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Exhibit 10.3

 
SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (this “Security Agreement”) is entered into as of March
15, 2007 among BENIHANA INC., a Delaware corporation (the “Borrower”), certain
Subsidiaries of the Borrower (individually a “Guarantor” and collectively the
“Guarantors”; together with the Borrower, individually an “Obligor”, and
collectively the “Obligors”) and WACHOVIA BANK, NATIONAL ASSOCIATION (F/K/A
FIRST UNION NATIONAL BANK), in its capacity as agent (in such capacity, the
“Administrative Agent”) for the lenders from time to time party to the Credit
Agreement described below (the “Lenders”).

RECITALS

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

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

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

1.             Definitions.

(a)             Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement, and the
following terms which are defined in the Uniform Commercial Code from time to
time in effect in the State of North Carolina (the “UCC”) are used herein as so
defined: Accessions, Accounts, As-Extracted Collateral, Chattel Paper,
Commercial Tort Claims, Consumer Goods, Control, Deposit Accounts, Documents,
Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property,
Letter-of-Credit Rights, Manufactured Homes, Proceeds, Securities Account,
Securities Intermediary, Security Entitlement, Software, Supporting Obligations
and Tangible Chattel Paper. For purposes of this Pledge Agreement, the term (a)
“Lender” shall include any Hedging Agreement Provider and the term “Secured
Hedging Agreement” shall mean any Hedging Agreement between a Credit Party and a
Hedging Agreement Provider, as amended, modified, extended, restated, replaced
or supplemented from time to time.
 

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

“Secured Obligations” means: (i) all of the Credit Party Obligations (including
obligations under Secured Hedging Agreements), howsoever evidenced, created,
incurred or acquired, whether primary, secondary, direct, contingent, or joint
and several and (ii) all expenses and charges, legal and otherwise, incurred by
the Administrative Agent, the Lenders and/or the Secured Hedging Agreement
Providers in collecting or enforcing any of the Credit Party Obligations or in
realizing on or protecting any security therefor, including without limitation
the security interest granted hereunder.

2.             Grant of Security Interest in the Collateral.

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

   
(i)
all Accounts;

   
(ii)
all cash and Cash Equivalents;

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

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

   
(v)
all Copyright Licenses;

   
(vi)
all Copyrights;

   
(vii)
all Deposit Accounts;

   
(viii)
all Documents;

   
(ix)
all Equipment;

   
(x)
all Fixtures;

   
(xi)
all General Intangibles;

   
(xii)
all Goods;

 
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(xiii)
all Instruments;

   
(xiv)
all Inventory;

   
(xv)
all Investment Property;

   
(xvi)
all Letter-of-Credit Rights;

   
(xvii)
all material contracts and all such other agreements, contracts, leases,
licenses, tax sharing agreements or hedging arrangements now or hereafter
entered into by an Obligor, as such agreements may be amended or otherwise
modified from time to time (collectively, the “Assigned Agreements”), including
without limitation, (A) all rights of an Obligor to receive moneys due and to
become due under or pursuant to the Assigned Agreements, (B) all rights of an
Obligor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreements, (C) claims of an Obligor for damages
arising out of or for breach of or default under the Assigned Agreements and (D)
the right of an Obligor to terminate the Assigned Agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder;

   
(xviii)
all Patent Licenses;

(xix)
all Patents;

(xx)
all Payment Intangibles;

   
(xxi)
all Trademark Licenses;

   
(xxii)
all Trademarks;

   
(xxiii)
all Supporting Obligations;

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

 

   
(xxv)
all other personal property of any kind or type whatsoever owned by such
Obligor; and

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

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

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

3.            Provisions Relating to Accounts, Contracts and Agreements.

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

(b)           The Administrative Agent hereby authorizes the Obligors to collect
the Accounts; provided, that the Administrative Agent may curtail or terminate
such authority at any time after the occurrence and during the continuation of
an Event of Default. If required by the Administrative Agent at any time after
the occurrence and during the continuation of an Event of Default, any payments
of Accounts, when collected by the Obligors (i) shall be forthwith (and in any
event within two (2) Business Days) deposited by the Obligors in a collateral
account maintained under the sole dominion and control of the Administrative
Agent, subject to withdrawal by the Administrative Agent for the account of the
Lenders only as provided in Section 12 hereof, and (ii) until so turned over,
shall be held by the Obligors in trust for the Administrative Agent and the
Lenders, segregated from other funds of the Obligors.

(c)           At any time and from time to time, the Administrative Agent shall
have the right, but not the obligation, to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Obligors shall furnish all such assistance and information as
the Administrative Agent may require in connection with such test verifications.
Upon the Administrative Agent’s request and at the expense of the Obligors, the
Obligors shall cause independent public accountants or others satisfactory to
the Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts. The Administrative Agent in its own name or in the name of others may
communicate with account debtors on the Accounts to verify with them to the
Administrative Agent’s satisfaction the existence, amount and terms of any
Accounts.
 
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4.            Representations and Warranties. Each Obligor hereby represents and
warrants to the Administrative Agent, for the benefit of the Lenders, that so
long as any of the Secured Obligations (other than contingent indemnity
obligations that survive termination of the Credit Documents pursuant to the
stated terms thereof) remain outstanding, any Credit Document or Secured Hedging
Agreement is in effect, and until all of the Commitments shall have been
terminated:

(a)           Chief Executive Office; Books & Records; Legal Name; State of
Formation. As of the Closing Date, each Obligor’s chief executive office and
chief place of business are (and for the prior four (4) months has been, or, to
the extent organized for less than four (4) months, for the entire period of
organization) located at the locations set forth on Schedule 6.20(b) to the
Credit Agreement, and as of the Closing Date each Obligor keeps its books and
records at such locations. As of the Closing Date, each Obligor’s exact legal
name is as shown in this Security Agreement and its state of incorporation or
organization is (and for the prior four (4) months has been, or, to the extent
organized for less than four (4) months, for the entire period of organization)
the location set forth on Schedule 6.20(b) to the Credit Agreement. No Obligor
has in the four (4) months preceding the Closing Date changed its name (or, to
the extent organized for less than four (4) months, has ever changed its name),
been party to a merger, consolidation or other change in structure or used any
tradename not disclosed on Schedule 4(a) attached hereto (as updated from time
to time).

(b)           Location of Tangible Collateral. As of the Closing Date, the
location of all tangible Collateral owned by each Obligor is as shown on
Schedule 6.20(b) to the Credit Agreement.

(c)           Ownership. Each Obligor is the legal and beneficial owner of its
Collateral and, subject to Section 2(b), has the right to pledge, sell, assign
or transfer the same.

 
(d)           Security Interest/Priority. This Security Agreement creates a
valid security interest in favor of the Administrative Agent, for the benefit of
the Lenders, in the Collateral of such Obligor and, when properly perfected by
filing, obtaining possession, the granting of Control to the Administrative
Agent or otherwise, shall constitute a valid first priority, perfected security
interest in such Collateral, to the extent such security interest can be
perfected by (i) filing, obtaining possession, the granting of Control or
otherwise under the UCC, (ii) by filing an appropriate notice with the United
States Patent and Trademark Office or the United States Copyright Office, or
(iii) such other action as may be required pursuant to any applicable
jurisdictions’ certificate of title statute, free and clear of all Liens except
for Permitted Liens.
 
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(e)           Consents. Except for (i) the filing or recording of UCC financing
statements, (ii) the filing of appropriate notices with the United States Patent
and Trademark Office and the United States Copyright Office, (iii) obtaining
Control to perfect the Liens created by this Security Agreement, (iv) compliance
with the Federal Assignment of Claims Act or comparable state law, and/or (v)
the filing, registration or other action required pursuant to any applicable
certificate of title statute, no consent or authorization of, filing with, or
other act by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any stockholder,
member or creditor of such Obligor) is required (A) for the grant by such
Obligor of the security interest in the Collateral granted hereby or for the
execution, delivery or performance of this Security Agreement by such Obligor or
(B) for the perfection of such security interest or the exercise by the
Administrative Agent of the rights and remedies provided for in this Security
Agreement.

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

(g)           Accounts. With respect to the Accounts of the Obligors: (i) the
goods sold and/or services furnished giving rise to each Account are not subject
to any security interest or Lien except the first priority, perfected security
interest granted to the Administrative Agent herein and except for Permitted
Liens; (ii) each Account and the papers and documents of the applicable Obligor
relating thereto are genuine and in all material respects what they purport to
be; (iii) each Account arises out of a bona fide transaction for goods sold and
delivered (or in the process of being delivered) by an Obligor or for services
actually rendered by an Obligor, which transaction was conducted in the ordinary
course of the Obligor’s business and was completed in accordance with the terms
of any documents pertaining thereto; (iv) no Account of an Obligor is evidenced
by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has
been theretofore endorsed over and delivered to, or submitted to the Control of,
the Administrative Agent; (v) the amount of each Account as shown on the
applicable Obligor’s books and records, and on all invoices and statements which
may be delivered to the Administrative Agent with respect thereto, is due and
payable to the applicable Obligor and is not in any way contingent; (vi) to each
of the Obligor’s knowledge, the account debtor with respect to each Account has
the capacity to contract; (vii) no surety bond was required or given in
connection with any Account of an Obligor or the contracts or purchase orders
out of which they arose; (viii) no Account is evidenced by a judgment, there are
no set-offs, counterclaims or disputes existing or asserted with respect to any
material Account, and no Obligor has made any agreement with any account debtor
for any deduction from any Account except for deductions made in the ordinary
course of its business; (ix) there are no facts, events or occurrences which in
any material respect impair the validity or enforcement of any Account or tend
to materially reduce the amount payable thereunder as shown on the applicable
Obligor’s books and records; and (x) the right to receive payment under each
Account is assignable except where the account debtor with respect to such
Account is a Governmental Authority, to the extent assignment of any such right
to payment is prohibited or limited by applicable law, regulations,
administrative guidelines or contract.
 
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(h)           Inventory. No Inventory of an Obligor is held by a third party
(other than an Obligor) pursuant to consignment, sale or return, sale on
approval or similar arrangement.

(i)            Intellectual Property.

(i)           Schedule 6.17 to the Credit Agreement includes all Intellectual
Property owned by or licensed by or to the Obligors as of the date hereof.

(ii)          All Intellectual Property of each Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned, and each Obligor is legally
entitled to use each of its tradenames.

(iii)         Except as set forth in Schedule 6.17 to the Credit Agreement, none
of the Intellectual Property of the Obligors is the subject of any licensing or
franchise agreement.

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

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

(vi)        All applications pertaining to the Intellectual Property of each
Obligor have been duly and properly filed, and all registrations or letters
pertaining to such Intellectual Property have been duly and properly filed and
issued, and all of such Intellectual Property is valid and enforceable.

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

(j)            Documents, Instruments and Chattel Paper. Set forth on Schedule
4(j) is a description of all Documents, Instruments, and Tangible Chattel Paper
of the Obligors as of the Closing Date. All Documents, Instruments and Chattel
Paper describing, evidencing or constituting Collateral are, to the Obligors’
knowledge, complete, valid, and genuine.

(k)           Equipment. With respect to each Obligor’s Equipment: (i) such
Obligor has good and marketable title thereto; (ii) all such Equipment is in
normal operating condition and repair, ordinary wear and tear alone and casualty
events excepted, and is suitable for the uses to which it is customarily put in
the conduct of such Obligor’s business; and (iii) no Equipment used in the
conduct of such Obligor’s business is leased, except for non-material items.
 
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(l)           Restrictions on Security Interest. None of the Obligors is party
to any material license or any material lease that contains legally enforceable
restrictions on the granting of a security interest therein.

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

5.           Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations (other than contingent indemnity obligations that survive
termination of the Credit Documents pursuant to the stated terms thereof) remain
outstanding, any Credit Document or Secured Hedging Agreement is in effect, and
until all of the Commitments shall have been terminated, such Obligor shall:

(a)           Perfection of Security Interest by Filing, Etc. Execute and
deliver to the Administrative Agent and/or file such agreements, assignments or
instruments (including affidavits, notices, reaffirmations, amendments and
restatements of existing documents, and any document as may be necessary if the
law of any jurisdiction other than North Carolina becomes or is applicable to
the Collateral or any portion thereof, in each case, as the Administrative Agent
may reasonably request) and do all such other things as the Administrative Agent
may reasonably deem necessary or appropriate (i) to assure to the Administrative
Agent its security interests hereunder are perfected, including (A) such
financing statements (including continuation statements) or amendments thereof
or supplements thereto or other instruments as the Administrative Agent may from
time to time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC and any other personal
property security legislation in the appropriate state(s) or province(s), (B)
with regard to Copyrights and Copyright Licenses, a Notice of Grant of Security
Interest in Copyrights for filing with the United States Copyright Office in the
form of Exhibit A attached hereto, (C) with regard to Patents and Patent
Licenses, a Notice of Grant of Security Interest in Patents for filing with the
United States Patent and Trademark Office in the form of Exhibit B attached
hereto and (D) with regard to Trademarks and Trademark Licenses, a Notice of
Grant of Security Interest in Trademarks for filing with the United States
Patent and Trademark Office in the form of Exhibit C attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise protect
and assure the Administrative Agent of its rights and interests hereunder. Each
Obligor hereby authorizes the Administrative Agent to prepare and file such
financing statements (including continuation statements) or amendments thereof
or supplements thereto or other instruments as the Administrative Agent may from
time to time deem necessary or appropriate in order to perfect and maintain the
security interests granted hereunder in accordance with the UCC, including,
without limitation, any financing statement that describes the Collateral as
“all personal property” or “all assets” of such Obligor or that describes the
Collateral in some other manner as the Administrative Agent deems necessary or
advisable. Each Obligor agrees to mark its books and records to reflect the
security interest of the Administrative Agent in the Collateral.
 
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(b)           Perfection of Security Interest by Possession. If (i) any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument, Tangible Chattel Paper or Supporting Obligation or
(ii) any Collateral shall be stored or shipped subject to a Document or (iii)
any Collateral shall consist of Investment Property in the form of certificated
securities, promptly notify the Administrative Agent of the existence of such
Collateral and at the request of the Administrative Agent, deliver such
Instrument, Chattel Paper, Supporting Obligation, Document or Investment
Property to the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Security
Agreement.

(c)           Perfection of Security Interest Through Control. If any Collateral
shall consist of Deposit Accounts, Electronic Chattel Paper, Letter-of-Credit
Rights, Securities Accounts or uncertificated Investment Property, execute and
deliver (and, with respect to any Collateral consisting of a Securities Account
or uncertificated Investment Property, cause the Securities Intermediary or the
issuer, as applicable, with respect to such Investment Property to execute and
deliver) to the Administrative Agent all control agreements, assignments,
instruments or other documents as reasonably requested by the Administrative
Agent for the purposes of obtaining and maintaining Control of such Collateral.

(d)           Other Liens. Defend its interests in the Collateral against the
claims and demands of all other parties claiming an interest therein and keep
the Collateral free from all Liens, except for Permitted Liens. Neither the
Administrative Agent nor any Lender authorizes any Obligor to, and no Obligor
shall, sell, exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except as permitted under the Credit
Agreement.

(e)           Preservation of Collateral. Keep the Collateral in good order,
condition and repair in all material respects, ordinary wear and tear excepted;
not use the Collateral in violation of the provisions of this Security Agreement
or any other agreement relating to the Collateral or any policy insuring the
Collateral or any applicable Requirement of Law; not permit any Collateral to be
or become a fixture to real property or an accession to other personal property
unless the Administrative Agent has a valid, perfected and first priority
security interest for the benefit of the Lenders in such real or personal
property; and not, without the prior written consent of the Administrative
Agent, alter or remove any identifying symbol or number on its Equipment.
 
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(f)           Changes in Structure or Location. Not, without providing thirty
(30) days prior written notice to the Administrative Agent and without filing
(or confirming that the Administrative Agent has filed) such financing
statements and amendments to any previously filed financing statements as the
Administrative Agent may require, (i) alter its legal existence or, in one
transaction or a series of transactions, merge into or consolidate with any
other entity, or sell all or substantially all of its assets, (ii) change its
state of incorporation or organization, or (iii) change its registered legal
name.

(g)           Inspection. Allow the Administrative Agent or its representatives
to visit and inspect the Collateral as set forth in Section 7.10 of the Credit
Agreement.

(h)           Collateral Held by Warehouseman, Bailee, etc. If any Collateral is
at any time in the possession or control of a warehouseman, bailee or any agent
or processor of such Obligor, (i) notify the Administrative Agent of such
possession, (ii) upon the request of the Administrative Agent, notify such
Person of the Administrative Agent’s security interest for the benefit of the
Lenders in such Collateral, (iii) instruct such Person to hold all such
Collateral for the Administrative Agent’s account subject to the Administrative
Agent’s instructions and (iv) obtain an acknowledgment from such Person that it
is holding such Collateral for the benefit of the Administrative Agent.

(i)            Treatment of Accounts. (i) Not grant or extend the time for
payment of any Account, or compromise or settle any Account for less than the
full amount thereof, or release any person or property, in whole or in part,
from payment thereof, or allow any credit or discount thereon, other than as
normal and customary in the ordinary course of an Obligor’s business and (ii)
maintain at its principal place of business a record of Accounts consistent with
customary business practices.

(j)            Covenants Relating to Inventory.

(i)           Maintain, keep and preserve its Inventory in good salable
condition at its own cost and expense.

(ii)          Comply with all reporting requirements set forth in the Credit
Agreement with respect to Inventory.

(iii)         If any of the Inventory is at any time evidenced by a document of
title, promptly notify the Administrative Agent thereof and, upon the request of
the Administrative Agent, deliver such document of title to the Administrative
Agent.

(k)           Covenants Relating to Copyrights.

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

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

(l)            Covenants Relating to Patents and Trademarks.

(i)           (A) Continue to use each Trademark in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B)
maintain as in the past the quality of products and services offered under such
Trademark, (C) employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is confusingly similar or a
colorable imitation of such Trademark unless the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected security interest in
such mark pursuant to this Security Agreement, and (E) not (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.

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

(iii)         Promptly notify the Administrative Agent if it knows, or has
reason to know, that any application or registration relating to any material
Patent or material Trademark may become abandoned or dedicated, or of any
adverse determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or any court or tribunal in any
country) regarding an Obligor’s ownership of any such Patent or Trademark or its
right to register the same or to keep, maintain and use the same.
 
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(iv)        Take all reasonable and necessary steps, including, without
limitation, in any proceeding before the United States Patent and Trademark
Office, or any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application, to obtain the
relevant registration and to maintain each registration of all material Patents
and material Trademarks, including, without limitation, filing of applications
for renewal, affidavits of use and affidavits of incontestability.

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

(vi)        Not make any assignment or agreement in conflict with the security
interest in the Patents or Trademarks of any Obligor hereunder.

(m)          New Patents, Copyrights and Trademarks. In accordance with Section
6.17 of the Credit Agreement, provide the Administrative Agent with (i) a
listing of all applications, if any, for new Copyrights, Patents or Trademarks
(together with a listing of the issuance of registrations or letters on present
applications), which new applications and issued registrations or letters shall
be subject to the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights and Copyright Licenses, a duly executed Notice of Grant of Security
Interest in Copyrights, (B) with respect to Patents and Patent Licenses, a duly
executed Notice of Grant of Security Interest in Patents, (C) with respect to
Trademarks and Trademark Licenses, a duly executed Notice of Grant of Security
Interest in Trademarks or (D) such other duly executed documents as the
Administrative Agent may request in a form acceptable to counsel for the
Administrative Agent and suitable for recording to evidence the security
interest of the Administrative Agent on behalf of the Lenders in the Copyright,
Patent or Trademark which is the subject of such new application, and the
goodwill and General Intangibles of such Obligor relating thereto or represented
thereby.

(n)           Commercial Tort Claims; Notice of Litigation. Promptly (i) forward
to the Administrative Agent written notification of any and all Commercial Tort
Claims of the Obligors, including, but not limited to, any and all actions,
suits, and proceedings before any court or Governmental Authority by or
affecting such Obligor or any of its Subsidiaries and (ii) execute and deliver
such statements, documents and notices and do and cause to be done all such
things as may be required by the Administrative Agent, or required by law,
including all things which may from time to time be necessary under the UCC to
fully create, preserve, perfect and protect the priority of the Administrative
Agent’s security interest in any Commercial Tort Claims.
 
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(o)           Status of Collateral as Personal Property. At all times maintain
the Collateral as personal property and not affix any of the Collateral to any
real property in a manner which would change its nature from personal property
to real property or a Fixture.

(p)           Regulatory Approvals. Promptly, and at its expense, execute and
deliver, or cause to be executed and delivered, all applications, certificates,
instruments, registration statements, and all other documents and papers the
Administrative Agent may reasonably request and as may be required by law to
acquire any Governmental Approval or the consent, approval, registration,
qualification or authorization of any other Person deemed necessary or
appropriate for the effective exercise of any of the rights under this Security
Agreement. Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, each Obligor shall take any
action which the Administrative Agent may reasonably request in order to
transfer and assign to the Administrative Agent, or to such one or more third
parties as the Administrative Agent may designate, or to a combination of the
foregoing, each Government Approval of such Obligor. To enforce the provisions
of this subsection, upon the occurrence and during the continuance of an Event
of Default, the Administrative Agent is empowered to request the appointment of
a receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the Governmental Authority an involuntary transfer of
control of each such Governmental Approval for the purpose of seeking a bona
fide purchaser to whom control will ultimately be transferred. Each Obligor
hereby agrees to authorize such an involuntary transfer of control upon the
request of the receiver so appointed, and, if such Obligor shall refuse to
authorize the transfer, its approval may be required by the court. Upon the
occurrence and continuance of an Event of Default, such Obligor shall further
use its reasonable best efforts to assist in obtaining Governmental Approvals,
if required, for any action or transaction contemplated by this Security
Agreement, including, without limitation, the preparation, execution and filing
with the Governmental Authority of such Obligor’s portion of any necessary or
appropriate application for the approval of the transfer or assignment of any
portion of the assets (including any Governmental Approval) of such Obligor.
Because each Obligor agrees that the Administrative Agent’s remedy at law for
failure of such Obligor to comply with the provisions of this subsection would
be inadequate and that such failure would not be adequately compensable in
damages, such Obligor agrees that the covenants contained in this subsection may
be specifically enforced, and such Obligor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants.

(q)           Insurance. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. Each Obligor shall promptly notify
the Administrative Agent, in accordance with Section 7.6 of the Credit
Agreement, of any material updates to its material insurance policies. All
proceeds derived from insurance on the Collateral shall be subject to the
security interest of the Administrative Agent hereunder.

(r)            Covenants Relating to the Assigned Agreements.
 
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(i)           Upon the request of the Administrative Agent, each Obligor shall,
at its expense, (A) furnish to the Administrative Agent copies of all notices,
requests and other documents received by such Obligor under or pursuant to the
Assigned Agreements, and such other information and reports regarding the
Assigned Agreements and (B) make to any other party to any Assigned Agreement
such demands and requests for information and reports or for action as an
Obligor is entitled to make thereunder.

(ii)          Unless the applicable Obligor believes it is necessary in the
prudent conduct of its business, no Obligor shall (A) cancel or terminate any
Assigned Agreement of such Obligor or consent to or accept any cancellation or
termination thereof; (B) amend or otherwise modify any Assigned Agreement of
such Obligor or give any consent, waiver or approval thereunder; (C) waive any
default under or breach of any Assigned Agreement of such Obligor; or (D) take
any other action in connection with any Assigned Agreement of such Obligor which
would impair the value of the interest or rights of such Obligor thereunder or
which would impair the interests or rights of the Administrative Agent.

6.           License of Intellectual Property. The Obligors hereby assign,
transfer and convey to the Administrative Agent, effective upon the occurrence
and during the continuance of any Event of Default, the nonexclusive right and
license to use all Intellectual Property owned or used by any Obligor that
relate to the Collateral and any other collateral granted by the Obligors as
security for the Secured Obligations, together with any goodwill associated
therewith, all to the extent necessary to enable the Administrative Agent to
use, possess and realize on the Collateral and to enable any successor or assign
to enjoy the benefits of the Collateral. This right and license shall inure to
the benefit of all successors, assigns and transferees of the Administrative
Agent and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to the
Obligors.

7.           Special Provisions Regarding Inventory. Notwithstanding anything to
the contrary contained in this Security Agreement, each Obligor may, unless and
until an Event of Default occurs and is continuing and the Administrative Agent
instructs such Obligor otherwise, without further consent or approval of the
Administrative Agent, use, consume, sell, lease and exchange its Inventory in
the ordinary course of its business as presently conducted, whereupon, in the
case of such a sale or exchange, the security interest created hereby in the
Inventory so sold or exchanged (but not in any Proceeds arising from such sale
or exchange) shall cease immediately without any further action on the part of
the Administrative Agent.

8.           Performance of Obligations; Advances by Administrative Agent. On
failure of any Obligor to perform any of the covenants and agreements contained
herein, the Administrative Agent may, at its sole option and in its sole
discretion, perform or cause to be performed the same and in so doing may expend
such sums as the Administrative Agent may reasonably deem advisable in the
performance thereof, including, without limitation, the payment of any insurance
premiums, the payment of any taxes, a payment to obtain a release of a Lien or
potential Lien, expenditures made in defending against any adverse claim and all
other expenditures which the Administrative Agent may make for the protection of
the security interest hereof or may be compelled to make by operation of law.
All such sums and amounts so expended shall be repayable by the Obligors on a
joint and several basis promptly upon timely notice thereof and demand therefor,
shall constitute additional Secured Obligations and shall bear interest from the
date said amounts are expended at the default rate for Revolving Loans that are
Base Rate Loans set forth in Section 3.1 of the Credit Agreement. No such
performance of any covenant or agreement by the Administrative Agent on behalf
of any Obligor, and no such advance or expenditure therefor, shall relieve the
Obligors of any default under the terms of this Security Agreement, the other
Credit Documents or any Secured Hedging Agreement. The Administrative Agent may
make any payment hereby authorized in accordance with any bill, statement or
estimate procured from the appropriate public office or holder of the claim to
be discharged without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax assessment, sale, forfeiture, tax lien,
title or claim except to the extent such payment is being contested in good
faith by an Obligor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.
 
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9.           Events of Default.

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

10.         Remedies.

(a)           General Remedies. Upon the occurrence of an Event of Default and
during continuation thereof, the Administrative Agent and the Lenders shall
have, in addition to the rights and remedies provided herein, in the Credit
Documents, in any Secured Hedging Agreement or by law (including, but not
limited to, levy of attachment, garnishment and the rights and remedies set
forth in the UCC of the jurisdiction applicable to the affected Collateral), the
rights and remedies of a secured party under the UCC (regardless of whether the
UCC is the law of the jurisdiction where the rights and remedies are asserted
and regardless of whether the UCC applies to the affected Collateral), and
further, the Administrative Agent may, with or without judicial process or the
aid and assistance of others, (i) enter on any premises on which any of the
Collateral may be located and, without resistance or interference by the
Obligors, take possession of the Collateral, (ii) dispose of any Collateral on
any such premises, (iii) require the Obligors to assemble and make available to
the Administrative Agent at the expense of the Obligors any Collateral at any
place and time designated by the Administrative Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such premises
for the purpose of effecting the sale or other disposition thereof, and/or (v)
without demand and without advertisement, notice, hearing or process of law, all
of which each of the Obligors hereby waives to the fullest extent permitted by
law, at any place and time or times, sell and deliver any or all Collateral held
by or for it at public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon such terms
as the Administrative Agent deems advisable, in its sole discretion (subject to
any and all mandatory legal requirements). Neither the Administrative Agent’s
compliance with any applicable state or federal law in the conduct of such sale,
nor its disclaimer of any warranties relating to the Collateral, shall be
considered to adversely affect the commercial reasonableness of such sale. In
addition to all other sums due the Administrative Agent and the Lenders with
respect to the Secured Obligations, the Obligors shall pay the Administrative
Agent and each of the Lenders all reasonable documented costs and expenses
incurred by the Administrative Agent or any such Lender, including, but not
limited to, reasonable attorneys’ fees and court costs, in obtaining or
liquidating the Collateral, in enforcing payment of the Secured Obligations, or
in the prosecution or defense of any action or proceeding by or against the
Administrative Agent or the Lenders or the Obligors concerning any matter
arising out of or connected with this Security Agreement, any Collateral or the
Secured Obligations, including, without limitation, any of the foregoing arising
in, arising under or related to a case under the Bankruptcy Code. To the extent
the rights of notice cannot be legally waived hereunder, each Obligor agrees
that any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Borrower in accordance
with the notice provisions of Section 11.1 of the Credit Agreement at least ten
(10) days before the time of sale or other event giving rise to the requirement
of such notice. The Administrative Agent and the Lenders shall not be obligated
to make any sale or other disposition of the Collateral regardless of notice
having been given. To the extent permitted by law, any Lender may be a purchaser
at any such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to any such
sale. Subject to the provisions of applicable law, the Administrative Agent and
the Lenders may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such sale,
and such sale may, without further notice, to the extent permitted by law, be
made at the time and place to which the sale was postponed, or the
Administrative Agent and the Lenders may further postpone such sale by
announcement made at such time and place.
 
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(b)           Remedies Relating to Accounts. Upon the occurrence of an Event of
Default and during the continuation thereof, whether or not the Administrative
Agent has exercised any or all of its rights and remedies hereunder, the
Administrative Agent shall have the right to enforce any Obligor’s rights
against any account debtors and obligors on such Obligor’s Accounts. Each
Obligor acknowledges and agrees that the Proceeds of its Accounts remitted to or
on behalf of the Administrative Agent in accordance with the provisions of this
Section shall be solely for the Administrative Agent’s own convenience and that
such Obligor shall not have any right, title or interest in such Proceeds or in
any such other amounts except as expressly provided herein. After the occurrence
and during the continuance of an Event of Default, to the extent required by the
Administrative Agent, each Obligor agrees to execute any document or instrument,
and to take any action, necessary under applicable law (including the Federal
Assignment of Claims Act) in order for the Administrative Agent to exercise its
rights and remedies (or be able to exercise its rights and remedies at some
future date) with respect to any Accounts of such Obligor where the account
debtor is a Governmental Authority. The Administrative Agent and the Lenders
shall have no liability or responsibility to any Obligor for acceptance of a
check, draft or other order for payment of money bearing the legend “payment in
full” or words of similar import or any other restrictive legend or endorsement
or be responsible for determining the correctness of any remittance. Each
Obligor hereby agrees to indemnify the Administrative Agent and the Lenders and
their respective officers, directors, employees, agents, advisors and affiliates
from and against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys’ fees suffered or incurred by
the Administrative Agent or the Lenders (each, an “Indemnified Party”) because
of the maintenance of the foregoing arrangements except, with respect to any
Indemnified Party, as relating to or arising out of the gross negligence or
willful misconduct of such Indemnified Party or its officers, employees or
agents. In the case of any investigation, litigation or other proceeding, the
foregoing indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by an Obligor, its directors, shareholders
or creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
 
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(c)           Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the
Administrative Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Administrative Agent, and
use the same, together with materials, supplies, books and records of the
Obligors for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Administrative Agent may
remove Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral. If the Administrative Agent exercises its right to take possession
of the Collateral, each Obligor shall also at its expense perform any and all
other steps reasonably requested by the Administrative Agent to preserve and
protect the security interest hereby granted in the Collateral, such as placing
and maintaining signs indicating the security interest of the Administrative
Agent, appointing overseers for the Collateral and maintaining inventory
records.

(d)           Nonexclusive Nature of Remedies. Failure by the Administrative
Agent or the Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Secured Hedging Agreement or as
provided by law, or any delay by the Administrative Agent or the Lenders in
exercising the same, shall not operate as a waiver of any such right, remedy or
option. No waiver hereunder shall be effective unless it is in writing, signed
by the party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Administrative Agent or
the Lenders shall only be granted as provided herein. To the extent permitted by
law, neither the Administrative Agent, the Lenders, nor any party acting as
attorney for the Administrative Agent or the Lenders, shall be liable hereunder
for any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct hereunder. The rights
and remedies of the Administrative Agent and the Lenders under this Security
Agreement shall be cumulative and not exclusive of any other right or remedy
which the Administrative Agent or the Lenders may have.
 
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(e)           Retention of Collateral. In addition to the rights and remedies
hereunder, upon the occurrence of an Event of Default and during the
continuation thereof, the Administrative Agent may, after providing the notices
required by Sections 9-620 and 9-621 of the UCC (or any successor sections of
the UCC) or otherwise complying with the notice requirements of applicable law
of the relevant jurisdiction, accept or retain all or any portion of the
Collateral in satisfaction of the Secured Obligations. Unless and until the
Administrative Agent shall have provided such notices, however, the
Administrative Agent shall not be deemed to have retained any Collateral in
satisfaction of any Secured Obligations for any reason.

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

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

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

(i)           to demand, collect, settle, compromise, adjust and give discharges
and releases concerning the Collateral of such Obligor, all as the
Administrative Agent may reasonably determine in respect of such Collateral;

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

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

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

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

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

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

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

(ix)         to execute any document or instrument, and to take any action,
necessary under applicable law (including the Federal Assignment of Claims Act)
in order for the Administrative Agent to exercise its rights and remedies (or to
be able to exercise its rights and remedies at some future date) with respect to
any Account of an Obligor where the account debtor is a Governmental Authority;
and
 
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(x)          to do and perform all such other acts and things as the
Administrative Agent may reasonably deem to be necessary, proper or convenient
in connection with the Collateral.

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

(b)           Assignment by the Administrative Agent. The Administrative Agent
may from time to time assign the Secured Obligations or any portion thereof
and/or the Collateral or any portion thereof to a successor Administrative
Agent, and the assignee shall be entitled to all of the rights and remedies of
the Administrative Agent under this Security Agreement in relation thereto.

(c)           The Administrative Agent’s Duty of Care. Other than the exercise
of reasonable care to assure the safe custody of the Collateral while being held
by the Administrative Agent hereunder, the Administrative Agent shall have no
duty or liability to preserve rights pertaining thereto, it being understood and
agreed that the Obligors shall be responsible for preservation of all rights in
the Collateral, and the Administrative Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering the
surrender of it to the Obligors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own property, which shall be no
less than the treatment employed by a reasonable and prudent agent in the
industry, it being understood that the Administrative Agent shall not have
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any of the Collateral. In the event of a public or
private sale of Collateral pursuant to Section 10 hereof, the Administrative
Agent shall have no obligation to clean-up, repair or otherwise prepare the
Collateral for sale.

12.         Application of Proceeds. After the exercise of remedies by the
Administrative Agent or the Lenders pursuant to Section 9.2 of the Credit
Agreement (or after the Commitments shall automatically terminate and the Loans
(with accrued interest thereon) and all other amounts under the Credit Documents
(including without limitation the maximum amount of all contingent liabilities
under Letters of Credit) shall automatically become due and payable in
accordance with the terms of such Section), any proceeds of the Collateral, when
received by the Administrative Agent, any of the Lenders or any Hedging
Agreement Provider in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.15 of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and
reapply any and all such proceeds in the Administrative Agent’s sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
 
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13.         Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Administrative Agent employs
counsel to prepare or consider amendments, waivers or consents with respect to
this Security Agreement, or to take action or make a response in or with respect
to any legal or arbitral proceeding relating to this Security Agreement or
relating to the Collateral, or to protect the Collateral or exercise any rights
or remedies under this Security Agreement or with respect to the Collateral,
then the Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Administrative Agent, all of which costs
and expenses shall constitute Secured Obligations hereunder.

14.         Continuing Agreement.

(a)         This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations (other than contingent indemnity obligations that survive
termination of the Credit Documents pursuant to the stated terms thereof) remain
outstanding, any Credit Document or Secured Hedging Agreement is in effect, and
until all of the Commitments shall have been terminated. Upon such payment and
termination, this Security Agreement shall be automatically terminated and the
Administrative Agent and the Lenders shall, upon the request and at the expense
of the Obligors, forthwith release all of the Liens and security interests
granted hereunder and shall execute and/or deliver all UCC termination
statements and/or other documents reasonably requested by the Obligors
evidencing such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this Security
Agreement.

(b)         This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar
law, all as though such payment had not been made; provided that in the event
that payment of all or any part of the Secured Obligations is rescinded or must
be restored or returned, all reasonable costs and expenses (including without
limitation any reasonable legal fees and disbursements) incurred by the
Administrative Agent or any Lender in defending and enforcing such reinstatement
shall be deemed to be included as a part of the Secured Obligations.
 
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15.         Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.

16.         Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Administrative Agent and the Lenders hereunder, to the
benefit of the Administrative Agent and the Lenders and their successors and
permitted assigns; provided, however, that none of the Obligors may assign its
rights or delegate its duties hereunder without the prior written consent of
each Lender or the Required Lenders, as required by the Credit Agreement. To the
fullest extent permitted by law, each Obligor hereby releases the Administrative
Agent and each Lender, each of their respective officers, employees and agents
and each of their respective successors and assigns, from any liability for any
act or omission relating to this Security Agreement or the Collateral, except
for any liability arising from the gross negligence or willful misconduct of the
Administrative Agent or such Lender or their respective officers, employees and
agents, in each case as determined by a court of competent jurisdiction pursuant
to a final non-appealable judgment.

17.         Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.

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

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

20.         Governing Law; Submission to Jurisdiction and Service of Process;
Waiver of Jury Trial; Venue. THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. The terms
of Sections 11.10 and 11.16 of the Credit Agreement are incorporated herein by
reference, mutatis mutandis, and the parties hereto agree to such terms.

21.         Severability. If any provision of this Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
 
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22.         Entirety. This Security Agreement, the other Credit Documents and
the Secured Hedging Agreements represent the entire agreement of the parties
hereto and thereto, and supersede all prior agreements and understandings, oral
or written, if any, including any commitment letters or correspondence relating
to this Security Agreement, the other Credit Documents, the Secured Hedging
Agreements or the transactions contemplated herein and therein.

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

24.         Joint and Several Obligations of Obligors.

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

(b)         Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Obligors with respect to the payment and
performance of all of the Secured Obligations arising under this Security
Agreement, the other Credit Documents and the Secured Hedging Agreements, it
being the intention of the parties hereto that all the Secured Obligations shall
be the joint and several obligations of each of the Obligors without preferences
or distinction among them.

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

25.         Rights of Required Lenders. All rights of the Administrative Agent
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.

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

BORROWER:
BENIHANA INC.,
 
a Delaware corporation
 
   
   
    By:   /s/ Joel A. Schwartz   

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Joel A. Schwartz
 
President

GUARANTORS:
   
1501 BROADWAY RESTAURANT CORP.,
a New York corporation
BENIHANA BETHESDA CORP.,
a New York corporation
BENIHANA BRICKELL STATION CORP.,
a Delaware corporation
BENIHANA BROOMFIELD CORP.,
a Delaware corporation
BENIHANA CARLSBAD CORP.,
a Delaware corporation
BENIHANA CHANDLER CORP.,
a Delaware corporation
BENIHANA CHICAGO CORP.,
a Delaware corporation
BENIHANA ENCINO CORP.,
a California corporation
BENIHANA INTERNATIONAL CORP.,
a Delaware corporation
BENIHANA LINCOLN ROAD CORP.,
a Florida corporation
BENIHANA LOMBARD CORP.,
an Illinois corporation
BENIHANA MARINA CORP.,
a California corporation
BENIHANA MONTEREY CORPORATION,
a Delaware corporation
BENIHANA NATIONAL CORP.,
a Delaware corporation
BENIHANA NATIONAL OF FLORIDA CORP.,
a Delaware corporation
BENIHANA NEW YORK CORP.,
a Delaware corporation
BENIHANA ONTARIO CORP.,
a Delaware corporation
BENIHANA ORLANDO CORP.,
a Delaware corporation
 
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BENIHANA PLYMOUTH MEETING CORP.,
a Delaware corporation
BENIHANA OF PUENTE HILLS CORP.,
a Delaware corporation
BENIHANA SCHAUMBURG CORP.,
a Delaware corporation
BENIHANA SUNRISE CORPORATION,
a Delaware corporation
BENIHANA TUCSON CORP.,
a Delaware corporation
BENIHANA WESTBURY CORP.,
a Delaware corporation
BENIHANA WESTWOOD CORP.,
a Delaware corporation
BENIHANA WHEELING CORP.,
a Delaware corporation
BIG SPLASH KENDALL CORP.,
a Delaware corporation
HARU AMSTERDAM AVENUE CORP.,
a New York corporation
HARU FOOD CORP.,
a New York corporation
HARU GRAMERCY PARK CORP.,
a New York corporation
HARU HOLDING CORP.,
a Delaware corporation
HARU PARK AVENUE CORP.,
a Delaware corporation
HARU PHILADELPHIA CORP.,
a Delaware corporation
HARU PRUDENTIAL CORP.,
a Delaware corporation
HARU THIRD AVENUE CORP.,
a New York corporation
HARU TOO, INC.,
a New York corporation
HARU WALL STREET CORP.,
a Delaware corporation
MAXWELL’S INTERNATIONAL INC.,
a Delaware corporation
NOODLE TIME, INC.,
a Florida corporation
RA AHWATUKEE RESTAURANT CORP.,
a Delaware corporation
RA FASHION VALLEY CORP.,
a Delaware corporation
RA KIERLAND RESTAURANT CORP.,
a Delaware corporation
RA SCOTTSDALE CORP.,
a Delaware corporation
 
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RA TEMPE CORP.,
a Delaware corporation
RA SUSHI BALTIMORE CORP.,
a Delaware corporation
RA SUSHI CHICAGO CORP.,
a Delaware corporation
RA SUSHI CORONA CORP.,
a Delaware corporation
RA SUSHI DENVER CORP.,
a Delaware corporation
RA SUSHI GLENVIEW CORP.,
a Delaware corporation
RA SUSHI HUNTINGTON BEACH CORP.,
a Delaware corporation
RA SUSHI HOLDING CORP.,
a Delaware corporation
RA SUSHI LAS VEGAS CORP.,
a Nevada corporation
RA SUSHI LOMBARD CORP.,
a Delaware corporation
RA SUSHI MESA CORP.,
a Delaware corporation
RA SUSHI PALM BEACH GARDENS CORP.,
a Delaware corporation
RA SUSHI SAN DIEGO CORP.,
a Delaware corporation
RA SUSHI SOUTH MIAMI CORP.,
a Delaware corporation
RA SUSHI TORRANCE CORP.,
a Delaware corporation
RA SUSHI TUCSON CORP.,
a Delaware corporation
RA SUSHI TUSTIN CORP.,
a Delaware corporation
RA SUSHI WESTWOOD CORP.,
a Delaware corporation
RUDY’S RESTAURANT GROUP, INC.,
a Nevada corporation
TEPPAN RESTAURANTS LTD.,
an Oregon corporation
THE SAMURAI, INC.,
a New York corporation

 

        By:   /s/ Joel A. Schwartz  

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Name: Joel A. Schwartz
  Title: President of each of the foregoing Guarantors

 
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BENIHANA LAS COLINAS CORP.,
a Texas corporation
BENIHANA OF TEXAS, INC.,
a Texas corporation
BENIHANA WOODLANDS CORP.,
a Texas corporation
RA HOUSTON CORP.,
a Texas corporation
RA SUSHI CITY CENTER CORP.,
a Texas corporation
RA SUSHI PLANO CORP.,
a Texas corporation

 
 
 
 

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Accepted and agreed to as of the date first above written.
 

       
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent
 
   
   
    By:      

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Name:
  Title: