Exhibit 10.4
SUBORDINATED GUARANTY AND PLEDGE AGREEMENT
Dated as of
June 18, 2008
made by
Teton Energy Corporation
and
each of the other Obligors
in favor of
Whitebox Advisors, LLC
as subordinated noteholder representative
     The indebtedness and other obligations of the Borrower and its subsidiaries
evidenced by this Agreement and the Debentures issued hereunder owed to the
Purchasers party to this Agreement are junior and subordinate to the
indebtedness and other obligations of the Borrower and its subsidiaries in
accordance with the provisions of the Intercreditor and Subordination Agreement
dated as of June 9, 2008, among JPMorgan Chase Bank, N.A., as Senior Agent,
Whitebox Advisors, LLC, as Subordinated Noteholder Representative, the Company
and certain of its affiliates, as amended from time to time.

 

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TABLE OF CONTENTS

                  Page
Article I
  Definitions   1
Section 1.01
  Definitions   2
Section 1.02
  Other Definitional Provisions   4
Section 1.03
  Rules of Interpretation   4
 
       
Article II
  Guarantee   4
Section 2.01
  Guarantee   4
Section 2.02
  Right of Contribution   5
Section 2.03
  No Subrogation   5
Section 2.04
  Guaranty Amendments, Etc. with respect to the Obligations   5
Section 2.05
  Waivers   6
Section 2.06
  Guaranty Absolute and Unconditional   6
Section 2.07
  Reinstatement   8
Section 2.08
  Payments   8
 
       
Article III
  Grant of Security Interest   8
Section 3.01
  Grant of Security Interest   8
Section 3.02
  Transfer of Pledged Securities   8
 
       
Article IV
  Representations and Warranties   9
Section 4.01
  Representations in Credit Agreement   9
Section 4.02
  Title; No Other Liens   9
Section 4.03
  Perfected First Priority Liens   9
Section 4.04
  Obligor Information   10
Section 4.05
  Pledged Securities   10
Section 4.06
  Benefit to the Guarantor   10
Section 4.07
  Solvency   11
 
       
Article V
  Covenants   11
Section 5.01
  Maintenance of Perfected Security Interest; Further Documentation   11
Section 5.02
  Changes in Locations, Name, Etc.   11
Section 5.03
  Pledged Securities   12
 
       
Article VI
  Remedial Provisions   14
Section 6.01
  Code and Other Remedies   14
Section 6.02
  Pledged Securities   15
Section 6.03
  Private Sales of Pledged Securities   17
Section 6.04
  Waiver; Deficiency   18
Section 6.05
  Non-Judicial Enforcement   18
 
       
Article VII
  The Subordinated Noteholder Representative   18
Section 7.01
  Subordinated Noteholder Representative’s Appointment as Attorney-in-Fact, Etc.
  18

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                  Page
Section 7.02
  Duty of Subordinated Noteholder Representative   19
Section 7.03
  Filing of Financing Statements   20
Section 7.04
  Authority of Subordinated Noteholder Representative   20
 
       
Article VIII
  Subordination of Indebtedness   21
Section 8.01
  Subordination of All Obligor Claims   21
Section 8.02
  Claims in Bankruptcy   21
Section 8.03
  Payments Held in Trust   21
Section 8.04
  Liens Subordinate   22
Section 8.05
  Notation of Records   22
 
       
Article IX
  Miscellaneous   22
Section 9.01
  Waiver   22
Section 9.02
  Notices   22
Section 9.03
  Payment of Expenses, Indemnities, Etc.   22
Section 9.04
  Amendments in Writing   23
Section 9.05
  Successors and Assigns   23
Section 9.06
  Survival; Revival; Reinstatement   23
Section 9.07
  Counterparts; Integration; Effectiveness   24
Section 9.08
  Severability   24
Section 9.09
  Set-Off   24
Section 9.10
  Governing Law; Submission to Jurisdiction   24
Section 9.11
  Headings   25
Section 9.12
  Acknowledgments   26
Section 9.13
  Additional Obligors and Pledgors   26
Section 9.14
  Releases   26
Section 9.15
  Acceptance   27

SCHEDULES:

         
Schedule 1
  —   Notice Addresses of Obligors
Schedule 2
  —   Description of Pledged Securities
Schedule 3
  —   Filings and Other Actions Required to Perfect Security Interests
Schedule 4
  —   Location of Jurisdiction of Organization and Chief Executive Office
 
       
ANNEXES:
       
 
       
Annex I
  —   Form of Assumption Agreement
Annex II
  —   Form of Supplement

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     This SUBORDINATED GUARANTY AND PLEDGE AGREEMENT, dated as of June 18, 2008,
is made by TETON ENERGY CORPORATION, a Delaware corporation (the “Borrower”),
and each of the signatories hereto (the Borrower and each of the signatories
hereto, together with any other Subsidiary or holding company of the Borrower
that becomes a party hereto from time to time after the date hereof, the
“Obligors”), in favor of WHITEBOX ADVISORS, LLC, as agent for the Subordinated
Noteholders (in such capacity, together with its successors in such capacity,
the “Subordinated Noteholder Representative”).
R E C I T A L S
     A. The Borrower has previously entered into that certain Amended and
Restated Credit Agreement dated as of August 9, 2007, among the Borrower, the
financial institutions party thereto (the “Lenders”), and JPMorgan Chase Bank,
NA, as administrative agent (the “Senior Agent”) for the Lenders (as heretofore
amended, supplemented or restated, the “Existing Credit Agreement”).
     B. As a condition precedent to the obligation of the Lenders to make their
respective extensions of credit to the Borrower under the Existing Credit
Agreement, the Obligors executed and delivered that certain Amended and Restated
Guaranty and Pledge Agreement dated as of August 9, 2007 (the “Existing Guaranty
and Pledge Agreement”) to Senior Agent for the ratable benefit of the Lenders.
     C. The Existing Credit Agreement was amended and restated in its entirety
as a Second Amended and Restated Credit Agreement dated as of April 2, 2008 by
and among the Borrower, the Lenders and the Senior Agent (as amended,
supplemented or restated from time to time, the “Credit Agreement”), pursuant to
which the Lenders have agreed to extend credit to the Borrower.
     D. The Existing Guaranty and Pledge Agreement was amended and restated in
its entirety as an Amended and Restated Guaranty and Pledge Agreement dated as
of April 2, 2008 by and among the Borrower, the Obligors, the Lenders and the
Senior Agent (as amended, supplemented or restated from time to time, the
“Senior Guaranty and Pledge Agreement”), pursuant to which the Lenders have
agreed to extend credit to the Borrower.
     E. The Borrower has entered into a Securities Purchase Agreement dated as
of June 9, 2008 (the “Purchase Agreement”) together with certain ancillary
agreements (collectively the “Transaction Documents” as defined in the Purchase
Agreement) with the Purchasers signatory thereto and their respective successors
and assigns (the “Subordinated Noteholders”), including, without limitation, an
Intercreditor and Subordination Agreement with the Senior Agent, the provisions
of which shall be applicable to this Agreement, whether specifically referred to
in any particular section or not.
     F. Now, therefore, in consideration of the premises herein and to induce
the Subordinated Noteholder Representative and the Subordinated Noteholders to
enter into the Purchase Agreement and the other Transaction Documents with the
Borrower and to induce the Subordinated Noteholders to make their respective
extensions of credit to the Borrower

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thereunder, each Obligor hereby agrees with the Subordinated Noteholder
Representative, for the ratable benefit of the Subordinated Noteholders as
follows:
ARTICLE I
Definitions
     Section 1.01 Definitions.
          (a) Unless otherwise defined herein, terms defined in any Transaction
Document and used herein have the meanings given to them in such Transaction
Document, and all uncapitalized terms which are defined in the UCC as in effect
in the State of New York on the date hereof are used herein as so defined.
          (b) The following terms have the following meanings:
          “Agreement” means this Subordinated Guaranty and Pledge Agreement, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.
          “Bankruptcy Code” means title 11, United States Code, as amended from
time to time.
          “Collateral” has the meaning assigned such term in Section 3.01.
          “Guaranteed Creditors” means the collective reference to the
Subordinated Noteholder Representative and the Subordinated Noteholders.
          “Guaranteed Documents” means the Purchase Agreement, the Security
Documents, and other Transaction Documents.
          “Guarantor Obligations” means with respect to any Guarantor, the
collective reference to (a) the Obligations and (b) all obligations and
liabilities of such Guarantor which may arise under or in connection with any
Guaranteed Document to which such Guarantor is a party, in each case, whether on
account of principal, interest, guarantee obligations, reimbursement
obligations, payments in respect of an early termination date, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
reasonable fees and disbursements of counsel to any Guaranteed Creditor under
any Guaranteed Document).
          “Guarantors” means the collective reference to each Obligor other than
the Borrower.
          “Issuers” means the collective reference to each issuer of a Pledged
Security.
          “LLC” means, with respect to each Pledgor, each limited liability
company described or referred to in Schedule 2 in which such Pledgor has an
interest.
          “LLC Agreement” means, with respect to each Pledgor, each operating
agreement or other governing documents relating to an LLC, as each agreement has
heretofore been, and may hereafter be, amended, restated, supplemented or
otherwise modified from time to time.

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          “Obligations” means: (a) in the case of the Borrower, the obligations
of the Borrower under each of the Transaction Documents and (b) in the case of
each Guarantor, its Guarantor Obligations.
          “Obligor Claims” has the meaning assigned to such term in
Section 8.01.
          “Partnership” means, with respect to each Pledgor, each partnership
described or referred to in Schedule 2 in which such Pledgor has an interest.
          “Partnership Agreement” means, with respect to each Pledgor, each
partnership agreement governing a Partnership, as each such agreement has
heretofore been, and may hereafter be, amended, restated, supplemented or
otherwise modified.
          “Pledged LLC Interests” means, with respect to each Pledgor, all
right, title and interest of such Pledgor as a member of each LLC and all right,
title and interest of any Pledgor in, to and under each LLC Agreement.
          “Pledged Partnership Interests” means, with respect to each Pledgor,
all right, title and interest of such Pledgor as a limited or general partner in
all Partnerships and all right, title and interest of any Pledgor in, to and
under the Partnership Agreements.
          “Pledged Securities” means: (a) the equity interests described or
referred to in Schedule 2 (as the same may be supplemented from time to time
pursuant to a Supplement); and (b) (i) the certificates or instruments, if any,
representing such Equity Interests, (ii) all dividends (cash, equity interests
or otherwise), cash, instruments, rights to subscribe, purchase or sell and all
other rights and property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such securities,
(iii) all replacements, additions to and substitutions for any of the property
referred to in this definition, including, without limitation, claims against
third parties, (iv) the proceeds, interest, profits and other income of or on
any of the property referred to in this definition, (v) all security
entitlements in respect of any of the foregoing, if any and (vi) all books and
records relating to any of the property referred to in this definition.
          “Pledgor” means any Obligor that now or hereafter pledges Pledged
Securities hereunder.
          “Proceeds” means all “proceeds” as such term is defined in
Section 9.102(65) of the Uniform Commercial Code in effect in the State of Texas
on the date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
          “Securities Act” shall mean the Securities Act of 1933, as amended.
          “Supplement” means a Supplement substantially in the form attached
hereto as Annex II.
          “UCC” means the Uniform Commercial Code as from time to time in effect
in the State of New York; provided, however, that, in the event that, by reason
of mandatory provisions

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of law, any of the attachment, perfection or priority of the Subordinated
Noteholder Representative’s and the Guaranteed Creditors’ security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection, the effect
thereof or priority and for purposes of definitions related to such provisions.
     Section 1.02 Other Definitional Provisions. Where the context requires,
terms relating to the Collateral or any part thereof, when used in relation to a
Pledgor, refer to such Pledgor’s Collateral or the relevant part thereof.
ARTICLE II
Guarantee
     Section 2.01 Guarantee.
          (a) Upon the terms and subject to the conditions of this Agreement,
each of the Guarantors hereby jointly and severally, unconditionally and
irrevocably, guarantees to the Guaranteed Creditors and each of their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
in cash and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. This is a guarantee
of payment and not collection and the liability of each Guarantor is primary and
not secondary.
          (b) Anything herein or in any other Transaction Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Transaction 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 2.02).
          (c) Each Guarantor agrees that the Obligations 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 Article II or affecting the
rights and remedies of any Guaranteed Creditor hereunder.
          (d) Each Guarantor agrees that if the maturity of the Obligations is
accelerated by bankruptcy or otherwise, such maturity shall also be deemed
accelerated for the purpose of this guarantee without demand or notice to such
Guarantor. The guarantee contained in this Article II shall remain in full force
and effect until all the Obligations shall have been satisfied by payment in
full in cash.
          (e) No payment made by any Obligor, any other guarantor or any other
Person or received or collected by any Guaranteed Creditor 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 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 Obligations or any payment
received or collected from such Guarantor in respect of the Obligations), remain
liable for the Obligations up

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to the maximum liability of such Guarantor hereunder until the Obligations are
paid in full in cash, no Letter of Credit shall be outstanding and all of the
Commitments are terminated.
     Section 2.02 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 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 2.03. The provisions of
this Section 2.02 shall in no respect limit the obligations and liabilities of
any Guarantor to the Guaranteed Creditors, and each Guarantor shall remain
liable to the Guaranteed Creditors for the full amount guaranteed by such
Guarantor hereunder.
     Section 2.03 No Subrogation. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
any Guaranteed Creditor, no Guarantor shall be entitled to be subrogated to any
of the rights of any Guaranteed Creditor against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by any
Guaranteed Creditor for the payment of the Obligations, nor shall any Guarantor
seek or be entitled to seek any indemnity, exoneration, participation,
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 Guaranteed Creditors by the Borrower on account of the Obligations are
irrevocably and indefeasibly paid in full in cash. If any amount shall be paid
to any Guarantor on account of such subrogation rights at any time when all of
the Obligations shall not have been irrevocably and indefeasibly paid in full in
cash, such amount shall be held by such Guarantor in trust for the Guaranteed
Creditors, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Subordinated Noteholder Representative in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Subordinated Noteholder
Representative, if required), to be applied against the Obligations, whether
matured or unmatured, in accordance with Section 10.02(c) of the Credit
Agreement.
     Section 2.04 Guaranty Amendments, Etc. with respect to the Obligations.
Each Guarantor shall remain obligated hereunder, and such Guarantor’s
obligations hereunder shall not be released, discharged or otherwise affected,
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to, demand upon or further assent by any Guarantor (which
notice, demand and assent requirements are hereby expressly waived by such
Guarantor), (a) any demand for payment of any of the Obligations made by any
Guaranteed Creditor may be rescinded by such Guaranteed Creditor or otherwise
and any of the Obligations continued; (b) the Obligations, 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, or any indulgence or
forbearance in respect thereof granted by, any Guaranteed Creditor; (c) any
Guaranteed Document may be amended, modified, supplemented or terminated, in
whole or in part, as the Guaranteed Creditors may deem advisable from time to
time; (d) any collateral security, guarantee or right of offset at any time held
by any Guaranteed Creditor for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released; (e) any additional guarantors,
makers or endorsers of the Borrower’s Obligations may from time to time be
obligated on the Borrower’s Obligations or any additional security or collateral
for the payment and performance of the Borrower’s

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Obligations may from time to time secure the Borrower’s Obligations; or (f) any
other event shall occur which constitutes a defense or release of sureties
generally. No Guaranteed Creditor shall have any obligation to protect, secure,
perfect or insure any Lien at any time held by it as security for the
Obligations or for the guarantee contained in this Article II or any property
subject thereto.
     Section 2.05 Waivers. Each Guarantor hereby waives any and all notice of
the creation, renewal, extension or accrual of any of the Obligations and notice
of or proof of reliance by any Guaranteed Creditor upon the guarantee contained
in this Article II or acceptance of the guarantee contained in this Article II;
the 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 Article II and no notice of
creation of the Obligations or any extension of credit already or hereafter
contracted by or extended to the Borrower need be given to any Guarantor; and
all dealings between the Borrower and any of the Guarantors, on the one hand,
and the Guaranteed Creditors, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Article II. 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 Obligations.
     Section 2.06 Guaranty Absolute and Unconditional.
          (a) Each Guarantor understands and agrees that the guarantee contained
in this Article II is, and shall be construed as, a continuing, completed,
absolute and unconditional guarantee of payment, and each Guarantor hereby
waives any defense of a surety or guarantor or any other obligor on any
obligations arising in connection with or in respect of any of the following and
hereby agrees that its obligations hereunder shall not be discharged or
otherwise affected as a result of any of the following:
          (i) the invalidity or unenforceability of any Guaranteed Document, any
of the 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
any Guaranteed Creditor;
          (ii) 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 any Guaranteed Creditor;
          (iii) the insolvency, bankruptcy arrangement, reorganization,
adjustment, composition, liquidation, disability, dissolution or lack of power
of the Borrower or any other Guarantor or any other Person at any time liable
for the payment of all or part of the Obligations, including any discharge of,
or bar or stay against collecting, any Obligation (or any part of them or
interest therein) in or as a result of such proceeding;

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          (iv) any sale, lease or transfer of any or all of the assets of the
Borrower or any other Guarantor, or any changes in the shareholders of the
Borrower or any other Guarantor;
          (v) any change in the corporate existence (including its constitution,
laws, rules, regulations or power), structure or ownership of any Obligor or in
the relationship between the Borrower and any Obligor;
          (vi) the fact that any Collateral or Lien contemplated or intended to
be given, created or granted as security for the repayment of the Obligations
shall not be properly perfected or created, or shall prove to be unenforceable
or subordinate to any other Lien, it being recognized and agreed by each of the
Guarantors that it is not entering into this Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectability
or value of any of the Collateral for the Obligations;
          (vii) the absence of any attempt to collect the Obligations or any
part of them from any Obligor;
          (viii) (A) any Guaranteed Creditor’s election, in any proceeding
instituted under chapter 11 of the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code; (B) any borrowing or grant of a Lien
by the Borrower, as debtor-in-possession, or extension of credit, under
Section 364 of the Bankruptcy Code; (C) the disallowance, under Section 502 of
the Bankruptcy Code, of all or any portion of any Guaranteed Creditor’s claim
(or claims) for repayment of the Obligations; (D) any use of cash collateral
under Section 363 of the Bankruptcy Code; (E) any agreement or stipulation as to
the provision of adequate protection in any bankruptcy proceeding; (F) the
avoidance of any Lien in favor of the Guaranteed Creditors or any of them for
any reason; or (G) failure by any Guaranteed Creditor to file or enforce a claim
against the Borrower or its estate in any bankruptcy or insolvency case or
proceeding; or
          (ix) any other circumstance or act whatsoever, including any action or
omission of the type described in Section 2.04 (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
Obligations, or of such Guarantor under the guarantee contained in this
Article II, in bankruptcy or in any other instance.
          (b) When making any demand hereunder or otherwise pursuing its rights
and remedies hereunder against any Guarantor, any Guaranteed Creditor may, but
shall be under no obligation to, join or make a similar demand on or otherwise
pursue or exhaust 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 Obligations or any right of offset with respect thereto, and
any failure by any Guaranteed Creditor 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, guarantee or right of offset, shall not relieve any Guarantor of any

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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 any
Guaranteed Creditor against any Guarantor. For the purposes hereof “demand”
shall include the commencement and continuance of any legal proceedings.
     Section 2.07 Reinstatement. The guarantee contained in this Article II
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 Obligations is rescinded or
must otherwise be restored or returned by any Guaranteed Creditor 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.
     Section 2.08 Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Subordinated Noteholder Representative, for the
ratable benefit of the Guaranteed Creditors, without set-off, deduction or
counterclaim, in dollars, in immediately available funds, at the offices of the
Subordinated Noteholder Representative as specified in Section 5.4 of the
Purchase Agreement.
ARTICLE III
Grant of Security Interest
     Section 3.01 Grant of Security Interest. Subject only to the prior pledge
of each such item of Collateral to the Senior Agent, under the Senior Guaranty
and Pledge Agreement, which such prior pledge is acknowledged by the
Subordinated Noteholder Agent and each Guaranteed Creditor, each Pledgor hereby
pledges, assigns and transfers to the Subordinated Noteholder Representative,
and hereby grants to the Subordinated Noteholder Representative, for the ratable
benefit of the Guaranteed Creditors, a security interest in all of the following
property now owned or at any time hereafter acquired by such Pledgor or in which
such Pledgor 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 Pledgor’s Obligations:
          (a) all Pledged Securities;
          (b) all books and records pertaining to the Collateral; and
          (c) 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 3.02 Transfer of Pledged Securities. All certificates or
instruments representing or evidencing such Pledged Securities shall be
delivered to and held pursuant hereto by the Subordinated Noteholder
Representative or a Person designated by the Subordinated Noteholder
Representative (which such designee shall be the Senior Agent until the
termination of the security interest created by the Senior Guaranty and Pledge
Agreement, after which such time, the designee shall be the Subordinated
Noteholder Representative) and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or

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assignment in blank, and accompanied by any required transfer tax stamps to
effect the pledge of the Pledged Securities to the Subordinated Noteholder
Representative. Notwithstanding the preceding sentence, at the Subordinated
Noteholder Representative’s reasonable discretion, all such Pledged Securities
must be delivered or transferred in such manner as to permit the Subordinated
Noteholder Representative to be a “protected purchaser” to the extent of its
security interest as provided in Section 8.303 of the UCC (if the Subordinated
Noteholder Representative otherwise qualifies as a protected purchaser). During
the continuance of an Event of Default, the Subordinated Noteholder
Representative, subject to its compliance with applicable federal and state
securities laws and the prior rights of the Senior Agent, shall have the right,
at any time in its discretion and without notice, to transfer to or to register
in the name of the Subordinated Noteholder Representative or any of its nominees
any or all of the Pledged Securities, subject only to the revocable rights
specified in Section 6.03. In addition, during the continuance of an Event of
Default, the Subordinated Noteholder Representative shall have the right at any
time to exchange certificates or instruments representing or evidencing Pledged
Securities for certificates or instruments of smaller or larger denominations.
ARTICLE IV
Representations and Warranties
     To induce the Subordinated Noteholder Representative and the Subordinated
Noteholders to enter into the Transaction Documents and to induce the
Subordinated Noteholders to make their respective extensions of credit to the
Borrower thereunder, each Obligor hereby represents and warrants to the
Subordinated Noteholder Representative and each Subordinated Noteholder that:
     Section 4.01 Representations in Credit Agreement. In the case of each
Guarantor, the representations and warranties set forth in Section 3.1 of the
Purchase Agreement as they relate to such Guarantor or to the Transaction
Documents to which such Guarantor is a party are true and correct in all
material respects, provided that each reference in each such representation and
warranty to the Borrower’s knowledge shall, for the purposes of this
Section 4.01, be deemed to be a reference to such Guarantor’s knowledge.
     Section 4.02 Title; No Other Liens. Except for the security interest
granted to the Senior Agent for the ratable benefit of the Lenders under the
Credit Agreement and the Subordinated Noteholder Representative for the ratable
benefit of the Guaranteed Creditors pursuant to this Agreement, such Pledgor is
the record and beneficial owner of its respective items of the Collateral free
and clear of any and all Liens and has rights in or the power to transfer each
item of the Collateral in which a Lien is granted by it hereunder, free and
clear of any Lien. 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 Senior Agent, for the ratable
benefit of the Lenders or the Subordinated Noteholder Representative, for the
ratable benefit of the Guaranteed Creditors, pursuant to this Agreement or the
Security Documents.
     Section 4.03 Perfected Second Priority Liens. The security interests
granted pursuant to this Agreement (a) upon the completion of the filings and
the other actions specified on Schedule 3 constitute valid perfected security
interests in all of the Collateral in favor of the

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Subordinated Noteholder Representative, for the ratable benefit of the
Guaranteed Creditors, as collateral security for such Pledgor’s Obligations,
enforceable in accordance with the terms hereof against all creditors of such
Pledgor and any Persons purporting to purchase any Collateral from such Pledgor
and (b) are prior to all other Liens on the Collateral in existence on the date
hereof other than the prior Liens in favor of the Senior Agent for the ratable
benefit of the Lenders.
     Section 4.04 Obligor Information. On the date hereof, the correct legal
name of such Obligor, all names and trade names that such Obligor has used in
the last five years, such Obligor’s jurisdiction of organization and each
jurisdiction of organization of such Obligor over the last five years,
organizational number, taxpayer identification number, and the location(s) of
such Obligor’s chief executive office or sole place of business over the last
five years are specified on Schedule 4.
     Section 4.05 Pledged Securities.
          (a) The Pledged Securities required to be pledged hereunder by such
Pledgor are listed in Schedule 2. The shares of Pledged Securities pledged by
such Pledgor hereunder constitute all the issued and outstanding shares of all
classes of the equity interests of each Issuer owned by such Pledgor. All the
shares of the Pledged Securities have been duly and validly issued and are fully
paid and nonassessable; and such Pledgor is the record and beneficial owner of,
and has good title to, the Pledged Securities 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 or by the Senior Guaranty and
Pledge Agreement, and has rights in or the power to transfer the Pledged
Securities in which a Lien is granted by it hereunder, free and clear of any
Lien.
          (b) There are no restrictions on transfer (that have not been waived
or otherwise consented to) in the LLC Agreement governing any Pledged LLC
Interest and the Partnership Agreement governing any Pledged Partnership
Interest or any other agreement relating thereto which would limit or restrict
(i) the grant of a security interest in the Pledged LLC Interests and the
Pledged Partnership Interests, (ii) the perfection of such security interest or
(iii) the exercise of remedies in respect of such perfected security interest in
the Pledged LLC Interests and the Pledged Partnership Interests, in each case,
as contemplated by this Agreement. Upon the exercise of remedies in respect of
the Pledged LLC Interests and the Pledged Partnership Interests, a transferee or
assignee of a membership interest or partnership interest, as the case may be,
of such LLC or Partnership, as the case may be, shall become a member or
partner, as the case may be, of such LLC or Partnership, as the case may be,
entitled to participate in the management thereof and, upon the transfer of the
entire interest of such Pledgor, such Pledgor ceases to be a member or partner,
as the case may be.
     Section 4.06 Benefit to the Guarantor. The Borrower is a member of an
affiliated group of companies that includes each Guarantor, and the Borrower and
the other Guarantors are engaged in related businesses. Each Guarantor is a
Subsidiary of the Borrower and its guaranty and surety obligations pursuant to
this Agreement may reasonably be expected to benefit, directly or indirectly,
such Subsidiary; and each Guarantor has determined that this Agreement is

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necessary and convenient to the conduct, promotion and attainment of the
business of such Guarantor and the Borrower.
     Section 4.07 Solvency. Each Obligor (a) is not insolvent as of the date
hereof and will not be rendered insolvent as a result of this Agreement (after
giving effect to Section 2.02), (b) is not engaged in business or a transaction,
or about to engage in a business or a transaction, for which any property
remaining with it constitutes unreasonably small capital, and (c) does not
intend to incur, or believe it will incur, Debt that will be beyond its ability
to pay as such Debt matures.
ARTICLE V
Covenants
     Each Obligor covenants and agrees with the Subordinated Noteholder
Representative and the Subordinated Noteholders that, from and after the date of
this Agreement until the Obligations shall have been paid in full in cash:
     Section 5.01 Maintenance of Perfected Security Interest; Further
Documentation. Each Pledgor agrees that:
          (a) it shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.03 and shall defend such security interest against the claims and
demands of all Persons whomsoever.
          (b) it will furnish to the Subordinated Noteholder Representative from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Subordinated Noteholder Representative may reasonably request, all in reasonable
detail.
          (c) At any time and from time to time, upon the written request of the
Subordinated Noteholder Representative, and at the sole expense of such Pledgor,
it will promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Subordinated
Noteholder Representative may reasonably deem necessary for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the delivery of
certificated securities and the filing of any financing or continuation
statements under the UCC (or other similar laws) in effect in any jurisdiction
with respect to the security interests created hereby.
     Section 5.02 Changes in Locations, Name, Etc. Such Obligor recognizes that
financing statements pertaining to the Collateral have been or may be filed
where such Obligor maintains any Collateral or is organized. Such Obligor will
not cause or permit any change in its (a) corporate name or in any trade name
used to identify it in the conduct of its business or in the ownership of its
properties, (b) the location of its chief executive office or principal place of
business, (c) its identity or corporate structure or in the jurisdiction in
which it is incorporated or formed, (d) its jurisdiction of organization or its
organizational identification number in such jurisdiction of organization or
(e) its federal taxpayer identification number, unless, in each case, such
Obligor shall have first (i) notified the Subordinated Noteholder Representative
of such

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change at least thirty (30) days prior to the effective date of such change, and
(ii) taken all action reasonably requested by the Subordinated Noteholder
Representative for the purpose of maintaining the perfection and priority of the
Subordinated Noteholder Representative’s security interests under this
Agreement. In any notice furnished pursuant to this Section 5.02, such Obligor
will expressly state in a conspicuous manner that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of the
Subordinated Noteholder Representative’s security interest in the Collateral. At
the request of the Subordinated Noteholder Representative, on or prior to the
occurrence of such event, the Borrower will provide to the Subordinated
Noteholder Representative and the Subordinated Noteholders an opinion of
counsel, in form and substance reasonably satisfactory to the Subordinated
Noteholder Representative, to the effect that such event will not impair the
validity of the security interests hereunder, the perfection and priority
thereof, the enforceability of the Transaction Documents, and such other matters
as may be reasonably requested by the Subordinated Noteholder Representative.
     Section 5.03 Pledged Securities.
          (a) If such Pledgor 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 equity
interests of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of the Pledged Securities, or
otherwise in respect thereof, such Pledgor shall accept the same as the agent of
the Guaranteed Creditors, hold the same in trust for the Guaranteed Creditors,
segregated from other property of such Pledgor, and, subject to any prior rights
of the Senior Agent, deliver the same forthwith to the Subordinated Noteholder
Representative in the exact form received, duly indorsed by such Pledgor to the
Subordinated Noteholder Representative, if required, together with an undated
stock power covering such certificate duly executed in blank by such Pledgor and
with, if the Subordinated Noteholder Representative so requests, signature
guaranteed, to be held by the Subordinated Noteholder Representative, subject to
the terms hereof, as additional collateral security for the Obligations.
          (b) Without the prior written consent of the Subordinated Noteholder
Representative, such Pledgor will not (i) unless otherwise expressly permitted
hereby or under the other Transaction Documents, vote to enable, or take any
other action to permit, any Issuer to issue any equity interests of any nature
or to issue any other securities convertible into or granting the right to
purchase or exchange for any equity interests of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Transaction Documents),
(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 Pledged Securities or Proceeds
thereof, or any interest therein, except for the security interests created by
this Agreement and the Senior Guaranty and Pledge Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of such Pledgor or
the Subordinated Noteholder Representative to sell, assign or transfer any of
the Pledged Securities or Proceeds thereof.

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          (c) In the case of each Pledgor that is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Subordinated Noteholder
Representative promptly in writing of the occurrence of any of the events
described in Section 5.03(a) with respect to the Pledged Securities issued by it
and (iii) the terms of Sections Section 6.02(a) and Section 6.03 shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.02(d) or Section 6.03 with respect to the Pledged
Securities issued by it.
          (d) In the case of each Pledgor that is a partner in a Partnership,
such Pledgor hereby consents to the extent required by the applicable
Partnership Agreement to the pledge by each other Pledgor, pursuant to the terms
hereof, of the Pledged Partnership Interests in such Partnership and to the
transfer of such Pledged Partnership Interests to the Subordinated Noteholder
Representative or its nominee and to the substitution of the Subordinated
Noteholder Representative or its nominee as a substituted partner in such
Partnership with all the rights, powers and duties of a general partner or a
limited partner, as the case may be. In the case of each Pledgor member of an
LLC, such Pledgor hereby consents to the extent required by the applicable LLC
Agreement to the pledge by each other Pledgor, pursuant to the terms hereof, of
the Pledged LLC Interests in such LLC and to the transfer of such Pledged LLC
Interests to the Subordinated Noteholder Representative or its nominee and to
the substitution of the Subordinated Noteholder Representative or its nominee as
a substituted member of the LLC with all the rights, powers and duties of a
member of the LLC in question.
          (e) Such Pledgor shall not agree to any amendment of a Partnership
Agreement or LLC Agreement that in any way adversely affects the perfection of
the security interest of the Subordinated Noteholder Representative in the
Pledged Partnership Interests or Pledged LLC Interests pledged by such Pledgor
hereunder, including any amendment electing to treat the membership interest or
partnership interest of such Pledgor as a security under Section 8-103 of the
UCC.
          (f) Each Pledgor shall furnish to the Subordinated Noteholder
Representative such stock powers and other instruments as may be required by the
Subordinated Noteholder Representative to assure the transferability of the
Pledged Securities when and as often as may be reasonably requested by the
Subordinated Noteholder Representative.
          (g) The Pledged Securities will at all times constitute not less than
100% of the equity interests of the Issuer thereof owned by any Pledgor. Each
Pledgor will not permit any Issuer of any of the Pledged Securities to issue any
new shares of any class of equity interests of such Issuer without the prior
written consent of the Subordinated Noteholder Representative.

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ARTICLE VI
Remedial Provisions
     Section 6.01 Code and Other Remedies.
          (a) Upon the occurrence and during the continuance of an Event of
Default, and subject always to any prior rights of the Senior Agent and the
Lenders under the Senior Guaranty and Pledge Agreement and the Intercreditor and
Subordination Agreement, the Subordinated Noteholder Representative, on behalf
of the Guaranteed Creditors, may exercise, in addition to all other rights and
remedies granted to them in this Agreement, the other Transaction Documents and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law or otherwise available at law or equity. Without limiting
the generality of the foregoing, the Subordinated Noteholder Representative,
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 Pledgor 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 any Guaranteed Creditor 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.
Any Guaranteed Creditor 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 Pledgor, which right or equity is hereby waived and
released. If applicable to any particular item of Collateral, each Pledgor
further agrees, at the Subordinated Noteholder Representative’s request, to
assemble the Collateral and make it available to the Subordinated Noteholder
Representative at places which the Subordinated Noteholder Representative shall
reasonably select, whether at such Pledgor’s premises or elsewhere. Any such
sale or transfer by the Subordinated Noteholder Representative either to itself
or to any other Person shall be absolutely free from any claim of right by
Pledgor, including any equity or right of redemption, stay or appraisal which
Pledgor has or may have under any rule of law, regulation or statute now
existing or hereafter adopted (and such Pledgor hereby waives any rights it may
have in respect thereof). Upon any such sale or transfer, the Subordinated
Noteholder Representative shall have the right to deliver, assign and transfer
to the purchaser or transferee thereof the Collateral so sold or transferred.
The Subordinated Noteholder Representative shall apply the net proceeds of any
action taken by it pursuant to this Section 6.01, 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 Subordinated Noteholder Representative and
the Guaranteed Creditors hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, and only after such application and after the payment by the
Subordinated Noteholder Representative of any other amount required by any
provision of law, including, without limitation, Section 9-615 of the UCC, need
the Subordinated Noteholder Representative account for the surplus, if any, to
any Pledgor. To the extent permitted by applicable law, each

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Pledgor waives all claims, damages and demands it may acquire against the
Subordinated Noteholder Representative or any Guaranteed Creditor arising out of
the exercise by them of any rights hereunder except to the extent caused by the
gross negligence or willful misconduct of the Subordinated Noteholder
Representative or such Guaranteed Creditor or their respective agents. 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.
          (b) In the event that the Subordinated Noteholder Representative
elects not to sell the Collateral, the Subordinated Noteholder Representative
retains its rights to dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in equity, and to apply
the proceeds of the same towards payment of the Obligations. Each and every
method of disposition of the Collateral described in this Agreement shall
constitute disposition in a commercially reasonable manner.
          (c) The Subordinated Noteholder Representative may appoint any Person
as agent to perform any act or acts necessary or incident to any sale or
transfer of the Collateral.
     Section 6.02 Pledged Securities.
          (a) Unless an Event of Default shall have occurred and be continuing
and the Subordinated Noteholder Representative shall have given notice to the
relevant Pledgor of the Subordinated Noteholder Representative’s intent to
exercise its corresponding rights pursuant to Section 6.02(c), each Pledgor
shall be permitted to receive all cash dividends paid in respect of the Pledged
Securities paid in the normal course of business of the relevant Issuer (other
than liquidating or distributing dividends), to the extent permitted under the
Transaction Documents. Any sums paid upon or in respect of any Pledged
Securities upon the liquidation or dissolution of any issuer of any Pledged
Securities, any distribution of capital made on or in respect of any Pledged
Securities or any property distributed upon or with respect to any Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of any issuer of Pledged Collateral or pursuant to the reorganization thereof
shall, unless otherwise subject to a perfected security interest in favor of the
Subordinated Noteholder Representative, unless delivered to the Senior Agent, be
delivered to the Subordinated Noteholder Representative to be held by it
hereunder as additional collateral security for the Obligations. If any sum of
money or property so paid or distributed in respect of any Pledged Securities
shall be received by such Pledgor, such Pledgor shall, until such money or
property is paid or delivered to the Subordinated Noteholder Representative (or
the Senior Agent), hold such money or property in trust for the Subordinated
Noteholder Representative, segregated from other funds of such Pledgor, as
additional security for the Obligations.
          (b) Unless an Event of Default shall have occurred and be continuing
and the Subordinated Noteholder Representative shall have given notice to the
relevant Pledgor of the Subordinated Noteholder Representative’s intent to
exercise its corresponding rights pursuant to Section 6.02(c), each Pledgor
shall be entitled to exercise all voting, consent and corporate, partnership or
limited liability rights with respect to the Pledged Securities; provided,
however, that no vote shall be cast, consent given or right exercised or other
action taken by such Pledgor that would impair the Collateral, be inconsistent
with or result in any violation of any provision

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of the this Agreement or any other Transaction Document or, without the prior
consent of the Subordinated Noteholder Representative and the Subordinated
Noteholders, enable or permit any issuer of Pledged Collateral to issue any
equity interest or to issue any other securities convertible into or granting
the right to purchase or exchange for any Stock of any issuer of Pledged
Collateral other than as permitted by this Agreement.
          (c) Upon the occurrence and during the continuance of an Event of
Default, upon notice by the Subordinated Noteholder Representative of its intent
to exercise such rights to the relevant Pledgor or Pledgors, and subject to the
prior rights of the Senior Agent, (i) the Subordinated Noteholder Representative
shall have the right to receive any and all cash dividends, payments, property
or other Proceeds paid in respect of the Pledged Securities and make application
thereof to the Obligations, and (ii) any or all of the Pledged Securities shall
be registered in the name of the Subordinated Noteholder Representative or its
nominee, and (iii) the Subordinated Noteholder Representative or its nominee may
exercise (A) all voting, consent, corporate, partnership or limited liability
and other rights pertaining to such Pledged Securities at any meeting of
shareholders, partners or members (or other equivalent body), as the case may
be, of the relevant Issuer or Issuers or otherwise and (B) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the
organizational structure of any Issuer, or upon the exercise by any Pledgor or
the Subordinated Noteholder Representative of any right, privilege or option
pertaining to such Pledged Securities, and in connection therewith, the right to
deposit and deliver any and all of the Pledged Securities with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Subordinated Noteholder Representative may determine), all
without liability except to account for property actually received by it, but
the Subordinated Noteholder Representative shall have no duty to any Pledgor to
exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
          (d) Upon the occurrence and during the continuance of an Event of
Default, in order to permit the Subordinated Noteholder Representative to
exercise the voting and other consensual rights that it may be entitled to
exercise pursuant hereto and to receive all dividends and other distributions
that it may be entitled to receive hereunder, subject to any prior rights to the
same items as may be held by the Senior Agent, (i) each Pledgor shall promptly
execute and deliver (or cause to be executed and delivered) to the Subordinated
Noteholder Representative all such proxies, dividend payment orders and other
instruments as the Subordinated Noteholder Representative may from time to time
reasonably request and (ii) without limiting the effect of clause (i) above,
such Pledgor hereby grants to the Subordinated Noteholder Representative an
irrevocable proxy to vote all or any part of the Pledged Securities and to
exercise all other rights, powers, privileges and remedies to which a holder of
the Pledged Securities would be entitled (including giving or withholding
written consents of shareholders, partners or members, as the case may be,
calling special meetings of shareholders, partners or members, as the case may
be, and voting at such meetings), which proxy shall be effective, automatically
and without the necessity of any action (including any transfer of any Pledged
Securities on the record books of the Issuer thereof) by any other Person
(including the Issuer of such Pledged Collateral or any officer or agent
thereof).

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          (e) Each Pledgor hereby authorizes and instructs each Issuer of any
Pledged Securities pledged by such Pledgor hereunder to (i) comply with any
instruction received by it from the Subordinated Noteholder Representative in
writing that (A) states that an Event of Default has occurred and is continuing
and (B) is otherwise in accordance with the terms of this Agreement, without any
other or further instructions from such Pledgor, and each Pledgor 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 Pledged Securities directly to the Subordinated Noteholder Representative.
          (f) Upon the occurrence and during the continuance of an Event of
Default, if the Issuer of any Pledged Securities is the subject of bankruptcy,
insolvency, receivership, custodianship or other proceedings under the
supervision of any governmental authority, then all rights of the Pledgor in
respect thereof to exercise the voting and other consensual rights which such
Pledgor would otherwise be entitled to exercise with respect to the Pledged
Securities issued by such Issuer shall cease, and all such rights shall
thereupon become vested in the Subordinated Noteholder Representative (subject
to any prior rights of the Senior Agent) who shall thereupon have the sole right
to exercise such voting and other consensual rights, but the Subordinated
Noteholder Representative shall have no duty to exercise any such voting or
other consensual rights and shall not be responsible for any failure to do so or
delay in so doing.
     Section 6.03 Private Sales of Pledged Securities.
          (a) Each Pledgor recognizes that the Subordinated Noteholder
Representative may be unable to effect a public sale of any or all the Pledged
Securities, by reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise or may determine that a public
sale is impracticable or not commercially reasonable and, accordingly, and may
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 Pledgor 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. Subject to its compliance with federal and state securities laws
applicable to private sales, the Subordinated Noteholder Representative shall be
under no obligation to delay a sale of any of the Pledged Securities 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.
          (b) Each Pledgor agrees to use its best efforts to do or cause to be
done all such other acts as may reasonably be necessary to make such sale or
sales of all or any portion of the Pledged Securities pursuant to this
Section 6.03 valid and binding and in compliance with any and all other
applicable governmental requirements, including any federal or state securities
laws.. Each Pledgor further agrees that a breach of any o the covenants
contained in this Section 6.03 will cause irreparable injury to the Guaranteed
Creditors, that the Guaranteed Creditors have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.03 shall be specifically enforceable against such
Pledgor, and such Pledgor hereby waives and agrees not to assert any defenses
against an action

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for specific performance of such covenants except for a defense that no Event of
Default has occurred or is continuing under the Credit Agreement.
     Section 6.04 Waiver; Deficiency. Each Pledgor 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 Subordinated Noteholder Representative or any
Guaranteed Creditor to collect such deficiency.
     Section 6.05 Non-Judicial Enforcement. Provided that there is no breach of
the peace, the Subordinated Noteholder Representative may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent
permitted by and carried out in accordance with applicable law, each Pledgor
expressly waives any and all legal rights which might otherwise require the
Subordinated Noteholder Representative to enforce its rights by judicial
process.
ARTICLE VII
The Subordinated Noteholder Representative
     Section 7.01 Subordinated Noteholder Representative’s Appointment as
Attorney-in-Fact, Etc.
          (a) Each Pledgor hereby irrevocably constitutes and appoints the
Subordinated Noteholder Representative 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 Pledgor and in
the name of such Pledgor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all reasonably appropriate action and
to execute any and all documents and instruments which may be reasonably
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Pledgor hereby gives the
Subordinated Noteholder Representative the power and right, on behalf of such
Pledgor, without notice to or assent by such Pledgor, to do any or all of the
following; provided, the Subordinated Noteholder Representative agrees that it
will not exercise any of the following rights under such power of attorney
unless an Event of Default shall have occurred and be continuing:
          (i) in the name of such Pledgor or its own name, or otherwise, take
possession of and indorse and collect any check, draft, note, acceptance or
other instrument for the payment of moneys due with respect to any 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 Subordinated Noteholder
Representative for the purpose of collecting any such moneys due with respect to
any other Collateral whenever payable;
          (ii) unless being disputed in good faith, 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 or any other
Transaction Document and pay all or any part of the premiums therefor and the
costs thereof;

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          (iii) execute, in connection with any sale provided for in
Section 6.01 or Section 6.03, any endorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
          (iv) (A) 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 Subordinated Noteholder Representative or as the Subordinated
Noteholder Representative shall direct; (B) 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;
(C) 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; (D) defend
any suit, action or proceeding brought against such Pledgor with respect to any
Collateral; (E) settle, compromise or adjust any such suit, action or proceeding
and, in connection therewith, give such discharges or releases as the
Subordinated Noteholder Representative may deem appropriate; and (F) 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 Subordinated
Noteholder Representative were the absolute owner thereof for all purposes, and
do, at the Subordinated Noteholder Representative’s option and such Pledgor’s
expense, at any time, or from time to time, all acts and things which the
Subordinated Noteholder Representative deems necessary to protect, preserve or
realize upon the Collateral and the Subordinated Noteholder Representative’s and
the Guaranteed Creditors’ security interests therein and to effect the intent of
this Agreement, all as fully and effectively as such Pledgor might do.
          (b) If any Obligor fails to perform or comply with any of its
agreements contained herein within the applicable grace periods, the
Subordinated Noteholder Representative, 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 reasonable expenses of the Subordinated Noteholder
Representative incurred in connection with actions undertaken as provided in
this Section 7.01, together with interest thereon at a rate per annum equal to
the post-default rate specified in Section 8(b) of the Debentures, but in no
event to exceed the maximum rate permitted by applicable law, from the date of
payment by the Subordinated Noteholder Representative to the date reimbursed by
the relevant Obligor, shall be payable by such Obligor to the Subordinated
Noteholder Representative on demand.
          (d) Each Obligor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue and in compliance hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated.
     Section 7.02 Duty of Subordinated Noteholder Representative. The
Subordinated Noteholder Representative’s sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise,

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shall be to deal with it in the same manner as the Subordinated Noteholder
Representative deals with similar property for its own account and shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which comparable secured parties accord comparable
collateral. Neither the Subordinated Noteholder Representative, any Guaranteed
Creditor nor any of their related parties 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 Pledgor 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 Subordinated Noteholder Representative and the Guaranteed
Creditors hereunder are solely to protect the Subordinated Noteholder
Representative’s and the Guaranteed Creditors’ interests in the Collateral and
shall not impose any duty upon the Subordinated Noteholder Representative or any
Guaranteed Creditor to exercise any such powers. The Subordinated Noteholder
Representative and the Guaranteed Creditors 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 related parties shall be responsible to any
Obligor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct. To the fullest extent permitted by applicable
law, the Subordinated Noteholder Representative shall be under no duty
whatsoever to make or give any presentment, notice of dishonor, protest, demand
for performance, notice of non-performance, notice of intent to accelerate,
notice of acceleration, or other notice or demand in connection with any
Collateral or the Obligations, or to take any steps necessary to preserve any
rights against any Pledgor or other Person or ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not it has or is deemed to have knowledge
of such matters. Each Obligor, to the extent permitted by applicable law, waives
any right of marshaling in respect of any and all Collateral, and waives any
right to require the Subordinated Noteholder Representative or any Guaranteed
Creditor to proceed against any Obligor or other Person, exhaust any Collateral
or enforce any other remedy which the Subordinated Noteholder Representative or
any Guaranteed Creditor now has or may hereafter have against any Obligor or
other Person.
     Section 7.03 Filing of Financing Statements. Pursuant to the UCC and any
other applicable law, each Pledgor authorizes the Subordinated Noteholder
Representative to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Pledgor in such form and in such offices as the Subordinated
Noteholder Representative reasonably determines appropriate to perfect the
security interests of the Subordinated Noteholder Representative 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.
     Section 7.04 Authority of Subordinated Noteholder Representative. Each
Obligor acknowledges that the rights and responsibilities of the Subordinated
Noteholder Representative under this Agreement with respect to any action taken
by the Subordinated Noteholder Representative or the exercise or non-exercise by
the Subordinated Noteholder Representative 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 Subordinated Noteholder
Representative and the Guaranteed Creditors, be governed by the Purchase
Agreement and by Annex III hereto as may exist from time to time among them,
but, as between the Subordinated

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Noteholder Representative and the Obligors, the Subordinated Noteholder
Representative shall be conclusively presumed to be acting as agent for the
Guaranteed Creditors with full and valid authority so to act or refrain from
acting, and no Obligor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
ARTICLE VIII
Subordination of Indebtedness
     Section 8.01 Subordination of All Obligor Claims. As used herein, the term
“Obligor Claims” shall mean all debts and obligations of the Borrower or any
other Obligor to any other Obligor, whether such debts and obligations now exist
or are hereafter incurred or arise, or whether the obligation of the debtor
thereon be direct, contingent, primary, secondary, several, joint and several,
or otherwise, and irrespective of whether such debts or obligations be evidenced
by note, contract, open account, or otherwise, and irrespective of the Person or
Persons in whose favor such debts or obligations may, at their inception, have
been, or may hereafter be created, or the manner in which they have been or may
hereafter be acquired. After and during the continuation of an Event of Default,
no Obligor shall receive or collect, directly or indirectly, from any other
obligor in respect thereof any amount upon the Obligor Claims.
     Section 8.02 Claims in Bankruptcy. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency
proceedings involving any Obligor, the Subordinated Noteholder Representative on
behalf of the Guaranteed Creditors shall have the right to prove their claim in
any proceeding, so as to establish their rights hereunder and receive directly
from the receiver, trustee or other court custodian, dividends and payments
which would otherwise be payable upon Obligor Claims. Each Obligor hereby
assigns such dividends and payments to the Subordinated Noteholder
Representative for the benefit of the Guaranteed Creditors for application
against the Obligations. Should any Agent or Guaranteed Creditor receive, for
application upon the Obligations, any such dividend or payment which is
otherwise payable to any Obligor, and which, as between such Obligors, shall
constitute a credit upon the Obligor Claims, then upon payment in full in cash
of the Obligations, the intended recipient shall become subrogated to the rights
of the Subordinated Noteholder Representative and the Guaranteed Creditors to
the extent that such payments to the Subordinated Noteholder Representative and
the Guaranteed Creditors on the Obligor Claims have contributed toward the
liquidation of the Obligations, and such subrogation shall be with respect to
that proportion of the Obligations which would have been unpaid if the
Subordinated Noteholder Representative and the Guaranteed Creditors had not
received dividends or payments upon the Obligor Claims.
     Section 8.03 Payments Held in Trust. In the event that, notwithstanding
Section 8.01 and Section 8.02, any Obligor should receive any funds, payments,
claims or distributions which is prohibited by such Sections, then it agrees:
(a) to hold in trust for the Subordinated Noteholder Representative and the
Guaranteed Creditors an amount equal to the amount of all funds, payments,
claims or distributions so received, and (b) that it shall have absolutely no
dominion over the amount of such funds, payments, claims or distributions except
to pay them promptly to the Subordinated Noteholder Representative, for the
benefit of the Guaranteed Creditors; and each Obligor covenants promptly to pay
the same to the Subordinated Noteholder Representative.

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     Section 8.04 Liens Subordinate. Each Obligor agrees that, until the
Obligations are paid in full in cash, any Liens securing payment of the Obligor
Claims shall be and remain inferior and subordinate to any Liens securing
payment of the Obligations, regardless of whether such encumbrances in favor of
such Obligor, the Subordinated Noteholder Representative or any Guaranteed
Creditor presently exist or are hereafter created or attach. Without the prior
written consent of the Subordinated Noteholder Representative, no Obligor,
during the period in which any of the Obligations are outstanding, shall
(a) exercise or enforce any creditor’s right it may have against any debtor in
respect of the Obligor Claims, or (b) foreclose, repossess, sequester or
otherwise take steps or institute any action or proceeding (judicial or
otherwise, including without limitation the commencement of or joinder in any
liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency
proceeding) to enforce any Lien securing payment of the Obligor Claims held by
it.
     Section 8.05 Notation of Records. Upon the request of the Subordinated
Noteholder Representative, all promissory notes and all accounts receivable
ledgers or other evidence of the Obligor Claims accepted by or held by any
Obligor shall contain a specific written notice thereon that the indebtedness
evidenced thereby is subordinated under the terms of this Agreement.
ARTICLE IX
Miscellaneous
     Section 9.01 Waiver. No failure on the part of the Subordinated Noteholder
Representative or any Subordinated Noteholder to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power,
privilege or remedy or any abandonment or discontinuance of steps to enforce
such right, power, privilege or remedy under this Agreement or any other
Transaction Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power, privilege or remedy under this Agreement
or any other Transaction Document preclude or be construed as a waiver of any
other or further exercise thereof or the exercise of any other right, power,
privilege or remedy. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law or equity.
     Section 9.02 Notices. All notices and other communications provided for
herein shall be given in the manner and subject to the terms of Section 5.4 of
the Purchase 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.
     Section 9.03 Payment of Expenses, Indemnities, Etc.
          (a) Each Guarantor agrees to pay or reimburse each Guaranteed Creditor
and the Subordinated Noteholder Representative for all out-of-pocket expenses
incurred by such Person, including the fees, charges and disbursements of any
counsel for the Subordinated Noteholder Representative or any Guaranteed
Creditor, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Transaction Document, including,
without limitation, all costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Article II or otherwise enforcing or
preserving any rights under this Agreement and the other Transaction Documents
to which such Guarantor is a party.

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          (b) Each Guarantor agrees to pay, and to save the Subordinated
Noteholder Representative and the Guaranteed Creditors harmless from, any and
all liabilities with respect to, or resulting from any delay in paying, any and
all taxes (other than income taxes payable by such Subordinated Noteholder)
which may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Agreement.
          (c) Each Guarantor agrees to pay, and to save the Subordinated
Noteholder Representative and the Guaranteed Creditors 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 any Transaction Document.
     Section 9.04 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 5.5 of the Purchase Agreement.
     Section 9.05 Successors and Assigns. The provisions of this Agreement shall
be binding upon the Obligors and their successors and assigns and shall inure to
the benefit of the Subordinated Noteholder Representative and the Guaranteed
Creditors and their respective successors and assigns.
     Section 9.06 Survival; Revival; Reinstatement.
          (a) All covenants, agreements, representations and warranties made by
any Obligor herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Transaction Document
to which it is a party shall be considered to have been relied upon by the
Subordinated Noteholder Representative and the Subordinated Noteholders and
shall survive the execution and delivery of this Agreement and the purchase of
any Debentures, regardless of any investigation made by any such other party or
on its behalf and notwithstanding that the Subordinated Noteholder
Representative or any Subordinated Noteholder may have had notice or knowledge
of any Event of Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Debenture or any fee or
any other amount payable under any Transaction Document is outstanding and
unpaid. The provisions of Section 9.03 shall survive and remain in full force
and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Debentures or the termination of this Agreement,
any other Transaction Document or any provision hereof or thereof.
          (b) To the extent that any payments on the Guarantor Obligations or
proceeds of any Collateral are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent, the Guarantor Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Subordinated Noteholder Representative’s and the
Guaranteed Creditors’ Liens, security

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interests, rights, powers and remedies under this Agreement and each other
Transaction Document shall continue in full force and effect. In such event,
each Transaction Document shall be automatically reinstated and the Borrower
shall take such action as may be reasonably requested by the Subordinated
Noteholder Representative and the Guaranteed Creditors to effect such
reinstatement.
     Section 9.07 Counterparts; Integration; Effectiveness.
          (a) This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.
          (b) This Agreement and the other Transaction Documents constitute the
entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. THIS AGREEMENT
AND THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
          (c) This Agreement shall become effective when it shall have been
executed by the Subordinated Noteholder Representative and when the Subordinated
Noteholder Representative shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto,
the Lenders and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
     Section 9.08 Severability. Any provision of this Agreement or any other
Transaction Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof or thereof; and
the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
     Section 9.09 Not Used.
     Section 9.10 Governing Law; Submission to Jurisdiction.
          (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK, AND,

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BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY ACCEPTS
FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
          (c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 5.4 OF THE PURCHASE AGREEMENT (OR SUCH OTHER
ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 5.4 OF THE PURCHASE AGREEMENT) OR
SCHEDULE 1 HERETO, AS APPLICABLE, SUCH SERVICE TO BECOME EFFECTIVE THIRTY
(30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY
OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY
OTHER JURISDICTION.
          (d) EACH PARTY HEREBY (1) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (2) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (3) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(4) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION 9.10.
     Section 9.11 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

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     Section 9.12 Acknowledgments. Each Obligor hereby acknowledges that:
          (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Transaction Documents to which it is a
party;
          (b) neither the Subordinated Noteholder Representative nor any
Guaranteed Creditor has any fiduciary relationship with or duty to any Obligor
arising out of or in connection with this Agreement or any of the other
Transaction Documents, and the relationship between the Obligors, on the one
hand, and the Subordinated Noteholder Representative and Guaranteed Creditors,
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 Transaction
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Guaranteed Creditors or among the Obligors and the Guaranteed
Creditors.
          (d) Each of the parties hereto specifically agrees that it has a duty
to read this Agreement, the Security Documents and the other Transaction
Documents and agrees that it is charged with notice and knowledge of the terms
of this Agreement, the Security Documents and the other Transaction Documents;
that it has in fact read this Agreement, the Security Documents and the other
Transaction Documents and is fully informed and has full notice and knowledge of
the terms, conditions and effects thereof; that it has been represented by
independent legal counsel of its choice throughout the negotiations preceding
its execution of this Agreement and the Security Documents; and has received the
advice of its attorney in entering into this Agreement and the Security
Documents; and that it recognizes that certain of the terms of this Agreement
and the Security Documents result in one party assuming the liability inherent
in some aspects of the transaction and relieving the other party of its
responsibility for such liability. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE SECURITY DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”
     Section 9.13 Additional Obligors and Pledgors. Each Subsidiary of the
Borrower that is formed or acquired after the date hereof shall become an
Obligor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement and shall thereafter have the same rights,
benefits and obligations as an Obligor party hereto on the date hereof. Each
Guarantor that is required to pledge equity interests of its Subsidiaries shall
execute and deliver a Supplement, if such equity interests were not previously
pledged.
     Section 9.14 Releases.
          (a) Release Upon Payment in Full. The grant of a security interest
hereunder and all of rights, powers and remedies in connection herewith shall
remain in full force and effect until the Subordinated Noteholder Representative
has (i) retransferred and delivered all Collateral in its possession to the
Pledgors, and (ii) executed a written release or termination statement and
reassigned to the Pledgors without recourse or warranty any remaining Collateral

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and all rights conveyed hereby. Upon the complete payment of the Obligations and
the compliance by the Obligors with all covenants and agreements hereof, the
Subordinated Noteholder Representative, at the expense of the Borrower, will
promptly release, reassign and transfer the Collateral to the Pledgors and
declare this Agreement to be of no further force or effect.
          (b) Partial Releases. If any of the Collateral shall be sold,
transferred or otherwise disposed of by any Pledgor in a transaction permitted
by this Agreement, then the Subordinated Noteholder Representative, at the
request and sole expense of such Pledgor, shall promptly execute and deliver to
such Pledgor all releases or other documents reasonably necessary or desirable
for the release of the Liens created hereby on such Collateral and the equity
interests of the Issuer thereof. At the request and sole expense of the
Borrower, a Guarantor shall be released from its obligations hereunder in the
event that all the equity interests of such Guarantor shall be sold, transferred
or otherwise disposed of in a transaction permitted by this Agreement; provided
that the Borrower shall have delivered to the Subordinated Noteholder
Representative, at least ten Business Days prior to the date of the proposed
release, a written request of the Borrower for release identifying the relevant
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 this Agreement and the other Transaction Documents.
          (c) Retention in Satisfaction. Except as may be expressly applicable
pursuant to Section 9-620 of the UCC, no action taken or omission to act by the
Subordinated Noteholder Representative or the Guaranteed Creditors hereunder,
including, without limitation, any exercise of voting or consensual rights or
any other action taken or inaction, shall be deemed to constitute a retention of
the Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full force
and effect, until the Subordinated Noteholder Representative and the Guaranteed
Creditors shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is provided in Section 9.14(a).
     Section 9.15 Acceptance. Each Obligor hereby expressly waives notice of
acceptance of this Agreement, acceptance on the part of the Subordinated
Noteholder Representative and the Guaranteed Creditors being conclusively
presumed by their request for this Agreement and delivery of the same to the
Subordinated Noteholder Representative.
[Remainder of page intentionally left blank; signature pages follow]

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

                 
 
                BORROWER:   TETON ENERGY CORPORATION    
 
               
 
  By:            
 
               
 
  Name:            
 
               
 
  Title:            
 
               
 
                GUARANTORS:   TETON NORTH AMERICA LLC         By:   Teton Energy
Corporation, its sole member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               
 
                    TETON PICEANCE LLC         By:   Teton North America LLC,
its sole member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               
 
                    TETON DJ LLC         By:   Teton North America LLC, its sole
member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               
 
                    TETON WILLISTON LLC         By:   Teton North America LLC,
its sole member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               

Signature Page
Subordinated Guaranty and Pledge Agreement

 

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                    TETON BIG HORN LLC         By:   Teton North America LLC,
its sole member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               
 
                    TETON DJCO LLC         By:   Teton Energy Corporation, its
sole member
 
               
 
      By:        
 
               
 
      Name:        
 
               
 
      Title:        
 
               

Signature Page
Subordinated Guaranty and Pledge Agreement

 

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Acknowledged and Agreed to as of the date hereof by:

          SUBORDINATED NOTEHOLDER REPRESENTATIVE:WHITEBOX ADVISORS, LLC.
      By:         Name:         Title:        

Signature Page
Subordinated Guaranty and Pledge Agreement

 

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Schedule 1
NOTICE ADDRESSES OF OBLIGORS
Teton Energy Corporation
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton North America LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Piceance LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton DJ LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Williston LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton Big Horn LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Teton DJCO LLC
410 17th Street, Suite 1850
Denver, Colorado 80202
Attention: Lonnie Brock
Schedule 1-1

 

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Schedule 2
DESCRIPTION OF PLEDGED SECURITIES
Pledged Securities:

                                  Percentage   Percentage   Class of Stock or
Owner   Issuer   Owned   Pledged   other Equity Interest
Teton Energy Corporation
  Teton North America LLC     100 %     100 %   Limited Liability Company
Interests
Teton North America LLC
  Teton Piceance LLC     100 %     100 %   Limited Liability Company Interests
Teton North America LLC
  Teton DJ LLC     100 %     100 %   Limited Liability Company Interests
Teton North America LLC
  Teton Williston LLC     100 %     100 %   Limited Liability Company Interests
Teton North America LLC
  Teton Big Horn LLC     100 %     100 %   Limited Liability Company Interests
Teton Energy Corporation
  Teton DJCO LLC     100 %     100 %   Limited Liability Company Interests

Schedule 2-1

 

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Schedule 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
     1.   .
Schedule 3-1

 

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Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE

     
Legal name of the Borrower:
  Teton Energy Corporation
Address:
  410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
    last five years:
  None
Jurisdictions of organization over the last five years:
  Delaware
Current jurisdiction of organization:
  Delaware
Organizational number:
  2896826
Taxpayer identification number:
  84-1482290
Location of chief executive office or sole place of
  410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202
 
   
Legal name of the Obligor:
  Teton North America LLC
Address:
  410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
  20051069170
Location of chief executive office or sole place of
  410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202
 
   
Legal name of the Obligor:
  Teton Piceance LLC
Address:
  410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
  20051069213
Location of chief executive office or sole place of
  410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202
 
 

Schedule 4-1

 

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Legal name of the Obligor:
  Teton DJ LLC
Address:
   410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
   20051069240
Location of chief executive office or sole place of
   410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202
 
   
Legal name of the Obligor:
  Teton Williston LLC
Address:
   410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
   20061183886
Location of chief executive office or sole place of
   410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202  
Legal name of the Obligor:
  Teton Big Horn LLC
Address:
  410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
   20071277018
Location of chief executive office or sole place of
   410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202
 
   

Schedule 4-2

 

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Legal name of the Obligor:
  Teton DJCO LLC
Address:
   410 17th Street, Suite 1850,
 
  Denver, Colorado 80202
All names and trade names that the Borrower has used in the
     last five years:
  None
Jurisdictions of organization over the last five years:
  Colorado
Current jurisdiction of organization:
  Colorado
Organizational number:
   20071416728
Location of chief executive office or sole place of
   410 17th Street, Suite 1850,
     business over the last five years:
  Denver, Colorado 80202

Schedule 4-3

 

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ACKNOWLEDGMENT AND CONSENT
     The undersigned hereby acknowledges receipt of a copy of the Subordinated
Guaranty and Pledge Agreement dated as of June ___, 2008 (the “Guaranty and
Pledge Agreement”), made by the Obligors parties thereto for the benefit of
Whitebox Advisors, LLC, as Subordinated Noteholder Representative. The
undersigned agrees for the benefit of the Subordinated Noteholder Representative
and the Guaranteed Creditors as follows:
     1. The undersigned will be bound by the terms of the Subordinated Guaranty
and Pledge Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
     2. The terms of Section 6.01(a) and Section 6.03 of the Subordinated
Guaranty and Pledge Agreement shall apply to it, mutatis mutandis, with respect
to all actions that may be required of it pursuant to Section 6.02(a) or
Section 6.03 of the Subordinated Guaranty and Pledge Agreement.

             
 
                [NAME OF ISSUER]
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
                Address for Notices:
 
           
 
       
 
           
 
       
 
           
 
       
 
  Fax:        
 
           

 

*   This consent is necessary only with respect to any Issuer which is not also
an Obligor. This consent may be modified or eliminated with respect to any
Issuer that is not controlled by a Obligor.

Schedule 4-4

 

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Annex I
Assumption Agreement
     ASSUMPTION AGREEMENT, dated as of [                    ],
200[                    ], made by [                     ], a
[                    ] (the “Additional Obligor”), in favor of Whitebox
Advisors, LLC, as Subordinated Noteholder Representative (in such capacity, the
“Subordinated Noteholder Representative”) for the Guaranteed Creditors (used
herein as defined in the Subordinated Guaranty and Pledge Agreement referred to
below). All capitalized terms not defined herein shall have the meaning ascribed
to them in the Transaction Documents referred to below.
W I T N E S S E T H:
     WHEREAS, Teton Energy Corporation, a Delaware corporation (the “Borrower”),
the Subordinated Noteholder Representative, and certain investors have entered
into that certain Securities Purchase Agreement, dated as of June ___, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement”);
     WHEREAS, in connection with the Purchase Agreement, the Borrower and
certain of its Affiliates (other than the Additional Obligor) have entered into
a Subordinated Guaranty and Pledge Agreement, dated as of June ___, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Subordinated Guaranty and Pledge Agreement”) in favor of the Subordinated
Noteholder Representative for the benefit of the Guaranteed Creditors;
     WHEREAS, the Transaction Documents require the Additional Obligor to become
a party to the Subordinated Guaranty and Pledge Agreement; and
     WHEREAS, the Additional Obligor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Subordinated Guaranty and
Pledge Agreement;
     NOW, THEREFORE, IT IS AGREED:
     1. Subordinated Guaranty and Pledge Agreement. By executing and delivering
this Assumption Agreement, the Additional Obligor, as provided in Section 9.13
of the Subordinated Guaranty and Pledge Agreement, hereby becomes a party to the
Subordinated Guaranty and Pledge Agreement as an Obligor thereunder with the
same force and effect as if originally named therein as an Obligor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of an Obligor thereunder and expressly grants to the
Subordinated Noteholder Representative, for the benefit of the Guaranteed
Creditors, a security interest in all Collateral owned by such Additional
Obligor to secure all of such Additional Obligor’s obligations and liabilities
thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in Schedules 1 through 4 to the Subordinated Guaranty and
Pledge Agreement. The Additional Obligor hereby represents and warrants that
each of the representations and warranties contained in Article IV of the
Subordinated Guaranty and Pledge Agreement is true and correct on and as the
date hereof (after giving effect to this Assumption Agreement) as if made on and
as of such date.

Annex I-1

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

 

     2. Governing Law. This Assumption Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.

             
 
           
 
  [ADDITIONAL OBLIGOR]      
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           

Annex I-2

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

 

Annex II
Supplement
     SUPPLEMENT, dated as of [                    ], 200[                    ],
made by [                     ], a [                    ] (the “Additional
Pledgor”), in favor of Whitebox Advisors, LLC., as Subordinated Noteholder
Representative (in such capacity, the “Subordinated Noteholder Representative”)
for the Guaranteed Creditors (used herein as defined in the Subordinated
Guaranty and Pledge Agreement referred to below). All capitalized terms not
defined herein shall have the meaning ascribed to them in the Transaction
Documents referred to below.
W I T N E S S E T H:
     WHEREAS, Teton Energy Corporation, a Delaware corporation (the “Borrower”),
the Subordinated Noteholder Representative, and certain investors have entered
into that certain Securities Purchase Agreement, dated as of June ___, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement”);
     WHEREAS, in connection with the Purchase Agreement, the Borrower and
certain of its Affiliates (other than the Additional Obligor) have entered into
a Subordinated Guaranty and Pledge Agreement, dated as of June ___, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Subordinated Guaranty and Pledge Agreement”) in favor of the Subordinated
Noteholder Representative for the benefit of the Guaranteed Creditors;
     WHEREAS, the Subordinated Guaranty and Pledge Agreement requires the
Additional Pledgor to pledge the equity interests described hereto on
Schedule 2-S; and
     WHEREAS, the Additional Pledgor has agreed to execute and deliver this
Supplement in order to pledge such equity interests;
     NOW, THEREFORE, IT IS AGREED:
     1. Guaranty and Pledge Agreement. By executing and delivering this
Supplement, the Additional Pledgor, as provided in Section 9.13 of the
Subordinated Guaranty and Pledge Agreement, hereby becomes a party to the
Subordinated Guaranty and Pledge Agreement as an Obligor thereunder with the
same force and effect as if originally named as an Obligor therein, and without
limiting the generality of the foregoing, hereby pledges and grants a security
interest in (a) the securities described or referred to in Schedule 2-S and (b)
(i) the certificates or instruments, if any, representing such securities,
(ii) all dividends (cash, equity interests or otherwise), cash, instruments,
rights to subscribe, purchase or sell and all other rights and property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such securities, (iii) all replacements, additions to
and substitutions for any of the property referred to in this definition,
including, without limitation, claims against third parties, (iv) the proceeds,
interest, profits and other income of or on any of the property referred to in
this definition, (v) all security entitlements in respect of any of the
foregoing, if any, (vi) all books and records relating to any of the property
referred to in this definition and

 

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

 

     (vii) all proceeds of any of the foregoing (collectively, the
“Collateral”). Upon execution of this Supplement, such securities will
constitute “Pledged Securities” for purposes of the Subordinated Guaranty and
Pledge Agreement with the same force and effect as if originally listed on
Schedule 2 thereto and, without limiting the generality of the foregoing, the
Additional Pledgor hereby expressly assumes all obligations and liabilities of a
Pledgor thereunder and expressly grants to the Subordinated Noteholder
Representative, for the benefit of the Guaranteed Creditors, a security interest
in all Collateral owned by such Additional Pledgor to secure all of such its
obligations and liabilities thereunder. The information set forth in
Schedule 2-S hereto is hereby added to the information set forth in Schedule 2
to the Subordinated Guaranty and Pledge Agreement. The Additional Pledgor hereby
represents and warrants that each of the representations and warranties
contained in Article IV of the Subordinated Guaranty and Pledge Agreement is
true and correct on and as the date hereof (after giving effect to this
Supplement) as if made on and as of such date.
     2. Governing Law. This Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
     IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly
executed and delivered as of the date first above written.

             
 
           
 
  [ADDITIONAL PLEDGOR]      
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           

 

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

 

Annex III
Rights and Obligations of the Subordinated Noteholder Representative with
Respect to the
Subordinated Noteholders
1. Nature of Duties. The Subordinated Noteholder Representative shall have no
duties or responsibilities except those expressly set forth in this Agreement.
Neither the Subordinated Noteholder Representative nor any of its partners,
members, shareholders, officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such under this Agreement or any other
Transaction Document or in connection herewith or therewith, be responsible for
the consequence of any oversight or error of judgment or answerable for any
loss, unless caused solely by its or their gross negligence or willful
misconduct as determined by a final judgment (not subject to further appeal) of
a court of competent jurisdiction. The duties of the Subordinated Noteholder
Representative shall be mechanical and administrative in nature; the
Subordinated Noteholder Representative shall not have by reason of this
Agreement or any other Transaction Document a fiduciary relationship in respect
of any Obligor or any Subordinated Noteholder; and nothing in this Agreement or
any other Transaction Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Subordinated Noteholder Representative any
obligations in respect of this Agreement or any other Transaction Document
except as expressly set forth herein and therein.
2. Lack of Reliance on the Subordinated Noteholder Representative. Independently
and without reliance upon the Subordinated Noteholder Representative, each
Subordinated Noteholder, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of the Obligors in connection with such Subordinated
Noteholder’s investment in the Obligors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction Documents, and the
taking or not taking of any action in connection therewith, and (ii) its own
appraisal of the creditworthiness of the Obligors, and of the value of the
Collateral from time to time, and the Subordinated Noteholder Representative
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Subordinated Noteholder with any credit, market or other
information with respect thereto, whether coming into its possession before any
Obligations are incurred or at any time or times thereafter. The Subordinated
Noteholder Representative shall not be responsible to the Obligors or any
Subordinated Noteholder for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith, or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectability, priority or
sufficiency of this Agreement or any other Transaction Document, or for the
financial condition of the Obligors or the value of any of the Collateral, or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other
Transaction Document, or the financial condition of the Obligors, or the value
of any of the Collateral, or the existence or possible existence of any default
or Event of Default under this Agreement, the Debentures or any of the other
Transaction Documents.

 

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

 

3. Certain Rights of the Subordinated Noteholder Representative. The
Subordinated Noteholder Representative shall have the right to take any action
with respect to the Collateral, on behalf of all of the Subordinated
Noteholders. To the extent practical, the Subordinated Noteholder Representative
shall request instructions from the Subordinated Noteholders with respect to any
material act or action (including failure to act) in connection with the
Agreement or any other Transaction Document, and shall be entitled to act or
refrain from acting in accordance with the instructions of a majority in
interest (based on outstanding principal amount of Debentures); if such
instructions are not provided despite the Subordinated Noteholder
Representative’s request therefor, the Subordinated Noteholder Representative
shall be entitled to refrain from such act or taking such action, and if such
action is taken, shall be entitled to appropriate indemnification from the
Subordinated Noteholders in respect of actions to be taken by the Subordinated
Noteholder Representative; and the Subordinated Noteholder Representative shall
not incur liability to any person or entity by reason of so refraining. Without
limiting the foregoing, (a) no Subordinated Noteholder shall have any right of
action whatsoever against the Subordinated Noteholder Representative as a result
of the Subordinated Noteholder Representative acting or refraining from acting
hereunder in accordance with the terms of this Agreement or any other
Transaction Document, and the debtors shall have no right to question or
challenge the authority of, or the instructions given to, the Subordinated
Noteholder Representative pursuant to the foregoing and (b) the Subordinated
Noteholder Representative shall not be required to take any action which the
Subordinated Noteholder Representative believes (i) could reasonably be expected
to expose it to personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.
4. Reliance. The Subordinated Noteholder Representative shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, statement, certificate, telecopier message, order or other document or
telephone message signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to the Agreement and the other
Transaction Documents and its duties thereunder, upon advice of counsel selected
by it and upon all other matters pertaining to this Agreement and the other
Transaction Documents and its duties thereunder, upon advice of other experts
selected by it. Anything to the contrary notwithstanding, the Subordinated
Noteholder Representative shall have no obligation whatsoever to any
Subordinated Noteholder to assure that the Collateral exists or is owned by the
Obligors or is cared for, protected or insured or that the liens granted
pursuant to this Agreement have been properly or sufficiently or lawfully
created, perfected, or enforced or are entitled to any particular priority.
5. Indemnification. To the extent that the Subordinated Noteholder
Representative is not reimbursed and indemnified by the debtors, the
Subordinated Noteholders will jointly and severally reimburse and indemnify the
Subordinated Noteholder Representative, in proportion to their initially
purchased respective principal amounts of Debentures, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Subordinated Noteholder
Representative in performing its duties hereunder or under this Agreement or any
other Transaction Document, or in any way relating to or arising out of this
Agreement or any other Transaction Document except for those determined by a
final judgment (not subject to further appeal) of a court of competent
jurisdiction to have resulted

 

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

 

solely from the Subordinated Noteholder Representative’s own gross negligence or
willful misconduct. Prior to taking any action hereunder as Subordinated
Noteholder Representative, the Subordinated Noteholder Representative may
require each Subordinated Noteholder to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Subordinated Noteholder
Representative for costs and expenses associated with taking such action.
6. Resignation by the Subordinated Noteholder Representative.
     (a) The Subordinated Noteholder Representative may resign from the
performance of all its functions and duties under the Agreement and the other
Transaction Documents at any time by giving 30 days’ prior written notice (as
provided in the Purchase Agreement) to the Obligors, the Senior Agent and the
Subordinated Noteholders. Such resignation shall take effect upon the
appointment of a successor Subordinated Noteholder Representative pursuant to
clauses (b) and (c) below.
     (b) Upon any such notice of resignation, the Subordinated Noteholders,
acting by a majority in interest based upon the outstanding principal amount of
Debentures, shall appoint a successor Subordinated Noteholder Representative
hereunder.
     (c) If a successor Subordinated Noteholder Representative shall not have
been so appointed within said 30-day period, the Subordinated Noteholder
Representative shall then appoint a successor Subordinated Noteholder
Representative who shall serve as Subordinated Noteholder Representative until
such time, if any, as the Subordinated Noteholders appoint a successor
Subordinated Noteholder Representative as provided above. If a successor
Subordinated Noteholder Representative has not been appointed within such 30-day
period, the Subordinated Noteholder Representative may petition any court of
competent jurisdiction or may interplead the Obligors and the Subordinated
Noteholders in a proceeding for the appointment of a successor Subordinated
Noteholder Representative, and all fees, including, but not limited to,
extraordinary fees associated with the filing of interpleader and expenses
associated therewith, shall be payable by the Obligors on demand.
7. Rights with Respect to Collateral. Each Subordinated Noteholder agrees with
all other Subordinated Noteholders and the Subordinated Noteholder
Representative (i) that it shall not, and shall not attempt to, exercise any
rights with respect to its security interest in the Collateral, whether pursuant
to any other agreement or otherwise (other than pursuant to this Agreement), or
take or institute any action against the Subordinated Noteholder Representative
or any of the other Subordinated Noteholders in respect of the Collateral or its
rights hereunder (other than any such action arising from the breach of this
Agreement) and (ii) that such Subordinated Noteholder has no other rights with
respect to the Collateral other than as set forth in this Agreement and the
other Transaction Documents. Upon the acceptance of any appointment as
Subordinated Noteholder Representative hereunder by a successor Subordinated
Noteholder Representative, such successor Subordinated Noteholder Representative
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Subordinated Noteholder Representative and
the retiring Subordinated Noteholder

 

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

 

Representative shall be discharged from its duties and obligations under the
Agreement.  After any retiring Subordinated Noteholder Representative’s
resignation or removal hereunder as Subordinated Noteholder Representative, the
provisions of the Agreement including this Annex III shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Subordinated
Noteholder Representative.