Exhibit 10.4

 

ABL SECURITY AGREEMENT

 

This ABL SECURITY AGREEMENT (this “Agreement”), dated as of September 23, 2020,
by and among the Persons listed on the signature pages hereof as “Grantors” and
those additional entities that hereafter become parties hereto by executing the
form of Joinder attached hereto as Annex 1 (each, a “Grantor” and collectively,
the “Grantors”), and CITIZENS BANK, N.A., in its capacities as administrative
agent and collateral agent for the Secured Parties (in such capacities, together
with its successors and permitted assigns in such capacities, “Administrative
Agent”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain ABL Credit Agreement, dated as of
September 23, 2020 (as amended, restated, amended and restated, supplemented, or
otherwise modified from time to time, the “Credit Agreement”), by and among
FRANCHISE GROUP INTERMEDIATE HOLDCO, LLC, a Delaware limited liability company
(“Lead Borrower”), as a Borrower, certain Subsidiaries of Lead Borrower from
time to time party thereto as Borrowers (collectively with Lead Borrower, the
“Borrowers”), FRANCHISE GROUP NEW HOLDCO, LLC, a Delaware limited liability
company (“Global Parent”), as a Guarantor, certain Subsidiaries of Lead Borrower
from time to time party thereto as Guarantors, the lenders from time to time
party thereto (each of such lenders, together with its successors and permitted
assigns, is referred to hereinafter as a “Lender”) and the Administrative Agent,
the Lenders have agreed to make certain financial accommodations available to
Borrowers from time to time pursuant to the terms and conditions thereof;

 

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

 

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

 

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

 

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

 

1.                   Definitions; Construction.

 

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

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(xii)                     “Discharge of Term Priority Obligations” has the
meaning specified therefor in the Intercreditor Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

(xix)                     “Intellectual Property Licenses” means, with respect
to any Grantor, (A) any licenses or other similar rights provided to such
Grantor in or with respect to Intellectual Property owned or controlled by any
other Person, and (B) any licenses or other similar rights provided to any other
Person in or with respect to Intellectual Property owned or controlled by such
Grantor, in each case, including (w) any agreements relating to the Licensed
Trademarks, (x) any software license agreements (other than license agreements
for commercially available off-the-shelf software that is generally available to
the public which have been licensed to a Grantor pursuant to end-user licenses),
(y) the license agreements listed on Schedule 3 as required by Section 5(g), and
(z) the right to use any of the licenses or other similar rights described in
this definition in connection with the enforcement of the Secured Parties’
rights under the Loan Documents.

 

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

 

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

 

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

 

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

 

(xxiv)                  “Material ABL IP Rights” means such rights with respect
to Intellectual Property (i) that is owned by or licensed to a Grantor and
material to the conduct of any Grantor’s business or material to the marketing,
sale or other disposition of the ABL Priority Collateral, (ii) that is
reasonably necessary to permit the Administrative Agent to enforce its rights
and remedies under the Loan Documents with respect to the ABL Priority
Collateral, or (iii) the disposition of which would otherwise materially
adversely affect the Net Orderly Liquidation Value of the ABL Priority
Collateral.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(xxxviii)               “Secured Obligations” means, collectively, (A) the
Obligations (including the Guaranteed Obligations), (B) the Secured Cash
Management Obligations and (C) the Secured Swap Agreement Obligations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

      (a)          all of such Grantor’s Accounts;

 

      (b)          all of such Grantor’s Books;

 

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

 

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

 

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

 

      (f)           all of such Grantor’s Equipment;

 

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

 

      (h)          all of such Grantor’s Fixtures;

 

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

 

      (j)           all of such Grantor’s Inventory;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Notwithstanding anything contained in this Agreement to the contrary, the term
“Collateral” shall not include the following (collectively, the “Excluded
Assets”): (i) motor vehicles and other assets subject to certificates of title
(except to the extent a security interest therein can be perfected by the filing
of Uniform Commercial Code financing statements); (ii) any rights or interest in
any Real Estate Asset that is not a Material Real Estate Asset; (iii) any United
States intent-to-use trademark applications to the extent that, and solely
during the period in which, the grant of a security interest therein would
impair the validity or enforceability of such intent-to-use trademark or service
mark applications under applicable federal law; provided, that upon submission
and acceptance by the PTO of an amendment to allege use pursuant to 15 U.S.C.
Section 1060(a) (or any successor provision), such intent-to-use trademark
application shall be considered Collateral; (iv) Capital Stock in any Person,
other than any wholly-owned Subsidiary of a Grantor, to the extent a security
interest therein is not permitted by the terms of such Person’s organizational
documents or joint venture documents (in each case, as in effect on the date
such Capital Stock was acquired), solely to the extent that (1) such joint
venture or other investment is permitted under Section 6.07 of the Credit
Agreement and (2) such restriction was not created or entered into in
contemplation of the acquisition of such Capital Stock; provided that the
exclusion in this clause (iv) shall in no way be construed to apply to the
extent that any described prohibition is ineffective under Sections 9-406,
9-407, 9-408, or 9-409 of the Code (or any successor provision or provisions) or
other applicable law (including the Bankruptcy Code) or applicable principles of
equity; provided further, that immediately upon the ineffectiveness (and for so
long as it remains ineffective), lapse or termination of any such restriction,
the Collateral shall include, and such Grantor shall be deemed to have granted a
security interest in, all such Capital Stock as if such restriction had never
been in effect (it being understood that no Capital Stock constitutes an
Excluded Asset under this clause (iv) as of the Closing Date); (v) any lease,
license or other agreement to which a Grantor is a party, or any property
subject to a purchase money security interest, Capital Lease or similar
arrangement, in each case, to the extent that a grant of a security interest
therein in favor of Administrative Agent would constitute a default or
forfeiture under, or violate or invalidate, such lease, license or other
agreement, or such purchase money security interest, Capital Lease or similar
arrangement, or create a right of termination in favor of any other party
thereto (other than a Grantor or a Subsidiary of a Grantor), solely to the
extent that (1) such lease, license or other agreement, or such purchase money
security interest, Capital Lease or similar arrangement is permitted under the
Loan Documents and (2) such default, forfeiture, prohibition, invalidation or
right of termination (as applicable) was not created in contemplation of this
Agreement or any other Loan Document; provided that the exclusion in this
clause (v) shall in no way be construed to apply to the extent that any
described default, forfeiture, restriction, prohibition, invalidation or right
of termination (as applicable) is ineffective under Sections 9-406, 9-407,
9-408, or 9-409 of the Code (or any successor provision or provisions) or other
applicable law (including the Bankruptcy Code) or applicable principles of
equity; provided further, that immediately upon the ineffectiveness (and for so
long as it remains ineffective), lapse or termination of any such default,
forfeiture, prohibition, restriction, invalidation or right of termination, the
Collateral shall include, and such Grantor shall be deemed to have granted a
security interest in, all such lease, license or other agreement, or such
property subject to purchase money security interest, Capital Lease or similar
arrangement as if such default, forfeiture, prohibition, restriction,
invalidation or right of termination had never been in effect; (vi) any property
or assets with respect to which the granting of security interests in such
assets would (1) be prohibited by applicable law, rule or regulation, (2) be
prohibited under the terms of any contractual obligation binding on the
applicable Grantor at the time the applicable property or asset was acquired (so
long as such prohibition was not entered into in contemplation of such
acquisition), or (3) require the consent, approval, license or authorization of
any Person (including any Governmental Authority) (other than a Grantor or a
Subsidiary of a Grantor) (so long as such consent, approval, license or
authorization right (as applicable) was not created in contemplation of this
Agreement or any other Loan Document); provided that the exclusion in this
clause (vi) shall in no way be construed to apply to the extent that any
described restriction, prohibition, or requirement of consent, approval, license
or authorization is ineffective under Sections 9-406, 9-407, 9-408, or 9-409 of
the Code (or any successor provision or provisions) or other applicable law
(including the Bankruptcy Code) or applicable principles of equity; provided
further, that immediately upon the ineffectiveness (and for so long as it
remains ineffective), lapse or termination of any such law, rule, regulation,
term, prohibition, condition or requirement, the Collateral shall include, and
such Grantor shall be deemed to have granted a security interest in, all such
property or assets as if such law, rule, regulation, term, prohibition,
condition or requirement had never been in effect; (vii) assets located outside
the United States to the extent a security interest in such assets could
reasonably be expected to result in material adverse tax consequences to the
Grantors, as determined in good faith by the Lead Borrower in consultation with
the Administrative Agent; (viii) the Excluded Accounts described in clauses (1),
(4) and (5) of the definition thereof in the Credit Agreement; (ix) any Margin
Stock (including any Margin Stock held through a Securities Account);
(x) Capital Stock of any Excluded Entities to the extent a pledge thereof is
prohibited by the terms of such Person’s third party Indebtedness (so long as
such prohibition was not created in contemplation of this Agreement or any other
Loan Document); provided further, that immediately upon any Subsidiary ceasing
to be an Excluded Entity, or upon the ineffectiveness (and for so long as it
remains ineffective), lapse or termination of any such prohibition, the
Collateral shall include, and such Grantor shall be deemed to have granted a
security interest in, all Capital Stock of such Subsidiary as if such Subsidiary
had never been an Excluded Entity or as if such prohibition had never been in
effect; (xi) those assets as to which Lead Borrower and Administrative Agent
mutually agree in writing that the cost and/or burden of obtaining a grant of a
Lien on such assets to secure the Secured Obligations outweighs the benefit to
the Secured Parties; (xii) (I) Letter of Credit Rights, which individually have
a value or face amount of less than or equal to the De Minimis Amount (except to
the extent a security interest therein can be perfected by the filing of Uniform
Commercial Code financing statements) and (II) Letter of Credit Rights which
individually have a value or face amount of greater than the De Minimis Amount,
which in the aggregate at any one time for all such Letter of Credit Rights,
have an aggregate value or face amount of $500,000 or less (except to the extent
a security interest therein can be perfected by the filing of Uniform Commercial
Code financing statements); and (xiii) (I) any commercial tort claims, which
individually have an aggregate amount claimed that is less than or equal to the
De Minimis Amount and (II) commercial tort claims which individually have an
aggregate amount claimed that is greater than the De Minimis Amount, which in
the aggregate at any one time for all such commercial tort claims, have an
aggregate amount claimed that is not in excess of $500,000; provided, that
(A) Excluded Assets shall not include, and the foregoing exclusions shall in no
way be construed to limit, impair, or otherwise affect any of Administrative
Agent’s continuing security interests in and liens upon any rights or interests
of any Grantor in or to, (1) monies due or to become due, or any income stream,
receivables, payment intangibles or proceeds arising, under or in connection
with any of the property or assets described in the foregoing clauses (i)
through (xiii), or (2) any proceeds from the sale, license, lease, or other
disposition of any such property or assets, in each case, other than to the
extent such monies, income stream, receivables, payment intangibles or proceeds
otherwise qualify as Excluded Assets, (B) the Proceeds of any Excluded Assets
shall not constitute Excluded Assets (unless such Proceeds otherwise qualify as
Excluded Assets), and (C) the Grantors shall from time to time at the reasonable
request of Administrative Agent, give written notice to Administrative Agent
identifying in reasonable detail the Excluded Assets and shall provide to
Administrative Agent such other information regarding the Excluded Assets as
Administrative Agent may reasonably request.

 

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

 

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

 

 9 

 

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

 

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

 

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

 

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

 

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

 

      (e)          [Reserved].

 

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

 

      (g)          As of the Closing Date: (i) Schedule 2 provides a complete
and correct list of all registered Copyrights and applications for registration
of Copyrights owned by any Grantor, (ii) Schedule 3 provides a complete and
correct list of all exclusive Intellectual Property Licenses with respect to
registered Intellectual Property entered into by any Grantor pursuant to which
(A) any Grantor has provided any license or other rights in registered
Intellectual Property owned or controlled by such Grantor to any other Person,
or (B) any Person has granted to any Grantor any license or other rights in
registered Intellectual Property owned or controlled by such Person that is
material to the business of such Grantor, including any such Intellectual
Property that is incorporated in any Inventory, software, or other product
marketed, sold, licensed, or distributed by such Grantor (collectively,
“Exclusive IP Licenses”), (iii) Schedule 4 provides a complete and correct list
of all Patents owned by any Grantor and all applications for Patents owned by
any Grantor, and (iv) Schedule 6 provides a complete and correct list of all
registered Trademarks owned by any Grantor, and all applications for
registration of Trademarks owned by any Grantor.

 

 10 

 

      (h)          (i)                   (A) Each Grantor owns, or holds
licenses in, or otherwise has the right to use all Material Intellectual
Property that is used in the conduct of its business as currently conducted, and
(B) all employees and contractors of each Grantor who were involved in the
creation or development of any Material Intellectual Property for such Grantor
that is used in the conduct of the business of such Grantor as currently
conducted have signed agreements containing assignment of Intellectual Property
rights to such Grantor and obligations of confidentiality;

 

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

 

 (iii)                 to each Grantor’s knowledge, all registered and issued
Material Intellectual Property that is owned by such Grantor is valid,
subsisting and enforceable and in compliance with all legal requirements,
filings, and payments and other actions that are required to maintain such
Intellectual Property in full force and effect; and

 

 (iv)                 each Grantor has taken reasonable steps to maintain the
confidentiality of and otherwise protect and enforce its rights in all trade
secrets constituting Material Intellectual Property owned by such Grantor.

 

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

 

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

 

 11 

 

      (k)          No consent, approval, authorization, or other order or other
action by, and no notice to or filing with, any Governmental Authority or any
other Person is required (i) for the grant of a Security Interest by such
Grantor in and to the Collateral pursuant to this Agreement or for the
execution, delivery, or performance of this Agreement by such Grantor or
(ii) for the exercise by Administrative Agent of the voting or other rights
provided for in this Agreement with respect to the Investment Property or the
remedies in respect of the Collateral pursuant to this Agreement, except (A) as
may be required in connection with such disposition of Investment Property by
laws affecting the offering and sale of securities generally, (B) for consents,
approvals, authorizations, or other orders or actions that have already been
obtained or given (as applicable) and that are still in force, and (C) the
filing of financing statements and other filings necessary to perfect the
Security Interests granted hereby. No Intellectual Property License of any
Grantor relating to any Licensed Trademarks constituting Material ABL IP Rights
requires any consent of any other Person that has not been obtained in order for
Administrative Agent to enforce any of its remedies under the Loan Documents
with respect to ABL Priority Collateral.

 

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

 

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

 

 12 

 

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

 

      (a)          Possession of Collateral. In the event that any Collateral,
including Proceeds, is evidenced by or consists of Drafts, Documents,
Certificated Securities, Promissory Notes, or tangible Chattel Paper having at
any one time an aggregate value of $1,500,000 or more for all such Drafts,
Documents, Certificated Securities, Promissory Notes, or tangible Chattel Paper,
the Grantors shall promptly (and in any event within thirty (30) days (or such
longer period as agreed to in writing by Administrative Agent) after acquisition
thereof), notify Administrative Agent thereof, and if and to the extent that
perfection or priority of Administrative Agent’s Security Interest is dependent
on or enhanced by possession, the applicable Grantor, promptly (and in any event
within five (5) Business Days (or such longer period as agreed to in writing by
Administrative Agent)) after request by Administrative Agent, shall execute such
other documents and instruments as shall be requested by Administrative Agent
or, if applicable, endorse and deliver physical possession of such Drafts,
Documents, Certificated Securities, Promissory Notes, or tangible Chattel Paper
to Administrative Agent, together with such undated powers (or other relevant
document of transfer acceptable to Administrative Agent) endorsed in blank as
shall be requested by Administrative Agent, and shall do such other acts or
things, reasonably deemed necessary or desirable by Administrative Agent to
protect Administrative Agent’s Security Interest therein, to the extent
otherwise required by this Agreement and the other Loan Documents; provided that
(x) no Grantor shall be required to notify the Administrative Agent or endorse
and/or deliver physical possession of any Draft, Document, Certificated
Security, Promissory Note or tangible Chattel Paper to the extent the individual
value thereof is less than $250,000 and (y) the Administrative Agent, in its
sole discretion, may agree that delivery of physical possession of any such
Drafts, Documents, Certificated Securities, Promissory Notes, or tangible
Chattel Paper (and related documents and instruments and endorsements, if
applicable) shall not be required.

 

      (b)          Chattel Paper.

 

  (i)                    Promptly (and in any event within five (5) Business
Days (or such longer period as agreed to in writing by Administrative Agent))
after request by Administrative Agent, each Grantor shall take all steps
reasonably necessary to grant Administrative Agent control of all electronic
Chattel Paper, which individually has a value or face amount greater than the De
Minimis Amount, in accordance with the Code and all “transferable records” as
that term is defined in Section 16 of the Uniform Electronic Transaction Act and
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act as in effect in any relevant jurisdiction, but only to the extent that the
aggregate value or face amount of all such electronic Chattel Paper equals or
exceeds at any one time, $500,000; and

 

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

 

      (c)          [Reserved].

 

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

 

 13 

 

      (e)          Commercial Tort Claims. If the Grantors (or any of them)
obtain any Commercial Tort Claims which individually have a value, or involve an
asserted claim, in excess of the De Minimis Amount, then the applicable Grantor
or Grantors shall promptly (and in any event within thirty (30) days (or such
longer period as agreed to in writing by Administrative Agent) of obtaining such
Commercial Tort Claims), notify Administrative Agent upon incurring or otherwise
obtaining such Commercial Tort Claims and, promptly (and in any event within
five (5) Business Days (or such longer period as agreed to in writing by
Administrative Agent)) after request by Administrative Agent, amend Schedule 1
to describe such Commercial Tort Claims in a manner that reasonably identifies
such Commercial Tort Claims and which is otherwise reasonably satisfactory to
Administrative Agent, and hereby authorizes the filing of additional financing
statements or amendments to existing financing statements describing such
Commercial Tort Claims, and agrees to do such other acts or things reasonably
deemed necessary or desirable by Administrative Agent to give Administrative
Agent a First Priority perfected security interest in any such Commercial Tort
Claims, but only to the extent that the aggregate value, or asserted claims, of
all such Commercial Tort Claims exceeds at any one time, $500,000.

 

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

 

      (g)          Intellectual Property.

 

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

 

 14 

 

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

 

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

 

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

 

 15 

 

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

 

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

 

 (vii)                 No Grantor shall enter into any Intellectual Property
License that the Grantor reasonably believes would constitute or contain
Material ABL IP Rights unless such Grantor has used commercially reasonable
efforts to permit the assignment of such Intellectual Property License (and all
rights of Grantor thereunder) to Administrative Agent (and any transferees of
Administrative Agent); provided (A) that the Grantor shall use commercially
reasonable efforts to ensure that no such Intellectual Property License shall
restrict or prohibit Administrative Agent from enforcing any of its remedies
under the Loan Documents with respect to any of the Collateral and (B) in all
events, all Material ABL IP Rights shall be subject to the Administrative
Agent’s right to use such Material ABL IP Rights pursuant to the license granted
in Section 16(b) hereof.

 

      (h)          Investment Property.

 

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

 

 16 

 

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

 

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

 

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

 

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

 

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

 

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

 

 17 

 

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

 

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

 

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

 

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

 

      (m)         Credit Card Receivables.

 

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

 

 (ii)                   No Grantor shall rescind or cancel any indebtedness
evidenced by any Credit Card Receivable or modify any term thereof or make any
adjustment with respect thereto except in the ordinary course of business
consistent with prudent business practice, or extend or renew any such
indebtedness except in the ordinary course of business consistent with prudent
business practice or compromise or settle any dispute, claim, suit or legal
proceeding relating thereto or sell any Credit Card Receivable or interest
therein except in the ordinary course of business consistent with prudent
business practice or in accordance with the Credit Agreement without the prior
written consent of Administrative Agent.

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

 

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

 

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

 

      (c)          Intercreditor Agreement.

 

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

 

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

 

8.                   Further Assurances.

 

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

 

 19 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 20 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 21 

 

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

 

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

 

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

 

16.                 Remedies.

 

     (a)           Upon the occurrence and during the continuance of an Event of
Default, Administrative Agent may, and, at the instruction of the Required
Lenders, shall exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, in the other Loan Documents, or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code or any other applicable law. Without limiting the
generality of the foregoing, each Grantor expressly agrees that, in any such
event, Administrative Agent without demand of performance or other demand,
advertisement or notice of any kind (except a notice specified below of time and
place of public or private sale) to or upon any Grantor or any other Person (all
and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code or any other applicable law),
may take immediate possession of all or any portion of the Collateral and
(i) require Grantors to, and each Grantor hereby agrees that it will at its own
expense and upon request of Administrative Agent forthwith, assemble all or part
of the Collateral as directed by Administrative Agent and make it available to
Administrative Agent at one or more locations where such Grantor regularly
maintains Inventory, and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Administrative Agent’s offices or elsewhere, for cash, on credit, and
upon such other terms as Administrative Agent may deem commercially reasonable.
Each Grantor agrees that, to the extent notification of sale shall be required
by law, at least ten (10) days’ notification by mail to the applicable Grantor
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification and specifically
such notification shall constitute a reasonable “authenticated notification of
disposition” within the meaning of Section 9-611 of the Code. Administrative
Agent shall not be obligated to make any sale of Collateral regardless of
notification of sale having been given. Administrative Agent may adjourn any
public sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Each Grantor agrees that (A) the internet
shall constitute a “place” for purposes of Section 9-610(b) of the Code, and
(B) to the extent notification of sale shall be required by law, notification by
mail of the URL where a sale will occur and the time when a sale will commence
at least ten days prior to the sale shall constitute a reasonable notification
for purposes of Section 9-611(b) of the Code. Each Grantor agrees that any sale
of Collateral to a licensor pursuant to the terms of a license agreement between
such licensor and a Grantor is sufficient to constitute a commercially
reasonable sale (including as to method, terms, manner, and time) within the
meaning of Section 9-610 of the Code.

 

 22 

 

     (b)           Solely for the purpose of enabling the Administrative Agent
to exercise rights and remedies under this Section 16, at such time as the
Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants, to the extent it has the right to grant,
to the Administrative Agent an irrevocable (solely during the time in which the
license under this Section 16(b) is effective), nonexclusive license
(exercisable only upon the occurrence and during the continuance of an Event of
Default and without payment of royalty or other compensation to such Grantor) to
use, license or sublicense any of the Intellectual Property now owned or
hereafter acquired by such Grantor (regardless of whether such Intellectual
Property constitutes Collateral), and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof; provided, that such
license (i) shall not violate the express terms of any agreement between a
Grantor and any unaffiliated third party governing the applicable Grantor’s use
of any of the foregoing Intellectual Property, or give such third party any
right of acceleration, modification or cancellation therein, (ii) is not
prohibited by any applicable Requirements of Law, and (iii) shall be subject, in
the case of Trademarks, to sufficient rights of quality control and inspection
in favor of such Grantor to avoid the risk of invalidation of such Trademarks.
The use of such license by the Administrative Agent shall be exercised, at the
option of the Administrative Agent, upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
other transaction entered into by the Administrative Agent in accordance
herewith shall be binding upon such Grantor notwithstanding any subsequent cure
of an Event of Default. Any royalties and other payments received by the
Administrative Agent shall be applied in accordance with Section 16(d) hereof.

 

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

 

 23 

 

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

 

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

 

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

 

18.                 Marshaling. 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 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.

 

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

 

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

 

 24 

 

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

 

22.                 Continuing Security Interest: Assignments under Credit
Agreement.

 

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

 

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

 

 25 

 

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

 

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

 

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

 

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

 

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

 

 26 

 

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

 

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

 

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

 

27.                 Miscellaneous.

 

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

 

 27 

 

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

 

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

 

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

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

 

 

 

 

 

 

 

 

 

 

 

 

 28 

 

 

IN WITNESS WHEREOF, the undersigned parties hereto have caused this Agreement to
be executed and delivered as of the day and year first above written.

 

GRANTORS:

 

 

FRANCHISE GROUP NEWCO INTERMEDIATE AF, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP INTERMEDIATE HOLDCO, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP INTERMEDIATE B, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP INTERMEDIATE S, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP NEWCO S, LLC, a Delaware limited liability company

 

 

 

By: /s/ Ron Allender
Name: Ron Allender
Title: Executive Vice President

 

AMERICAN FREIGHT DISCOUNT OUTLET FRANCHISING, LLC, a Delaware limited liability
company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: Executive Vice President

 

AMERICAN FREIGHT OUTLET STORES, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: President

 

OUTLET MERCHANDISE, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: President

 

BUDDY’S NEWCO, LLC, a Delaware limited liability company

 

 

 

By: /s/ Michael Bennett
Name: Michael Bennett
Title: Chief Executive Officer

 

BUDDY’S FRANCHISING AND LICENSING LLC, a Florida limited liability company

 

 

 

By: /s/ Michael Bennett
Name: Michael Bennett
Title: Chief Executive Officer

 

 

[Signature Page to ABL Security Agreement]

 

AMERICAN FREIGHT GROUP, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: Executive Vice President

 

AMERICAN FREIGHT HOLDINGS, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: Executive Vice President

 

AMERICAN FREIGHT, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell

Name: William Powell
Title: Executive Vice President

 

AMERICAN FREIGHT MANAGEMENT COMPANY, LLC, a Delaware limited liability company

 

 

 

By: /s/ William Powell
Name: William Powell
Title: Executive Vice President

 

FRANCHISE GROUP INTERMEDIATE V, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP NEWCO V, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP NEW HOLDCO, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

FRANCHISE GROUP INTERMEDIATE L, LLC, a Delaware limited liability company

 

 

 

By: /s/ Brian Kahn
Name: Brian Kahn
Title: President and Chief Executive Officer

 

   

 

 

 

 

 

[Signature Page to ABL Security Agreement]

 

 

 

 

ADMINISTRATIVE AGENT:

 

CITIZENS BANK, N.A.

 

 

 

By: /s/ Brian Kennedy
Name: Brian Kennedy
Title: Senior Vice President

 

 

 

 

 

 

 

 

 

[Signature Page to ABL Security Agreement]