Exhibit 10.2

 

EXECUTION VERSION

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (this “Security Agreement”) is entered into as of
December 14, 2012 among RED ROBIN INTERNATIONAL, INC., a Nevada corporation (the
“Borrower”), RED ROBIN GOURMET BURGERS, INC., a Delaware corporation (the
“Parent”), those Domestic Subsidiaries of the Borrower or Parent that may from
time to time become parties hereto (together with the Parent, individually a
“Guarantor” and collectively the “Guarantors”; the Guarantors and the Borrower,
individually an “Obligor” and collectively the “Obligors”) and WELLS FARGO BANK,
NATIONAL ASSOCIATION, in its capacity as administrative agent (in such capacity,
the “Administrative Agent”) for the lenders from time to time party to the
Credit Agreement described below (the “Lenders”).

 

RECITALS

 

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

 

WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue or participate in Letters of Credit under the Credit Agreement that the
Obligors shall have executed and delivered this Security Agreement to the
Administrative Agent for the ratable benefit of the Lenders.

 

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

 

1.                                      Definitions.

 

(a)                                 Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to such terms in the Credit
Agreement, and the following terms which are defined in the Uniform Commercial
Code from time to time in effect in the State of New York (the “UCC”) are used
herein as so defined: Accessions, Accounts, As-Extracted Collateral, Chattel
Paper, Commercial Tort Claims, Consumer Goods, Control, Deposit Accounts,
Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Manufactured Homes, Proceeds, Securities Intermediary,
Security Entitlement, Software, Supporting Obligations and Tangible Chattel
Paper.  For purposes of this Security Agreement, the term “Lender” shall include
any Hedge Bank or any Cash Management Bank that is party to a Secured Cash
Management Agreement.

 

(b)                                 In addition, the following terms shall have
the following meaning:

 

“Material”: shall mean, with respect to any item of Collateral (or amount
payable thereunder or in connection therewith with respect to Accounts or
similar obligations) qualified by the term “Material” in this Security
Agreement, that such item of Collateral (or such amount), when aggregated with
all other items of Collateral excluded because such items are qualified by the
term “Material,” has a fair market value in excess of $500,000 in the aggregate.

 

“Secured Obligations”: the collective reference to the following:

 

(i)                                     all Secured Obligations (as defined in
the Credit Agreement); and

 

(ii)                                  all reasonable expenses and charges, legal
and otherwise, incurred by the Administrative Agent, the Lenders, the Hedge
Banks and/or the Cash Management Banks (party to Secured Cash Management

 

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Agreements) in collecting or enforcing any of the Secured Obligations (as
defined in the Credit Agreement), or in realizing on or protecting any security
therefor, including without limitation, the security granted hereunder.

 

“Vehicles”: shall mean all cars, trucks, vans, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law of any
state, including, without limitation, all tires and other appurtenances to any
of the foregoing.

 

2.                                      Grant of Security Interest in the
Collateral.  To secure the prompt payment and performance in full when due,
whether by lapse of time, acceleration, mandatory prepayment or otherwise, of
the Secured Obligations, each Obligor hereby grants to the Administrative Agent,
for the ratable benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the “Collateral”):

 

(a)                                 all Accounts;

 

(b)                                 all cash and Cash Equivalents;

 

(c)                                  all Chattel Paper (including Electronic
Chattel Paper);

 

(d)                                 those certain Commercial Tort Claims of such
Obligor set forth on Schedule 2(d) attached hereto (as such Schedule may be
updated from time to time by the Obligors);

 

(e)                                  all Copyright Licenses;

 

(f)                                   all Copyrights;

 

(g)                                  all Deposit Accounts;

 

(h)                                 all Documents;

 

(i)                                     all Equipment;

 

(j)                                    all Fixtures;

 

(k)                                 all General Intangibles;

 

(l)                                     all Goods;

 

(m)                             all Instruments;

 

(n)                                 all Inventory;

 

(o)                                 all Investment Property;

 

(p)                                 all Letter-of-Credit Rights;

 

(q)                                 all Material Contracts and all such other
agreements, contracts, leases, licenses, tax sharing agreements or hedging
arrangements now or hereafter entered into by an Obligor, as such agreements may
be amended or otherwise modified from time to time (collectively, the “Assigned
Agreements”), including without limitation, (i) all rights of an Obligor to
receive moneys due and to become due under or pursuant to the Assigned
Agreements, (ii) all rights of an Obligor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
claims of an Obligor for damages arising out of or for breach of or default
under the Assigned Agreements and (iv) the right of an Obligor to terminate the
Assigned

 

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Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder;

 

(r)                                    all Payment Intangibles;

 

(s)                                   all Patent Licenses;

 

(t)                                    all Patents;

 

(u)                                 all Software;

 

(v)                                 all Supporting Obligations;

 

(w)                               all Trademark Licenses;

 

(x)                                 all Trademarks;

 

(y)                                 all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and related data processing
software (owned by such Obligor or in which it has an interest) that at any time
evidence or contain information relating to any Collateral or are otherwise
necessary or helpful in the collection thereof or realization thereupon;

 

(z)                                  to the extent not otherwise included, all,
Accessions, Proceeds and products of any and all of the foregoing; and

 

(aa)                          all other assets of such Obligor.

 

Notwithstanding the foregoing, “Collateral” shall not include (i) Deposit
Accounts that consist of, contain or include money deposited by franchisees to
the extent the Credit Parties do not have money deposited in such accounts
exceeding $500,000 in the aggregate, (ii) shares of Capital Stock of any Foreign
Subsidiary in excess of 65% of the total shares of outstanding Capital Stock of
such Foreign Subsidiary to the extent that a pledge of, or lien on, such shares
would result in adverse tax consequences for any Obligor, or (iii) any “Excluded
Property” (as defined below) until such time, if any, as the prohibitions
causing such property to be Excluded Property have terminated (howsoever
occurring).  Upon such termination, the Administrative Agent will be deemed to
have and at all times from and after the date hereof to have had, a security
interest in such Excluded Property and the relevant Obligor shall take all
actions necessary in the reasonable judgment of the Administrative Agent to
perfect such security interest.  The term “Excluded Property” means (a) any
permit, lease, license, agreement, contract or other General Intangible of any
Obligor that validly prohibits the creation by such Obligor of a security
interest therein which was entered into prior to the date hereof (to the extent
such prohibition is not invalidated under the UCC) and (b) any permit, lease,
license, agreement, contract or other General Intangible of such Obligor to the
extent that any Requirement of Law applicable thereto prohibits the creation by
such Obligor of a security interest therein, in each case other than (i) the
right to receive any payment of money due in respect of such permit, lease,
license, agreement, contract or other General Intangible and (ii) any
Accessions, Proceeds or products of any such permit, lease, license, agreement,
contract or other General Intangible (unless such Accessions, Proceeds or
products would itself constitute Excluded Property).

 

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

 

The term “Collateral” shall include any Secured Hedging Agreement or Secured
Cash Management Agreement and any rights of the Obligors thereunder only for
purposes of this Section 2.

 

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3.                                      Provisions Relating to Accounts,
Material Contracts and Assigned Agreements.

 

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

 

(b)                                 At any time and from time to time, the
Administrative Agent shall have the right, but not the obligation, to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the Obligors shall furnish all such
assistance and information as the Administrative Agent may reasonably require in
connection with such test verifications.  At any time upon the occurrence and
during the continuation of a Default or Event of Default upon the Administrative
Agent’s request and at the expense of the Obligors, the Obligors shall cause
independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Accounts.  The
Administrative Agent in its own name or in the name of others may communicate
with account debtors on the Accounts to verify with them to the Administrative
Agent’s satisfaction the existence, amount and terms of any Accounts.

 

4.                                      Representations and Warranties.  Each
Obligor hereby represents and warrants to the Administrative Agent, for the
benefit of the Lenders, that so long as any of the Secured Obligations remain
outstanding (other than contingent indemnity obligations which by the terms
thereof are stated to survive termination of the Credit Documents) or any Credit
Document, Secured Hedging Agreement or Secured Cash Management Agreement is in
effect, and until all of the Commitments shall have been terminated:

 

(a)                                 Chief Executive Office; Books & Records;
Legal Name; State of Formation.  As of the Closing Date, each Obligor’s chief
executive office and chief place of business are (and for the prior four months
prior to the date hereof has been) located at the locations set forth on
Schedule 3.19(c) to the Credit Agreement (as updated from time to time), and as
of the Closing Date each Obligor keeps its books and records at such locations. 
As of the Closing Date, each Obligor’s exact legal name is as shown in this
Security Agreement and its state of formation is (and for the prior four months
prior to the date hereof has been) the location set forth on Schedule 3.12 to
the Credit Agreement.  No Obligor has in the past four months prior to the date
hereof changed its name, been party to a merger, consolidation or other change
in structure or used any tradename not disclosed on Schedule 4(a) attached
hereto (as updated from time to time in accordance with Section 5(d));

 

(b)                                 Location of Collateral.  As of the Closing
Date, the tangible Collateral owned by each Obligor is located solely at the
locations set forth on Schedule 3.19(b) to the Credit Agreement (other than
tangible Collateral with a fair market value not in excess of $500,000 in the
aggregate);

 

(c)                                  Ownership.  Each Obligor is the legal and
beneficial owner of its Collateral and has the right to pledge, sell, assign or
transfer the same except to the extent that any pledge, sale, assignment or
transfer of such Collateral is prohibited or limited by applicable law,
regulations or administrative guidelines or by any contract entered into prior
to the date hereof;

 

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(d)                                 Security Interest/Priority.  This Security
Agreement creates a valid security interest in favor of the Administrative
Agent, for the benefit of the Lenders, in the Collateral of such Obligor and,
when properly perfected by filing, the granting of Control to the Administrative
Agent or otherwise, shall constitute a valid first priority, perfected security
interest in the Collateral with respect to which the security interest is to be
perfected, to the extent such security interest can be perfected by filing or
otherwise under the UCC or by filing an appropriate notice with the United
States Patent and Trademark Office or the United States Copyright Office, free
and clear of all Liens except for Permitted Liens;

 

(e)                                            Consents.  Except for (i) the
filing or recording of UCC financing statements, (ii) the filing of appropriate
notices with the United States Patent and Trademark Office and the United States
Copyright Office or (iii) obtaining Control to perfect the Liens created by this
Security Agreement, no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder, member or creditor
of such Obligor), is required under the UCC (y) for the grant by such Obligor of
the security interest in the Collateral granted hereby or for the execution,
delivery or performance of this Security Agreement by such Obligor or (z) for
the perfection of such security interest or the exercise by the Administrative
Agent of the rights and remedies provided for in this Security Agreement;

 

(f)                                   Types of Collateral.  None of the
Collateral consists of, or is the Proceeds of, As-Extracted Collateral, Consumer
Goods, Farm Products, Manufactured Homes or standing timber (as such term is
used in the UCC);

 

(g)                                  Accounts.  With respect to the Accounts of
the Obligors:  (i) each Account and the papers and documents of the applicable
Obligor relating thereto are genuine and in all material respects what they
purport to be; (ii) each Account arises out of a bona fide transaction for goods
sold and delivered (or in the process of being delivered) by an Obligor or for
services actually rendered by an Obligor, which transaction was conducted in the
ordinary course of the Obligor’s business and was or will be performed
substantially in accordance with the terms of any documents pertaining thereto;
(iii) no Account of an Obligor is evidenced by any Instrument or Chattel Paper
unless such Instrument or Chattel Paper has been theretofore delivered to, or
submitted to the Control of, the Administrative Agent; provided that this
subsection (iii) is not intended to (A) require the endorsement or delivery of
ordinary course records and payment instructions or (B) require the endorsement
or delivery of any individual Instrument or Chattel Paper in an amount of less
than $500,000; (iv) the amount of each Account as shown on the applicable
Obligor’s books and records, and on all invoices and statements which may be
delivered to the Administrative Agent with respect thereto, is payable to the
applicable Obligor and no material portion of the Accounts are contingent; (v)
no Account is evidenced by a judgment, there are no set-offs, counterclaims or
disputes existing or asserted with respect to any Account that in the aggregate
could reasonably be expected to have a Material Adverse Effect, and no Obligor
has made any agreement with any account debtor for any deduction from any
Account except a discount or allowance for prompt payment allowed by the
applicable Obligor and other discounts or allowances made in the ordinary course
of its business; (vi) there are no facts, events or occurrences which in any
material respect impair the validity or enforcement of any Material Account or
could reasonably be expected to materially reduce the amount payable thereunder
as shown on the applicable Obligor’s books and records and all invoices and
statements delivered to the Administrative Agent with respect thereto; (vii) the
right to receive payment under each Account is assignable except where the
account debtor with respect to such Account is the United States government or
any state government or any agency, department or instrumentality thereof, to
the extent the assignment of any such right to payment is prohibited or limited
by applicable law, regulations, administrative guidelines or contract; and
(viii) the goods sold and/or services furnished giving rise to each Account are
not subject to any security interest or Lien except the security interest
granted the Administrative Agent herein and except for Permitted Liens;

 

(h)                                 Inventory.  No Inventory of an Obligor is
held by a third party (other than an Obligor) pursuant to consignment, sale or
return, sale on approval or similar arrangement;

 

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(i)                                     Intellectual Property.

 

(i)                                     Schedule 3.16 to the Credit Agreement
includes all material Intellectual Property owned by the Obligors in their own
names, or that the Obligors have the right to use, as of the Closing Date.

 

(ii)                                  Each Material Copyright, Material Patent
and Material Trademark owned by such Obligor is valid, subsisting, unexpired,
and to such Obligor’s knowledge, enforceable and has not been abandoned, and
such Obligor is legally entitled to use each of its tradenames.

 

(iii)                               Except as set forth in Schedule 3.16 to the
Credit Agreement, none of the Material Copyrights, Material Patents and Material
Trademarks is the subject of any licensing or franchise agreement other than for
the benefit of any franchisee.

 

(iv)                              No holding, decision or judgment has been
rendered by any Governmental Authority which would limit, cancel or question the
validity of any Material Intellectual Property of the Obligors.

 

(v)                                 No action or proceeding is pending seeking
to limit, cancel or question the validity of any Material Intellectual Property,
or which, if adversely determined, would have a material adverse effect on the
value of any Material Intellectual Property.

 

(vi)                              All applications pertaining to the Material
Copyrights, Material Patents and Material Trademarks of each Obligor have been
duly and properly filed, and all registrations or letters pertaining to such
Copyrights, Patents and Trademarks have been duly and properly filed and issued,
and all of such Copyrights, Patents and Trademarks are valid and enforceable.

 

(vii)                           No Obligor has made any assignment or agreement
in conflict with the security interest of the Administrative Agent in the
Material Intellectual Property of each Obligor hereunder.

 

(j)                                    Documents, Instruments and Chattel
Paper.  All Documents, Instruments and Chattel Paper describing, evidencing or
constituting Collateral are, to the Obligors’ knowledge, complete in all
material respects, valid and genuine;

 

(k)                                 Equipment.  With respect to each Obligor’s
Equipment that is material to its business:  (i) such Obligor has good and
marketable title thereto or a valid leasehold interest therein; and (ii) all
such Equipment is in normal operating condition and repair, ordinary wear and
tear and obsolescence alone excepted (subject to casualty events), and is
suitable for the uses to which it is customarily put in the conduct of such
Obligor’s business;

 

(l)                                     Restrictions on Security Interest.  None
of the Obligors is party to any material license (other than certain liquor
licenses) or any material personal property lease that contains legally
enforceable restrictions on the granting of a security interest therein; and

 

(m)                             Collateral Requiring Control to Perfect.  Set
forth on Schedule 4(m) attached hereto is a description of all Deposit Accounts,
Electronic Chattel Paper, Letter of Credit Rights, Securities Accounts and
uncertificated Investment Property of the Obligors, including the name and
address of (i) in the case of a Deposit Account, the depository institution,
(ii) in the case of Electronic Chattel Paper, the account debtor, (iii) in the
case of Letter of Credit Rights, the issuer or nominated person, as applicable,
and (iv) in the case of a Securities Account or other uncertificated Investment
Property, the Securities Intermediary or issuer, as applicable.

 

5.                                      Covenants.  Each Obligor covenants that,
so long as any of the Secured Obligations remain outstanding (other than
contingent indemnity obligations which by the terms thereof are stated to
survive termination of

 

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the Credit Documents) or any Credit Document, Secured Hedging Agreement or
Secured Cash Management Agreement is in effect, and until all of the Commitments
shall have been terminated, such Obligor shall:

 

(a)                                 Other Liens.  Defend its interests in the
Collateral against the claims and demands of all other parties claiming an
interest therein and keep the Collateral free from all Liens, except, in each
case, for Permitted Liens, and not sell, exchange, transfer, assign, lease or
otherwise dispose of the Collateral or any interest therein and, except as
permitted under the Credit Agreement and the other Credit Documents;

 

(b)                                 Preservation of Collateral.  Keep all
Material Collateral useful and necessary in its business in good order,
condition and repair, ordinary wear and tear and obsolescence excepted; not use
the Collateral in violation of the provisions of this Security Agreement or any
other agreement relating to the Collateral or any policy insuring the Collateral
or any applicable Requirement of Law except for violations that could not
reasonably be expected to have a Material Adverse Effect; and not, without the
prior written consent of the Administrative Agent, alter or remove any
identifying symbol or number on any Material item of Equipment;

 

(c)                                  Possession or Control of Certain
Collateral.  If (i) any amount payable under or in connection with any of the
Collateral in excess of $500,000 shall be or become evidenced by any Instrument,
Tangible Chattel Paper or Supporting Obligation or (ii) if any Collateral shall
be stored or shipped subject to a Document or (iii) if any Collateral in excess
of $500,000 shall consist of Investment Property in the form of certificated
securities (other than Cash Equivalents held in accordance with the Credit
Agreement), promptly notify the Administrative Agent of the existence of such
Collateral and, at the reasonable request of the Administrative Agent, deliver
such Instrument, Chattel Paper, Supporting Obligation, Document or Investment
Property to the Administrative Agent to be held as Collateral pursuant to this
Security Agreement.  If any Collateral shall consist of Material Deposit
Accounts, Material Electronic Chattel Paper, Material Letter-of-Credit Rights or
Material uncertificated Investment Property, promptly execute and deliver (and,
with respect to any Collateral consisting of uncertificated Investment Property,
cause the issuer or Securities Intermediary with respect to such Investment
Property to execute and deliver) to the Administrative Agent all control
agreements, assignments, instruments or other documents as reasonably requested
by the Administrative Agent for the purposes of obtaining and maintaining
Control of such Collateral;

 

(d)                                 Changes in Corporate Structure or Location. 
Not, without providing 30 days prior written notice to the Administrative Agent
and without filing (or confirming that the Administrative Agent has filed) such
amendments to any previously filed financing statements as the Administrative
Agent may require, (i) alter its corporate existence or, in one transaction or a
series of transactions, merge into or consolidate with any other entity, or sell
all or substantially all of its assets, except as permitted by the Credit
Agreement, (ii) change its state of incorporation or formation or (iii) change
its registered corporate name;

 

(e)                                  Inspection.  Allow the Administrative Agent
or its representatives to visit and inspect the Collateral as set forth in
Section 5.6 of the Credit Agreement;

 

(f)                                   Perfection of Security Interest. Each
Obligor hereby authorizes the Administrative Agent to prepare and file such
financing statements (including continuation statements) or amendments thereof
or supplements thereto or other instruments as the Administrative Agent may from
time to time deem necessary or appropriate in order to perfect and maintain the
security interests granted on the Collateral hereunder except with respect to
perfection only, for Collateral that is subject to a Permitted Lien under
subsections (xi) and (xii) of the definition of Permitted Lien in accordance
with the UCC.  Each Obligor shall also execute and deliver to the Administrative
Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing documents,
as the Administrative Agent may reasonably request) and do all such other things
as the Administrative Agent may reasonably deem necessary or appropriate (i) to
assure to the Administrative Agent its security interests hereunder are
perfected in accordance with the UCC, including, without limitation, (A) any
financing statement that describes the Collateral as “all personal property” or
“all assets” or in some other manner as the Administrative Agent deems necessary
or advisable, (B) such financing statements (including continuation statements)
or amendments thereof or supplements thereto or other instruments as the
Administrative Agent may from time to time reasonably request

 

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in order to perfect and maintain the security interests granted hereunder in
accordance with the UCC and any other personal property security legislation in
the appropriate state(s) or province(s), (C) with regard to Investment Property,
execute and cause any Securities Intermediary with respect to such Investment
Property to execute a securities control agreement in form and substance
satisfactory to the Administrative Agent, (D) with regard to registered Material
Copyrights, a Notice of Grant of Security Interest in Copyrights for filing with
the United States Copyright Office in the form of Schedule 5(f)(i) attached
hereto, (E) with regard to Material Patents, a Notice of Grant of Security
Interest in Patents for filing with the United States Patent and Trademark
Office in the form of Schedule 5(f)(ii) attached hereto and (F) with regard to
Material Trademarks, a Notice of Grant of Security Interest in Trademarks for
filing with the United States Patent and Trademark Office in the form of
Schedule 5(f)(iii) attached hereto, (ii) to consummate the transactions
contemplated hereby and (iii) to otherwise protect and assure the Administrative
Agent of its rights and interests hereunder.  To that end, each Obligor hereby
irrevocably makes, constitutes and appoints the Administrative Agent, its
nominee or any other person whom the Administrative Agent may designate, as such
Obligor’s attorney in fact with full power and for the limited purpose to sign
in the name of such Obligor any such notices or similar documents which in the
Administrative Agent’s reasonable discretion would be necessary or appropriate
in order to perfect and maintain perfection of the security interests granted
hereunder other than, with respect to perfection only, in Vehicles and
Collateral that is subject to a Permitted Lien under subsections (xi) and (xii)
of the definition of Permitted Lien, such power, being coupled with an interest,
being and remaining irrevocable so long as the Credit Agreement is in effect or
any amounts payable thereunder, under any other Credit Document, Secured Hedging
Agreement or Secured Cash Management Agreement shall remain outstanding (other
than contingent indemnity obligations which by the terms thereof are stated to
survive termination of the Credit Documents, and until all of the Commitments
thereunder shall have terminated.  In the event for any reason the law of any
jurisdiction other than New York becomes or is applicable to the Collateral of
any Obligor or any part thereof, or to any of the Secured Obligations, such
Obligor agrees to execute and deliver all such instruments and to do all such
other things as the Administrative Agent reasonably deems necessary or
appropriate to preserve, protect and enforce the security interests of the
Administrative Agent under the law of such other jurisdiction other than, with
respect to perfection only, in Vehicles and Collateral that is subject to a
Permitted Lien under subsections (xi) and (xii) of the definition of Permitted
Lien (and, if an Obligor shall fail to do so promptly upon the request of the
Administrative Agent, then the Administrative Agent may execute any and all such
requested documents on behalf of such Obligor pursuant to the power of attorney
granted hereinabove).  Each Obligor agrees to mark its books and records to
reflect the security interest of the Administrative Agent in the Collateral;

 

(g)                                  Collateral Held by Warehouseman, Bailee,
etc.  If any Collateral exceeding an aggregate value of $500,000 is at any time
in the possession or control of a warehouseman, bailee or any agent or processor
of such Obligor (except if under repair or refurbishment), notify the
Administrative Agent of such possession and, upon the Administrative Agent’s
reasonable request, notify such Person of the Administrative Agent’s security
interest for the benefit of the Lenders in such Collateral and instruct such
Person to hold all such Collateral for the Administrative Agent’s account
subject to the Administrative Agent’s instructions, and obtain from such Person
a written acknowledgement of the Administrative Agent’s security interest
therein, in form and substance reasonably satisfactory to the Administrative
Agent;

 

(h)                                 Treatment of Accounts.  Unless and until an
Event of Default occurs and is continuing, each Obligor may settle and adjust
disputes and claims with its franchisees, customers and account debtors, handle
returns and recoveries and grant discounts, credit and allowances in the
ordinary course of its business as presently conducted and otherwise for amounts
and on terms which such Obligor in good faith considers advisable.  However,
upon the occurrence of any Event of Default and during the continuation thereof,
if so instructed by the Administrative Agent, such Obligor shall settle and
adjust disputes and claims as directed by the Administrative Agent, and no
discount, credit or allowance other than on normal trade terms in the ordinary
course of business shall be granted to any customer or account debtor and no
returns of merchandise shall be accepted by such Obligor without the
Administrative Agent’s consent.  The Administrative Agent may (but shall not be
required to) at all times upon the occurrence of any Event of Default and during
the continuance thereof, settle or adjust disputes and claims directly with
customers or account debtors for amounts and upon terms which the Administrative
Agent considers reasonable;

 

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(i)                                     Covenants Relating to Inventory.

 

(i)                                     Maintain, keep and preserve all Material
Inventory in accordance with standard operating procedures.

 

(ii)                                  If any Inventory exceeding an aggregate
value of $500,000 is at any time evidenced by a document of title, deliver such
document of title to the Administrative Agent;

 

(j)                                    Covenants Relating to Copyrights.

 

(i)                                     Employ the Copyrights for each work with
such notice of copyright as may be required by law to secure copyright
protection.

 

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

 

(iii)                               Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each Obligor hereunder;

 

(k)                                 Covenants Relating to Patents and
Trademarks.

 

(i)                                     (A) Continue to use each Material
Trademark in full force free from any claim of abandonment for non-use, unless
such Material Trademark is abandoned or no longer used in the ordinary course of
business, (B) maintain as in the past the quality of products and services
offered under such Material Trademark, (C) employ such Material Trademark with
the appropriate notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Material Trademark unless
the Administrative Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Security Agreement,
and (E) not (and not permit any licensee or sublicensee thereof to) do any act
or knowingly omit to do any act whereby any such Material Trademark may become
invalidated.

 

(ii)                                  Not do any act, or omit to do any act,
whereby any Material Patent may become abandoned or dedicated.

 

(iii)                               Notify the Administrative Agent immediately
if it knows, or has reason to know, that any application or registration
relating to any Material Patent or Material Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any court or
tribunal in any country) regarding an Obligor’s ownership of any such Patent or
Trademark or its right to register the same or to keep and maintain the same.

 

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(iv)                              Whenever an Obligor, either by itself or
through an agent, employee, licensee or designee, shall file an application for
the registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Obligor shall report such filing to the
Administrative Agent within fifteen Business Days after the last day of the
fiscal year in which such filing occurs.  Upon request of the Administrative
Agent, an Obligor shall execute and deliver any and all agreements, instruments,
documents and papers as the Administrative Agent may request to evidence the
Administrative Agent’s and the Lenders’ security interest in any Patent or
Trademark and the goodwill and General Intangibles of an Obligor relating
thereto or represented thereby.

 

(v)                                 Take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application, to
obtain the relevant registration and to maintain each registration of all
Material Patents and Material Trademarks, unless such Material Patents and
Material Trademarks have been abandoned or are no longer used in the ordinary
course of business, including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.

 

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

 

(vii)                           Not make any assignment or agreement in conflict
with the security interest in the Patents or Trademarks of each Obligor
hereunder;

 

(l)                                     New Patents, Copyrights and Trademarks. 
Promptly provide the Administrative Agent (i) with respect to Material
Copyrights, a duly executed Notice of Grant of Security Interest in Copyrights,
(ii) with respect to Material Patents, a duly executed Notice of Grant of
Security Interest in Patents, (iii) with respect to Material Trademarks, a duly
executed Notice of Grant of Security Interest in Trademarks or (iv) such other
duly executed documents as the Administrative Agent may reasonably request in a
form acceptable to counsel for the Administrative Agent and suitable for
recording to evidence the security interest of the Administrative Agent on
behalf of the Lenders in the Copyright, Patent or Trademark which is the subject
of such new application;

 

(m)                             Commercial Tort Claims; Notice of Litigation. 
(i) Promptly forward to the Administrative Agent written notification of any and
all Commercial Tort Claims, including, but not limited to, any and all actions,
suits, and proceedings before any court or Governmental Authority by or
affecting such Obligor or any of its Subsidiaries and (ii) execute and deliver
such statements, documents and notices and do and cause to be done all such
things as may be reasonably required by the Administrative Agent, or required by
law, including all things which may from time to time be necessary under the UCC
to fully create, preserve, perfect and protect the priority of the
Administrative Agent’s security interest in any Commercial Tort Claims;

 

(n)                                 Insurance.  Insure, repair and replace the
Collateral of such Obligor as set forth in Section 5.5 of the Credit Agreement. 
All proceeds derived from insurance on the Collateral shall be subject to the
security interest of the Administrative Agent hereunder; and

 

(o)                                 Fixtures.  At all times maintain the
Collateral existing as of the Closing Date as personal property and not affix
any of such Collateral to any real property (except real property that is
subject to a Permitted Lien to the extent such Collateral may be encumbered by a
Permitted Lien) in a manner which would change its nature from personal property
to real property or a Fixture.

 

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6.                                      Performance of Obligations; Advances by
Administrative Agent.  On failure of any Obligor to perform any of the covenants
and agreements contained herein, the Administrative Agent may, at its sole
option and in its sole discretion, perform or cause to be performed the same and
in so doing may expend such sums as the Administrative Agent may reasonably deem
advisable in the performance thereof, including, without limitation, the payment
of any insurance premiums, the payment of any taxes, a payment to obtain a
release of a Lien or potential Lien (other than a Permitted Lien), expenditures
made in defending against any adverse claim (other than a Permitted Lien) and
all other expenditures which the Administrative Agent may make for the
protection of the security interest hereof or may be compelled to make by
operation of law.  All such sums and amounts so expended shall be repayable by
the Obligors on a joint and several basis promptly upon timely notice thereof
and demand therefor, shall constitute additional Secured Obligations and shall
bear interest from the date said amounts are expended at the rate determined in
accordance with the terms and conditions of Section 2.9 of the Credit
Agreement.  No such performance of any covenant or agreement by the
Administrative Agent on behalf of any Obligor, and no such advance or
expenditure therefor, shall relieve the Obligors of any default under the terms
of this Security Agreement, the other Credit Documents or any Secured Hedging
Agreement or Secured Cash Management Agreement.  The Administrative Agent may
make any payment hereby authorized in accordance with any bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax lien,
title or claim except to the extent such payment is being contested in good
faith by an Obligor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

 

7.                                      Events of Default.

 

The occurrence of an event, which under the Credit Agreement would constitute an
Event of Default, shall be an event of default hereunder (an “Event of
Default”).

 

8.                                      Remedies.

 

(a)                                 General Remedies.  Upon the occurrence of an
Event of Default and during continuation thereof, the Administrative Agent and
the Lenders shall have, in addition to the rights and remedies provided herein,
in the Credit Documents, in any Secured Hedging Agreement or Secured Cash
Management Agreement or by law (including, but not limited to, levy of
attachment, garnishment, and the rights and remedies set forth in the Uniform
Commercial Code of the jurisdiction applicable to the affected Collateral), the
rights and remedies of a secured party under the UCC (regardless of whether the
UCC is the law of the jurisdiction where the rights and remedies are asserted
and regardless of whether the UCC applies to the affected Collateral), and
further, the Administrative Agent may, with or without judicial process or the
aid and assistance of others, to the extent permitted by law, (i) enter on any
premises on which any of the Collateral may be located and, without resistance
or interference by the Obligors, take possession of the Collateral, (ii) dispose
of any Collateral on any such premises, (iii) require the Obligors to assemble
and make available to the Administrative Agent at the expense of the Obligors
any Collateral at any place and time designated by the Administrative Agent
which is reasonably convenient to both parties, (iv) remove any Collateral from
any such premises for the purpose of effecting the sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice, hearing or
process of law, all of which each of the Obligors hereby waives to the fullest
extent permitted by law, at any place and time or times, sell and deliver any or
all Collateral held by or for it at public or private sale, by one or more
contracts, in one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Administrative Agent deems advisable, in its
sole discretion (subject to any and all mandatory legal requirements).  Neither
the Administrative Agent’s compliance with any applicable state or federal law
in the conduct of such sale, nor its disclaimer of any warranties relating to
the Collateral, shall be considered to adversely affect the commercial
reasonableness of such sale.  In addition to all other sums due the
Administrative Agent and the Lenders with respect to the Secured Obligations,
the Obligors shall pay the Administrative Agent and each of the Lenders all
reasonable documented costs and expenses incurred by the Administrative Agent or
any such Lender, including, but not limited to, reasonable attorneys’ fees and
court costs, in obtaining or liquidating the Collateral, in enforcing payment of
the Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Administrative Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security Agreement,
any Collateral or the Secured Obligations, including, without limitation, any of
the foregoing arising in, arising under or related

 

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to a case under the Bankruptcy Code.  To the extent the rights of notice cannot
be legally waived hereunder, each Obligor agrees that any requirement of
reasonable notice shall be met if such notice is personally served on or mailed,
postage prepaid, to the applicable Obligor in accordance with the notice
provisions of Section 9.2 of the Credit Agreement at least ten (10) days before
the time of sale or other event giving rise to the requirement of such notice.
 The Administrative Agent and the Lenders shall not be obligated to make any
sale or other disposition of the Collateral regardless of notice having been
given.  To the extent permitted by law, any Lender may be a purchaser at any
such sale.  To the extent permitted by applicable law, each of the Obligors
hereby waives all of its rights of redemption with respect to any such sale. 
Subject to the provisions of applicable law, the Administrative Agent and the
Lenders may postpone or cause the postponement of the sale of all or any portion
of the Collateral by announcement at the time and place of such sale, and such
sale may, without further notice, to the extent permitted by law, be made at the
time and place to which the sale was postponed, or the Administrative Agent and
the Lenders may further postpone such sale by announcement made at such time and
place.

 

(b)                                 Remedies Relating to Accounts.  Upon the
occurrence of an Event of Default and during the continuation thereof, whether
or not the Administrative Agent has exercised any or all of its rights and
remedies hereunder, each Obligor will promptly upon request of the
Administrative Agent instruct all account debtors to remit all payments in
respect of Accounts to a mailing location selected by the Administrative Agent. 
In addition, upon the occurrence of an Event of Default and during the
continuation thereof, the Administrative Agent or its designee may notify any
Obligor’s customers and account debtors that the Accounts of such Obligor have
been assigned to the Administrative Agent or of the Administrative Agent’s
security interest therein, and may (either in its own name or in the name of an
Obligor or both) demand, collect (including, without limitation, by way of a
lockbox arrangement), receive, take receipt for, sell, sue for, compound,
settle, compromise and give acquittance for any and all amounts due or to become
due on any Account, and, in the Administrative Agent’s discretion, file any
claim or take any other action or proceeding to protect and realize upon the
security interest of the Administrative Agent in the Accounts.  Each Obligor
acknowledges and agrees that the Proceeds of its Accounts remitted to or on
behalf of the Administrative Agent for the benefit of the Lenders in accordance
with the provisions hereof shall be applied to the Secured Obligations in the
order set forth in Section 2.12(b) of the Credit Agreement and that such Obligor
shall not have any right, title or interest in such Proceeds or in any such
other amounts except as expressly provided herein.  The Administrative Agent and
the Lenders shall have no liability or responsibility to any Obligor for
acceptance of a check, draft or other order for payment of money bearing the
legend “payment in full” or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness of any
remittance.  Each Obligor hereby agrees to indemnify the Administrative Agent
and the Lenders and their respective officers, directors, employees, partners,
members, counsel, agents, representatives, advisors and affiliates from and
against all liabilities, damages, losses, actions, claims, judgments, costs,
expenses, charges and reasonable attorneys’ fees suffered or incurred by the
Administrative Agent or the Lenders (each, an “Indemnified Party”) because of
the maintenance of the foregoing arrangements except as relating to or arising
out of the gross negligence or willful misconduct of an Indemnified Party or its
officers, employees or agents, in which case such Indemnified Party shall not be
entitled to the indemnification provisions hereunder.  In the case of any
investigation, litigation or other proceeding, the foregoing indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by an Obligor, its directors, shareholders or creditors or an Indemnified Party
or any other Person or any other Indemnified Party is otherwise a party thereto.

 

(c)                                  Access.  In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default and during the
continuation thereof, the Administrative Agent shall have the right to enter and
remain upon the various premises of the Obligors without cost or charge to the
Administrative Agent, and use the same, together with materials, supplies, books
and records of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the Collateral,
whether by foreclosure, auction or otherwise.  In addition, the Administrative
Agent may remove Collateral, or any part thereof, from such premises and/or any
records with respect thereto, in order to effectively collect or liquidate such
Collateral.  If the Administrative Agent exercises its right to take possession
of the Collateral, each Obligor shall also at its expense perform any and all
other steps reasonably requested by the Administrative Agent to preserve and
protect the security interest hereby granted in the Collateral, such as placing
and

 

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maintaining signs indicating the security interest of the Administrative Agent,
appointing overseers for the Collateral and maintaining inventory records.

 

(d)                                 Nonexclusive Nature of Remedies.  Failure by
the Administrative Agent or the Lenders to exercise any right, remedy or option
under this Security Agreement, any other Credit Document, any Secured Hedging
Agreement or Secured Cash Management Agreement or as provided by law, or any
delay by the Administrative Agent or the Lenders in exercising the same, shall
not operate as a waiver of any such right, remedy or option.  No waiver
hereunder shall be effective unless it is in writing, signed by the party
against whom such waiver is sought to be enforced and then only to the extent
specifically stated, which in the case of the Administrative Agent or the
Lenders shall only be granted as provided herein.  To the extent permitted by
law, neither the Administrative Agent, the Lenders, nor any party acting as
attorney for the Administrative Agent or the Lenders, shall be liable hereunder
for any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct hereunder.  The rights
and remedies of the Administrative Agents and the Lenders under this Security
Agreement shall be cumulative and not exclusive of any other right or remedy
which the Administrative Agent or the Lenders may have.

 

(e)                                  Retention of Collateral.  In addition to
the rights and remedies hereunder, upon the occurrence of any Event of Default
and during the continuation thereof, the Administrative Agent may retain all or
a portion of the Collateral in satisfaction of the Secured Obligations but only
after providing the notices required by Sections 9-620 and 9-621 (or similar
provision) of the UCC (or any successor sections of the UCC) and otherwise
complying with the requirements of applicable law of the relevant jurisdiction. 
Unless and until the Administrative Agent shall have provided such notices and
complied with all applicable legal requirements, however, the Administrative
Agent shall not be deemed to have retained any Collateral in satisfaction of any
Secured Obligations for any reason.

 

(f)                                   Deficiency.  In the event that the
proceeds of any sale, collection or realization are insufficient to pay all
amounts to which the Administrative Agent or the Lenders are legally entitled,
the Obligors shall be jointly and severally liable for the deficiency, together
with interest thereon at the rate determined in accordance with the terms and
conditions of Section 2.9 of the Credit Agreement, together with the costs of
collection and the reasonable fees of any attorneys employed by the
Administrative Agent to collect such deficiency.  Any surplus remaining after
the full payment and satisfaction of the Secured Obligations shall be returned
to the Obligors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.

 

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

 

9.                                      Rights of the Administrative Agent.

 

(a)                                 Power of Attorney.  In addition to other
powers of attorney contained herein, each Obligor hereby designates and appoints
the Administrative Agent, on behalf of the Lenders, and each of its designees or
agents, as attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following actions upon
the occurrence and during the continuation of an Event of Default:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ix)                              to do and perform all such other acts and
things as the Administrative Agent may reasonably deem to be necessary or
appropriate in connection with the Collateral.

 

This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations remain outstanding
(other than contingent indemnity obligations which by the terms thereof are
stated to survive termination of the Credit Documents), any Credit Document, any
Secured Hedging Agreement or any Secured Cash Management Agreement is in effect,
and until all of the Commitments shall have been terminated.  The Administrative
Agent shall be under no duty to exercise or withhold the exercise of any of the
rights, powers, privileges and options expressly or implicitly granted to the
Administrative Agent in this Security Agreement, and shall not be liable for any
failure to do so or any delay in doing so.  The Administrative Agent shall not
be liable for any act or omission or for any error of judgment or any mistake of
fact or law in its individual capacity or its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct.  This power of attorney is conferred on the Administrative Agent
solely to perfect, protect, preserve and realize upon its security interest in
the Collateral.

 

(b)                                 Assignment by the Administrative Agent.  The
Administrative Agent may from time to time assign its rights and obligations
hereunder as permitted under the Credit Agreement and any portion thereof and/or
the Collateral and any portion thereof, and the assignee shall be entitled to
all of the rights and remedies of the Administrative Agent under this Security
Agreement in relation thereto.

 

(c)                                  The Administrative Agent’s Duty of Care. 
Other than the exercise of reasonable care to assure the safe custody of the
Collateral while being held by the Administrative Agent hereunder, the
Administrative Agent shall have no duty or liability to preserve rights
pertaining thereto, it being understood and agreed that the Obligors shall be
responsible for preservation of all rights in the Collateral, and the
Administrative Agent shall be relieved of all responsibility for the Collateral
upon surrendering it or tendering the surrender of it to the Obligors.  The
Administrative Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment

 

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substantially equal to that which the Administrative Agent accords its own
property, which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Administrative Agent
shall not have responsibility for taking any necessary steps to preserve rights
against any parties with respect to any of the Collateral.  In the event of a
public or private sale of Collateral pursuant to Section 8 hereof, the
Administrative Agent shall have no obligation to clean-up, repair or otherwise
prepare the Collateral for sale.

 

10.                               Application of Proceeds.  Upon the occurrence
and during the continuation of an Event of Default, any payments in respect of
the Secured Obligations and any proceeds of the Collateral, when received by the
Administrative Agent or any of the Lenders in cash or its equivalent, will be
applied in reduction of the Secured Obligations in the order set forth in
Section 2.12(b) of the Credit Agreement, and each Obligor irrevocably waives the
right to direct the application of such payments and proceeds and acknowledges
and agrees that the Administrative Agent shall have the continuing and exclusive
right to apply and reapply any and all such payments and proceeds in the order
set forth in Section 2.12(b) of the Credit Agreement, notwithstanding any entry
to the contrary upon any of its books and records.

 

11.                               Costs of Counsel.  If at any time hereafter,
whether upon the occurrence of an Event of Default or not, the Administrative
Agent employs counsel to prepare or consider amendments, waivers or consents
with respect to this Security Agreement, or to take action or make a response in
or with respect to any legal or arbitral proceeding relating to this Security
Agreement or relating to the Collateral, or to protect the Collateral or
exercise any rights or remedies under this Security Agreement or with respect to
the Collateral, then the Obligors agree to promptly pay upon demand any and all
such reasonable documented costs and expenses of the Administrative Agent, all
of which costs and expenses shall constitute Secured Obligations hereunder.

 

12.                               Continuing Agreement.

 

(a)                                 This Security Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
so long as any of the Secured Obligations remain outstanding (other than
contingent indemnity obligations which by the terms thereof are stated to
survive termination of the Credit Documents) or any Credit Document or any
Secured Hedging Agreement or any Secured Cash Management Agreement is in effect,
and until all of the Commitments thereunder shall have terminated.  Upon such
payment and termination, this Security Agreement shall be automatically
terminated without delivery of any instrument or performance of any act by any
Person and the Administrative Agent and the Lenders shall, upon the request and
at the expense of the Obligors, forthwith release all liens and security
interests granted hereunder and shall execute and deliver all UCC termination
statements and/or other documents reasonably requested by the Obligors
evidencing such termination.  Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this Security
Agreement.

 

(b)                                 This Security Agreement shall continue to be
effective or be automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
as a preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event that payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including without limitation any reasonable legal fees and
disbursements) incurred by the Administrative Agent or any Lender in defending
and enforcing such reinstatement shall be deemed to be included as a part of the
Secured Obligations.

 

13.                               Amendments; Waivers; Modifications.  This
Security Agreement and the provisions hereof may not be amended, waived,
modified, changed, discharged or terminated except as set forth in Section 9.1
of the Credit Agreement.

 

14.                               Successors in Interest.  This Security
Agreement shall create a continuing security interest in the Collateral and
shall be binding upon each Obligor, its successors and assigns and shall inure,
together with the rights and remedies of the Administrative Agent and the
Lenders hereunder, to the benefit of the Administrative Agent and the Lenders
and their successors and permitted assigns; provided, however, that none of the
Obligors may assign its rights or

 

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delegate its duties hereunder without the prior written consent of each Lender
or the Required Lenders, as required by the Credit Agreement.  To the fullest
extent permitted by law, each Obligor hereby releases the Administrative Agent
and each Lender, each of their respective officers, employees and agents, and
each of their respective successors and assigns, from any liability for any act
or omission relating to this Security Agreement or the Collateral, except for
any liability arising from the gross negligence or willful misconduct of such
Person.

 

15.                               Notices.  All notices required or permitted to
be given under this Security Agreement shall be in conformance with Section 9.2
of the Credit Agreement.

 

16.                               Counterparts.  This Security Agreement may be
executed in any number of counterparts, each of which where so executed and
delivered shall be an original, but all of which shall constitute one and the
same instrument.  It shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart.  Delivery of
executed counterparts of the Security Agreement by telecopy shall be effective
as an original and shall constitute a representation that an original shall be
delivered upon the request of the Administrative Agent.

 

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

 

18.                               Governing Law; Submission to Jurisdiction;
Waiver of Jury Trial; Venue. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK) WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.  The terms of Sections 9.14 and
9.17 of the Credit Agreement are incorporated herein by reference, mutatis
mutandis, and the parties hereto agree to such terms.

 

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

 

20.                               Entirety.  This Security Agreement, the other
Credit Documents, the Secured Hedging Agreements and the Secured Cash Management
Agreements represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to this Security
Agreement, the other Credit Documents, the Secured Hedging Agreements, the
Secured Cash Management Agreement or the transactions contemplated herein and
therein.

 

21.                               Survival.  All representations and warranties
of the Obligors hereunder shall survive the execution and delivery of this
Security Agreement, the other Credit Documents, the Secured Hedging Agreements
and the Secured Cash Management Agreements, the delivery of the Notes and the
making of the Loans and the issuance of the Letters of Credit under the Credit
Agreement.

 

22.                               Joint and Several Obligations of Obligors.

 

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

 

(b)                                 Each of the Obligors jointly and severally
hereby irrevocably and unconditionally accepts, not merely as a surety but also
as a co-debtor, joint and several liability with the other Obligors with respect
to the payment and performance of all of the Secured Obligations arising under
this Security Agreement, the other Credit Documents, the Secured Hedging
Agreements and the Secured Cash Management Agreement, it being

 

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the intention of the parties hereto that all the Secured Obligations shall be
the joint and several obligations of each of the Obligors without preferences or
distinction among them.

 

(c)                                  Notwithstanding any provision to the
contrary contained herein or in any other of the Credit Documents, to the extent
the obligations of an Obligor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or transfers)
then the obligations of such Obligor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and
including, without limitation, the Bankruptcy Code).

 

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EXECUTION VERSION

 

Each of the parties hereto has caused a counterpart of this Security Agreement
to be duly executed and delivered as of the date first above written.

 

 

OBLIGORS:

RED ROBIN INTERNATIONAL, INC.,

 

a Nevada corporation

 

 

 

 

 

 

 

By:

/s/ Stuart B. Brown

 

Name:

Stuart B. Brown

 

Title:

Treasurer and Assistant Secretary

 

 

 

 

 

 

 

RED ROBIN GOURMET BURGERS, INC.,

 

a Delaware corporation

 

 

 

 

 

 

 

By:

/s/ Stuart B. Brown

 

Name:

Stuart B. Brown

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

 

 

 

 

RED ROBIN WEST, INC.,

 

a Nevada corporation

 

WESTERN FRANCHISE DEVELOPMENT, INC.,

 

a California corporation

 

 

 

 

 

 

 

By:

/s/ Stuart B. Brown

 

Name:

Stuart B. Brown

 

Title:

Treasurer and Assistant Secretary

 

 

 

 

 

 

 

RED ROBIN DISTRIBUTING COMPANY LLC,

 

a Colorado limited liability company

 

 

 

 

 

 

 

By:

/s/ Stuart B. Brown

 

Name:

Stuart B. Brown

 

Title:

Manager

 

 

 

 

 

 

 

NORTHWEST ROBINS, L.L.C.,

 

a Washington limited liability company

 

 

 

 

 

 

 

By:

RED ROBIN INTERNATIONAL, INC.

 

 

Sole Member and Manager of Northwest Robins, L.L.C.

 

 

 

 

 

 

 

By:

/s/ Stuart B. Brown

 

Name:

Stuart B. Brown

 

Title:

Treasurer and Assistant Secretary

 

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OBLIGORS (CONT.):

RED ROBIN EXPRESS, LLC,

 

a Colorado limited liability company

 

 

 

 

 

 

 

By:

/s/ Douglas L. Christman

 

Name:

Douglas L. Christman

 

Title:

Manager

 

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ADMINISTRATIVE AGENT:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent

 

 

 

 

 

By:

/s/ Stephen A. Leon

 

Name:

Stephen A. Leon

 

Title:

Managing Director

 

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