Exhibit 10.1

BORROWER AND DOMESTIC SUBSIDIARY
GUARANTEE AND COLLATERAL AGREEMENT

     THIS BORROWER AND DOMESTIC SUBSIDIARY GUARANTEE AND COLLATERAL AGREEMENT,
dated as of December 4, 1998, made by each of the signatories hereto (together
with any other entity that may become a party hereto as provided herein, the
“Grantors”), in favor of THE CHASE MANHATTAN BANK, as Administrative Agent (in
such capacity, the “Administrative Agent”) for the banks and other financial
institutions (the “Lenders”) from time to time parties to the Credit Agreement,
dated as of December 4, 1998 (as amended, supplemented or otherwise modified
from time to time, the “Credit Agreement”), among The Scotts Company, an Ohio
corporation (the “Borrower”), the Subsidiary Borrowers, the Lenders, the
Administrative Agent, Credit Lyonnais Chicago Branch, as Co-Documentation Agent,
NBD Bank, as Co-Documentation Agent, and Salomon Smith Barney Inc., as
Syndication Agent.

W I T N E S S E T H:

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

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

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

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

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

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

 

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SECTION 1. DEFINED TERMS

             1.1 Definitions. (a) Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms are used herein as defined in the
New York UCC: Certificated Security, Chattel Paper, Documents, Equipment, Farm
Products, Instruments and Inventory.

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

      “Agreement”: this Borrower and Domestic Subsidiary Guarantee and
Collateral Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.

      “Borrower Obligations”: the collective reference to the unpaid principal
of and interest on the Loans and Reimbursement Obligations and all other
obligations and liabilities of the Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit Agreement
after the maturity of the Loans and Reimbursement Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to the Administrative Agent or any Lender (or, in the case of any Lender Hedge
Agreement, any Affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, the other Loan Documents, any Letter of Credit, any Lender Hedge
Agreement or any other document made, delivered or given in connection with any
of the foregoing, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be paid by the
Borrower pursuant to the terms of any of the foregoing agreements).

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

      “Collateral”: as defined in Section 4, provided that “Collateral” shall in
no event include any present or future property wholly or partially situated in
Australia as of the date hereof or at any time following the date hereof.

      “Collateral Account”: any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.

 

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      “Copyrights”: (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.

      “Copyright Licenses”: any written agreement naming any Grantor as licensor
or licensee (including, without limitation, those listed in Schedule 6),
granting any right under any Copyright, including, without limitation, the grant
of rights to manufacture, distribute, exploit and sell materials derived from
any Copyright.

      “Deposit Account”: as defined in the Uniform Commercial Code of any
applicable jurisdiction and, in any event, including, without limitation, any
demand, time, savings, passbook or like account maintained with a depositary
institution.

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

      “Foreign Subsidiary Capital Stock”: the Capital Stock of any Foreign
Subsidiary.

      “General Intangibles”: all “general intangibles” as such term is defined
in Section 9-106 of the New York UCC and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements, instruments
and indentures in any form, and portions thereof, to which such Grantor is a
party or under which such Grantor has any right, title or interest or to which
such Grantor or any property of such Grantor is subject, as the same may from
time to time be amended, supplemented or otherwise modified, including, without
limitation, (i) all rights of such Grantor to receive moneys due and to become
due to it thereunder or in connection therewith, (ii) all rights of such Grantor
to damages arising thereunder and (iii) all rights of such Grantor to perform
and to exercise all remedies thereunder, in each case to the extent the grant by
such Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is not
prohibited by such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other party to such
contract, agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all necessary consents
to such grant of a security interest have been obtained from the other parties
thereto (it being understood that the foregoing shall not be deemed to obligate
such Grantor to obtain such consents); provided, that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such Grantor of a
security interest pursuant to this Agreement in any Receivable or any money or
other amounts due or to become due under any such contract, agreement,
instrument or indenture.

 

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      “Guarantor Obligations”: with respect to any Guarantor, without
duplicating any Subsidiary Borrower Obligations, all obligations and liabilities
of such Guarantor which may arise under or in connection with this Agreement
(including, without limitation, Section 3) or any other Loan Document to which
such Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by
such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).

      “Guarantors”: the collective reference to each Grantor other than the
Borrower. For the avoidance of doubt, notwithstanding any other provision of
this Agreement, the parties hereto expressly agree that no Foreign Subsidiary
shall be a Guarantor.

      “Intellectual Property”: (a) the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.

      “Intercompany Note”: any promissory note evidencing loans made by any
Grantor to the Borrower or any of its Subsidiaries.

      “Investment Property”: the collective reference to (i) all “investment
property” as such term is defined in Section 9-115 of the New York UCC (other
than any Foreign Subsidiary Capital Stock) and (ii) whether or not constituting
“investment property” as so defined, all Pledged Notes and all Pledged Stock.

      “Issuers”: the collective reference to each issuer of any Investment
Property.

      “Lender Hedge Agreements”: all interest rate swaps, caps or collar
agreements or similar arrangements entered into by the Borrower with any Lender
(or any Affiliate of any Lender) providing for protection against fluctuations
in interest rates, currency exchange rates or commodity prices or the exchange
of nominal interest obligations, either generally or under specific
contingencies.

      “Monsanto Receivables”: all Receivables collected, received and/or held by
any Grantor for the benefit of the Monsanto Company in connection with the
Roundup Agreement or the Ortho Acquisition.

      “New York UCC”: the Uniform Commercial Code as from time to time in effect
in the State of New York.

 

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      “Obligations”: (i) in the case of the Borrower, the Borrower Obligations
and the Borrower’s Guarantor Obligations, (ii) in the case of each Guarantor
which is also a Domestic Subsidiary Borrower, its Subsidiary Borrower
Obligations, and (iii) in the case of each Guarantor (whether or not a Domestic
Subsidiary Borrower), its Guarantor Obligations.

      “Patents”: (i) all letters patent of the United States, any other country
or any political subdivision thereof, all reissues and extensions thereof and
all goodwill associated therewith, including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) all applications for letters patent of
the United States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues
or extensions of the foregoing.

      “Patent License”: all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.

      “Pledged Notes”: all promissory notes listed on Schedule 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).

      “Pledged Stock”: the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in effect
excluding any Foreign Subsidiary Capital Stock.

      “Proceeds”: all “proceeds” as such term is defined in Section 9-306(1) of
the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.

      “Receivable”: any “account” (as defined in the New York UCC) and any other
right to payment for goods sold or leased or for services rendered, whether or
not such right is evidenced by an Instrument or Chattel Paper and whether or not
it has been earned by performance, except for the Monsanto Receivables and the
Sold Receivables.

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

      “Subsidiary Borrower Obligations”: with respect to each Subsidiary
Borrower, without duplicating any Guarantor Obligations, the collective
reference to the unpaid principal of and interest on the Loans and all other
obligations and liabilities of such

 

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Subsidiary Borrower (including, without limitation, interest accruing at the
then applicable rate provided in the Credit Agreement after the maturity of the
Loans and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to such Subsidiary
Borrower, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) to the Administrative Agent or any Lender (or, in
the case of any Lender Hedge Agreement, any Affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, this Agreement, the other Loan Documents, any Letter
of Credit, any Lender Hedge Agreement or any other document made, delivered or
given in connection with any of the foregoing, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are required to be
paid by such Subsidiary Borrower pursuant to the terms of any of the foregoing
agreements).

      “Trademarks”: (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (ii) the right to obtain all renewals thereof.

      “Trademark License”: any agreement, whether written or oral, providing for
the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in Schedule 6.

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

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

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

 

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SECTION 2. BORROWER GUARANTEE

             2.1 Borrower Guarantee. (a) The Borrower hereby, unconditionally
and irrevocably, guarantees to the Administrative Agent, for the ratable benefit
of the Lenders and their respective successors, indorsees, transferees and
assigns, the prompt and complete payment and performance by each Subsidiary
Borrower when due (whether at the stated maturity, by acceleration or otherwise)
of its Subsidiary Borrower Obligations.

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

             (c) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Subsidiary Borrower Obligations and the
obligations of the Borrower under the guarantee contained in this Section 2
shall have been satisfied by payment in full, no Letter of Credit shall be
outstanding and the Commitments and Loans shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement each Subsidiary
Borrower may be free from any Subsidiary Borrower Obligations.

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

             2.2 No Subrogation. Notwithstanding any payment or payments made by
the Borrower hereunder, or any set-off or application of funds of the Borrower
by the Administrative Agent or any Lender, the Borrower shall not be entitled to
be subrogated to any of the rights of the Administrative Agent or any Lender
against the Subsidiary Borrowers or against any collateral security or guarantee
or right of offset held by the Administrative Agent or any Lender for the
payment of the Subsidiary Borrower Obligations, nor shall the Borrower seek or
be entitled to seek any contribution or reimbursement from the Subsidiary
Borrowers in respect of payments made by the Borrower hereunder, until all
amounts owing to the Administrative Agent and the Lenders by the Subsidiary
Borrowers on account of the Subsidiary Borrower Obligations are paid in full and
the Commitments and Loans are terminated. If any amount shall be paid to

 

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the Borrower on account of such subrogation rights at any time when all of the
Subsidiary Borrower Obligations shall not have been paid in full, such amount
shall be held by the Borrower in trust for the Administrative Agent and the
Lenders, segregated from other funds of the Borrower, and shall, forthwith upon
receipt by the Borrower, be turned over to the Administrative Agent in the exact
form received by the Borrower (duly indorsed by the Borrower to the
Administrative Agent, if required), to be applied against the Subsidiary
Borrower Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine.

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

             2.4 Guarantee Absolute and Unconditional. The Borrower waives any
and all notice of the creation, renewal, extension or accrual of any of the
Subsidiary Borrower Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon the guarantee contained in this
Section 2 or acceptance of the guarantee contained in this Section 2; the
Subsidiary Borrower Obligations, and any of them, shall conclusively be deemed
to have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon the guarantee contained in this Section 2; and all
dealings between the Borrower and the Subsidiary Borrowers, on the one hand, and
the Administrative Agent and the Lenders, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. The Borrower waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or the applicable Subsidiary Borrower with respect to the
Subsidiary Borrower Obligations. The Borrower understands and agrees that the
guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of the Credit Agreement or any other Loan Document,

 

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any of the Subsidiary Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by any
Subsidiary Borrower or any other Person against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or any Subsidiary Borrower) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Subsidiary Borrowers for the Subsidiary Borrower Obligations, or of the Borrower
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against the Borrower, the Administrative Agent or any Lender
may, but shall be under no obligation to, make a similar demand on or otherwise
pursue such rights and remedies as it may have against the Subsidiary Borrowers
or any other Person or against any collateral security or guarantee for the
Subsidiary Borrower Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any Lender to make any such demand,
to pursue such other rights or remedies or to collect any payments from the
Borrower, any Subsidiary Borrower, or any other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Borrower, any Subsidiary Borrower or any other Person or
any such collateral security, guarantee or right of offset, shall not relieve
the Borrower of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against the Borrower.
For the purposes hereof, “demand” shall include the commencement and continuance
of any legal proceedings.

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

             2.6 Payments. The Borrower hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars or the applicable Optional Currency or Tranche A
Subtranche Currency at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017 or at such other place and time specified
by the Administrative Agent.

SECTION 3. DOMESTIC SUBSIDIARY GUARANTEE

             3.1 Domestic Subsidiary Guarantee. (a) Each of the Guarantors
hereby, jointly and severally, unconditionally and irrevocably, guarantees to
the Administrative Agent, for the

 

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ratable benefit of the Lenders and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment and performance by the
Borrower when due (whether at the stated maturity, by acceleration or otherwise)
of the Borrower Obligations and the Borrower’s Guarantor Obligations.

             (b) [Intentionally Omitted]

             (c) [Intentionally Omitted]

             (d) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 3.2).

             (e) Each Guarantor agrees that the Borrower Obligations and the
Borrower’s Guarantor Obligations either solely or collectively, may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 3 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.

             (f) The guarantees contained in this Section 3 shall remain in full
force and effect until all the Borrower Obligations and the Borrower’s Guarantor
Obligations and the obligations of each Guarantor under the guarantees contained
in this Section 3 shall have been satisfied by payment in full, no Letter of
Credit shall be outstanding and the Commitments and Loans shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement,
the Borrower may be free from any Borrower Obligations and any Borrower’s
Guarantor Obligations.

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

 

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             3.2 Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder and which has not
paid its proportionate share of such payment. Each Guarantor’s right of
contribution shall be subject to the terms and conditions of Section 3.3. The
provisions of this Section 3.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Lenders, and
each Guarantor shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.

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

             3.4 Amendments, etc. with respect to the Borrower Obligations and
the Borrower’s Guarantor Obligations. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights against any
Guarantor and without notice to or further assent by any Guarantor, any demand
for payment of any of the Borrower Obligations or the Borrower’s Guarantor
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations and
the Borrower’s Guarantor Obligations continued, and the Borrower Obligations and
the Borrower’s Guarantor Obligations or the liability of any other Person upon
or for any part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Majority
Facility Lenders, the

 

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Supermajority Lenders, the Required Lenders or all Lenders, as the case may be)
may deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations or the Borrower’s Guarantor Obligations
may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or the Borrower’s Guarantor Obligations or for the
guarantee contained in this Section 3 or any property subject thereto.

             3.5 Guarantees Absolute and Unconditional. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations or Borrower’s Guarantor Obligations and notice of or proof
of reliance by the Administrative Agent or any Lender upon any of the guarantees
contained in this Section 3 or acceptance of the guarantees contained in this
Section 3; the Borrower Obligations and the Borrower’s Guarantor Obligations and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 3; and all dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon the guarantee contained in this Section 3.
Each Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations and the Borrower’s Guarantor
Obligations. Each Guarantor understands and agrees that the guarantees contained
in this Section 3 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or
the Borrower’s Guarantor Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower or any other Person against
the Administrative Agent or any Lender, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations or the Borrower’s
Guarantor Obligations, or of such Guarantor under the guarantee contained in
this Section 3, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Borrower, any other Guarantor or any other
Person or against any collateral security or guarantee for the Borrower
Obligations or the Borrower’s Guarantor Obligations or any right of offset with
respect thereto, and any failure by the Administrative Agent or any Lender to
make any such demand, to pursue such other rights or remedies or to collect any
payments from the Borrower, any other Guarantor or any other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of the Borrower, any other Guarantor or any
other Person or any such collateral security,

 

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guarantee or right of offset, shall not relieve any Guarantor of any obligation
or liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Administrative
Agent or any Lender against any Guarantor. For the purposes hereof “demand”
shall include the commencement and continuance of any legal proceedings.

             3.6 Reinstatement. The guarantees contained in this Section 3 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations or the
Borrower’s Guarantor Obligations, is rescinded or must otherwise be restored or
returned by the Administrative Agent or any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.

             3.7 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars or the applicable Optional Currency or Tranche A
Subtranche Currency at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017 or at such other place and time specified
by the Administrative Agent.

SECTION 4. GRANT OF SECURITY INTEREST

             Each Grantor hereby assigns and transfers to the Administrative
Agent, and hereby grants to the Administrative Agent, for the ratable benefit of
the Lenders, a security interest in, all of the following property now owned or
at any time hereafter acquired by such Grantor or in which such Grantor now has
or at any time in the future may acquire any right, title or interest
(collectively, the “Collateral”), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor’s Obligations:

      (a) all Receivables;

      (b) all Chattel Paper;

      (c) all Deposit Account;

      (d) all Documents;

      (e) all Equipment;

      (f) all General Intangibles;

 

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      (g) all Instruments;

      (h) all Intellectual Property;

      (i) all Inventory;

      (j) all Investment Property;

      (k) all books and records pertaining to the Collateral; and

      (l) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security and guarantees given by any
Person with respect to any of the foregoing.

SECTION 5. REPRESENTATIONS AND WARRANTIES

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

             5.1 Title; No Other Liens. Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement and as otherwise noted in Section 5.8(a), such Grantor owns
each item of the Collateral free and clear of any and all Liens or claims of
others, except, with respect to material Intellectual Property, as set forth on
Schedule 6 and except that no representation is made as to any other
Intellectual Property. No financing statement or other public notice with
respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the ratable benefit of the Lenders, pursuant to this Agreement or as
are permitted by the Credit Agreement.

             5.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral (or, with respect to Inventory and Equipment,
in Inventory and Equipment kept at the locations set forth on Schedule 5) in
favor of the Administrative Agent, for the ratable benefit of the Lenders, as
collateral security for such Grantor’s Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor (other than Inventory
sold by such Grantor in the ordinary course of business), to the extent that
perfection or enforceability against third parties is obtainable by completion
of the filings and

 

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other actions set forth on Schedule 3 or any similar filings or other actions in
other jurisdictions in the United States of America and (b) are prior to all
other Liens on the Collateral in existence on the date hereof except for
(i) unrecorded Liens permitted by the Credit Agreement which have priority over
the Liens on the Collateral by operation of law and (ii) other Liens on the
Collateral permitted by the Credit Agreement.

             5.3 Chief Executive Office. On the date hereof, such Grantor’s
jurisdiction of organization and the location of such Grantor’s chief executive
office or sole place of business are specified on Schedule 4.

             5.4 Inventory and Equipment. On the date hereof, the Inventory and
the Equipment (other than mobile goods) (except for Inventory and Equipment not
material in relation to the Inventory and Equipment of the Borrower and its
Domestic Subsidiaries as a whole) are kept at the locations listed on
Schedule 5.

             5.5 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.

             5.6 Investment Property. (a) The shares of Pledged Stock pledged by
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer, which is a direct or an indirect
Domestic Subsidiary of any Grantor, owned by such Grantor.

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

             (c) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

             (d) Such Grantor is the record and beneficial owner of, and has
good and marketable title to, the Investment Property pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement and except as
permitted under subsection 7.1(k) of the Credit Agreement.

             5.7 Receivables. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.

             (b) None of the obligors on any Receivables is a Governmental
Authority.

 

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             (c) The amounts represented by such Grantor to the Lenders from
time to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.

             5.8 Intellectual Property. (a) Schedule 6 lists all material United
States Intellectual Property owned by such Grantor in its own name on the date
hereof. To the knowledge of such Grantor, all material foreign Intellectual
Property owned by such Grantor is owned in its own name on the date hereof.

             (b) Except as otherwise identified on Schedule 6, on the date
hereof, all material Intellectual Property listed on Schedule 6 is valid,
unexpired and does not infringe the intellectual property rights of any other
Person.

             (c) On the date hereof, none of the Intellectual Property listed on
Schedule 6 is the subject of any licensing or franchise agreement pursuant to
which such Grantor is the licensor or franchisor, other than the Scotts
trademark for the franchising of lawn care services to EG Systems, Inc. and the
Miracle-Gro trademark for the franchising of tree and shrub services to EG
Systems, Inc., which in turn grants local franchises in the United States of
America to tree and shrub service operators, respectively.

             (d) No final judgment has been rendered by any Governmental
Authority which would limit or cancel such Grantor’s rights in, any Intellectual
Property listed on Schedule 6 in any respect that could reasonably be expected
to have a Material Adverse Effect.

             (e) No action or proceeding is pending, or, to the knowledge of
such Grantor, threatened, on the date hereof (i) seeking to limit or cancel any
Intellectual Property listed on Schedule 6 or such Grantor’s ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property listed on Schedule 6.

SECTION 6. COVENANTS

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

             6.1 Delivery of Instruments, Certificated Securities and Chattel
Paper. If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed (including by
delivery of related stock or bond powers) in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.

 

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             6.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Administrative Agent and
(ii) to the extent requested by the Administrative Agent, insuring such Grantor,
the Administrative Agent and the Lenders against liability for personal injury
and property damage relating to such Inventory and Equipment, such policies to
be in such form and amounts and having such coverage as may be reasonably
satisfactory to the Administrative Agent and the Lenders.

             (b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (ii) name the Administrative Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.

             (c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
substantially concurrently with each delivery of the Borrower’s audited annual
financial statements and such supplemental reports with respect thereto as the
Administrative Agent may from time to time reasonably request.

             6.3 Payment of Obligations. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.

             6.4 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 5.2 and shall defend such security interest against the
claims and demands of all Persons whomsoever.

             (b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the assets and property of such Grantor and such other reports in
connection therewith as the Administrative Agent may reasonably request, all in
reasonable detail.

             (c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and

 

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duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, (i) filing any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby and (ii) in
the case of Investment Property, Deposit Accounts and any other relevant
Collateral, taking any actions necessary to enable the Administrative Agent to
obtain “control” (within the meaning of the applicable Uniform Commercial Code)
with respect thereto.

             6.5 Changes in Locations, Name, etc. Such Grantor will not, except
upon 15 days’ prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:

      (i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5;

      (ii) change its jurisdiction of organization or the location of its chief
executive office or sole place of business from that referred to in Section 5.3;
or

      (iii) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Administrative Agent in connection
with this Agreement would become misleading without 45 days prior written notice
to the Administrative Agent.

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

             (a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and

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

             6.7 Investment Property. (a) If such Grantor shall become entitled
to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer which is a direct or indirect
Domestic Subsidiary of such

 

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Grantor, whether in addition to, in substitution of, as a conversion of, or in
exchange for, any shares of the Pledged Stock, or otherwise in respect thereof,
such Grantor shall accept the same as the agent of the Administrative Agent and
the Lenders, hold the same in trust for the Administrative Agent and the Lenders
and deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed (including by delivery of related stock or bond powers)
by such Grantor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by such
Grantor to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for such Grantor’s Obligations. Any sums paid
upon or in respect of the Investment Property upon the liquidation or
dissolution of any Issuer shall be paid over to the Administrative Agent to be
held by it hereunder as additional collateral security for the applicable
Grantor’s Obligations, and in case any distribution of capital shall be made on
or in respect of the Investment Property or any property shall be distributed
upon or with respect to the Investment Property pursuant to the recapitalization
or reclassification of the capital of any Issuer or pursuant to the
reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for such Obligations except to the extent
permitted under Subsection 6.3. If any sums of money or property so paid or
distributed in respect of the Investment Property shall be received by such
Grantor, such Grantor shall, until such money or property is paid or delivered
to the Administrative Agent, hold such money or property in trust for the
Lenders, segregated from other funds of such Grantor, as additional collateral
security for the Obligations.

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

             (c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Investment Property issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
Section 6.7(a) with respect to the Investment Property issued by it and
(iii) the terms of Sections 7.3(c) and 7.7 shall apply to it, mutatis mutandis,
with respect to all actions that may be required of it pursuant to
Section 7.3(c) or 7.7 with respect to the Investment Property issued by it.

 

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             6.8 Receivables. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could materially adversely affect the
value thereof.

             (b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.

             (c) Anything contained in this Agreement to the contrary
notwithstanding, the Grantors, or any of them, shall have the right to enter
into one or more Receivables Purchase Facilities, as contemplated by the Credit
Agreement, and the Administrative Agent shall execute any and all documents
reasonably necessary to release its security interest in the Receivables which
become Sold Receivables upon the consummation of such Receivables Purchase
Facility(ies).

             6.9 Intellectual Property. (a) Such Grantor (either itself or
through licensees) will (i) continue to use each material Trademark in the
ordinary course of business, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) wherever practical,
use such Trademark with the appropriate notice of registration if required by
applicable Requirements of Law, and (iv) not knowingly do any act whereby such
Trademark may become invalidated.

             (b) Such Grantor (either itself or through licensees) will not
knowingly do any act, or omit to do any act, in Grantor’s reasonable business
judgment, whereby any material Patent may become forfeited, abandoned or
dedicated to the public.

             (c) Such Grantor (either itself or through licensees) (i) will, in
Grantor’s reasonable business judgment, employ each material Copyright and
(ii) will not (and will not permit any licensee or sublicensee thereof to)
knowingly do any act or knowingly omit to do any act whereby any material
portion of the Copyrights may become invalidated or otherwise impaired. Such
Grantor will not (either itself or through Licensees) knowingly do any act
whereby any material portion of the Copyrights may fall into the public domain.

             (d) Such Grantor (either itself or through licensees) will not
knowingly use any material Intellectual Property to infringe the intellectual
property rights of any other Person.

             (e) Such Grantor will notify the Administrative Agent and the
Lenders immediately if it knows that any registration relating to any material
Intellectual Property may become abandoned or of any final adverse determination
in any proceeding in the United States Patent and Trademark Office or any U.S.
court regarding such Grantor’s ownership of, or the validity of, any material
Intellectual Property.

 

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             (f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
such Grantor shall report such filing to the Administrative Agent within five
Business Days after the last day of the fiscal year in which such filing occurs.
Upon request of the Administrative Agent, such Grantor shall execute and
deliver, and have recorded, any and all agreements, instruments, documents, and
papers as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the Lenders’ security interest in any U.S. Trademark
and the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.

             (g) Such Grantor will in its reasonable business judgment
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, maintain and pursue each application (and obtain the
relevant registration) and to maintain each registration of the material
Intellectual Property, including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.

             (h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall take
such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property.

SECTION 7. REMEDIAL PROVISIONS

             7.1 Certain Matters Relating to Receivables. (a) The Administrative
Agent shall have the right after the occurrence and during the continuance of an
Event of Default to make test verifications of the Receivables in any manner and
through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Administrative Agent
may require in connection with such test verifications. At any time and from
time to time, upon the Administrative Agent’s request and at the expense of the
relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Receivables.

             (b) The Administrative Agent hereby authorizes each Grantor to
collect such Grantor’s Receivables, and the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default. If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of Default,
any payments of Receivables, when collected by any Grantor, (i) shall be
forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the
Administrative Agent if required, in a Collateral Account maintained under the
sole dominion and control of the Administrative Agent, subject to withdrawal by
the Administrative Agent for the account of the Lenders only as provided in
Section 7, and (ii) until so turned over, shall be held by such Grantor in trust
for the

 

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Administrative Agent and the Lenders, segregated from other funds of such
Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.

             (c) At the Administrative Agent’s request, each Grantor shall
deliver to the Administrative Agent all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Receivables, including, without limitation, all original orders, invoices and
shipping receipts.

             7.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to the
Administrative Agent’s satisfaction the existence, amount and terms of any
Receivables.

             (b) Upon the written request of the Administrative Agent at any
time after the occurrence and during the continuance of an Event of Default,
each Grantor shall notify obligors on its Receivables that the Receivables have
been assigned to the Administrative Agent for the ratable benefit of the Lenders
and that payments in respect thereof shall be made directly to the
Administrative Agent.

             (c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of its Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent or any Lender
of any payment relating thereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

             7.3 Pledged Stock. (a) Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor of the Administrative Agent’s intent to exercise its
corresponding rights pursuant to Section 7.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, to pay and declare dividends to
the extent permitted by the Credit Agreement and to exercise all voting and
corporate rights with respect to the Investment Property; provided, however,
that no vote shall be cast or corporate right exercised or other action taken
which, in the

 

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Administrative Agent’s reasonable judgment, would impair the Collateral or which
would be inconsistent with or result in any violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.

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

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

             7.4 Proceeds to be Turned Over To Administrative Agent. In addition
to the rights of the Administrative Agent and the Lenders specified in
Section 7.1 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor consisting
of cash, checks and other near-cash items shall be held by such Grantor in trust
for the Administrative Agent and the Lenders, segregated from other funds of
such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over
to the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral

 

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Account (or by such Grantor in trust for the Administrative Agent and the
Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 7.5.

             7.5 Application of Proceeds. At such intervals as may be agreed
upon by the Grantors and the Administrative Agent, or, if an Event of Default
shall have occurred and be continuing, at any time at the Administrative Agent’s
election, the Administrative Agent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to the Grantors or to whomsoever may be lawfully entitled
to receive the same. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Grantors or to whomsoever may be lawfully entitled to receive the same.

             7.6 Code and Other Remedies. If an Event of Default shall occur and
be continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted to them in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent’s request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor’s premises
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys’ fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Administrative Agent may elect, and only after such application

 

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and after the payment by the Administrative Agent of any other amount required
by any provision of law, including, without limitation, Section 9-504(1)(c) of
the New York UCC, need the Administrative Agent account for the surplus, if any,
to any Grantor. To the extent permitted by applicable law, each Grantor waives
all claims, damages and demands it may acquire against the Administrative Agent
or any Lender arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.

             7.7 Registration Rights. (a) If the Administrative Agent shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 7.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, the relevant
Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or “Blue Sky”
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.

             (b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account,
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.

             (c) Each Grantor agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged

 

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Stock pursuant to this Section 7.7 valid and binding and in compliance with any
and all other applicable Requirements of Law. Each Grantor further agrees that a
breach of any of the covenants contained in this Section 7.7 will cause
irreparable injury to the Administrative Agent and the Lenders, that the
Administrative Agent and the Lenders have no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant contained in
this Section 6.7 shall be specifically enforceable against such Grantor, and
such Grantor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Credit Agreement.

             7.8 Waiver; Deficiency. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any Lender to collect such deficiency.

SECTION 8. THE ADMINISTRATIVE AGENT

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

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

      (ii) in the case of any Intellectual Property, execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent’s and the
Lenders’ security interest in such Intellectual Property and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby;

 

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      (iii) pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by the
terms of this Agreement and pay all or any part of the premiums therefor and the
costs thereof;

      (iv) execute, in connection with any sale provided for in Section 7.6 or
7.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and

      (v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due thereunder
directly to the Administrative Agent or as the Administrative Agent shall
direct; (2) ask or demand for, collect, and receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (3) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other documents in
connection with any of the Collateral; (4) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce any
other right in respect of any Collateral; (5) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral;
(6) settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Administrative
Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Administrative Agent shall in its sole
discretion determine; and (8) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent’s and the Lenders’ security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as such Grantor might do.

     Anything in this Section 8.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 8.1(a) unless an Event of Default shall
have occurred and be continuing.

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

             (c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 8.1, together with interest
thereon at a rate per annum

 

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equal to the highest rate per annum at which interest would then be payable on
any category of past due ABR Loans under the Credit Agreement, from the date of
payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.

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

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

             8.3 Execution of Financing Statements. Pursuant to Section 9-402 of
the New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.

             8.4 Authority of Administrative Agent. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the

 

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Lenders with full and valid authority so to act or refrain from acting, and no
Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.

SECTION 9. MISCELLANEOUS

             9.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with subsection 10.1 of the Credit Agreement.

             9.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 10.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.

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

             9.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
agrees to pay or reimburse each Lender and the Administrative Agent for all its
costs and expenses incurred in collecting against such Guarantor under the
guarantees contained in Section 2 or 3, as applicable, or otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents to which
such Guarantor is a party, including, without limitation, the reasonable fees
and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Administrative Agent.

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

 

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             (c) Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement to the
extent the Borrower would be required to do so pursuant to subsection 10.5 of
the Credit Agreement.

             (d) The agreements in this Section 9.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.

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

             9.6 Set-Off. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time while an
Event of Default shall have occurred and be continuing, without notice to such
Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section 9.6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.

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

             9.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such

 

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prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

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

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

             9.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

             9.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
irrevocably and unconditionally:

      (a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

      (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;

      (c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

      (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

 

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      (e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

             9.13 Acknowledgments. Each Grantor hereby acknowledges that:

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

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

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

             9.14 Additional Grantors. Each Domestic Subsidiary Borrower that is
required to become a party to this Agreement pursuant to subsection 10.1(b) of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Domestic Subsidiary Borrower of an
Assumption Agreement in the form of Annex 1 hereto.

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

             (b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable for the release of the Liens created
hereby on such Collateral. At the request and sole expense of the Borrower, a
Subsidiary Guarantor shall be released from its obligations hereunder in the
event that all the Capital Stock of such Subsidiary Guarantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Credit
Agreement; provided that the Borrower shall have delivered to the

 

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Administrative Agent, at least ten Business Days prior to the date of the
proposed release, a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the sale or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Borrower stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.

             9.16 Conflict of Laws. Notwithstanding anything to the contrary
herein, in the event that any provision of any pledge, charge or foreign
equivalent executed by any Foreign Subsidiary and governed by the laws of the
applicable foreign jurisdiction is inconsistent with any corresponding provision
in this Agreement, the provision in such pledge, charge or foreign equivalent
shall govern.

             9.17 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

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

                       
THE CHASE MANHATTAN BANK,
  THE SCOTTS COMPANY
as Administrative Agent

                   
By:
  /s/ Thomas H. Kozlark   By:   /s/ G. Robert Lucas

           

  Title:   Vice President       Title:   Senior Vice President,

                  General Counsel and Secretary

            HYPONEX CORPORATION
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SCOTTS’ MIRACLE-GRO PRODUCTS, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SCOTTS-SIERRA HORTICULTURAL PRODUCTS COMPANY
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
REPUBLIC TOOL & MANUFACTURING CORP.
      By:   /s/ Rebecca J. Bruening         Title: Vice President             

 

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            SCOTTS-SIERRA INVESTMENTS, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SCOTTS PROFESSIONAL PRODUCTS CO.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SCOTTS PRODUCTS CO.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
OMS INVESTMENTS, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
MIRACLE-GRO LAWN PRODUCTS, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President             

 

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            MIRACLE-GRO PRODUCTS LTD.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SCOTTS-SIERRA CROP PROTECTION COMPANY
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
OLD FORT FINANCIAL CORP.
      By:   /s/ Rebecca J. Bruening         Title: Treasurer               
EARTHGRO, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President               
SANFORD SCIENTIFIC, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President             

 

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            EG SYSTEMS, INC.
      By:   /s/ Rebecca J. Bruening         Title: Vice President