Exhibit 10.4

 

Execution Version

 

 

 

SECOND LIEN SECURITY AGREEMENT

 

dated as of November 7, 2017

 

among

 

99 CENTS ONLY STORES LLC,
as the Borrower,

 

NUMBER HOLDINGS, INC.
as Holdings,

 

THE SUBSIDIARY GUARANTORS PARTY HERETO FROM TIME TO TIME,
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Collateral Agent

 

 

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

Article I

Definitions

 

1

 

 

 

 

Section 1.01

Credit Agreement

 

1

Section 1.02

Other Defined Terms

 

1

 

 

 

 

Article II

Pledge of Securities

 

6

 

 

 

 

Section 2.01

Pledge

 

6

Section 2.02

Delivery of the Pledged Collateral

 

8

Section 2.03

Representations, Warranties and Covenants

 

9

Section 2.04

Certification of Limited Liability Company and Limited Partnership Interests

 

11

Section 2.05

Registration in Nominee Name; Denominations

 

11

Section 2.06

Voting Rights; Dividends and Interest

 

12

Section 2.07

Collateral Agent Not a Partner or Limited Liability Company Member

 

14

 

 

 

 

Article III

Security Interests in Personal Property

 

14

 

 

 

 

Section 3.01

Security Interest

 

14

Section 3.02

Representations and Warranties

 

17

Section 3.03

Covenants

 

22

Section 3.04

Other Actions

 

24

 

 

 

 

Article IV

Special Provisions Concerning IP Collateral

 

25

 

 

 

 

Section 4.01

Grant of License to Use Intellectual Property

 

25

Section 4.02

Protection of Collateral Agent’s Security

 

26

 

 

 

 

Article V

[Reserved]

 

28

 

 

 

 

Article VI

Remedies

 

28

 

 

 

 

Section 6.01

Remedies Upon Default

 

28

Section 6.02

Application of Proceeds

 

31

 

 

 

 

Article VII

Indemnity, Subrogation and Subordination

 

31

 

 

 

 

Article VIII

Miscellaneous

 

32

 

 

 

 

Section 8.01

Notices

 

32

Section 8.02

Waivers; Amendment

 

32

Section 8.03

Collateral Agent’s Fees and Expenses; Indemnification

 

33

Section 8.04

Successors and Assigns

 

35

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

Section 8.05

Survival of Agreement

 

35

Section 8.06

Counterparts; Effectiveness; Several Agreement

 

35

Section 8.07

Severability

 

36

Section 8.08

GOVERNING LAW, ETC

 

36

Section 8.09

WAIVER OF RIGHT TO TRIAL BY JURY

 

37

Section 8.10

Headings

 

37

Section 8.11

Security Interest Absolute

 

37

Section 8.12

Termination or Release

 

37

Section 8.13

Additional Restricted Subsidiaries

 

38

Section 8.14

Collateral Agent Appointed Attorney-in-Fact

 

38

Section 8.15

General Authority of the Collateral Agent

 

39

Section 8.16

Collateral Agent’s Duties

 

39

Section 8.17

Recourse; Limited Obligations

 

40

Section 8.18

Mortgages

 

40

Section 8.19

Intercreditor Agreement

 

40

Section 8.20

Right of Setoff

 

42

 

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SCHEDULES

 

Schedule I

—

Subsidiary Guarantors

Schedule II

—

Pledged Equity; Pledged Debt

Schedule III

—

Commercial Tort Claims

Schedule IV

—

UCC Filing Offices

 

EXHIBITS

 

Exhibit I

—

Form of Security Agreement Supplement

Exhibit II

—

Form of Perfection Certificate

Exhibit III

—

Form of Trademark Security Agreement

Exhibit IV

—

Form of Patent Security Agreement

Exhibit V

—

Form of Copyright Security Agreement

 

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This SECOND LIEN SECURITY AGREEMENT, dated as of November 7, 2017 (this
“Agreement”), among 99 CENTS ONLY STORES LLC, a California limited liability
company (the “Borrower”), NUMBER HOLDINGS, INC., a Delaware corporation
(“Holdings”), the Subsidiary Guarantors set forth on Schedule I hereto and
Wilmington Trust, National Association, as Collateral Agent for the Secured
Parties.

 

Reference is made to the Second Lien Credit Agreement, dated as of November 7,
2017 (as amended, restated, amended and restated, supplemented and/or otherwise
modified from time to time, the “Credit Agreement”), among the Borrower,
Holdings, the Lenders party thereto from time to time, and Wilmington Trust,
National Association, as Administrative Agent for the Lenders and Collateral
Agent for the Secured Parties.

 

The Lenders have agreed to extend credit to the Borrower on the terms and
conditions set forth in the Credit Agreement.  The obligations of the Lenders to
extend such agreements relating to credit are conditioned upon, among other
things, the execution and delivery of this Agreement by each Grantor (as defined
below).  The Grantors are affiliates of one another, will derive substantial
direct and indirect benefits from the extensions of credit to the Borrower
pursuant to the Credit Agreement and are willing to execute and deliver this
Agreement in order to induce the Lenders to extend such credit.  The
Intercreditor Agreement governs the relative rights and priorities of the Term
Secured Parties and the ABL Secured Parties (as defined below) in respect of the
Term Priority Collateral (as defined below) and the ABL Priority Collateral (as
defined below) (and with respect to certain other matters as described therein),
and the First Lien/Second Lien Intercreditor Agreement governs the relative
rights and priorities of the Secured Parties and the First Lien Secured Parties
(as defined below) (and with respect to certain other matters as described
therein).  Accordingly, the parties hereto agree as follows:

 

ARTICLE I

 

Definitions

 

Section 1.01                             Credit Agreement.

 

(a)                                 Capitalized terms used in this Agreement,
including the preamble and introductory paragraphs hereto, and not otherwise
defined herein have the meanings specified in the Credit Agreement.

 

(b)                                 Unless otherwise defined in this Agreement
or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as
defined below) are used in this Agreement as such terms are defined in such
Article 8 or 9.

 

(c)                                  The rules of construction specified in
Article I of the Credit Agreement also apply to this Agreement.

 

Section 1.02                             Other Defined Terms.  As used in this
Agreement, the following terms have the meanings specified below:

 

“ABL Agent” has the meaning assigned that term in the Intercreditor Agreement.

 

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“ABL Priority Collateral” has the meaning assigned to such term in the
Intercreditor Agreement.

 

“ABL Secured Parties” has the meaning assigned that term in the Intercreditor
Agreement.

 

“Accommodation Payment” has the meaning assigned to such term in Article VII.

 

“Account Debtor” means any Person who is or who may become obligated to any
Grantor under, with respect to or on account of an Account.

 

“After-Acquired Intellectual Property” has the meaning assigned to such term in
Section 4.02(f).

 

“Agreement” has the meaning assigned to such term in the introductory paragraph
hereto.

 

“Allocable Amount” has the meaning assigned to such term in Article VII.

 

“Article 9 Collateral” has the meaning assigned to such term in Section 3.01(a).

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States
Code, as amended, modified, succeeded or replaced from time to time.

 

“Bankruptcy Event of Default” means any Event of Default under
Section 10.1(f) of the Credit Agreement.

 

“Blue Sky Laws” has the meaning assigned to such term in Section 6.01.

 

“Borrower” has the meaning assigned to such term in the introductory paragraph
to this Agreement.

 

“Collateral” means the Article 9 Collateral and the Pledged Collateral.

 

“Company” has the meaning assigned to such term in the preliminary statement
hereto.

 

“Copyright License” means any written agreement, now or hereafter in effect,
naming any Grantor as licensor and granting any right to any third party under
any Copyright now or hereafter owned by such Grantor or that such Grantor
otherwise has the right to license, or naming any Grantor as licensee and
granting any right to such Grantor under any Copyright now or hereafter owned by
any third party, and all rights of such Grantor under any such agreement.

 

“Copyrights” means all of the following now owned or hereafter acquired by or
assigned to any Grantor:  (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, whether registered or unregistered and
whether published or unpublished, (b) all registrations and applications for
registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office, including
those listed on Schedule 7(c) to the

 

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Perfection Certificate and all:  (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of such copyrights,
(ii) reissues, renewals, and extensions thereof and amendments thereto,
(iii) income, fees, royalties, damages, claims and payments now or hereafter due
and/or payable with respect thereto, including damages and payments for past,
present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present or future
infringements thereof.

 

“Credit Agreement” has the meaning assigned to such term in the preliminary
statement of this Agreement.

 

“Discharge of ABL Obligations” has the meaning assigned that term in the
Intercreditor Agreement.

 

“Discharge of First Lien Obligations” has the meaning assigned to the term
“Discharge of Senior Obligations” as defined in the First Lien/Second Lien
Intercreditor Agreement.

 

“Discharge of Secured Obligations” means the time at which all the Secured
Obligations (other than contingent indemnification and reimbursement obligations
as to which no claim has been asserted by the Person entitled thereto) have been
paid in full in cash and all Commitments have been terminated.

 

“Domain Names” means all Internet domain names and associated URL addresses in
or to which any Grantor now or hereafter has any right, title or interest.

 

“Effective Date Grantor” has the meaning assigned to such term in Section 2.02
of this Agreement.

 

“Equipment” shall mean (x) any “equipment” as such term is defined in Article 9
of the UCC and in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, appliances, furniture, fixtures, tools, and
vehicles now or hereafter owned by any Grantor in each case, regardless of
whether characterized as equipment under the UCC and (y) and any and all
additions, substitutions and replacements of any of the foregoing and all
accessions thereto, wherever located, whether or not at any time of
determination incorporated or installed therein or attached thereto, and all
replacements therefore, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.

 

“Excluded Equity Interests” has the meaning assigned to such term in
Section 2.01 of this Agreement.

 

“Excluded Property” has the meaning assigned to such term in Section 3.01 of
this Agreement.

 

“Excluded Securities” means (i) Pledged Securities and Pledged Debt, in each
case, that is promptly deposited into an investment or securities account,
(ii) checks received in the ordinary course of business, (iii) Pledged
Securities issued in connection with the extension of trade credit by such
Grantor, and (iv) any uncertificated securities, but only for so long as such
Securities remain uncertificated.

 

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“First Lien Agent” has the meaning assigned to the term “Administrative Agent”
as defined in the First Lien/Second Lien Intercreditor Agreement.

 

“First Lien Documentation” has the meaning assigned to the term “Senior Debt
Documents” as defined in the First Lien/Second Lien Intercreditor Agreement.

 

“First Lien Secured Parties” has the meaning assigned to the term “Credit
Agreement Secured Parties” as defined in the First Lien/Second Lien
Intercreditor Agreement.

 

“General Intangibles” has the meaning provided in Article 9 of the UCC and shall
in any event include all choses in action and causes of action and all other
intangible personal property of every kind and nature (other than Accounts) now
owned or hereafter acquired by any Grantor, as the case may be, including
corporate or other business records, indemnification claims, contract rights
(including rights under leases, whether entered into as lessor or lessee, Swap
Contracts and other agreements), rights to the payment of money, rights to the
payment of insurance claims, rights to the payment of proceeds, goodwill,
registrations, franchises, tax refund claims and any letter of credit,
guarantee, claim, security interest or other security held by or granted to any
Grantor.

 

“Grantor” means the Borrower and each Guarantor.

 

“Holdings” has the meaning assigned to such term in the preliminary statement
hereto.

 

“Intellectual Property” means all intellectual and similar property of every
kind and nature now owned, licensed or hereafter acquired by any Grantor,
including Patents, Copyrights, Licenses, Trademarks, Domain Names and Trade
Secrets.

 

“Intellectual Property Security Agreement” means an agreement providing for a
grant of a Security Interest in certain IP Collateral in the form of
Exhibit III, IV or V attached hereto.

 

“IP Collateral” means the Collateral consisting of Intellectual Property.

 

“License” means any Patent License, Trademark License, Copyright License or
other license or sublicense agreement granting rights under Intellectual
Property to which any Grantor is a party.

 

“Notes Documentation” means any documentation governing the Senior Notes and any
Permitted Refinancing Indebtedness in respect thereof.

 

“Patent License” means any written agreement, now or hereafter in effect, naming
any Grantor as licensor and granting to any third party any right to develop,
commercialize, import, make, have made, offer for sale, use or sell any
invention on which a Patent, now or hereafter owned by such Grantor, or that
such Grantor otherwise has the right to license, is in existence, or naming any
Grantor as licensee and granting to such Grantor any such right with respect to
any invention on which a Patent, now or hereafter owned by any third party, is
in existence, and all rights of such Grantor under any such agreement.

 

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“Patents” means all of the following now owned or hereafter acquired by any
Grantor:  (a) all letters patent of the United States or the equivalent thereof
in any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or the equivalent thereof
in any other country, including registrations, recordings and pending
applications in the United States Patent and Trademark Office or any similar
offices in any other country, including those listed on Schedule 7(a) to the
Perfection Certificate, and (b) all (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of any patents,
(ii) inventions and improvements described and claimed therein, (iii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part thereof
and amendments thereto, (iv) income, fees, royalties, damages, claims and
payments now or hereafter due and/or payable with respect to any of the
foregoing including damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the world and
(vi) rights to sue for past, present or future infringements thereof.

 

“Perfection Certificate” means a certificate substantially in the form of
Exhibit II, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by a Responsible Officer of the
Borrower.

 

“Pledged Collateral” has the meaning assigned to such term in Section 2.01.

 

“Pledged Debt” has the meaning assigned to such term in Section 2.01.

 

“Pledged Equity” has the meaning assigned to such term in Section 2.01.

 

“Pledged Securities” means any promissory notes, stock certificates, unit
certificates, limited or unlimited liability membership certificates or other
Securities or instruments now or hereafter included in the Pledged Collateral,
including all Pledged Equity, Pledged Debt and all other certificates,
instruments or other documents representing or evidencing any Pledged
Collateral.

 

“Securities Act” has the meaning assigned to such term in Section 6.01.

 

“Security” means a “security” as such term is defined in Article 8 of the UCC
and, in any event, shall include any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
“securities” or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.

 

“Security Agreement Supplement” means an instrument substantially in the form of
Exhibit I hereto.

 

“Security Interest” has the meaning assigned to such term in Section 3.01(a).

 

“Term Priority Collateral” has the meaning assigned that term in the
Intercreditor Agreement.

 

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“Term Secured Parties” has the meaning assigned that term in the Intercreditor
Agreement.

 

“Trademark License” means any written agreement, now or hereafter in effect,
granting to any third party any right to use any Trademark now or hereafter
owned by any Grantor or that any Grantor otherwise has the right to license to a
third party, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement (not including vendor or distribution agreements that allow incidental
use of intellectual property rights in connection with the sale or distribution
of such products or services).

 

“Trademarks” means all of the following now owned or hereafter acquired by any
Grantor:  (a) all trademarks, service marks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, trade
dress, logos, other source or business identifiers, designs and general
intangibles of like nature, the goodwill of the business symbolized thereby or
associated therewith, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office or any similar offices in any State of the United States or any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule 7(b) to the Perfection
Certificate, (b) all rights and privileges arising under applicable Law with
respect to such Grantor’s use of any trademarks, (c) all extensions and renewals
thereof and amendments thereto, (d) all income, fees, royalties, damages and
payments now and hereafter due and/or payable with respect to any of the
foregoing, including damages, claims and payments for past, present or future
infringements thereof, (e) all rights corresponding thereto throughout the world
and (f) all rights to sue for past, present and future infringements or
dilutions thereof or other injuries thereto.

 

“Trade Secrets” means all of the following now owned or hereafter acquired by
any Grantor: confidential proprietary technical or business information, know
how, data information, software, databases, and all other proprietary
information and all embodiments thereof and related documentation, and books and
records describing or used in connection with any of the foregoing.

 

“UFCA” has the meaning assigned to such term in Article VII.

 

“UFTA” has the meaning assigned to such term in Article VII.

 

ARTICLE II

 

Pledge of Securities

 

Section 2.01                             Pledge.  As security for the payment or
performance, as the case may be, in full of the Secured Obligations, each
Grantor hereby collaterally assigns and pledges to the Collateral Agent, its
successors and permitted assigns, for the benefit of the Secured Parties, and
hereby grants to the Collateral Agent, its successors and assigns, for the
benefit of the Secured Parties, a security interest in all of such Grantor’s
right, title and interest in, to and under

 

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(a) (i) all Equity Interests held by it on the date hereof (including those
Equity Interests listed on Schedule II) and (ii) any other Equity Interests
obtained in the future by such Grantor and, in each case, the certificates
representing all such Equity Interests (the foregoing clauses (i) and
(ii) collectively, the “Pledged Equity”), in each case including all dividends,
distributions, return of capital, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Equity and all warrants, rights or
options issued thereon or with respect thereto; provided that the Pledged Equity
shall not include (A) more than 65% of the issued and outstanding Equity
Interests of (x) each Foreign Subsidiary that is directly owned by the Borrower
or by any Subsidiary Guarantor and (y) each Domestic Subsidiary that is directly
owned by the Borrower or by any Subsidiary Guarantor and that is a disregarded
entity for United States Federal income tax purposes substantially all of the
assets of which consist of Equity Interests in one or more Foreign Subsidiaries,
(B) any Equity Interest of any Person (other than a Wholly-Owned Subsidiary that
is directly owned by the Borrower or any Subsidiary Guarantor, excluding any
Equity Interests of any Unrestricted Subsidiary), to the extent restricted or
not permitted by the terms of such Person’s organizational documents or other
agreements (other than the Shareholders Agreement) with holders of such Equity
Interests (so long as such prohibition did not arise as part of the acquisition
or formation of such Person and other than to the extent that any such
prohibition would be rendered ineffective pursuant to the UCC or any other
applicable Law); provided that such Equity Interest shall cease to be an
Excluded Equity Interest at such time as such prohibition ceases to be in
effect, (C) any Equity Interest if, to the extent and for so long as the pledge
of such Equity Interest hereunder is prohibited by any applicable Law (other
than to the extent such prohibition would be rendered ineffective under the UCC
or any other applicable Law); provided that such Equity Interest shall cease to
be an Excluded Equity Interest at such time as such prohibition ceases to be in
effect, (D) any Equity Interest if, to the extent and for so long as the pledge
of such Equity Interest hereunder would result in (1) material adverse tax
consequences (including, without limitation, as a result of the operation of
Section 956 of the Code or any similar Law or regulation in any applicable
jurisdiction) or (2) material adverse regulatory consequences, in each case as
reasonably determined by the Borrower and with the consent of the Administrative
Agent (acting at the direction, or with the consent, of the Requisite Lenders),
(E) any Equity Interest that the Borrower and the Administrative Agent shall
have agreed in writing to treat as an Excluded Equity Interest for purposes
hereof on account of the cost, difficulty, burden or consequences of pledging
such Equity Interest hereunder being excessive in relation to the benefit to the
Secured Parties of the security to be afforded thereby and (F) any Equity
Interest in an Excluded Subsidiary (any Equity Interests excluded pursuant to
clauses (A) through (F) above, the “Excluded Equity Interests”); (b)(i) the
promissory notes and any instruments evidencing indebtedness owned by it
(including those listed opposite the name of such Grantor on Schedule II) and
(ii) any promissory notes and instruments evidencing indebtedness obtained in
the future by such Grantor (the foregoing clauses (i) and (ii) collectively, the
“Pledged Debt”), in each case including all interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all Pledged Debt (except to the extent
otherwise excluded from the Collateral pursuant to this Agreement); (c) all
other property that may be delivered to and held by the Collateral Agent (or the
First Lien Agent as the Collateral Agent’s bailee for perfection) pursuant to
the terms of this Section 2.01 (except to the extent otherwise excluded from the
Collateral pursuant to this Agreement); (d) subject to Section 2.06, all
payments of principal or

 

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interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of, and all Proceeds
and securities entitlements received in respect of, the securities or other
property referred to in clauses (a), (b), and (c) above; and (e) subject to
Section 2.06, all rights and privileges of such Grantor with respect to the
securities and other property referred to in clauses (a) and (b) above (the
items referred to in clauses (a) through (e) above being collectively referred
to as the “Pledged Collateral”).

 

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and assigns, for the benefit of the
Secured Parties, forever; subject, however, to the terms, covenants and
conditions hereinafter set forth.

 

Section 2.02                             Delivery of the Pledged Collateral.

 

(a)                                 Subject to Section 2.02(d), on the Effective
Date (in the case of any Grantor that grants a Lien on any of its assets
hereunder on the Effective Date (each an “Effective Date Grantor”)) or on the
date on which it signs and delivers its first Security Agreement Supplement (in
the case of any other Grantor), each Grantor shall deliver or cause to be
delivered to the Collateral Agent (or the First Lien Agent as the Collateral
Agent’s bailee for perfection), for the benefit of the applicable Secured
Parties, any and all Pledged Securities; provided that promissory notes and
instruments evidencing Indebtedness shall only be so required to be delivered to
the extent required pursuant to paragraph (b) of this Section 2.02.  Thereafter,
whenever such Grantor acquires any other Pledged Security, such Grantor shall
promptly deliver or cause to be delivered to the Collateral Agent (or the First
Lien Agent as the Collateral Agent’s bailee for perfection) such Pledged
Security as Collateral; provided that, if Section 8.11(a) of the Credit
Agreement is applicable to such Grantor, such Grantor shall deliver or cause to
be delivered to the Collateral Agent (or the First Lien Agent as the Collateral
Agent’s bailee for perfection) such Pledged Security as Collateral to the extent
and within the time frames required under Section 8.11 of the Credit Agreement;
provided further that, notwithstanding the foregoing, promissory notes and
instruments evidencing Indebtedness shall only be so required to be delivered to
the extent required pursuant to paragraph (b) of this Section 2.02.

 

(b)                                 As promptly as practicable (and in any event
within thirty (30) days after receipt by Grantor (or such longer period as the
Administrative Agent may agree (acting at the direction, or with the consent, of
the Requisite Lenders, provided in their reasonable discretion)), each Grantor
will cause any Indebtedness for borrowed money having an aggregate principal
amount equal to or in excess of $3,000,000 owed to such Grantor by any Person
(other than a Loan Party) to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent (or the First Lien Agent
as the Collateral Agent’s bailee for perfection), for the benefit of the Secured
Parties, pursuant to the terms hereof; provided that such delivery shall not be
required with respect to Excluded Securities.

 

(c)                                  Upon delivery to the Collateral Agent (or
the First Lien Agent as the Collateral Agent’s bailee for perfection), (i) any
certificate or promissory note representing Pledged Collateral shall be
accompanied by undated stock or note powers, as applicable, duly executed in
blank or other undated instruments of transfer duly-executed in blank reasonably

 

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satisfactory to the Collateral Agent and by such other instruments and documents
as the Collateral Agent may reasonably request in connection with the
preservation of its security interest therein and (ii) all other property
comprising part of the Pledged Collateral shall be accompanied by such
instruments and documents as the Collateral Agent may reasonably request.  At
the time of delivery of financial statements as required by Section 7.1(a) or
7.1(b) of the Credit Agreement, the Grantors  shall deliver a schedule
describing the additional Pledged Securities pledged hereunder since the date of
the last schedule delivered in accordance herewith, which schedule shall be
deemed to supplement Schedule II and be made a part hereof; provided that
failure to provide any such schedule hereto shall not affect the validity of
such pledge of such Pledged Securities.  Each schedule so delivered shall
supplement any prior schedules so delivered.

 

(d)                                 Notwithstanding the foregoing, to the extent
that any Effective Date Grantor does not or cannot deliver any Pledged
Collateral (other than Pledged Collateral consisting of the Equity Interests of
the Borrower or any wholly-owned Domestic Subsidiary of the Borrower) on the
Effective Date, after the use of commercially reasonable efforts to do so or
without undue cost, difficulty, burden or consequence, such Effective Date
Grantor shall not be required to deliver such Pledged Collateral until the date
that is ninety (90) days after the Effective Date (or such longer period as
(i) the Borrower, (ii) the ABL Agent, (iii) the First Lien Agent and (iv) the
Administrative Agent (acting at the direction, or with the consent, of the
Requisite Lenders) mutually agree in good faith).

 

(e)                                  The collateral assignment, pledge and
security interest granted in Section 2.01  are granted as security only and
shall not subject the Collateral Agent or any other Secured Party to, or in any
way alter or modify, any obligation or liability of any Grantor with respect to
or arising out of the Pledged Collateral.

 

Section 2.03                             Representations, Warranties and
Covenants.  Each Grantor, jointly and severally, represents, warrants and
covenants, as to itself and the other Grantors, to the Collateral Agent, for the
benefit of the Secured Parties, that:

 

(a)                                 Schedule II sets forth, as of the Effective
Date and as of each date on which a supplement to Schedule II is delivered
pursuant to Section 2.02(c), a true and correct list of (i) all the issued and
outstanding units of each class of the Equity Interests that constitutes Pledged
Equity directly owned beneficially, or of record, by such Grantor specifying the
issuer and certificate number (if any) of, and the number and percentage of
ownership represented by, such Pledged Equity and (ii) all the Pledged Debt
owned by such Grantor (other than checks to be deposited in the ordinary course
of business), including all promissory notes and instruments required to be
pledged hereunder, in each case, other than Excluded Securities (without giving
effect to clause (iv) thereof);

 

(b)                                 the Pledged Equity issued by such Grantor or
any of its respective Subsidiaries and the Pledged Debt issued by such Grantor
or any of its respective Subsidiaries have been duly and validly authorized and
issued by such Grantor or such Subsidiary, as the case may be, and (i) in the
case of Pledged Equity (other than Pledged Equity consisting of limited
liability company interests or partnership interests or other Equity Interests
of entities other than corporations which, pursuant to the relevant
organizational or formation documents, cannot be

 

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fully paid and non-assessable), are fully paid and nonassessable and (ii) in the
case of such Pledged Debt issued by such Grantor or any of its respective
Subsidiaries, are legal, valid and binding obligations of such Grantor or such
Subsidiary, as the case may be, subject to applicable Debtor Relief Laws and
general principles of equity;

 

(c)                                  Such Grantor (i) holds the Pledged
Securities indicated on Schedule II (as supplemented from time to time as and to
the extent required pursuant to Section 2.02(c) hereof) as owned by such Grantor
free and clear of all Liens, other than (A) Liens created by the Collateral
Documents, subject to the Intercreditor Agreement, the ABL Facility
Documentation,, subject to the First Lien/Second Lien Intercreditor Agreement,
the First Lien Documentation, and, subject to the Notes Intercreditor Agreement,
the Notes Documentation and (B) other Liens permitted pursuant to Section 9.1 of
the Credit Agreement, (ii) except as permitted under the Credit Agreement, will
make no assignment, pledge, hypothecation or transfer of, or create or permit to
exist any security interest in or other Lien on, the Pledged Collateral, other
than (A) Liens created by the Collateral Documents, subject to the Intercreditor
Agreement, the ABL Facility Documentation, subject to the First Lien/Second Lien
Intercreditor Agreement, the First Lien Documentation and, subject to the Notes
Intercreditor Agreement, the Notes Documentation and (B) other Liens permitted
pursuant to Section 9.1 of the Credit Agreement, and (iii) will defend its title
or interest thereto or therein against any and all Liens (other than the Liens
permitted pursuant to this Section 2.03(c)), however arising, of all Persons
whomsoever (other than the holder of a Lien permitted pursuant to Section 9.1 of
the Credit Agreement, any Secured Party, any “Secured Party” (as defined in the
ABL Credit Agreement) or any “Secured Party” (as defined in the First Lien
Credit Agreement));

 

(d)                                 except for (i) restrictions and limitations
imposed by the Loan Documents, the ABL Facility Documentation, the First Lien
Documentation, the Notes Documentation or securities laws generally or by Liens
permitted pursuant to Section 9.1 of the Credit Agreement, (ii) restrictions and
limitations permitted under Section 9.9 of the Credit Agreement and (iii) in the
case of Pledged Equity of Persons that are not Subsidiaries (other than Excluded
Subsidiaries), transfer restrictions that exist at the time of acquisition of
Equity Interests in such Persons, the Pledged Equity is and will continue to be
freely transferable and assignable, and none of the Pledged Equity is or will be
subject to any option, right of first refusal, shareholders agreement, charter
or by-law or other organizational document provisions or contractual restriction
of any nature (other than Liens permitted under Section 9.1 of the Credit
Agreement) that would prohibit, impair, delay or otherwise affect, in each case,
in any manner material and adverse to the Secured Parties the pledge of such
Pledged Equity hereunder, the sale or disposition thereof pursuant hereto or the
exercise by the Collateral Agent of rights and remedies hereunder;

 

(e)                                  such Grantor has the power and authority to
pledge the Pledged Collateral pledged by it hereunder in the manner done
pursuant to Section 2.01 or required hereby;

 

(f)                                   no consent or approval of any Governmental
Authority, any securities exchange or any other Person is necessary to the
validity and perfection of the pledge of such Grantor in the Pledged Collateral
effected pursuant to Section 2.01 (other than such as have been obtained and are
in full force and effect);

 

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(g)                                  by virtue of the execution and delivery by
such Grantor of this Agreement, when any Pledged Securities of such Grantor
constituting “certificated securities” (within the meaning of
Section 8-102(a)(4) of the New York UCC) are delivered to the Collateral Agent
(or the First Lien Agent as the Collateral Agent’s bailee for perfection) in
accordance with this Agreement together with undated powers or instruments of
transfer duly endorsed in blank by an effective endorsement, in each case in the
State of New York, the Collateral Agent will (i) for so long as such Pledged
Securities and undated power or instruments of transfer are held by the
Collateral Agent (or the First Lien Agent as the Collateral Agent’s bailee for
perfection) in the State of New York, obtain a legal, valid and perfected lien
upon and security interest (subject, as to priority, only to any nonconsensual
Liens permitted pursuant to Section 9.1 of the Credit Agreement and to lien
subordination as set forth in the Intercreditor Agreement and the First
Lien/Second Lien Intercreditor Agreement) in such Pledged Securities as security
for the payment and performance of the Secured Obligations, (ii) have Control
pursuant to Section 8-106(a) or (b), as applicable, under the New York UCC of
such Pledged Securities to the extent constituting certificated securities in
registered or bearer form, and (iii) assuming that neither the Collateral Agent
nor any of the Secured Parties have “notice of an adverse claim” (as defined in
Section 8-105 of the UCC) with respect to such Pledged Securities at the time
such Pledged Securities are delivered to the Collateral Agent, be a protected
purchaser (within the meaning of Section 8-303 of the UCC) thereof; and

 

(h)                                 subject to the terms of this Agreement and
to the extent permitted by applicable Law, such Grantor hereby agrees that upon
the occurrence and during the continuation of an Event of Default, it will
comply with instructions of the Collateral Agent with respect to the Equity
Interests in such Grantor that constitute Pledged Equity hereunder that are not
certificated without further consent by the applicable owner or holder of such
Pledged Equity.

 

Section 2.04                             Certification of Limited Liability
Company and Limited Partnership Interests.  Each Grantor acknowledges and agrees
that, to the extent any interest in any corporation, limited liability company
or limited partnership controlled by any Grantor and pledged under Section 2.01
is a “security” within the meaning of Article 8 of the UCC and is governed by
Article 8 of the UCC, such interest shall be represented by a certificate.  Each
Grantor further acknowledges and agrees that with respect to any interest in any
limited liability company or limited partnership controlled on or after the date
hereof by such Grantor and pledged hereunder that is not a “security” within the
meaning of Article 8 of the UCC, such Grantor shall at no time elect to treat
any such interest as a “security” within the meaning of Article 8 of the UCC,
nor shall such interest be represented by a certificate, unless such election
and such interest is thereafter represented by a certificate that is promptly
delivered to the Collateral Agent (or the First Lien Agent as the Collateral
Agent’s bailee for perfection), subject to the Intercreditor Agreement and the
First Lien/Second Lien Intercreditor Agreement, pursuant to the terms hereof.

 

Section 2.05                             Registration in Nominee Name;
Denominations.  If an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the Borrower written notice of its intent
to exercise such rights, (a) the Collateral Agent, on behalf of the Secured
Parties, shall have the right (acting at the direction, or with the consent, of
the Requisite Lenders, in their sole and absolute discretion) to cause each of
the Pledged Securities to be transferred of record into the name of the
Collateral Agent and (b) the Collateral Agent shall

 

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have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement; provided that, notwithstanding the foregoing, if a Bankruptcy
Event of Default shall have occurred and be continuing, the Collateral Agent
shall not be required to give the notice referred to above in order to exercise
the rights described above.  Each Grantor will promptly give to the Collateral
Agent copies of any notices material to the interests of the Lenders received by
it with respect to Pledged Securities registered in the name of such Grantor. 
Each Grantor will take any and all actions reasonably requested by the
Collateral Agent to facilitate compliance with this Section 2.05.

 

Section 2.06                             Voting Rights; Dividends and Interest. 
(a)              Unless and until an Event of Default shall have occurred and be
continuing and the Collateral Agent shall have notified the Borrower that the
rights of such Grantor under this Section 2.06 are being suspended:

 

(i)                           Each Grantor shall be entitled to exercise any and
all voting and/or other consensual rights and powers inuring to an owner of
Pledged Securities or any part thereof for any purpose consistent with or not
expressly prohibited by the terms of this Agreement, the Credit Agreement and
the other Loan Documents; provided that such rights and powers shall not be
exercised in any manner that could reasonably be expected to materially and
adversely affect the rights and remedies of any of the Collateral Agent or the
other Secured Parties under this Agreement, the Credit Agreement or any other
Loan Document to which any Grantor is a party or the ability of the Secured
Parties to exercise the same.

 

(ii)                        The Collateral Agent shall promptly execute and
deliver to each Grantor, or cause to be executed and delivered to each Grantor,
all such proxies, powers of attorney and other instruments as any Grantor may
reasonably request in writing for the purpose of enabling such Grantor to
exercise the voting and/or consensual rights and powers it is entitled to
exercise pursuant to subparagraph (i) above, in each case as shall be specified
in such request and be in form and substance reasonably satisfactory to the
Collateral Agent (acting at the direction, or with the consent, of the Requisite
Lenders).

 

(iii)                     Each Grantor shall be entitled to receive and retain
any and all dividends, interest, principal and other distributions paid on or
distributed in respect of the Pledged Securities, to the extent (and only to the
extent) that such dividends, interest, principal and other distributions are not
expressly prohibited by, the terms and conditions of the Credit Agreement, the
other Loan Documents and applicable Laws; provided that any noncash dividends,
interest, principal or other distributions that would constitute Pledged Equity
or Pledged Debt, whether resulting from a subdivision, combination or
reclassification of the outstanding Equity Interests of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Pledged Collateral, and, if received
by any Grantor, shall not be commingled by such Grantor with any of its other
funds or property but shall be held separate and apart therefrom, shall be held
in trust for the benefit of the Collateral Agent and the other Secured Parties
and shall be forthwith delivered to the Collateral Agent (or the First Lien
Agent as the Collateral Agent’s bailee for perfection) in the same form as so
received (with any necessary endorsement reasonably requested by the Collateral
Agent).  So long as no Event of

 

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Default has occurred and is continuing, the Collateral Agent shall promptly
deliver to each Grantor (at the expense of such Grantor) any Pledged Securities
in its possession if requested to be delivered to the issuer thereof in
connection with any exchange or redemption of such Pledged Securities.

 

(b)                                 Upon the occurrence and during the
continuance of any Event of Default, after the Collateral Agent shall have
notified the Borrower of the suspension of the rights of such Grantor under
Section 2.06(a), then all rights of such Grantor to dividends, interest,
principal or other distributions that such Grantor is authorized to receive
pursuant to Section 2.06(a)(iii) shall cease, and all such rights shall
thereupon become vested in the Collateral Agent (or the First Lien Agent as the
Collateral Agent’s bailee for perfection), which shall have the sole and
exclusive right and authority to receive and retain such dividends, interest,
principal or other distributions.  All dividends, interest, principal or other
distributions received by any Grantor contrary to the provisions of this
Section 2.06 shall be held in trust for the benefit of the Collateral Agent and
the other Secured Parties, shall be segregated from other property or funds of
such Grantor and shall be forthwith delivered to the Collateral Agent (or the
First Lien Agent as the Collateral Agent’s bailee for perfection) upon demand in
the same form as so received (with any necessary stock or note powers or other
instruments of transfer reasonably requested by the Collateral Agent).  Any and
all money and other property paid over to or received by the Collateral Agent
pursuant to the provisions of this paragraph (b) shall be retained by the
Collateral Agent in an account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 6.02.  After all Events of Default have been cured or
waived in accordance with the Credit Agreement and the Borrower shall have
delivered to the Collateral Agent a certificate to such effect (solely with
respect to any Events of Default that have been cured and then only to the
extent that the cure of any such Event of Default is not conditioned on the
approval or satisfaction of the Collateral Agent or any other Person, as to
which the parties acknowledge the Borrower is not in a position to make such
certification) the Collateral Agent shall promptly repay to each Grantor
(without interest) all dividends, interest, principal or other distributions
that such Grantor would otherwise be permitted to retain pursuant to the terms
of Section 2.06(a)(iii) in the absence of any such Event of Default and that
remain in such account, and such Grantor’s right to receive and retain any and
all dividends, interest, principal and other distributions paid on or
distributed in respect of the Pledged Securities shall be automatically
reinstated.

 

(c)                                  Upon the occurrence and during the
continuance of an Event of Default, after the Collateral Agent shall have
notified the Borrower of the suspension of the rights of such Grantor under
Section 2.06(a), then all rights of such Grantor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to
Section 2.06(a)(i), and the obligations of the Collateral Agent under
Section 2.06(a)(ii), shall cease, and all such rights shall thereupon become,
subject to the rights of the ABL Agent under the Intercreditor Agreement and the
First Lien Agent under the First Lien/Second Lien Intercreditor Agreement,
vested in the Collateral Agent, which shall have the sole and exclusive right
and authority to exercise such voting and consensual rights and powers; provided
that, unless otherwise directed by the Requisite Lenders, the Collateral Agent
shall have the right from time to time following the occurrence and during the
continuance of an Event of Default to permit the Grantors to exercise such
rights.  After all Events of Default have been cured or waived in accordance
with the Credit Agreement and the Borrower shall have delivered to the
Collateral Agent a certificate to such

 

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effect (solely with respect to any Events of Default that have been cured and
then only to the extent that the cure of any such Event of Default is not
conditioned on the approval or satisfaction of the Collateral Agent or any other
Person, as to which the parties acknowledge the Borrower is not in a position to
make such certification), each Grantor shall have the exclusive right to
exercise the voting and/or consensual rights and powers that such Grantor would
otherwise be entitled to exercise pursuant to the terms of Section 2.06(a)(i),
and the obligations of the Collateral Agent under Section 2.06(a)(ii) shall
automatically be reinstated.

 

(d)                                 Any notice given by the Collateral Agent to
the Borrower suspending the rights of such Grantor under this Section 2.06,
(i) shall be given in writing, (ii) may be given with respect to one or more of
the Grantors at the same or different times and (iii) may suspend the rights of
the Grantors under Sections 2.06(a)(i) or (iii) in part without suspending all
such rights (as specified by the Collateral Agent in writing) and without
waiving or otherwise affecting the Collateral Agent’s rights to give additional
notices from time to time suspending other rights so long as an Event of Default
has occurred and is continuing.  Notwithstanding anything to the contrary
contained in Section 2.06(a), (b) or (c), if a Bankruptcy Event of Default shall
have occurred and be continuing, the Collateral Agent shall not be required to
give any notice referred to in said Sections in order to exercise any of its
rights described in such Sections, and the suspension of the rights of each of
the Grantors under each such Section shall be automatic upon the occurrence and
during the continuance of such Bankruptcy Event of Default.

 

Section 2.07                             Collateral Agent Not a Partner or
Limited Liability Company Member.  Nothing contained in this Agreement shall be
construed to make the Collateral Agent or any other Secured Party liable as a
member of any limited liability company or as a partner of any partnership and
neither the Collateral Agent nor any other Secured Party by virtue of this
Agreement or otherwise (except as referred to in the following sentence) shall
have any of the duties, obligations or liabilities of a member of any limited
liability company or as a partner in any partnership.  The parties hereto
expressly agree that, unless the Collateral Agent shall become the absolute
owner of Pledged Equity consisting of a limited liability company interest or a
partnership interest pursuant hereto, this Agreement shall not be construed as
creating a partnership or joint venture among the Collateral Agent, any other
Secured Party, any Grantor and/or any other Person.

 

ARTICLE III

 

Security Interests in Personal Property

 

Section 3.01                             Security Interest.

 

(a)                                 As security for the payment or performance,
as the case may be, in full of the Secured Obligations, each Grantor hereby
grants to the Collateral Agent, its successors and permitted assigns, for the
benefit of the Secured Parties, a security interest (the “Security Interest”)
in, all of such Grantor’s right, title and interest in, to or under any and all
of the following assets and properties, whether now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
“Article 9 Collateral”):

 

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(i)                           all Accounts;

 

(ii)                        all chattel paper;

 

(iii)                     all Documents;

 

(iv)                    all Equipment;

 

(v)                       all General Intangibles;

 

(vi)                    all instruments;

 

(vii)                 all Inventory;

 

(viii)              all investment property:

 

(ix)                    all books and records pertaining to the Article 9
Collateral;

 

(x)                       all goods and fixtures;

 

(xi)                    all money, cash, and Cash Equivalents

 

(xii)                 all letter-of-credit rights;

 

(xiii)              all commercial tort claims described on Schedule III from
time to time;

 

(xiv)             all Deposit Accounts and all cash, money, Securities and other
investments deposited therein;

 

(xv)                all supporting obligations;

 

(xvi)             all security entitlements in any or all of the foregoing;

 

(xvii)          all Intellectual Property and Licenses; and

 

(xviii)       to the extent not otherwise included in clauses (i) through
(xvii) of this Section 3.01(a), 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;

 

provided that “Collateral” shall not include any of the following assets or
property, each being an “Excluded Property”:  (i) any “intent to use” trademark
application or intent-to-use service mark application, solely during the period
in which the grant of a security interest therein would impair the validity or
enforceability of, or render void or voidable or result in the cancellation of
the applicable Grantor’s right, title or interest in, such intent-to-use
trademark application or intent-to-use service mark application or any Trademark
issued as a result of such use trademark application or intent-to-use service
mark application under applicable federal law, after which period such
application shall be automatically subject to the security interest granted
herein and deemed to be included in the Collateral; (ii) the Excluded Equity
Interests; (iii) any asset or

 

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property with respect to which the Administrative Agent and the Borrower
reasonably agree in writing that any of the cost, difficulty, burden or
consequences (including adverse tax consequences) of obtaining a security
interest therein are excessive in relation to the benefit to the Secured Parties
of the security to be afforded thereby; (iv) any asset or property securing a
purchase money obligation or Capitalized Lease Obligation permitted to be
incurred under the Credit Agreement, to the extent that the terms of the
agreements relating to such Lien would violate or invalidate such purchase money
obligation or Capitalized Lease Obligation or create a right of termination in
favor of, or require the consent of, any other party thereto (other than the
Borrower or any Grantor), except to the extent such prohibition or restriction
is deemed ineffective under the UCC or other applicable Law or principle of
equity (except that Proceeds thereof, as and to the extent the assignment of
which is expressly deemed effective under the UCC, notwithstanding such
prohibition shall constitute Collateral); (v) any asset or property, if a
security interest therein is prohibited by applicable Law, rule or regulation
(including any requirement to obtain the consent of any Governmental Authority)
other than to the extent such prohibition is rendered ineffective under the UCC
or other applicable Law notwithstanding such prohibition; (vi) any rights of a
Grantor arising under or evidenced by any contract, lease, instrument, license
or agreement (other than the Shareholders Agreement) to the extent the security
interest therein are prohibited or restricted by, or would violate or invalidate
such contract, lease, instrument, license or other agreement, or create a right
of termination in favor of, or require the consent of, any other party thereto
(other than the Borrower or any Grantor), except to the extent such prohibition
or restriction is deemed ineffective under the UCC or other applicable Law or
principle of equity (except that Proceeds thereof, as and to the extent the
assignment of which is expressly deemed effective under the UCC, notwithstanding
such prohibition shall constitute Collateral); (vii) any governmental license or
state or local franchise, charter or authorization, to the extent a security
interest therein is prohibited or restricted thereby, except to the extent such
prohibition or restriction is deemed ineffective under the UCC or other
applicable Law or principal of equity (except that Proceeds thereof, as and to
the extent the assignment of which is expressly deemed effective under the UCC,
notwithstanding such prohibition shall constitute Collateral); (viii) any asset
or property to the extent a security interest therein would result in
(a) material adverse tax consequences (including, without limitation, as a
result of the operation of Section 956 of the Code or any similar Law or
regulation in any applicable jurisdiction) or (b) material adverse regulatory
consequences, in each case as reasonably determined by the Borrower with the
consent of the Administrative Agent (acting at the direction, or with the
consent, of the Requisite Lenders); (ix)(a) payroll and other employee wage and
benefit accounts, (b) tax accounts, including, without limitation, sales tax
accounts, (c) escrow accounts and (d) fiduciary or trust accounts, and, in the
case of clauses (a) through (d), the funds or other property held in or
maintained in any such account; (x) motor vehicles and other assets subject to
certificates of title; and (xi) any commercial tort claim with a value not in
excess of $3,000,000.  Each Grantor shall, if reasonably requested to do so by
the Collateral Agent, use commercially reasonable efforts to obtain any such
required consent that is reasonably obtainable with respect to Collateral
described in clause (vi) above which the Collateral Agent reasonably determines
(acting at the direction, or with the consent, of the Requisite Lenders) to be
material, with such commercially reasonable efforts to be maintained for a time
period determined by the Collateral Agent (acting at the direction, or with the
consent, of the Requisite Lenders) (it being agreed that commercially reasonable
efforts shall not require the payment of any monetary or other consideration).

 

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(b)                                 Each Grantor hereby irrevocably authorizes
the Collateral Agent for the benefit of the Secured Parties at any time and from
time to time to file in any relevant jurisdiction any financing statements or
continuation statements (including fixture filings) with respect to the
Article 9 Collateral or any part thereof and amendments thereto that
(i) describe the collateral covered thereby in any manner that the
Administrative Agent or the Collateral Agent reasonably determines is necessary
or advisable to ensure the perfection of the security interest in the Article 9
Collateral granted under this Agreement including indicating the Collateral as
all assets or all personal property of such Grantor or words of similar effect
and (ii) contain the information required by Article 9 of the UCC, of each
applicable jurisdiction for the filing of any financing statement or amendment,
including (A) whether such Grantor is an organization, the type of organization
and any organizational identification number issued to such Grantor and (B) in
the case of a financing statement filed as a fixture filing, a sufficient
description of the real property to which such Article 9 Collateral relates. 
Each Grantor agrees to provide such information to the Collateral Agent promptly
upon receipt by such Grantor of written request therefor from the Collateral
Agent.  Notwithstanding the foregoing, with respect to fixtures, the Collateral
Agent shall only file financing statements in the jurisdiction of organization
of a Grantor, except in connection with a Mortgage in which case such fixture
filing shall be filed in the office in which the related Mortgage is recorded.

 

(c)                                  The Security Interest is granted as
security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Article 9 Collateral.

 

(d)                                 On the Effective Date and otherwise in
accordance with Section 4.02(g), each Grantor hereby further authorizes the
Collateral Agent to file an Intellectual Property Security Agreement
substantially in the form of Exhibit III, IV or V, as applicable, covering
relevant IP Collateral consisting of Patents (and Patents for which applications
are pending), registered Trademarks (and Trademarks for which registration
applications are pending) and registered Copyrights (and Copyrights for which
registration applications are pending) with the United States Patent and
Trademark Office or United States Copyright Office (or any successor office), as
applicable, and such other documents as may be necessary or advisable for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest granted by such Grantor hereunder, without the signature of
such Grantor, and naming such Grantor, as debtor, and the Collateral Agent, as
secured party.

 

Section 3.02                             Representations and Warranties.  Each
Grantor represents and warrants, as to itself and the other Grantors, to the
Collateral Agent and the Secured Parties that:

 

(a)                                 Each Grantor has good and valid rights (not
subject to any Liens other than Liens permitted by Section 9.1 of the Credit
Agreement) and/or good or marketable title in the Article 9 Collateral with
respect to which it has purported to grant a Security Interest hereunder (which
rights and/or title, are in any event, sufficient under Section 9-203 of the
UCC), and has all necessary power and authority to grant to the Collateral Agent
the Security Interest in such Article 9 Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
(i) any consent or approval that has been obtained, (ii) perfection actions with
respect to Article 9 Collateral and the Pledged Collateral and (iii) as may be

 

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required under applicable Law in connection with a Disposition of Article 9
Collateral or Pledged Collateral, including Laws affecting the offering and sale
of securities generally.

 

(b)                                 The Perfection Certificate delivered to the
Collateral Agent on or prior to the Effective Date has been duly executed and
delivered to the Collateral Agent and the information set forth therein,
including the exact legal name of each Grantor and its jurisdiction of
organization, taken as a whole, is correct and complete in all material respects
as of the Effective Date.  The UCC financing statements (including fixture
filings) prepared by the Collateral Agent based upon the information provided to
the Collateral Agent in the Perfection Certificate (assuming such financing
statements accurately reflect the information set forth in the Perfection
Certificate as to the applicable Grantor, and such other information as is
required to be contained therein as to the secured party thereunder (and, in the
case of Collateral consisting of commercial tort claims, sufficient information
with respect thereto as is required under the UCC)) for filing in each
governmental, municipal or other office specified in Schedule IV of this
Agreement (or specified by notice from the applicable Grantor to the Collateral
Agent after the Effective Date in the case of filings, recordings or
registrations required by Section 8.11 of the Credit Agreement and the
Collateral and Guarantee Requirement), and the filings required to be made
pursuant to the last sentence of this Section 3.02(b) in the United States
Patent and Trademark Office or the United States Copyright Office in order to
perfect the Security Interest in Article 9 Collateral consisting of United
States Patents and United States registered or pending intellectual property,
are all the filings, recordings and registrations necessary to establish a
legal, valid and perfected security interest in favor of the Collateral Agent
(for the benefit of the Secured Parties, assuming the Secured Parties have
validly appointed the Collateral Agent as their agent for such purpose) in
respect of all Article 9 Collateral in which the Security Interest may be
perfected by such filings, recordings or registrations.  Based on the Law as in
effect on the Effective Date, no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration with respect to Article 9
Collateral of the types described in the preceding sentence is necessary in any
such jurisdiction, except as provided under applicable Law with respect to the
filing of continuation statements or, in the case of commercial tort claims, the
filing of financing statements.  Each Grantor represents and warrants that, as
of the Effective Date, Grants of Security Interest executed by the applicable
Grantor in the form attached as Exhibit III, IV or V, as applicable, containing
a description of all IP Collateral consisting of Patents (and Patents for which
applications are pending), registered Trademarks (and Trademarks for which
registration applications are pending) or registered Copyrights (and Copyrights
for which registration applications are pending), as applicable, have been
delivered to the Collateral Agent for recording by the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, pursuant
to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations
thereunder.

 

(c)                                  The Security Interest constitutes (i) a
legal and valid security interest in all the Article 9 Collateral (other than
commercial tort claims with respect to which a UCC financing statement in
appropriate form for filing and in sufficient detail has not been filed in the
appropriate filing office) securing the payment and performance of the Secured
Obligations (with respect to the Collateral consisting of Equity Interests of
Foreign Subsidiaries, to the extent the enforceability of such Security Interest
is governed by the UCC and does not require the taking of any perfection steps,
including the filing of financing statements (or the equivalent thereof), in any
jurisdiction outside of the United States), subject to the effects of Debtor
Relief Laws and

 

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general equitable principles, (ii) subject to the filings described in
Section 3.02(b), a perfected security interest in all Article 9 Collateral in
which a security interest may be perfected by filing a financing statement in
the United States (or any political subdivision thereof) pursuant to the UCC and
(iii) a security interest that shall be perfected in all Article 9 Collateral
(other than with respect to any Copyright that is not material to the business
of the Grantors, taken as a whole) in which a security interest may be perfected
upon the due recording of the relevant Grants of Security Interest with the
United States Patent and Trademark Office and the United States Copyright
Office, as applicable, within the three (3) month period (commencing as of the
date hereof) pursuant to 35 U.S.C.  § 261 or 15 U.S.C.  § 1060 or the one
(1) month period (commencing as of the date hereof) pursuant to 17 U.S.C.  §
205.  The Security Interest is and shall be prior to any other Lien on any of
the Article 9 Collateral, other than (i) any nonconsensual Lien that is
permitted pursuant to Section 9.1 of the Credit Agreement and has priority as a
matter of Law and (ii) any other Lien that is permitted pursuant to Section 9.1
of the Credit Agreement and which, in the case of Liens permitted pursuant to
Section 9.1(v) of the Credit Agreement, are subject at all times to the
Intercreditor Agreement, in the case of Liens permitted pursuant to
Section 9.1(a)(ii) of the Credit Agreement, are subject at all times to the
First Lien/Second Lien Intercreditor Agreement and, in the case of Liens
permitted pursuant to Section 9.1(a)(iii) of the Credit Agreement, are subject
at all times to the Notes Intercreditor Agreement.

 

(d)                                 None of the Grantors has filed or consented
to the filing, in each case, to the extent constituting Liens, of (i) any
financing statement or analogous document under the UCC or any other applicable
Laws covering any Article 9 Collateral, (ii) any assignment in which any Grantor
assigns any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with the United States Patent and Trademark
Office or the United States Copyright Office, or (iii) any assignment in which
any Grantor assigns any Article 9 Collateral or any security agreement or
similar instrument covering any Article 9 Collateral with any foreign
governmental, municipal or other office, in the case of each of clauses (i),
(ii) and (iii) above, which financing statement or analogous document,
assignment, security agreement or similar instrument is still in effect, except,
in each case, for Liens expressly permitted pursuant to Section 9.1 of the
Credit Agreement (or documentation, instruments, filings, registrations or
recordations governing or evidencing any such Lien);

 

(e)                                  Notwithstanding anything to the contrary in
any Loan Document:

 

(i)                           no Grantor shall be required to perfect the
Security Interests granted by this Agreement or the pledges, collateral
assignments or grants of security interests pursuant to Article II or
Article III of this Agreement by any means other than by (A) filings in the
United States pursuant to the UCC in the office of the secretary of state (or
equivalent filing office) of the relevant State(s), (B) solely with respect to
any properties subject to any Mortgages on Material Real Property, fixture
filings pursuant to the UCC in the applicable county filing office of the
relevant State(s) in which such Material Real Property is located, (C) the
recording of required Mortgages on Material Real Property in the applicable
county offices referred to in the foregoing clause (B), (D) filings in the
United States Patent and Trademark Office and the United States Copyright Office
with respect to IP Collateral consisting of Patents (and Patents for which
applications are pending), registered Trademarks (and Trademarks for which
registration is pending) or registered Copyrights (and Copyrights for which
registration

 

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applications are pending), (E) delivery to the Collateral Agent of certificated
securities, to the extent delivery thereof is expressly required by the terms of
this Agreement or any other Loan Document and (F) execution and delivery by the
applicable Grantor of Deposit Account Control Agreements to the extent required
by the terms of this Agreement or any other Loan Document; provided that,
notwithstanding anything to the contrary herein or in any other Loan Document,
no Grantor shall be required to execute or deliver any Deposit Account Control
Agreements or Securities Account Control Agreements with respect to any Other
Accounts (as defined in the ABL Facility Credit Agreement), except to the extent
required under Section 8.12(a)(i) of the ABL Facility Credit Agreement;

 

(ii)                        any representations, warranties, covenants or other
statements in this Agreement or any other Collateral Documents as to the
perfection of any pledge, security interest or other Lien in or on any
Collateral (as defined in the Credit Agreement), or as to the effect or
non-effect of any perfection step, shall be deemed to be limited solely as to
perfection effected by the perfection steps referred to in the preceding clause
(i);

 

(iii)                     no Grantor shall be required to enter into any
security agreement or any other pledge or collateral documents governed or
purported to be governed by foreign Law or required to be filed, recorded or
registered in any jurisdiction outside the United States; and

 

(iv)                    without limiting the generality of the foregoing, no
Grantor shall be deemed to give any representation, warranty or covenant or make
any statement in any Collateral Document as to the perfection of any pledge,
security interest or Lien in or on any Collateral (as defined in the Credit
Agreement) by Control except as provided in Sections 2.03(g)(ii), 2.04,
3.02(e)(i) and 3.04(b) of this Agreement, and pursuant to any Deposit Account
Control Agreement.

 

(f)                                   Subject to Section 3.04(b) and Article VI
hereof, it is understood and agreed that the Security Interests in cash and Cash
Equivalents created hereunder shall not prevent the Grantors from knowingly
using such assets in the ordinary course of their respective businesses.

 

(g)                                  All commercial tort claims of each Grantor
where the amount of the damages claimed in respect of any such commercial tort
claim by such Grantor is in excess of $3,000,000 in existence on the date of
this Agreement (or on the date upon which such Grantor becomes a party to this
Agreement) are described on Schedule III hereto.

 

(h)                                 Except as could not reasonably be expected
to have a Material Adverse Effect, with respect to the IP Collateral:

 

(i)                           such Grantor is the owner of all right, title and
interest in and to, the IP Collateral or has the right or license to use the IP
Collateral subject only to the terms of the Licenses;

 

(ii)                        the operation of such Grantor’s business as
currently conducted and the use of the IP Collateral by such Grantor in
connection therewith do not conflict with, infringe, misappropriate, dilute,
misuse or otherwise violate the intellectual property rights of any third party;

 

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(iii)                     the IP Collateral set forth on the Perfection
Certificate includes all of the IP Collateral consisting of U.S. Patents (and
Patents for which applications are pending), U.S. registered Trademarks (and
Trademarks for which registration is pending) and U.S. registered Copyrights
(and Copyrights for which registration applications are pending) owned by such
Grantor as of the date hereof;

 

(iv)                    the IP Collateral is subsisting and has not been
adjudged invalid or unenforceable in whole or in part, and to such Grantor’s
knowledge, is valid and enforceable (within the meaning of Article 9 of the
UCC), subject, in the case of any IP Collateral consisting of a License or other
contractual obligations, to Debtor Relief Laws and equitable principles;

 

(v)                       such Grantor is not aware of any uses by such Grantor
of any item of IP Collateral material to the business of the Grantors, taken as
a whole, that could reasonably be expected to lead to such item becoming invalid
or unenforceable;

 

(vi)                    no claim, action, suit, investigation, litigation or
proceeding has been asserted in a writing delivered to such Grantor or is
pending or threatened in a writing delivered to such Grantor against such
Grantor  (A) based upon or challenging or seeking to deny or restrict the
Grantor’s rights in or use of any of the IP Collateral, (B) alleging that the
Grantor’s rights in or use of the IP Collateral or that any services provided
by, processes used by, or products manufactured or sold by such Grantor
infringe, misappropriate, dilute, misuse or otherwise violate any patent,
trademark, copyright or any other proprietary right of any third party, or
(C) alleging that the IP Collateral is being licensed or sublicensed in
violation or contravention of the terms of any license or other agreement;

 

(vii)                 to such Grantor’s knowledge, no Person is engaging in any
activity that infringes, misappropriates, dilutes, misuses or otherwise violates
any material IP Collateral or the Grantor’s rights in or use thereof;

 

(viii)              the consummation of the transactions contemplated by the
Loan Documents will not result in the termination or impairment of any of the IP
Collateral;

 

(ix)                    with respect to each License constituting IP Collateral:
(A) such License is valid and binding on such Grantor, subject to Debtor Relief
Laws and equitable principles, and in full force and effect; (B) such Grantor
has not received any written notice of termination or cancellation under such
License; (C) such Grantor has not received any written notice that has not been
rescinded or withdrawn of a breach or default under such License; and
(D) neither such Grantor nor, to such Grantor’s knowledge, any other party to
such License is in breach of default thereof in any material respect, and no
event has occurred that, with notice or lapse of time or both, would constitute
such a breach or default or permit termination, modification or acceleration
under such License; and

 

(x)                       to such Grantor’s knowledge, (A) none of the material
trade secrets of such Grantor constituting IP Collateral has been used,
divulged, disclosed or appropriated to the detriment of such Grantor for the
benefit of any other Person other than any Grantor; (B) no employee, independent
contractor or agent of such Grantor has misappropriated any material trade
secrets of any other Person in the course of the performance of his or her
duties as an

 

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employee, independent contractor or agent of such Grantor; and (C) no employee,
independent contractor or agent of such Grantor is in default or breach of any
material term of any employment agreement, non-disclosure agreement, assignment
or inventions agreement or similar agreement or contract relating in any way to
the protection, ownership, development, use or transfer of such Grantor’s
material IP Collateral.

 

Notwithstanding the foregoing, nothing in this Agreement (including Article IV)
shall (i) prohibit the acquisition or Disposition of any Intellectual Property
or IP Collateral permitted (or required) to be acquired or Disposed of pursuant
to the Credit Agreement, (ii) require the acquisition or disposition of any
Intellectual Property or IP Collateral prohibited from being acquired or
Disposed of pursuant to the Credit Agreement, or (iii) prohibit the license
granted pursuant to Section 4.01.

 

Section 3.03                             Covenants.

 

(a)                                 The Borrower agrees to promptly (and in any
event within thirty (30) calendar days of such event, or such later date as the
Collateral Agent may agree (acting at the direction, or with the consent, of the
Requisite Lenders)) notify the Collateral Agent of any change (i) in the legal
name of any Grantor, (ii) in the identity or type of organization or corporate
structure of any Grantor, (iii) in the jurisdiction of organization of any
Grantor, (iv) in the location of any Grantor under the UCC or (v) in the
organizational identification number of any Grantor.  In addition, if any
Grantor does not have an organizational identification number on the Effective
Date (or the date such Grantor becomes a party to this Agreement) and later
obtains one, the Borrower shall promptly thereafter notify the Collateral Agent
of such organizational identification number and shall take all actions
reasonably satisfactory to the Collateral Agent (acting at the direction, or
with the consent, of the Requisite Lenders) to the extent necessary to maintain
the security interests (and the priority thereof) of the Collateral Agent in the
Collateral intended to be granted hereby fully perfected and in full force and
effect (it being acknowledged that no such actions shall be required to be taken
in any jurisdiction in which such organization identification number is not
required, under the applicable UCC, to be set forth on a financing statement). 
The Loan Parties agree not to effect or permit any change referred to in the
preceding sentence unless all filings, publications and registrations (other
than those not required to be made under Section 3.02(e)(i)), have been made (or
will be made in a timely fashion) under the UCC or other applicable Law that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected security interest to the extent
required under the Loan Documents, including Section 3.02(e)(i) hereof (subject,
as to priority, only to (i) any nonconsensual Lien that is permitted pursuant to
Section 9.1 of the Credit Agreement and has priority as a matter of Law and
(ii) any other Lien that is permitted pursuant to Section 9.1 of the Credit
Agreement and has priority as a matter of Law and which, in the case of Liens
permitted pursuant to Section 9.1(v) of the Credit Agreement, is subject at all
times to the Intercreditor Agreement, in the case of Liens permitted pursuant to
Section 9.1(a)(ii) of the Credit Agreement, are subject at all times to the
First Lien/Second Lien Intercreditor Agreement and, in the case of Liens
permitted pursuant to Section 9.1(a)(iii) of the Credit Agreement, are subject
at all times to the Notes Intercreditor Agreement) in all the Collateral for its
own benefit and the benefit of the other Secured Parties.

 

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(b)                                 Each Grantor shall, at its own expense, take
any and all commercially reasonable actions necessary to defend title to the
Article 9 Collateral against all Persons, except with respect to Article 9
Collateral that such Grantor determines in its reasonable business judgment is
no longer necessary or beneficial to the conduct of the business, and to defend
the Security Interest of the Collateral Agent in the Article 9 Collateral and
the priority thereof against any Lien not permitted pursuant to Section 9.1 of
the Credit Agreement.

 

(c)                                  At the time of delivery of annual financial
statements with respect to the preceding Fiscal Year pursuant to
Section 7.1(a) of the Credit Agreement and delivery of the related Compliance
Certificate, the Borrower shall deliver to the Collateral Agent a certificate
executed by a Responsible Officer of the Borrower setting forth a listing of
(i) any new Material Real Property owned by any Loan Party that has been
acquired since the last such certificate (or since the Effective Date, in the
case of the first such certificate delivered after the Effective Date), (ii) any
United States Patents (and Patents for which applications are pending), United
States registered Trademarks (and Trademarks for which registration is pending)
and United States registered Copyrights (and Copyrights for which registration
applications are pending) acquired, created, developed, or exclusively licensed
by any Loan Party since the most recent list delivered pursuant to this
Section 3.03(c), (or, in the case of the first such list so delivered, since the
Effective Date) and (iii) any new Restricted Subsidiary since the date of the
most recent list delivered pursuant to this Section 3.03(c), or confirming that
there has been no change in such information since the date of such certificate
or the date of the most recent certificate delivered pursuant to this
Section 3.03(c).

 

(d)                                 Each Grantor agrees, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and Taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith.  If any amount payable under or
in connection with any of the Article 9 Collateral (other than by a Loan Party)
that equals or exceeds $3,000,000 shall be or become evidenced by any promissory
note or instrument, such promissory note or instrument shall be promptly pledged
and, subject to the Intercreditor Agreement and the First Lien/Second Lien
Intercreditor Agreement, delivered to the Collateral Agent (or the First Lien
Agent as the Collateral Agent’s bailee for perfection), for the benefit of the
Secured Parties, in a manner reasonably satisfactory to the Collateral Agent
(acting at the direction, or with the consent, of the Requisite Lenders).

 

(e)                                  At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, Liens, security interests
or other encumbrances at any time levied or placed on the Article 9 Collateral
and not permitted pursuant to Section 9.1 of the Credit Agreement, and may pay
for the maintenance and preservation of the Article 9 Collateral to the extent
any Grantor fails to do so as required by the Credit Agreement, this Agreement
or any other Loan Document and within a reasonable period of time after the
Collateral Agent has requested that it do so, and each Grantor jointly and
severally agrees to reimburse the Collateral Agent within ten (10) days after
demand for any payment made or any reasonable out-of-pocket expense incurred by
the Collateral Agent pursuant to the foregoing authorization; provided that

 

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nothing in this paragraph shall be interpreted as (i) excusing any Grantor from
the performance of, or imposing any obligation on the Collateral Agent or any
Secured Party to cure or perform, any covenants or other promises of any Grantor
with respect to taxes, assessments, charges, fees, Liens, security interests or
other encumbrances and maintenance as set forth herein or in the other Loan
Documents to which such Grantor is a party, (ii) imposing on any Grantor any
obligation with respect to the maintenance and preservation of the Article 9
Collateral not otherwise imposed by the Credit Agreement, or (iii) requiring any
Grantor to obtain or maintain any insurance coverage not otherwise required to
be obtained or maintained by any Grantor under the Credit Agreement.

 

(f)                                   If at any time any Grantor shall take a
security interest in any property (which security interest does not otherwise
constitute Excluded Property) of an Account Debtor or any other Person the value
of which equals or exceeds $1,500,000 (determined on a per property basis) to
secure payment and performance of an Account owed by, or related contracts
providing for payments by the applicable Account Debtor or other Person, such
Grantor shall promptly assign such security interest to the Collateral Agent (or
the First Lien Agent as the Collateral Agent’s bailee for perfection) for the
benefit of the applicable Secured Parties.  Such assignment need not be filed of
public record unless necessary to continue the perfected status of the security
interest against creditors of and transferees from the Account Debtor or other
Person granting the security interest.

 

(g)                                  Each Grantor (rather than the Collateral
Agent or any Secured Party) shall remain liable (as between itself and any
relevant counterparty) to observe and perform all the conditions and obligations
to be observed and performed by it under each contract, agreement or instrument
relating to the Article 9 Collateral, all in accordance with the terms and
conditions thereof.

 

(h)                                 Notwithstanding anything in this Agreement
to the contrary other than the filing of a UCC financing statement, (i) no
actions shall be required to perfect the security interest granted hereunder in
letter-of-credit rights, (ii) no actions shall be required to perfect the
security interest granted hereunder in motor vehicles and other assets subject
to certificates of title and (iii) no Grantor shall be required to complete any
filings or other action with respect to the perfection of the security interests
created hereby in any jurisdiction outside of the United States or any State
thereof.

 

Section 3.04                             Other Actions.  In order to further
insure the attachment, perfection and priority of, and the ability of the
Collateral Agent to enforce, the Security Interest, each Grantor agrees, in each
case at such Grantor’s own expense and subject to the Intercreditor Agreement
and First Lien/Second Lien Intercreditor Agreement, to take the following
actions with respect to the following Article 9 Collateral:

 

(a)                                 Instruments.  If any Grantor shall at any
time hold or acquire any instruments constituting Collateral and evidencing an
amount equal to or in excess of $3,000,000 (or, in the case of ABL Priority
Collateral, $1,500,000) such Grantor shall promptly endorse, assign and deliver
the same to the Collateral Agent (or the First Lien Agent as the Collateral
Agent’s bailee for perfection) for the benefit of the applicable Secured
Parties, accompanied by

 

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such undated instruments of transfer or assignment duly executed in blank as the
Collateral Agent may from time to time reasonably request.

 

(b)                                 Investment Property.  Except to the extent
otherwise provided in Article II, if any Grantor shall at any time hold or
acquire any certificated securities (other than Excluded Securities), such
Grantor shall promptly endorse, assign and deliver the same to the Collateral
Agent (or the First Lien Agent as the Collateral Agent’s bailee for perfection)
for the benefit of the applicable Secured Parties, accompanied by such undated
instruments of transfer or assignment duly executed in blank as the Collateral
Agent may from time to time reasonably request.

 

(c)                                  Commercial Tort Claims.  If any Grantor
shall at any time after the date of this Agreement acquire a commercial tort
claim in an amount of $3,000,000 or more, such Grantor shall promptly notify the
Collateral Agent thereof at the time of delivery of financial statements as
required by Section 7.1(a) or 7.1(b) of the Credit Agreement in writing and at
such time provide supplements to Schedule III describing the details thereof and
shall grant to the Collateral Agent (or the First Lien Agent as the Collateral
Agent’s bailee for perfection) a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement.

 

ARTICLE IV

 

Special Provisions Concerning IP Collateral

 

Section 4.01                             Grant of License to Use Intellectual
Property.  Without limiting the provisions of Section 3.01 hereof or any other
rights of the Collateral Agent as the holder of a Security Interest in any IP
Collateral, for the purpose of enabling the Collateral Agent to exercise rights
and remedies under this Agreement at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to the Collateral Agent, for the benefit of the Secured Parties, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to the Grantors) to use, license or sublicense any of the IP
Collateral now owned or hereafter acquired by such Grantor, and wherever the
same may be located (whether or not any license agreement by and between any
Grantor and any other Person relating to the use of such IP Collateral may be
terminated hereafter), and including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer software and programs used for the compilation or printout thereof,
provided, however, that any such license granted by the Collateral Agent to a
third party shall include reasonable and customary terms necessary to preserve
the existence, validity and value of the affected IP Collateral, including
without limitation, provisions requiring the continuing confidential handling of
trade secrets, requiring the use of appropriate notices and prohibiting the use
of false notices, protecting and maintaining the quality standards of the
Trademarks in the manner set forth below (it being understood and agreed that,
without limiting any other rights and remedies of the Collateral Agent under
this Agreement, any other Loan Document or applicable Law, nothing in the
foregoing license grant shall be construed as granting the Collateral Agent
rights in and to such IP Collateral above and beyond (x) the rights to such IP
Collateral that each Grantor has reserved for itself and (y) in the case of IP
Collateral that is licensed to any such Grantor by a third party, the extent to
which such Grantor has the right to grant a sublicense to such IP Collateral
hereunder).

 

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The use of such license by the Collateral Agent may only be exercised, at the
option of the Collateral Agent, after the occurrence and during the continuation
of an Event of Default; provided that any license, sublicense or other
transaction entered into by the Collateral Agent in accordance herewith shall
immediately terminate at such time as the Collateral Agent is no longer lawfully
entitled to exercise its rights and remedies under this Agreement and all rights
that may be deemed to have vested in the Collateral Agent shall be and hereby
are assigned, transferred and conveyed to the Grantors.  Nothing in this
Section 4.01 shall require a Grantor to grant any license that is prohibited by
any rule of law, statute or regulation, or is prohibited by, or constitutes a
breach or default under or results in the termination of any contract, license,
agreement, instrument or other document evidencing, giving rise to or
theretofore granted, with respect to such property or otherwise unreasonably
prejudices the value thereof to the relevant Grantor.  In the event the license
set forth in this Section 4.01 is exercised with regard to any Trademarks, then
the following shall apply:  (i) all goodwill arising from any licensed or
sublicensed use of any Trademark shall inure to the benefit of the Grantor;
(ii) the licensed or sublicensed Trademarks shall only be used in association
with goods or services of a quality and nature consistent with the quality and
reputation with which such Trademarks were associated when used by Grantor prior
to the exercise of the license rights set forth herein; and (iii) at the
Grantor’s request and expense, licensees and sublicensees shall provide
reasonable cooperation in any effort by the Grantor to maintain the registration
or otherwise secure the ongoing validity and effectiveness of such licensed
Trademarks, including, without limitation the actions and conduct described in
Section 4.02 below.

 

Section 4.02                             Protection of Collateral Agent’s
Security.

 

(a)                                 Except to the extent permitted by
Section 4.02(h) below, and except for exceptions to the following that could not
reasonably be expected to have a Material Adverse Effect, each Grantor agrees to
take, with respect to each registration or pending application of its IP
Collateral for which such Grantor has standing to do so, at its expense, all
reasonable steps in the U.S. Patent and Trademark Office and the U. S. Copyright
Office to (i) maintain the validity and enforceability of any registered IP
Collateral and maintain such IP Collateral in full force and effect, and
(ii) pursue the registration and maintenance of each Patent, Trademark, or
Copyright registration or application, now or hereafter included in such IP
Collateral of such Grantor with the U.S. Patent and Trademark Office and the
U.S. Copyright Office, including, without limitation, (A) the payment of
required fees and taxes, the filing of responses to office actions issued by the
U.S. Patent and Trademark Office or the U.S. Copyright Office, as applicable, or
(B) the filing of applications for renewal or extension, the filing of
affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of
divisional, continuation, continuation-in-part, reissue and renewal applications
or extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings, in each case with the U.S. Patent and Trademark
Office and the U.S Copyright Office.

 

(b)                                 Except to the extent permitted by
Section 4.02(h) below, or except for exceptions to the following that could not
reasonably be expected to have a Material Adverse Effect, no Grantor shall do or
permit any act or knowingly omit to do any act whereby any of its IP Collateral
may lapse, be terminated, or become invalid or unenforceable or placed in the
public domain (or in case of a trade secret, lose its competitive value).

 

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(c)                                  In the event that any Grantor becomes aware
that any item of the IP Collateral material to the business of the Grantors,
taken as a whole, is being infringed or misappropriated by a third party, such
Grantor shall promptly notify the Collateral Agent and shall take such actions,
at its expense, as such Grantor reasonably deems appropriate under the
circumstances to protect or enforce such IP Collateral, including, without
limitation, suing for infringement or misappropriation and for an injunction
against such infringement or misappropriation.

 

(d)                                 Each Grantor shall use proper statutory
notice as commercially practical in connection with its use of each item of its
IP Collateral that is material to the business of the Grantors, taken as a
whole.  Except to the extent permitted by Section 4.02(h) below, or except for
exceptions to the following that could not reasonably be expected to have a
Material Adverse Effect, no Grantor shall do or permit any act or knowingly omit
to do any act whereby any of its IP Collateral may lapse or become invalid or
unenforceable or placed in the public domain.

 

(e)                                  Except to the extent permitted by
Section 4.02(h) below, or except for exceptions to the following that could not
reasonably be expected to have a Material Adverse Effect, each Grantor shall
take all reasonable steps to preserve and protect each item of its IP
Collateral, including, without limitation, maintaining the quality of any and
all products or services used or provided in connection with any of the
Trademarks, consistent with the quality of the products and services as of the
date hereof, and taking all reasonable steps reasonably requested by the
Collateral Agent to ensure that all licensed users of any of the Trademarks
abide by the applicable license’s terms with respect to the standards of
quality.

 

(f)                                   Each Grantor agrees that, should it obtain
an ownership or other interest in any IP Collateral after the Effective Date
(the “After-Acquired Intellectual Property”) (i) the provisions of this
Agreement shall automatically apply thereto, and (ii) any such After-Acquired
Intellectual Property and, in the case of Trademarks, the goodwill symbolized
thereby, shall automatically become part of the IP Collateral subject to the
terms and conditions of this Agreement with respect thereto.

 

(g)                                  At the time of delivery of financial
statements as required by Section 7.1(a) or 7.1(b) of the Credit Agreement, each
Grantor shall sign and deliver to the Collateral Agent an appropriate Security
Agreement Supplement and related Intellectual Property Security Agreement with
respect to applications for registration or registrations of IP Collateral owned
or exclusively licensed by it as of the last day of the applicable Fiscal
Quarter, to the extent that such IP Collateral is not covered by any previous
Security Agreement Supplement (and Intellectual Property Security Agreement) so
signed and delivered by it.  In each case, it will promptly cooperate as
reasonably necessary to enable the Collateral Agent to make any necessary
recordations (subject to the terms of the Intercreditor Agreement and the First
Lien/Second Lien Intercreditor Agreement) with the U.S. Copyright Office or the
U.S. Patent and Trademark Office, as appropriate.

 

(h)                                 Notwithstanding the foregoing provisions of
this Section 4.02 or elsewhere in this Agreement (including Section 3.02),
nothing in this Agreement shall prevent any Grantor from abandoning or
discontinuing the use or maintenance of any or its IP Collateral, or from
failing to take action to enforce license agreements or pursue actions against
infringers,

 

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if such Grantor determines in its reasonable business judgment that such
abandonment, discontinuance, or failure to take action is desirable in the
conduct of its business.

 

ARTICLE V

 

[Reserved]

 

ARTICLE VI

 

Remedies

 

Section 6.01                             Remedies Upon Default.  Upon the
occurrence and during the continuance of an Event of Default, subject to the
Intercreditor Agreement and the First Lien/Second Lien Intercreditor Agreement,
it is agreed that the Collateral Agent shall have the right to exercise any and
all rights afforded to a secured party under this Agreement, the UCC or other
applicable Law, and, subject to the Intercreditor Agreement and the First
Lien/Second Lien Intercreditor Agreement, also may, (i) require each Grantor to,
and each Grantor agrees that it will at its expense and upon request of the
Collateral Agent forthwith, assemble all or part of the Collateral as directed
by the Collateral Agent and make it available to the Collateral Agent at a place
and time to be designated by the Collateral Agent that is reasonably convenient
to both parties; (ii) occupy any premises owned or, to the extent lawful and
permitted (including pursuant to the terms of the applicable lease or any
applicable Collateral Access Agreement), leased by any of the Grantors where the
Collateral or any part thereof is assembled or located for a reasonable period
in order to effectuate its rights and remedies hereunder or under Law, without
obligation to such Grantor in respect of such occupation; provided that the
Collateral Agent shall provide the applicable Grantor with notice thereof prior
to or promptly after such occupancy; (iii) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or
otherwise in respect of the Collateral; provided that the Collateral Agent shall
provide the applicable Grantor with notice thereof prior to or promptly after
such exercise; (iv) withdraw any and all cash or other Collateral from any
Approved Deposit Account and apply such cash and other Collateral to the payment
of any and all Secured Obligations in the manner provided in Section 6.02 of
this Agreement; (v) subject to the mandatory requirements of applicable Law and
the notice requirements described below, sell or otherwise dispose of all or any
part of the Collateral securing the Secured Obligations at a public or private
sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate
(acting at the direction, or with the consent, of the Requisite Lenders) and
(vi) with respect to any IP Collateral, on receipt of written demand from the
Collateral Agent, cause the Security Interest to become an assignment, transfer
and conveyance of any of or all such IP Collateral (provided that no such demand
may be made unless an Event of Default has occurred and has continued for
thirty (30) consecutive days) by the applicable Grantors to the Collateral
Agent, the Collateral Agent being free to sell, transfer, offer for sale,
otherwise dispose of such IP Collateral, or license or sublicense, whether
general, special or otherwise, and whether on an exclusive or nonexclusive
basis, any such IP Collateral throughout the world on such terms and conditions
and in such manner as the Collateral Agent shall determine (acting at the
direction, or with the consent, of the Requisite Lenders), provided, however,
that such terms shall include all terms and restrictions that are customarily
required to ensure the continuing validity and effectiveness of the IP
Collateral (if any) at issue, such as,

 

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without limitation, notice, quality control and inurement provisions with regard
to Trademarks, patent designation provisions with regard to patents, and
copyright notices and restrictions or decompilation and reverse engineering of
copyrighted software, and confidentiality protections for trade secrets.  The
Collateral Agent or any other Secured Party or any of their respective
Affiliates may be the purchaser, licensee, assignee or recipient of the
Collateral or any part thereof at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold, assigned or licensed at such sale, to
use and apply any of the Secured Obligations owed to such person as a credit on
account of the purchase price of the Collateral or any part thereof payable by
such person at such sale.

 

Each Grantor acknowledges and recognizes that (a) the Collateral Agent may be
unable to effect a public sale of all or a part of the Collateral consisting of
securities by reason of certain prohibitions contained in the Securities Act of
1933, 15 U.S.C. §77, (as amended and in effect, the “Securities Act”) or the
securities laws of various states (the “Blue Sky Laws”), but may be compelled to
resort to one or more private sales to a restricted group of purchasers who 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, (b) private sales so made may be at prices and upon other terms less
favorable to the seller than if such securities were sold at public sales,
(c) neither the Collateral Agent nor any other Secured Party has any obligation
to delay sale of any of the Collateral for the period of time necessary to
permit such securities to be registered for public sale under the Securities Act
or the Blue Sky Laws, and (d) private sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.  To the maximum extent permitted by Law, each Grantor hereby waives any
claim against any Secured Party arising because the price at which any
Collateral may have been sold at a private sale was less than the price that
might have been obtained at a public sale, even if the Collateral Agent accepts
the first offer received and does not offer such Collateral to more than one
offeree.  Upon consummation of any such sale the Collateral Agent shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold.  Each such purchaser at any sale of Collateral shall hold
the property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by applicable
Law) all rights of redemption, stay and appraisal which such Grantor now has or
may at any time in the future have under any rule of Law or statute now existing
or hereafter enacted.

 

The Collateral Agent shall give the applicable Grantors not less than
ten (10) days’ written notice (which each Grantor agrees is reasonable notice
within the meaning of Section 9-611 of the New York UCC or its equivalent in
other jurisdictions) of the Collateral Agent’s intention to make any sale of
Collateral.  Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange.  Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale. 
The Collateral Agent may conduct one or more going out of business sales, in the
Collateral Agent’s own right or by one or more agents and contractors.  Such
sale(s) may be conducted upon any premises owned, leased, or occupied by any
Grantor.  The Collateral Agent and any

 

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such agent or contractor, in conjunction with any such sale, may augment the
Inventory with other goods (all of which other goods shall remain the sole
property of the Collateral Agent or such agent or contractor).  Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in their
disposition) shall be the sole property of the Collateral Agent or such agent or
contractor and neither any Grantor nor any Person claiming under or in right of
any Grantor shall have any interest therein.  At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may (acting at the direction, or with
the consent, of the Requisite Lenders, in their sole and absolute discretion)
determine.  The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given.  The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned.  In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice.  At any public (or, to the extent permitted
by applicable Law, private) sale made pursuant to this Agreement, any Secured
Party may bid for or purchase, free (to the extent permitted by applicable Law)
from any right of redemption, stay, valuation or appraisal on the part of any
Grantor (all said rights being also hereby waived and released to the extent
permitted by applicable Law), the Collateral or any part thereof offered for
sale and may make payment on account thereof by using any claim then due and
payable to such Secured Party from any Grantor as a credit against the purchase
price, and such Secured Party may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to any
Grantor therefor.  As an alternative to exercising the power of sale herein
conferred upon it, the Collateral Agent may proceed by a suit or suits at law or
in equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court appointed receiver.  Any
sale pursuant to the provisions of this Section 6.01 shall be deemed, to the
extent permitted by applicable Law, to conform to the commercially reasonable
standards as provided in Section 9-610(b) of the UCC or its equivalent in other
jurisdictions.

 

Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent
(and all officers, employees or agents designated by the Collateral Agent) as
such Grantor’s true and lawful agent (and attorney-in-fact) during the
continuance of an Event of Default and after notice to the Borrower by the
Collateral Agent of its intent to exercise such rights (except in the case of a
Bankruptcy Event of Default, in which case no such notice shall be required),
for the purpose of, subject to the Intercreditor Agreement and the First
Lien/Second Lien Intercreditor Agreement, (i) making, settling and adjusting
claims in respect of Article 9 Collateral under policies of insurance, endorsing
the name of such Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance, (ii) making all
determinations and decisions with respect thereto and (iii) obtaining or
maintaining the policies of insurance required by Section 8.5 of the Credit
Agreement or to pay any premium then due in whole or in part relating thereto. 
All sums disbursed by the Collateral Agent in connection with

 

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this paragraph, including reasonable out-of-pocket attorneys’ fees, court costs,
expenses and other charges relating thereto, in each case to the extent payable
pursuant to the Credit Agreement), shall be payable, within twenty (20) Business
Days following receipt by the Grantor from the Collateral Agent of written
demand therefor, by the Grantors to the Collateral Agent and shall be additional
Secured Obligations secured hereby.  All powers, authorizations and agencies
contained in this paragraph are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

 

By accepting the benefits of this Agreement and each other Collateral Document,
the Secured Parties expressly acknowledge and agree that this Agreement and each
other Collateral Document may be enforced only by the action of the Collateral
Agent and that no other Secured Party shall have any right individually to seek
to enforce or to enforce this Agreement or to realize upon the security to be
granted hereby, it being understood and agreed that such rights and remedies may
be exercised by the Collateral Agent for the benefit of the Secured Parties upon
the terms of this Agreement and the other Collateral Documents.

 

Section 6.02                             Application of Proceeds.  Subject to
the Intercreditor Agreement and the First Lien/Second Lien Intercreditor
Agreement, the Collateral Agent shall apply the proceeds of any collection or
sale of Collateral, including any Collateral consisting of cash, in accordance
with the provisions of Section 10.3 of the Credit Agreement.  Subject to the
Intercreditor Agreement and the First Lien/Second Lien Intercreditor Agreement
and compliance with applicable Law, the Collateral Agent (acting at the
direction, or with the consent, of the Requisite Lenders in their absolute
discretion) as to the time of application of any such proceeds, moneys or
balances in accordance with this Agreement.  Upon any sale of Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the Collateral Agent or of the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.  It is understood and agreed that the Grantors shall
remain jointly and severally liable to the extent of any deficiency between the
amount of the proceeds of the Collateral and the aggregate amount of the Secured
Obligations.

 

ARTICLE VII

 

Indemnity, Subrogation and Subordination

 

Upon payment by any Grantor of any Secured Obligations, all rights of such
Grantor against the Borrower or any other Grantor arising as a result thereof by
way of right of subrogation, contribution, reimbursement, indemnity or otherwise
shall in all respects be subordinate and junior in right of payment to the
Discharge of Secured Obligations.  If any amount shall be paid to the Borrower
or any other Grantor in contravention of the foregoing subordination on account
of (i) such subrogation, contribution, reimbursement, indemnity or similar right
or (ii) any such indebtedness of the Borrower or any other Grantor, such amount
shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Collateral Agent to be credited against the payment of
the Secured Obligations, whether matured or unmatured, in accordance with the
terms of the Credit Agreement and the other Loan

 

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Documents.  Subject to the foregoing, including without limitation, the
Discharge of Secured Obligations, to the extent that any Grantor (other than the
Borrower) shall, under this Agreement or the Credit Agreement as a joint and
several obligor, repay any of the Secured Obligations (an “Accommodation
Payment”), then the Grantor making such Accommodation Payment shall be entitled
to contribution and indemnification from, and be reimbursed by, each of the
other Grantors in an amount equal to a fraction of such Accommodation Payment,
the numerator of which fraction is such other Grantor’s Allocable Amount and the
denominator of which is the sum of the Allocable Amounts of all of the
Grantors.  As of any date of determination, the “Allocable Amount” of each
Grantor shall be equal to the maximum amount of liability for Accommodation
Payments which could be asserted against such Grantor hereunder and under the
Credit Agreement without (a) rendering such Grantor “insolvent” within the
meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform
Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent
Conveyance Act (“UFCA”), (b) leaving such Grantor with unreasonably small
capital or assets, within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Grantor
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.

 

ARTICLE VIII

 

Miscellaneous

 

Section 8.01                             Notices.  All communications and
notices hereunder shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 12.8 of the Credit Agreement.  Except
as otherwise expressly provided herein, all communications and notices hereunder
to a Grantor other than the Borrower shall be given in care of the Borrower. 
All communications and notices hereunder to any Lender (other than the
Collateral Agent) shall be given in care of the Collateral Agent for further
distribution to the other relevant Lenders.

 

Section 8.02                             Waivers; Amendment.

 

(a)                                 No failure or delay by the Collateral Agent
in exercising any right or power hereunder or under any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power.  The rights and remedies of the
Collateral Agent hereunder and under the other Loan Documents are cumulative and
are not exclusive of any other rights or remedies that they would otherwise
have.  No waiver of any provision of this Agreement or consent to any departure
by any Loan Party therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) of this Section 8.02, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.  Without limiting the generality of the foregoing, the making
of any Loan shall not be construed as a waiver of any Default or Event of
Default, regardless of whether the Collateral Agent or any other Secured Party
may have had notice or knowledge of such Default or Event of Default at the
time.

 

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(b)                                 Subject to the Intercreditor Agreement and
the First Lien/Second Lien Intercreditor Agreement, neither this Agreement nor
any provision hereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by the Collateral Agent and the
Grantor or Grantors with respect to which such waiver, amendment or modification
is to apply, subject to any consent required in accordance with Section 12.1 of
the Credit Agreement.

 

Section 8.03                             Collateral Agent’s Fees and Expenses;
Indemnification.

 

(a)                                 Each Grantor agrees to pay or reimburse the
Collateral Agent for all reasonable, documented and invoiced out-of-pocket costs
and expenses incurred in connection with the preparation, negotiation,
documentation and execution of this Agreement and any amendment, waiver, consent
or other modification of the provisions hereof (whether or not the transactions
contemplated thereby are consummated), and the consummation and administration
of this Agreement and the transactions contemplated hereby, including (A) all
Attorney Costs of Duane Morris LLP and, if reasonably necessary, a single firm
of local counsel in each relevant jurisdiction material to the interests of the
Lenders taken as a whole (which may include a single special counsel acting in
multiple jurisdictions), and (B) reasonable, documented and invoiced
out-of-pocket fees and expenses incurred in connection with field examinations
and inventory appraisals (including desktop appraisals), and to pay or reimburse
the Collateral Agent for all reasonable, documented and invoiced out-of-pocket
costs and expenses incurred in connection with the enforcement of any rights or
remedies under this Agreement (including all such reasonable, documented and
invoiced out-of-pocket costs and expenses incurred during any legal proceeding,
including any proceeding under any Debtor Relief Law, and including all Attorney
Costs of a single firm of counsel to the Administrative Agent and all Attorney
Costs of a single firm of counsel to the Lenders taken as a whole (and, if
reasonably necessary, a single firm of local counsel in any relevant material
jurisdiction (which may include a single special counsel acting in multiple
jurisdictions).  The agreements in this Section 8.03(a) shall survive the
termination of the Aggregate Commitments and repayment of all other
Obligations.  All amounts due under this Section 8.03(a) shall be paid promptly
following receipt by a Grantor of an invoice relating thereto setting forth such
expenses in reasonable detail.

 

(b)                                 Without limitation of its indemnification
obligations under the other Loan Documents, each Grantor agrees to jointly and
severally indemnify and hold harmless the Collateral Agent and the other
Indemnitees (as defined in Section 12.4 of the Credit Agreement) from and
against any and all liabilities, losses, damages, claims, and reasonable,
documented and invoiced out-of-pocket fees and expenses (including Attorney
Costs) of any kind or nature whatsoever which may at any time be imposed on,
incurred by or asserted against any such Indemnitee in any way relating to or
arising out of or in connection with (but limited, in the case of Attorney
Costs, to the reasonable, documented and invoiced out-of-pocket fees,
disbursements and other charges of a single firm of counsel to all Indemnitees
taken as a whole and, if necessary, a single firm of local counsel for all
Indemnitees taken as a whole in each appropriate jurisdiction (which may include
a single firm of special counsel acting in multiple jurisdictions), and solely
in the case of an actual or perceived conflict of interest, where the Indemnitee
affected by such conflict informs the Borrower and thereafter retains its own
counsel, one additional firm of counsel for each group of affected Indemnitees
similarly situated taken as a whole) (i) the execution, delivery, enforcement,
performance or administration of this Agreement or any other

 

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agreement, letter or instrument delivered in connection with the transactions
contemplated hereby or the consummation of the transactions contemplated
thereby, (ii) the ownership, delivery, lease, possession, use, operation,
condition, sale, return or other disposition of Collateral, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by any Grantor or any Subsidiary, or any
Environmental Liabilities arising out of the activities or operations of any
Grantor or any Subsidiary, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened claim, investigation, litigation or
proceeding) and regardless of whether any Indemnitee is a party thereto (all the
foregoing, collectively, the “Indemnified Liabilities”); provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, losses, damages, claims, costs, expenses or disbursements resulted
from (A) the gross negligence, bad faith, intentional fraud or willful
misconduct of such Indemnitee or of any Related Indemnified Person, in each
case, as determined by a final, non-appealable judgment of a court of competent
jurisdiction or (B) are relating to disputes amongst Indemnitees other than
(x) any claim against an Indemnitee or its Related Parties in its capacity or in
fulfilling its role as Administrative Agent or Collateral Agent and (y) any
claim arising out of any act or omission of a Grantor or any of its Affiliates. 
To the extent that the undertakings to indemnify and hold harmless set forth in
this Section 8.03 may be unenforceable in whole or in part because they are
violative of any applicable law or public policy, such Grantor shall contribute
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.  No Indemnitee shall be liable for any damages
arising from the use by others of any information or other materials obtained
through IntraLinks or other similar information transmission systems in
connection with this Agreement, nor shall any Indemnitee or any Grantor have any
liability for any special, punitive, indirect or consequential damages relating
to this Agreement or arising out of its activities in connection herewith
(whether before or after the Effective Date) (other than, in the case of any
Grantor, in respect of any such damages incurred or paid by an Indemnitee to a
third party).  In the case of an investigation, litigation or other proceeding
to which the indemnity in this Section 8.03 applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by any Grantor, its directors, stockholders or creditors or an Indemnitee or any
other Person, whether or not any Indemnitee is otherwise a party thereto and
whether or not any of the transactions contemplated hereunder or under any of
the other Loan Documents is consummated.  All amounts due under this
Section 8.03 shall be paid within twenty (20) Business Days after written demand
therefor from the Collateral Agent or the Indemnitee entitled thereto.  The
agreements in this Section 8.03 shall survive the resignation of the
Administrative Agent or the Collateral Agent, the replacement of any Lender, the
termination of the Aggregate Commitments, the repayment, satisfaction or
discharge of all the other Obligations, and the termination of this Agreement. 
This Section 8.03 shall not apply to Taxes, or amounts excluded from the
definition of Taxes pursuant to clauses (i) through (viii) of the first sentence
of Section 3.1(a) of the Credit Agreement, that are imposed with respect to
payments to or for account of any Agent or any Lender under any Loan Document,
which shall be governed by Section 3.1 of the Credit Agreement.  This
Section 8.03 also shall not apply to Other Taxes or to taxes covered by
Section 3.4 of the Credit Agreement.

 

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(c)                                  Any such amounts payable as provided
hereunder shall be additional Secured Obligations secured hereby and by the
other Collateral Documents.  The provisions of this Section 8.03 shall remain
operative and in full force and effect regardless of the termination of this
Agreement or any other Loan Document, the repayment of any of the Secured
Obligations, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, any resignation of the Administrative
Agent or Collateral Agent or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party.  All amounts due under this
Section 8.03 shall be payable within twenty (20) Business Days after written
demand therefor.

 

Section 8.04                             Successors and Assigns.  Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of any Grantor or the
Collateral Agent that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and permitted assigns.  Except as
provided in Section 12.2 of the Credit Agreement, (i) no Grantor may assign any
of its rights or obligations hereunder without the written consent of the
Collateral Agent, except pursuant to a transaction permitted under Section 9.4
of the Credit Agreement, and (ii) the Collateral Agent may not assign any of its
rights and obligations except in accordance with Section 11.6 of the Credit
Agreement.  Any purported assignment in breach of this Section 8.04 shall be of
no force and effect.

 

Section 8.05                             Survival of Agreement.  Without
limitation of any provision of the Credit Agreement or Section 8.03 hereof, all
covenants, agreements, indemnities, representations and warranties made by the
Grantors in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the Lenders and shall
survive the execution and delivery of the Loan Documents and the making of any
Loans, regardless of any investigation made by any such Lender or on its behalf
and notwithstanding that the Collateral Agent or any Lender may have had notice
or knowledge of any Default or Event of Default or incorrect representation or
warranty at the time any credit is extended under the Credit Agreement, and
shall continue in full force and effect until this Agreement is terminated as
provided in Section 8.13 hereof, or with respect to any individual Grantor until
such Grantor is otherwise released from its obligations under this Agreement in
accordance with the terms hereof or the terms of the Credit Agreement.

 

Section 8.06                             Counterparts; Effectiveness; Several
Agreement.  This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which when taken together shall
constitute one and the same instrument.  Delivery by telecopier or by electronic
.pdf copy of an executed counterpart of a signature page to this Agreement shall
be effective as delivery of an original executed counterpart of this Agreement. 
This Agreement shall become effective when it shall have been executed by each
Effective Date Grantor (and, with respect to each Person that becomes a Grantor
hereunder following the Effective Date, on the date of delivery of a Security
Agreement Supplement by such Grantor) and the Collateral Agent and thereafter
shall be binding upon and inure to the benefit of each Grantor and the
Collateral Agent and the other Secured Parties and their respective permitted
successors and assigns, subject to Section 8.04 hereof.  This Agreement shall be
construed as a separate agreement with respect to each Grantor and may be
amended, restated, modified, supplemented,

 

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waived or released with respect to any Grantor without the approval of any other
Grantor and without affecting the obligations of any other Grantor hereunder.

 

Section 8.07                             Severability.  If any provision of this
Agreement is held to be invalid, illegal, or unenforceable, the legality,
validity and enforceability of the remaining provisions of this Agreement shall
not be affected or impaired thereby.  The invalidity of a provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

Section 8.08                             GOVERNING LAW, ETC.

 

(a)                                 THIS AGREEMENT AND ANY CLAIMS, CONTROVERSY,
DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED
UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK.

 

(b)                                 THE GRANTORS AND THE COLLATERAL AGENT EACH
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK OR FEDERAL COURTS
OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK COUNTY, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN
SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. 
EACH PARTY HERETO AGREES THAT THE COLLATERAL AGENT RETAINS THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY
GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION SOLELY IN CONNECTION WITH THE
EXERCISE OF ANY RIGHTS UNDER THIS AGREEMENT OR THE ENFORCEMENT OF ANY JUDGMENT.

 

(c)                                  THE GRANTORS AND THE COLLATERAL AGENT EACH
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE

 

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LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

Section 8.09                             WAIVER OF RIGHT TO TRIAL BY JURY.  EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 8.10                             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 are not to affect the construction of, or to be
taken into consideration in interpreting, this Agreement.

 

Section 8.11                             Security Interest Absolute.  All rights
of the Collateral Agent hereunder, the Security Interest, the grant of a
security interest in the Pledged Collateral and all obligations of each Grantor
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Credit Agreement, any other Loan Document, any
agreement with respect to any of the Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document, or any other
agreement or instrument, (c) any exchange, release or non-perfection of any Lien
on other collateral, or any release or amendment or waiver of or consent under
or departure from any guarantee, securing or guaranteeing all or any of the
Secured Obligations or (d) subject only to termination of a Grantor’s
obligations hereunder in accordance with the terms of Section 8.12, but without
prejudice to reinstatement rights under Section 2.04 of the Guaranty, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Secured Obligations or this
Agreement.

 

Section 8.12                             Termination or Release.

 

(a)                                 This Agreement, the Security Interest and
all other security interests granted hereby shall terminate with respect to all
Secured Obligations upon a Discharge of Secured Obligations.

 

(b)                                 The Security Interest in any Collateral
shall be automatically released in the circumstances set forth in
Section 11.11(a) of the Credit Agreement or upon any release of the Lien on such
Collateral in accordance with Sections 11.11(b) or (d) of the Credit Agreement.

 

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(c)                                  In connection with any termination or
release pursuant to paragraph (a) or (b), the Collateral Agent shall promptly
execute and deliver to any Grantor, at such Grantor’s expense, all termination
statements, instruments and other documents as shall be necessary or that such
Grantor shall reasonably request to evidence such termination or release.  Any
execution and delivery of documents pursuant to this Section 8.12 shall be
without recourse to or warranty by the Collateral Agent.

 

(d)                                 The Collateral Agent shall have no liability
whatsoever to any Secured Party as the result of any release of Collateral by it
as permitted (or which the Collateral Agent in good faith believes to be
permitted) by this Section 8.12.

 

Section 8.13                             Additional Restricted Subsidiaries. 
Pursuant to Section 8.11 of the Credit Agreement, upon the formation or
acquisition of any new Wholly-Owned Subsidiary that is a Material Domestic
Subsidiary (in each case, other than an Excluded Subsidiary, but including any
Subsidiary that ceases to constitute an Excluded Subsidiary) by any Loan Party,
the designation in accordance with Section 8.3 of the Credit Agreement, of any
existing Wholly-Owned Subsidiary that is a Material Domestic Subsidiary as a
Restricted Subsidiary or any Subsidiary becoming a Wholly-Owned Subsidiary that
is a Material Domestic Subsidiary, or with respect to any Subsidiary at the time
it becomes a Loan Party, such Subsidiary is required to enter in this Agreement
as a Grantor.  Upon execution and delivery by the Collateral Agent and a
Restricted Subsidiary of a Security Agreement Supplement, such Restricted
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein.  The execution and delivery of any such
instrument shall not require the consent of any other Grantor hereunder.  The
rights and obligations of each Grantor hereunder shall remain in full force and
effect notwithstanding the addition of any new Grantor as a party to this
Agreement.

 

Section 8.14                             Collateral Agent Appointed
Attorney-in-Fact.

 

(a)                                 Each Grantor hereby appoints the Collateral
Agent the true and lawful attorney-in-fact of such Grantor solely for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof at any time after and during the
continuance of an Event of Default, which appointment is irrevocable and coupled
with an interest and is irrevocable until this Agreement is terminated and the
security interests created hereby are released.  Without limiting the generality
of the foregoing, the Collateral Agent shall have the right, subject to the
Intercreditor Agreement and the First Lien/Second Lien Intercreditor Agreement,
upon the occurrence and during the continuance of an Event of Default and
(unless a Bankruptcy Event of Default has occurred and is continuing, in which
case no such notice shall be required) delivery of notice by the Collateral
Agent to the Borrower of its intent to exercise such rights, with full power of
substitution either in the Collateral Agent’s name or in the name of such
Grantor (i) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Collateral; (ii) to sign the name
of any Grantor on any invoice or bill of lading relating to any of the
Collateral; (iii) to send verifications of Accounts to any Account Debtor;
(iv) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect or otherwise
realize on all or any of the Collateral or to enforce any rights in respect of
any Collateral; (v) to settle, compromise,

 

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compound, adjust or defend any actions, suits or proceedings relating to all or
any of the Collateral; (vi) to notify, or to require any Grantor to notify,
Account Debtors to make payment directly to the Collateral Agent and adjust,
settle or compromise the amount of payment of any Account or related contracts;
(vii) to make, settle and adjust claims in respect of Collateral under policies
of insurance and to endorse the name of such Grantor on any check, draft,
instrument or any other item of payment with respect to the proceeds of such
policies of insurance and for making all determinations and decisions with
respect thereto; and (viii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Collateral Agent were the
absolute owner of the Collateral for all purposes; provided that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Collateral Agent, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby.  The Collateral Agent and the other Secured Parties shall be
accountable only for amounts actually received as a result of the exercise of
the powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct or that of any of their Affiliates, directors, officers, employees,
counsel, agents or attorneys-in-fact, in each case as determined by a final,
non-appealable judgment of a court of competent jurisdiction.

 

(b)                                 All acts in accordance with this
Section 8.14 and the other provisions of this Agreement of said attorney or
designee are hereby ratified and approved by the Grantors.  The powers conferred
on the Collateral Agent, for the benefit of the Secured Parties, under this
Section 8.14 are solely to protect the Collateral Agent’s interests in the
Collateral and shall not impose any duty upon the Collateral Agent or any
Secured Party to exercise any such powers.

 

Section 8.15                             General Authority of the Collateral
Agent.  By acceptance of the benefits of this Agreement and any other Collateral
Documents, each Secured Party (whether or not a signatory hereto) shall be
deemed irrevocably (a) to consent to the appointment of the Collateral Agent as
its agent hereunder and under such other Collateral Documents, (b) to confirm
that the Collateral Agent shall have the authority to act as the exclusive agent
of such Secured Party for the enforcement of any provisions of this Agreement
and such other Collateral Documents against any Grantor, the exercise of
remedies hereunder or thereunder and the giving or withholding of any consent or
approval hereunder or thereunder relating to any Collateral or any Grantor’s
obligations with respect thereto, (c) to agree that it shall not take any action
to enforce any provisions of this Agreement or any other Collateral Document
against any Grantor, to exercise any remedy hereunder or thereunder or to give
any consents or approvals hereunder or thereunder except as expressly provided
in this Agreement or any other Collateral Document and (d) to agree to be bound
by the terms of this Agreement and any other Collateral Documents.

 

Section 8.16                             Collateral Agent’s Duties.  Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Collateral Agent shall have no
duty as to any Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not any Secured Party has or is deemed to have
knowledge of such matters, or as to

 

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the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral.  The Collateral Agent shall be deemed
to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which it accords its own property.

 

Section 8.17                             Recourse; Limited Obligations.  This
Agreement is made with full recourse to each Grantor and pursuant to and upon
all the warranties, representations, covenants and agreements on the part of
such Grantor contained herein, in the Credit Agreement and the other Loan
Documents and otherwise in writing in connection herewith or therewith, with
respect to the Secured Obligations of each applicable Secured Party.  It is the
desire and intent of each Grantor and each applicable Secured Party that this
Agreement shall be enforced against each Grantor to the fullest extent
permissible under applicable Law applied in each jurisdiction in which
enforcement is sought.

 

Section 8.18                             Mortgages.  In the event that any of
the Collateral hereunder is also subject to a valid and enforceable Lien under
the terms of a Mortgage and the terms thereof are inconsistent with the terms of
this Agreement, then with respect to such Collateral, the terms of such Mortgage
shall control in the case of fixtures and real property leases, letting and
licenses of, and contracts, and agreements relating to the lease of, real
property, and the terms of this Agreement shall control in the case of all other
Collateral.

 

Section 8.19                             Intercreditor Agreement and First
Lien/Second Lien Intercreditor Agreement.

 

(a)                                 Notwithstanding anything herein to the
contrary, the Liens granted to the Collateral Agent under this Agreement and the
exercise of the rights and remedies of the Collateral Agent hereunder and under
any other Collateral Document are subject to the provisions of the Intercreditor
Agreement and the First Lien/Second Lien Intercreditor Agreement.  In the event
of any conflict between the terms of the Intercreditor Agreement or the First
Lien/Second Lien Intercreditor Agreement and this Agreement or any other
Collateral Document, the terms of the Intercreditor Agreement or the First
Lien/Second Lien Intercreditor Agreement, as applicable, shall govern and
control.  Notwithstanding anything to the contrary herein, the Collateral Agent
acknowledges and agrees that no Grantor shall be required to take or refrain
from taking any action at the request of the Collateral Agent with respect to
the Collateral if such action or inaction would be inconsistent with the terms
of the Intercreditor Agreement or the First Lien/Second Lien Intercreditor
Agreement.

 

(b)                                 Subject to the foregoing, (i) to the extent
the provisions of this Agreement (or any other Collateral Documents) require the
delivery of, or control over, ABL Priority Collateral to be granted to the
Collateral Agent at any time prior to the Discharge of ABL Obligations, then
delivery of such ABL Priority Collateral (or control with respect thereto, (and
any related approval or consent rights)) shall instead be granted to the ABL
Agent, to be held in accordance with the ABL Facility Documentation and subject
to the Intercreditor Agreement, (ii) to the extent the provisions of this
Agreement (or any other Collateral Documents) require delivery of, or control
over, Term Priority Collateral to be granted to the Collateral Agent at any time
prior to the Discharge of First Lien Obligations, then delivery of such Term
Priority Collateral (or control with respect thereto, (and any related approval
or consent rights)) shall

 

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instead be granted to the First Lien Agent, to be held in accordance with the
First Lien Documentation and the Loan Documents and subject to the First
Lien/Second Lien Intercreditor Agreement, and (iii) in the case of any provision
of this Agreement (or any other Loan Documents) requiring Grantors to name the
Collateral Agent as an additional insured or a loss payee under any insurance
policy or a beneficiary of any letter of credit, such requirement shall have
been complied with if any such insurance policy or letter of credit also names
the ABL Agent as an additional insured, loss payee or beneficiary, as the case
may be, in each case pursuant and subject to the terms of the Intercreditor
Agreement.

 

(c)                                  Furthermore, (i) at all times prior to the
Discharge of ABL Obligations the Collateral Agent is authorized by the parties
hereto to effect transfers of ABL Priority Collateral at any time in its
possession (and any “control” or similar agreements with respect to ABL Priority
Collateral) to the ABL Agent and (ii) at all times prior to the Discharge of
First Lien Obligations the Collateral Agent is authorized by the parties hereto
to effect transfers of Term Priority Collateral at any time in its possession
(and any “control” or similar agreements with respect to Term Priority
Collateral) to the First Lien Agent.

 

(d)                                 Notwithstanding anything to the contrary
herein but subject to the Intercreditor Agreement, in the event the ABL Facility
Documentation provide for the grant of a security interest or pledge over the
assets of any Grantor and such assets do not otherwise constitute Collateral
under this Agreement or any other Loan Document, such Grantor shall (i) promptly
grant a security interest in or pledge such assets to secure the Secured
Obligations, (ii) promptly take any actions necessary to perfect such security
interest or pledge to the extent set forth in the ABL Facility Documentation and
(iii) take all other steps reasonably requested by the Collateral Agent in
connection with the foregoing.

 

(e)                                  Notwithstanding anything to the contrary
herein but subject to the First Lien/Second Lien Intercreditor Agreement, in the
event the  First Lien Documentation provide for the grant of a security interest
or pledge over the assets of any Grantor and such assets do not otherwise
constitute Collateral under this Agreement or any other Loan Document, such
Grantor shall (i) promptly grant a security interest in or pledge such assets to
secure the Secured Obligations, (ii) promptly take any actions necessary to
perfect such security interest or pledge to the extent set forth in the First
Lien Documentation and (iii) take all other steps reasonably requested by the
Collateral Agent in connection with the foregoing.

 

(f)                                   Except as otherwise provided in this
Section 8.19, in the Intercreditor Agreement, nothing contained in the
Intercreditor Agreement, shall be deemed to modify any of the provisions of this
Agreement, which, as among the Grantors and the Collateral Agent shall remain in
full force and effect in accordance with its terms.  Except as otherwise
provided in this Section 8.19, in the First Lien/Second Lien Intercreditor
Agreement, nothing contained in the First Lien/Second Lien Intercreditor
Agreement, shall be deemed to modify any of the provisions of this Agreement,
which, as among the Grantors and the Collateral Agent shall remain in full force
and effect in accordance with its terms.

 

(g)                                  In the event of any conflict or
inconsistency between any provisions of this Agreement and the provisions of the
Credit Agreement, the provisions of the Credit Agreement shall control.

 

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Section 8.20                             Right of Setoff.  If an Event of
Default shall have occurred and be continuing, the Agents and each Lender and
each of its Affiliates is hereby authorized at any time and from time to time,
and in the case of the Lenders after obtaining the prior written consent of the
Administrative Agent, to the fullest extent permitted by applicable law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Agent or Lender or
any such Affiliate to or for the credit or the account of any Grantor against
any and all of the obligations of the Grantor now or hereafter existing under
this Agreement or any other Loan Document to such Lender, irrespective of
whether or not such Agent or Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations of such
Grantor may be contingent or unmatured or are owed to a branch or office of such
Agent or Lender different from the branch or office holding such deposit or
obligated on such indebtedness.  The rights of each Agent and Lender and its
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Agent and Lender or its Affiliates
may have.  Each Agent and Lender agrees to notify the Borrower and, in the case
of Lenders and the Administrative Agent, the Collateral Agent promptly after any
such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

 

99 CENTS ONLY STORES LLC, as a Grantor

 

 

 

 

 

By:

/s/ Felicia Thornton

 

 

Name: Felicia Thornton

 

 

Title: Chief Financial Officer

 

 

 

NUMBER HOLDINGS, INC., as a Grantor

 

 

 

 

 

By:

/s/ Felicia Thornton

 

 

Name: Felicia Thornton

 

 

Title: Chief Financial Officer

 

 

 

99 CENTS ONLY STORES TEXAS, INC., as a Grantor

 

 

 

 

 

By:

/s/ Felicia Thornton

 

 

Name: Felicia Thornton

 

 

Title: Chief Financial Officer

 

 

99 Cents Only –Signature Page to Term Loan Second Lien Security Agreement

 

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COLLATERAL AGENT:

 

 

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

 

as Collateral Agent

 

 

 

 

 

By:

/s/ Joshua G. James

 

 

Name: Joshua G. James

 

 

Title: Vice President

 

 

99 Cents Only –Signature Page to Term Loan Second Lien Security Agreement

 

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