arbitration or judicially.

24.          Secured Parties.  Each Secured Party that is not a party to the
Credit Agreement who obtains the benefit of this Agreement shall be deemed to
have acknowledged and accepted the appointment of the Administrative Agent
pursuant to the terms of the Credit Agreement, and with respect to the actions
and omissions of the Administrative Agent hereunder or otherwise relating hereto
that do or may affect such Secured Party, the Administrative Agent and each of
its Affiliates shall be entitled to all of the rights, benefits and immunities
conferred under Article IX of the Credit Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
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Each of the parties hereto has caused a counterpart of this Agreement to be duly
executed and delivered as of the date first above written.
 
GRANTORS:
GOOD TIMES RESTAURANTS INC.
         
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
GOOD TIMES DRIVE THRU INC.
                 
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BD OF COLORADO LLC
                 
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S FRANCHISE DEVELOPMENT, LLC
                 
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S INTERNATIONAL LLC
                 
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S BURGER BAR, LLC
                 
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
 

 
 
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BAD DADDY’S BURGER BAR OF BALLANTYNE, LLC
               
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S BURGER BAR OF BIRKDALE, LLC
               
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S BURGER BAR OF MOORESVILLE, LLC
               
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BDBB OF OLIVE PARK NC, LLC
               
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
           
BAD DADDY’S BURGER BAR OF WAVERLY, LLC
               
By:
/s/ Boyd E. Hoback
   
Name:
Boyd E. Hoback
   
Title:
President and Chief Executive Officer
 

 
 
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Accepted and agreed to as of the date first above written.
     
CADENCE BANK, NATIONAL ASSOCIATION,
as Administrative Agent
     
By:
/s/ Charles M. Joye III
 
Name:
Charles M. Joye III
 
Title:
Senior Vice President
 

 
 
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