Exhibit 10.2

Execution Version

GUARANTEE AND COLLATERAL AGREEMENT

made by

PAPERWEIGHT DEVELOPMENT CORP.,

APPVION, INC.,

and certain of its Subsidiaries

in favor of

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Administrative Agent

Dated as of October 4, 2017

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TABLE OF CONTENTS

 

     Page  

SECTION 1. DEFINED TERMS

     2  

1.1 Definitions

     2  

1.2 Other Definitional Provisions

     7  

SECTION 2. GUARANTEE

     7  

2.1 Guarantee

     7  

2.2 Right of Contribution

     8  

2.3 No Subrogation

     8  

2.4 Amendments, etc. with respect to the Borrower Obligations

     9  

2.5 Guarantee Absolute and Unconditional

     9  

2.6 Reinstatement

     10  

2.7 Payments

     10  

SECTION 3. GRANT OF SECURITY INTEREST

     10  

SECTION 4. REPRESENTATIONS AND WARRANTIES

     12  

4.1 Representations in Credit Agreement

     12  

4.2 Title; No Other Liens

     12  

4.3 Perfected First Priority Liens

     13  

4.4 Jurisdiction of Organization; Chief Executive Office

     13  

4.5 Inventory and Equipment

     13  

4.6 Farm Products

     13  

4.7 Investment Property

     14  

4.8 Receivables

     14  

4.9 Intellectual Property

     14  

SECTION 5. COVENANTS

     15  

5.1 Covenants in Credit Agreement

     15  

 

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TABLE OF CONTENTS

 

     Page  

5.2 Delivery of Instruments, Certificated Securities and Chattel Paper

     15  

5.3 Maintenance of Insurance

     15  

5.4 Maintenance of Perfected Security Interest; Further Documentation

     15  

5.5 Changes in Locations, Name, etc.

     16  

5.6 Notices

     17  

5.7 Investment Property

     17  

5.8 Receivables

     18  

5.9 Intellectual Property

     18  

5.10 Commercial Tort Claims

     20  

5.11 Cash Management Systems

     20  

SECTION 6. REMEDIAL PROVISIONS

     21  

6.1 Certain Matters Relating to Receivables

     21  

6.2 Communications with Obligors; Grantors Remain Liable

     22  

6.3 Pledged Stock

     23  

6.4 Proceeds to be Turned Over to Administrative Agent

     24  

6.5 Application of Proceeds

     24  

6.6 Code and Other Remedies

     24  

6.7 Private Sales

     25  

6.8 Deficiency

     26  

6.9 Intellectual Property License

     26  

SECTION 7. THE ADMINISTRATIVE AGENT

     26  

7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc.

     26  

7.2 Duty of Administrative Agent

     28  

7.3 Filing of Financing Statements

     28  

 

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TABLE OF CONTENTS

 

     Page  

7.4 Authority of Administrative Agent

     29  

SECTION 8. MISCELLANEOUS

     29  

8.1 Amendments in Writing

     29  

8.2 Notices

     29  

8.3 No Waiver by Course of Conduct; Cumulative Remedies

     29  

8.4 Enforcement Expenses; Indemnification

     30  

8.5 Successors and Assigns

     30  

8.6 Set-Off

     30  

8.7 Counterparts

     31  

8.8 Severability

     31  

8.9 Section Headings

     31  

8.10 Integration

     31  

8.11 GOVERNING LAW

     31  

8.12 Submission To Jurisdiction; Waivers

     32  

8.13 Acknowledgements

     32  

8.14 Additional Grantors

     32  

8.15 Releases

     33  

8.16 WAIVER OF JURY TRIAL

     33  

 

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GUARANTEE AND COLLATERAL AGREEMENT, dated as of October 4, 2017 (as the same may
be amended, restated, supplemented and/or otherwise modified from time to time,
this “Agreement”), made by each of the signatories hereto (together with any
other entity that may become a party hereto as provided herein, the “Grantors”),
in favor of Wilmington Trust, National Association, as Administrative Agent (in
such capacity, the “Administrative Agent”) for the banks, financial institutions
and other entities (the “Lenders”) from time to time parties to the
Superpriority Senior Debtor-in-Possession Credit Agreement, dated as of
October 2, 2017 (as amended, restated, supplemented and/or otherwise modified
from time to time, the “Credit Agreement”), among Appvion, Inc., a Delaware
corporation (the “Borrower”), Paperweight Development Corp., a Wisconsin
corporation (“Holdings”), the Administrative Agent and the Lenders.

W I T N E S S E T H:

WHEREAS, on October 1, 2017 (the “Petition Date”), the Borrower and the other
Grantors commenced the Chapter 11 Cases by filing voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code, with the Bankruptcy
Court. The Debtors continue to operate their business and manage their
properties as debtors and debtors-in-possession pursuant to Sections 1107(a) and
1108 of the Bankruptcy Code;

WHEREAS, prior to the Petition Date, the Prepetition First Lien Lenders provided
financing to Borrower pursuant to that certain Credit Agreement, dated as of
June 28, 2013, by and among the Borrower, Holdings, the Prepetition First Lien
Lenders, the Prepetition First Lien Administrative Agent and the Prepetition
First Lien Agents (as amended or otherwise modified through the Petition Date,
the “Prepetition First Lien Credit Agreement”);

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

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

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement
will be used in part (i) to refinance certain existing indebtedness and cash
collateralize outstanding letters of credit, (ii) to pay fees, costs and
expenses incurred in connection with the transactions contemplated by the Credit
Agreement and (iii) other administration costs incurred in connection with the
Chapter 11 Cases;

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

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

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

SECTION 1. DEFINED TERMS

1.1 Definitions.

(a) Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein, including in the recitals hereto, shall have the meanings given to
them in the Credit Agreement, and the following terms are used herein as defined
in the New York UCC: Account, Certificated Security, Chattel Paper, Commercial
Tort Claim, Contract, Document, Equipment, Farm Products, General Intangible,
Instruments, Inventory, Letter-of-Credit Right and Supporting Obligation.

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

“Borrower Credit Agreement Obligations”: with respect to the Borrower, the
collective reference to the unpaid principal of and interest on the Loans and
all other obligations and liabilities of the Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans) to the Administrative Agent or any
Lender, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan Documents
or any other document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Administrative Agent or the Lenders
that are required to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).

“Borrower Obligations”: with respect to the Borrower, the collective reference
to (i) the Borrower Credit Agreement Obligations, (ii) the Secured Hedge
Agreement Obligations, (iii) Secured Cash Management Obligations and (iv) all
other obligations and liabilities of the Loan Parties to the Administrative
Agent or any Lender, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement (including, without limitation, all
fees and disbursements of counsel to the Administrative Agent or the Lenders
that are required to be paid by the Borrower pursuant to the terms of this
Agreement). For the avoidance of doubt, Borrower Obligations shall not include
any Excluded Hedge Obligations.

“Canadian Grantors”: the grantors under the Guarantee and Collateral Agreement
(Canada), dated as of the date hereof (as the same may be amended, restated,
supplemented and/or otherwise modified from time to time), by and among
Wilmington Trust, National Association, as administrative agent, and the
grantors from time to time party thereto.

 

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“CFC”: a “controlled foreign corporation” within the meaning of Sections 956 and
957 of the Code.

“Collateral”: as defined in Section 3.

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

“Copyrights”: (i) all copyrights arising under the Laws of the United States,
any other country or any political subdivisions thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Schedule 6), all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States
Copyright Office or any other similar authority throughout the world, (ii) all
rights corresponding thereto throughout the world and (iii) the right to obtain
all extensions and renewals thereof.

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

“Credit Agreement Collateral”: all “Collateral” under, and as defined in, the
Credit Agreement.

“Deposit Account”: as defined in the New York UCC and, in any event, including,
without limitation, any demand, time, savings, passbook or like account
maintained with a depositary institution. The Deposit Accounts of the Grantors
as of the Closing Date are listed on Schedule 8.

“Excluded Stock”: means all interests of the Borrower or any Grantor in (i) Rose
Holdings Limited, (ii) Appvion de Mexico SA de CV, (iii) any Immaterial
Subsidiary and (iv) any CFC in excess of 66% of the outstanding voting stock of
such CFC, in the case of this clause (iv) to the extent a pledge of the
interests of such CFC would result in a material adverse tax or accounting
consequence to the Borrower.

“Governmental Authority”: the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

“Guarantor Obligations”: with respect to any Guarantor, the collective reference
to (i) the Borrower Credit Agreement Obligations, (ii) the Secured Hedge
Agreement Obligations, (iii) the Secured Cash Management Obligations and
(iv) all other obligations and liabilities of such Guarantor to the
Administrative Agent or any Lender which may arise under or in connection with
this Agreement (including, without limitation, Section 2) or any other Loan
Document to which such Guarantor is a party, in each case whether on account of
guarantee obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or the Lenders that are required to be
paid by such Guarantor pursuant to the terms of this Agreement or any other Loan
Document). For the avoidance of doubt, the Guarantor Obligations shall not
include any Excluded Hedge Obligations.

 

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“Guarantors”: the collective reference to each Grantor other than the Borrower.
It is understood and agreed that in no event shall any Immaterial Subsidiary be
deemed to be a Guarantor.

“Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property or similar proprietary rights,
whether arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, Trade
Secrets and Trade Secret Licenses and all rights thereto throughout the world
including, without limitation, all claims, causes of action, defenses arising
out of or related to any of the foregoing and the right to sue at law or in
equity for any past, present and future infringement, misappropriation, misuse,
dilution or other impairment thereof, including the right to receive all
proceeds and damages from all of the foregoing.

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

“Investment Property”: the collective reference to (i) all “investment property”
as such term is defined in Section 9-102(a)49 of the New York UCC and
(ii) whether or not constituting “investment property” as so defined in the
preceding clause (i), all Pledged Notes and all Pledged Stock; provided that in
no event shall Investment Property include any Excluded Stock.

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

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

“Obligations”: in the case of any Grantor, such Person’s (i) Borrower
Obligations and/or (ii) Guarantor Obligations.

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

“Patents”: (i) all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof, including,
without limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country and
all reissues, extensions, renewals, reexaminations, divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in Schedule 6, (iii) all invention disclosures, utility
models or similar industrial property rights and (iv) all rights corresponding
thereto, including rights to obtain any reissues or extensions of the foregoing.

 

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“Permitted Unperfected Account”: with respect to any Grantor, any Deposit
Account of such Grantor that is used solely as (i) a payroll account, (ii) an
employee benefit account, (iii) an operating expenses disbursement account that
is zero-balanced on a daily basis, (iv) a sub-concentration account that is
zero-balanced on a daily basis, (v) a fiduciary, escrow or trust account or
(vi) a tax account, including with respect to sales taxes; or (c) as to which
the Required Lenders otherwise agree that no control agreement need be obtained.
The Permitted Unperfected Accounts of the Grantors as of the Closing Date are so
indicated on Schedule 8.

“Pledged Notes”: all promissory notes listed on Schedule 2, all Intercompany
Notes at any time issued to any Grantor in excess of $1,000,000 (or Intercompany
Notes which, in the aggregate, are in excess of $1,000,000) and all other
promissory notes issued to or held by any Grantor in excess of $1,000,000 in the
aggregate (other than promissory notes issued in connection with extensions of
trade credit by any Grantor in the ordinary course of business).

“Pledged Stock”: the shares of Capital Stock listed on Schedule 2, together with
any other shares, stock certificates, options, interests or rights of any nature
whatsoever in respect of the Capital Stock of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in effect; provided
that such term shall not, in any case, include any Excluded Stock.

“Prepetition First Lien Credit Agreement”: as defined in the recitals hereto.

“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of
the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.

“Receivable”: any right to payment for goods sold or leased or for services
rendered, whether or not such right is evidenced by an Instrument or Chattel
Paper and whether or not it has been earned by performance (including, without
limitation, any Account).

“Requirement of Law”: as to any Person, the certificate or articles of
incorporation and by laws or other organizational or governing documents of such
Person, and any Law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

“Secured Cash Management Obligations”: the collective reference to all
obligations and liabilities of a Loan Party (including, without limitation,
interest accruing at the then applicable rate provided in any Secured Cash
Management Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to a
Loan Party, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) to any Cash Management Bank, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, any
Secured Cash Management Agreement or any other document made, delivered or given
in connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
relevant Lender or affiliate thereof that are required to be paid by any Loan
Party pursuant to the terms of any Secured Cash Management Agreement).

 

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“Secured Hedge Agreement Obligations”: the collective reference to all
obligations and liabilities of a Loan Party (including, without limitation,
interest accruing at the then applicable rate provided in any Secured Hedge
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to such Loan Party,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) to any Hedge Bank, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, any Secured Hedge Agreement or
any other document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the relevant Lender or affiliate thereof
that are required to be paid by the Borrower pursuant to the terms of any
Secured Hedge Agreement). For the avoidance of doubt, Secured Hedge Agreement
Obligations shall not include any Excluded Hedge Obligation.

“Securities Account”: as defined in the New York UCC. The Securities Accounts of
the Grantors as of the Closing Date are listed on Schedule 8.

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

“Trade Secret Licenses”: means any and all written or oral agreements granting
any right in or to Trade Secrets (whether a Grantor is licensee or licensor
thereunder).

“Trade Secrets”: means all trade secrets, as recognized under applicable local
Law, whether or not reduced to a writing or other tangible form, now or
hereafter in force, owned or used in, or contemplated at any time for use in,
the business of any Grantor, including with respect to any and all of the
foregoing: (i) all documents and things embodying, incorporating, or referring
in any way thereto, (ii) all rights to sue for past, present and future
infringement thereof, (iii) all claims, damages, and proceeds of suit arising
therefrom, and (iv) all payments and royalties and rights to payments and
royalties arising out of the sale, lease, license, assignment, or other
dispositions thereof.

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

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

 

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Notwithstanding the foregoing, the Trademarks shall not include any
“intent-to-use” applications for trademark or service mark registrations filed
pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section 1051, unless and
until an Amendment to Allege Use or a Statement of Use under Section 1(c) or
Section 1(d) of the Lanham Act has been filed, to the extent that any assignment
of an “intent-to-use” application prior to such filing would violate the Lanham
Act or cause the trademark that is the subject thereof to be invalidated or
abandoned.

1.2 Other Definitional Provisions.

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

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

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

(d) Unless the context otherwise requires, any Cash Management Bank or Hedge
Bank which is party to a Secured Hedge Agreement or a Secured Cash Management
Agreement shall be deemed to be a “Lender” for purposes of this Agreement.

SECTION 2. GUARANTEE

2.1 Guarantee.

(a) Each of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Administrative Agent, for the ratable benefit of
the Secured Parties and their respective successors, endorsees, transferees and
assigns, the prompt and complete payment and performance by the Borrower when
due (whether at the stated maturity, by acceleration or otherwise) of all
Obligations.

(b) Reserved.

(c) Each Guarantor agrees that the Obligations may at any time and from time to
time exceed the amount of the liability of such Guarantor hereunder without
impairing the guarantee contained in this Section 2 or affecting the rights and
remedies of the Administrative Agent, any Lender or any other Secured Party
hereunder.

(d) The guarantee contained in this Section 2 shall remain in full force and
effect until all the Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been satisfied by payment in
full in cash (other than contingent or indemnification obligations for which no
claim has been made) and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Borrower may
be free from any Obligations; provided that any Guarantor shall be released from
its guarantee contained in this Section 2 as provided in Section 8.15.

 

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(e) No payment made by the Borrower, any of the Guarantors, any other guarantor
or any other Person or received or collected by the Administrative Agent, any
Lender or any other Secured Party from the Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
release the liability of any Guarantor hereunder which shall, notwithstanding
any such payment (other than any payment made by such Guarantor in respect of
the Obligations or any payment received or collected from such Guarantor in
respect of the Obligations), remain liable for the Borrower Obligations up to
the maximum liability of such Guarantor hereunder until the Borrower Obligations
are paid in full in cash (other than contingent or indemnification obligations
for which no claim has been made) and the Commitments are terminated; provided
that any Guarantor shall be released from its guarantee contained in this
Section 2 as provided in Section 8.15. Notwithstanding the foregoing, in no
event shall the Guarantors be liable for payment of any amount in excess of the
then outstanding Borrower Obligations and, without duplication, Guarantor
Obligations.

2.2 Right of Contribution.

Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Guarantor
shall be entitled to seek and receive contribution from and against any other
Guarantor hereunder which has not paid its proportionate share of such payment.
Each Guarantor’s right of contribution shall be subject to the terms and
conditions of Section 2.3. The provisions of this Section 2.2 shall in no
respect limit the obligations and liabilities of any Guarantor to the
Administrative Agent, the Lenders and any of the other Secured Parties, and each
Guarantor shall remain liable to the Secured Parties for the full amount
guaranteed by such Guarantor hereunder.

2.3 No Subrogation.

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

 

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2.4 Amendments, etc. with respect to the Borrower Obligations.

To the maximum extent permitted by applicable Law, each Guarantor shall remain
obligated hereunder notwithstanding that, without any reservation of rights
against any Guarantor and without notice to or further assent by any Guarantor,
any demand for payment of any of the Borrower Obligations made by the
Administrative Agent, any Lender or any other Secured Party may be rescinded by
such Secured Party and any of the Borrower Obligations continued, and the
Borrower Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent, any Lender or any other Secured Party, and
the Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the respective Secured
Parties party thereto may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent, any Lender or any other Secured Party for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. No Secured
Party shall have any obligation to protect, secure, perfect or insure any Lien
at any time held by it as security for the Borrower Obligations or for the
guarantee contained in this Section 2 or any property subject thereto.

2.5 Guarantee Absolute and Unconditional.

Each Guarantor waives, to the maximum extent permitted by applicable Law, each
any and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Administrative
Agent, any Lender or any other Secured Party upon the guarantee contained in
this Section 2 or acceptance of the guarantee contained in this Section 2; the
Borrower Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Section 2; and all dealings
between the Borrower and any of the Guarantors, on the one hand, and among the
Secured Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower or any of
the Guarantors with respect to the Borrower Obligations. Each Guarantor
understands and agrees, to the maximum extent permitted by applicable Law, that
the guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of the Credit Agreement or any other Loan Document,
any of the Borrower Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent, any Lender or any other Secured Party,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower or any other Person against the Administrative Agent, any Lender or any
other Secured Party, or (c) any other circumstance whatsoever (other than a
defense of payment or

 

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

2.6 Reinstatement.

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

2.7 Payments.

Each Guarantor hereby guarantees that payments hereunder will be paid to the
Administrative Agent without set-off or counterclaim in Dollars at the
appropriate funding office as set forth in the Credit Agreement.

SECTION 3. GRANT OF SECURITY INTEREST

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

(a) all Accounts;

(b) all Chattel Paper;

 

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(c) all Contracts;

(d) all Deposit Accounts;

(e) all Documents;

(f) all Equipment;

(g) all General Intangibles;

(h) all Instruments;

(i) all Intellectual Property;

(j) all Inventory;

(k) all Investment Property;

(l) all Letter-of-Credit Rights;

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

(n) those certain Commercial Tort Claims of the Obligors set forth on Schedule 7
attached hereto;

(o) upon the entry of the Final Financing Order, Avoidance Proceeds; and

(p) to the extent not otherwise included, all Proceeds, Supporting Obligations
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,
however, that notwithstanding any of the other provisions set forth in this
Section 3, this Agreement shall not constitute a grant of a security interest in
and of the following (the “Excluded Property”): (i) any property to the extent
that such grant of a security interest is prohibited by any Requirement of Law,
except to the extent that such Requirement of Law providing for such prohibition
is ineffective under applicable Law; (ii) any Permitted Unperfected Account; and
(iii) any Excluded Stock; provided, however, that (x) Excluded Property shall
not include proceeds, products, substitutions or replacements of Excluded
Property and (y) any Excluded Property that at any time fails to satisfy the
above criteria (whether as a result of the applicable Grantor obtaining any
necessary consent, any change in any rule of Law, statute or regulation, or
otherwise) shall no longer constitute Excluded Property for purposes hereof and
shall automatically constitute a portion of the Collateral subject to the grant
of security contained herein.

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, ALL TERMS OF THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, THE REPRESENTATIONS AND WARRANTIES MADE HEREIN,
THE LIENS AND SECURITY INTERESTS

 

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GRANTED TO THE ADMINISTRATIVE AGENT PURSUANT TO THIS AGREEMENT, THE EXERCISE OF
ANY RIGHT OR REMEDY BY THE ADMINISTRATIVE AGENT, AND LENDERS HEREUNDER, ALL
OTHER RIGHTS AND BENEFITS AFFORDED HEREUNDER TO THE ADMINISTRATIVE AGENT AND THE
LENDERS AND ALL OBLIGATIONS OF THE BORROWER AND OTHER GRANTORS HEREUNDER) ARE
SUBJECT IN ALL RESPECTS TO THE TERMS, CONDITIONS AND PROVISIONS OF THE
PREPETITION INTERCREDITOR AGREEMENT (AS SUPPLEMENTED BY THE PREPETITION
INTERCREDITOR AGREEMENT JOINDER). IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS
OF THE PREPETITION INTERCREDITOR AGREEMENT (AS SUPPLEMENTED BY THE PREPETITION
INTERCREDITOR AGREEMENT JOINDER) AND THE TERMS OF THIS AGREEMENT, THE TERMS OF
THE PREPETITION INTERCREDITOR AGREEMENT (AS SUPPLEMENTED BY THE PREPETITION
INTERCREDITOR AGREEMENT JOINDER) SHALL GOVERN AND CONTROL.

SECTION 4. REPRESENTATIONS AND WARRANTIES

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

4.1 Representations in Credit Agreement.

In the case of each Guarantor, the representations and warranties set forth in
Article V of the Credit Agreement as they relate to such Guarantor or to the
Loan Documents to which such Guarantor is a party, each of which is hereby
incorporated herein by reference, are true and correct, in all material respects
(other than any representation or warranty that is qualified by materiality or
makes reference to Material Adverse Effect, which such representations and
warranties shall be true and correct in all respects), and the Administrative
Agent and each Lender shall be entitled to rely on each of them as if they were
fully set forth herein, provided that each reference in each such representation
and warranty to the Borrower’s knowledge shall, for the purposes of this
Section 4.1, be deemed to be a reference to such Guarantor’s knowledge.

4.2 Title; No Other Liens.

Except for the security interest granted to the Administrative Agent for the
ratable benefit of the Secured Parties pursuant to this Agreement and the other
Liens permitted to exist on the Collateral by the Credit Agreement, such Grantor
owns its Collateral in all material respects free and clear of any and all Liens
or claims of others. For the avoidance of doubt, it is understood and agreed
that any Grantor may, as part of its business, grant licenses to third parties
to use Intellectual Property owned or developed by a Grantor. For purposes of
this Agreement and the other Loan Documents, such licensing activity shall not
constitute a “Lien” or a “claim” on such Intellectual Property. Each of the
Administrative Agent, each Lender and each other Secured Party understands that
any such licenses may be exclusive to the applicable licensees, and such
exclusivity provisions may limit the ability of the Administrative Agent to
utilize, sell, Lease or transfer the related Intellectual Property or otherwise
realize value from such Intellectual Property pursuant hereto.

 

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4.3 Perfected First Priority Liens.

Subject to the entry of the Interim Financing Order (or the Final Financing
Order, when applicable), the security interests granted pursuant to this
Agreement will constitute valid perfected security interests in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, as
collateral security for such Grantor’s Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor, other than purchasers
in the ordinary course of business, and other than purchasers under transactions
permitted under the Credit Agreement, and (b) have the priority set forth in
Section 2.17 of the Credit Agreement. Notwithstanding anything to the contrary
contained above or elsewhere in this Agreement, but nonetheless subject to the
terms of the Prepetition Intercreditor Agreement, with respect to
Letter-of-Credit Rights where the relevant Grantor has been requested by the
Administrative Agent (at the direction of the Required Lenders) to obtain
“control” of same, the respective Grantor shall have a reasonable period of time
to comply with such request and such “control” shall not be required if the
respective Grantor is unable to obtain any required consents for such “control”
after using commercially reasonable efforts to obtain same, and unless and until
“control” of the respective Letter-of-Credit Rights is obtained in accordance
with the above provisions of this Section 4.3 (including this sentence), there
shall be no violation of any representation or warranty or covenant contained in
this Agreement as a result thereof.

4.4 Jurisdiction of Organization; Chief Executive Office.

On the date hereof, such Grantor’s jurisdiction of organization, identification
number from the jurisdiction of organization (if any), and the location of such
Grantor’s chief executive office or sole place of business or principal
residence, as the case may be, are specified on Schedule 4.

4.5 Inventory and Equipment.

On the date hereof, all of the Grantors’ Inventory and Equipment is kept at the
locations listed on Schedule 5, except with respect to (i) Inventory and
Equipment in transit to or from a location listed on Schedule 5, (ii) locations
inside the United States and Canada where the value of such Inventory (other
than consigned Inventory, which is the subject of clause (iii) below) and
Equipment does not exceed in the aggregate for the Grantors and all other
Guarantors (including the Canadian Grantors) combined (x) $250,000 at any one
such location, and (y) $1,000,000 at all such locations, (iii) locations inside
the United States and Canada where the value of Inventory on consignment for the
Grantors and all other Guarantors (including the Canadian Grantors) combined
does not exceed (x) $300,000 at any one such location and (y) $2,000,000 at all
such locations, and (iv) locations in a jurisdiction outside the United States
and Canada (or any constituent jurisdiction thereof), provided that the value of
all such Inventory and Equipment located in such jurisdictions does not exceed
[$8,500,000].

4.6 Farm Products.

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

 

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4.7 Investment Property.

(a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all
the issued and outstanding shares of all classes of the Capital Stock of each
Issuer owned by such Grantor, except for Excluded Stock.

(b) On the date hereof, all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.

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

(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens in favor of, or claims of, any other Person, except the
security interest created by this Agreement and otherwise would not violate the
applicable requirements of the Credit Agreement.

4.8 Receivables.

(a) Except to the extent that such amounts so payable to Grantors and the other
Guarantors (including the Canadian Grantors) combined do not exceed $50,000 in
aggregate, no amount payable to such Grantor under or in connection with any
Receivable is evidenced by any Instrument or Chattel Paper that has not been
delivered to the Administrative Agent.

(b) As of the date hereof, not more than ten percent (10%) of the Receivables
have a Governmental Authority as an obligor.

4.9 Intellectual Property.

(a) Schedule 6 lists all registered and applied for Patents, Trademarks and
Copyrights in the United States that are owned by such Grantor in its own name
on the date hereof. To each Grantor’s knowledge, as of the date hereof, all
Intellectual Property owned by such Grantor and set forth on Schedule 6 is
valid, in full force and effect, subsisting, unexpired and enforceable, and has
not been abandoned. To each Grantor’s knowledge, the business of such Grantor
and the use of any Intellectual Property in connection therewith, does not
infringe, misappropriate, dilute or violate the intellectual property rights of
any third Person. There are no pending or, to such Grantor’s knowledge,
threatened claims of infringement, misappropriation, dilution or violation by
Grantor of any third Person’s intellectual property rights, and none of the
Grantors is aware of any facts or circumstances that such Grantor reasonably
believes are likely to form the basis for any such claim, and such Grantor has
not received written notice of any such claim

(b) Except as set forth in Schedule 6, on the date hereof none of the material
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.

 

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SECTION 5. COVENANTS.

Each Grantor covenants and agrees with the Administrative Agent and the Lenders
that, from and after the date of this Agreement until the Obligations shall have
been paid in full in cash (other than contingent or indemnification obligations
for which no claim has been made) and the Commitments shall have terminated:

5.1 Covenants in Credit Agreement.

In the case of each Guarantor, to the extent applicable, such Guarantor shall
take, or shall refrain from taking, as the case may be, each action that is
necessary to be taken or not taken, as the case may be, so that no Default or
Event of Default is caused by the failure to take such action or to refrain from
taking such action by such Guarantor or any of its Subsidiaries.

5.2 Delivery of Instruments, Certificated Securities and Chattel Paper.

Except to the extent that such amounts so payable to Grantors and the other
Guarantors (including the Canadian Grantors) combined do not exceed $250,000 in
aggregate, if any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any Instrument, Certificated Security
or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall
be promptly delivered to the Administrative Agent, duly endorsed in a manner
reasonably satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.

5.3 Maintenance of Insurance.

(a) Such Grantor will maintain, with financially sound and reputable companies,
insurance policies, in accordance with the terms of the Credit Agreement,
(i) insuring the Inventory and Equipment against loss by fire, explosion, theft
and such other casualties in accordance with the terms of the Credit Agreement
and (ii) insuring such Grantor against liability for personal injury and
property damage relating to such Inventory and Equipment.

(b) All such insurance shall (i) provide for not less than 30 days’ prior notice
to the Administrative Agent of termination, lapse or cancellation of such
insurance (to the extent such provision is obtainable using commercially
reasonably efforts) and (ii) name the Administrative Agent as an additional
insured and/or loss payee, as applicable.

(c) The Borrower shall deliver to the Administrative Agent, substantially
concurrently with the annual renewal of each insurance policy covered by the
certificates of insurance delivered pursuant to Section 6.15(b) of the Credit
Agreement, updated insurance certificates with respect to each such insurance
policy and, in addition, such supplemental information with respect to each such
insurance policy as the Administrative Agent may from time to time reasonably
request.

5.4 Maintenance of Perfected Security Interest; Further Documentation.

(a) Such Grantor (i) shall maintain the security interest created by this
Agreement as a perfected security interest (but only to the extent that such
security interest can be perfected by the filing of a financing statement under
the Uniform Commercial Code (or other similar Laws) or obtaining “control”
(within the meaning of the applicable Uniform Commercial Code) of

 

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Deposit Accounts (other than Permitted Unperfected Accounts) or Investment
Property) having at least the priority described in Section 4.3 and (ii) shall
defend such security interest against the claims and demands of all Persons
whomsoever (other than Persons with prior Liens permitted under clause (b) of
Section 4.3), subject to the rights of such Grantor under the Loan Documents to
dispose of the Collateral.

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

(c) At any time and from time to time, upon the reasonable written request of
the Administrative Agent, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and shall record or cause to be
recorded, such further instruments and documents and take such further actions
as the Administrative Agent may reasonably request for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing or
continuation statements under the Uniform Commercial Code (or other similar
Laws) in effect in any jurisdiction with respect to the security interests
created hereby (ii) in the case of Investment Property, Deposit Accounts and
Securities Accounts (other than Permitted Unperfected Accounts),
Letter-of-Credit Rights (but, in the case of such Letter-of-Credit Rights, only
after written request from the Administrative Agent (at the direction of the
Required Lenders) and subject to the last sentence of Section 4.3) and any other
relevant Collateral, taking any actions necessary to enable the Administrative
Agent to obtain “control” (within the meaning of the applicable Uniform
Commercial Code) with respect thereto and (iii) in the case of Intellectual
Property, filings to the United States Patent and Trademark Office, the United
States Copyright Office or other similar authority.

(d) By virtue of the execution and delivery by the Grantors of this Agreement
and the entry of the Interim Financing Order (or the Final Financing Order, when
applicable), the Administrative Agent will obtain, for the benefit of the
Secured Parties, a legal, valid and perfected lien upon and security interest in
the Collateral under the Bankruptcy Code, subject only to the Liens permitted
under the Loan Documents, as security for the payment and performance of the
Obligations.

5.5 Changes in Locations, Name, etc.

Such Grantor will not, except upon 15 days’ prior written notice to the
Administrative Agent and delivery to the Administrative Agent of all additional
financing statements and other documents necessary to maintain the validity,
perfection and priority of the security interests provided for herein:

(i) change its jurisdiction of organization from that referred to in
Section 4.4; or

(ii) change its name.

 

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5.6 Notices.

Such Grantor will advise the Administrative Agent and the Lenders promptly, in
reasonable detail, of the occurrence of any event which could reasonably be
expected to have a material adverse effect on the aggregate value of the Credit
Agreement Collateral or on the security interests created hereby.

5.7 Investment Property.

(a) If such Grantor shall become entitled to receive or shall receive any
certificate (including, without limitation, any certificate representing a
dividend or a distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of the Capital Stock of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in respect thereof, such
Grantor shall accept the same as the agent of the Administrative Agent, the
Lenders and the other Secured Parties, hold the same in trust for such Persons
and deliver the same forthwith to the Administrative Agent in the exact form
received, duly endorsed by such Grantor to the Administrative Agent, if
required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor to be held by the Administrative Agent,
subject to the terms hereof, as additional collateral security for the
Obligations. If an Event of Default has occurred and is continuing (to the
extent in accordance with the Interim Financing Order (and the Final Financing
Order, when applicable), any sums paid upon or in respect of the Investment
Property upon the liquidation or dissolution of, or as a distribution of capital
by, any Issuer shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in case any
property (if an Event of Default has occurred and is continuing) or any
Investment Property shall be distributed upon or with respect to the Investment
Property pursuant to the recapitalization or reclassification of the capital of
any Issuer or pursuant to the reorganization thereof, the property so
distributed shall, unless otherwise subject to a perfected security interest in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Investment Property shall be received by such Grantor (when otherwise required
to be paid or delivered over to the Administrative Agent as set forth above),
such Grantor shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the
Administrative Agent, the Lenders and the other Secured Parties, segregated from
other funds of such Grantor, as additional collateral security for the
Obligations.

(b) Without the prior written consent of the Administrative Agent (acting at the
direction of the Required Lenders), such Grantor will not (i) if an Event of
Default has occurred and is continuing, vote to enable, or take any other action
to permit, any Issuer to issue any Capital Stock of any nature or to issue any
other securities convertible into or granting the right to purchase or exchange
for any Capital Stock of any nature of any Issuer, (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Investment Property or Proceeds thereof (except pursuant to a transaction
permitted by the Credit Agreement), (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Investment Property or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement or otherwise permitted in the
Credit Agreement or (iv) enter into any agreement or undertaking, other than as
permitted under the Credit Agreement or Financing Orders, restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Investment Property or Proceeds thereof.

 

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(c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Investment
Property issued by it and will comply with such terms insofar as such terms are
applicable to it and (ii) the terms of Section 6.3(c) shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it pursuant to
Section 6.3(c) with respect to the Investment Property issued by it.

5.8 Receivables.

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

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

(c) If, as of any fiscal quarter end occurring after the Closing Date, the
Grantors determine that more than ten percent (10%) of Receivables (in the
aggregate for all Grantors) have a Governmental Authority as an obligor, then
the Grantors shall so notify the Administrative Agent (such notice to be given
substantially concurrently with the delivery of the quarterly financial
statements required pursuant to Section 6.01(b) of the Credit Agreement) and
shall promptly take such steps as may be necessary to comply with any applicable
federal assignment of claims Laws and other comparable Laws.

5.9 Intellectual Property.

(a) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will (i) continue to use each
Trademark on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non-use, (ii) maintain as in the past the quality of products and services
offered under such Trademark, (iii) use such Trademark with the appropriate
notice of registration and all other notices and legends required by applicable
Requirements of Law, (iv) not adopt or use any new mark which is confusingly
similar or a colorable imitation of such Trademark unless the Administrative
Agent, for the ratable benefit of the Administrative Agent, the Lenders and the
other Secured Parties, shall obtain a perfected security interest in such new
mark pursuant to this Agreement, and (v) not do any act or knowingly omit to do
any act whereby such Trademark may become invalidated or impaired in any way.

 

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(b) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act, or omit to do
any act, whereby any Patent may become forfeited, abandoned or dedicated to the
public.

(c) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act or knowingly
omit to do any act whereby any Copyright may become invalidated or otherwise
impaired. Such Grantor will not do any act whereby any Copyright may fall into
the public domain, to the extent such Copyright is material to the aggregate
value of the Credit Agreement Collateral.

(d) Except as would not have a material adverse effect on the aggregate value of
the Credit Agreement Collateral, such Grantor will not do any act that knowingly
uses any Intellectual Property to infringe the intellectual property rights of
any other Person.

(e) Such Grantor will promptly notify the Administrative Agent and the Lenders
if it knows, or has reason to know, that any application or registration
relating to any Intellectual Property may become forfeited, abandoned or
dedicated to the public, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any cancellation or invalidation proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court or
tribunal in any country, but specifically excluding any official actions or
search reports issued by any intellectual property office around the world
during the normal course of prosecution of any applications for Intellectual
Property) regarding such Grantor’s ownership of, or the validity of, any
Intellectual Property or such Grantor’s right to register the same or to own and
maintain the same, in each case to the extent such Intellectual Property is
material to the aggregate value of the Credit Agreement Collateral.

(f) Whenever such Grantor, either by itself or through the Administrative Agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Administrative Agent in accordance with Section 6.02(a)(iii)(y) of
the Credit Agreement. Upon reasonable request of the Administrative Agent, such
Grantor shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Administrative Agent may request to
evidence the Administrative Agent’s security interest in any Copyright, Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby.

(g) Except as otherwise determined in the exercise of such Grantor’s reasonable
business judgment, Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability, in each case to the extent such Intellectual Property is
material to the aggregate value of the Credit Agreement Collateral.

 

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(h) In the event that any Intellectual Property is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Intellectual Property and (ii) notify the Administrative Agent after it
learns thereof, in each case to the extent such Intellectual Property is
material to the aggregate value of the Credit Agreement Collateral.

(i) Upon the occurrence and during the continuance of an Event of Default (to
the extent in accordance with the Interim Financing Order (and when applicable,
the Final Financing Order)), each Grantor shall use its best efforts to obtain
all requisite consents or approvals from the licensor of each Copyright License,
Patent License, Trade Secret License or Trademark License to effect the
assignment or sublicense of all of such Grantor’s right, title and interest
thereunder to the Administrative Agent or its designee for the benefit of the
Secured Parties in accordance with this Agreement or the Credit Agreement.

(j) For the avoidance of doubt, no Grantor shall be required to take any steps
to perfect the Administrative Agent’s security interest in any Intellectual
Property in any jurisdiction outside of the United States or Canada unless and
until the Administrative Agent (at the direction of the Required Lenders) shall
have requested such Grantor to do so in writing.

5.10 Commercial Tort Claims.

Each Grantor shall (i) forward to the Administrative Agent written notification
(such notice to be given substantially concurrently with the delivery of the
quarterly financial statements required pursuant to Section 6.01(b) of the
Credit Agreement) of any and all Commercial Tort Claims where the expected
recovery could reasonably be expected to be in an amount in excess of $200,000,
including, but not limited to, any and all actions, suits and proceedings before
any court or Governmental Authority by or affecting such Grantor or any of its
Subsidiaries and (ii) execute and deliver to the Administrative Agent such
statements, documents and notices and do and cause to be done all such things as
may be 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 such Commercial
Tort Claims.

5.11 Cash Management Systems.

(a) On or prior to the Closing Date, the Borrower shall have established and
shall thereafter maintain in existence one or more lockboxes (each a “Lockbox”)
with such Lenders as shall be reasonably acceptable to the Required Lenders
(each a “Depositary Account Bank”) and shall instruct all account debtors on the
Borrower’s Accounts to remit all payments to a Lockbox. All payments remitted by
account debtors of the Borrower to any Lockbox, all other amounts received by
the Borrower from any account debtor and all other cash received by the Borrower
from any other source shall in each case upon receipt thereof be deposited into
a Deposit Account.

(b) Each Deposit Account or Securities Account of the Borrower or any other
Grantor that is not a Permitted Unperfected Account (each such Deposit Account,
a “Controlled Deposit Account,” and each such Securities Account, a “Controlled
Securities Account,” Controlled Securities Accounts together with Controlled
Deposit Accounts may sometimes be referred to herein individually as a
“Controlled Account” and, collectively, as “Controlled Accounts”), shall be
maintained with a Depositary Account Bank.

 

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(c) Within the time period prescribed under Section 6.15 of the Credit
Agreement, the Borrower and each other Grantor shall have entered into a deposit
account control agreement or securities account control agreement in form and
substance satisfactory to the Administrative Agent and the Required Lenders with
respect to each Controlled Account with the respective Depositary Account Bank
and in favor of the Administrative Agent (each an “Account Control Agreement”),
which, in the case of Account Control Agreements with respect to Controlled
Deposit Accounts, shall provide that, among other things, upon the occurrence
and during the continuance of an Event of Default and to the extent permitted by
and in accordance with the Interim Financing Order (and the Final Financing
Order, when applicable), at the instruction of the Administrative Agent, all
available amounts held in each Controlled Deposit Account maintained at such
Depositary Account Bank shall be wired on each Business Day into an account (the
“Administrative Agent Account”) maintained by the Administrative Agent;
provided, that the Administrative Agent hereby agrees that it will not give any
instructions under any Account Control Agreement unless and until an Event of
Default shall have occurred and be continuing.

(d) The closing of any Lockbox or Controlled Account and the termination of any
Account Control Agreement, except in connection with a release of Liens under
Section 8.15 hereof or Section 9.12 of the Credit Agreement, shall require in
each case the prior written consent of the Administrative Agent (at the
direction of the Required Lenders).

SECTION 6. REMEDIAL PROVISIONS

6.1 Certain Matters Relating to Receivables.

(a) If an Event of Default shall have occurred and be continuing, (x) the
Administrative Agent shall have the right to make test verifications of the
Receivables in any reasonable manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance and
information as the Administrative Agent may require in connection with such test
verifications and (y) upon the Administrative Agent’s reasonable request (at the
direction of the Required Lenders) and at the sole expense of the relevant
Grantor, such Grantor shall cause independent public accountants or others
satisfactory to the Administrative Agent and the Required Lenders to furnish to
the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.

(b) Subject to the Financing Orders, the Administrative Agent hereby authorizes
each Grantor to collect such Grantor’s Receivables and the Administrative Agent
may curtail or terminate said authority at any time after the occurrence and
during the continuance of an Event of Default. If required by the Administrative
Agent at any time after the occurrence and during the continuance of an Event of
Default, any payments of Receivables, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly endorsed by such Grantor to the
Administrative Agent if required, in a Collateral Account maintained under the
sole dominion and control of the Administrative Agent, subject to withdrawal by
the Administrative Agent for the account of the Lenders only as provided in
Section 6.5, and (ii) until so turned over, shall be held by such Grantor in
trust for the Secured Parties, segregated from other funds of such Grantor.

 

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(c) Subject to the Financing Orders, if an Event of Default shall have occurred
and be continuing, at the Administrative Agent’s reasonable request, (i) each
Grantor shall deliver to the Administrative Agent all original (to the extent
such Grantor has original copies) and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original (to the extent such Grantor has
original copies) orders, invoices and shipping receipts and (ii) at the
reasonable request of the Administrative Agent the applicable Grantor shall use
its commercially reasonable efforts to take such steps as may be necessary to
comply with any applicable federal assignment of claims Laws and other
comparable Laws. Notwithstanding anything to the contrary in this Agreement, no
Grantor will be required to disclose any document, information or other matter
that (i) constitutes non-financial trade secrets or non-financial proprietary
information with respect to any account debtors related to any Receivables,
(ii) in respect of which disclosure to the Administrative Agent or any Lender
(or their respective representatives or contractors) is prohibited by Law or
(iii) is subject to attorney-client or similar privilege or constitutes attorney
work product.

6.2 Communications with Obligors; Grantors Remain Liable.

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

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

(c) Anything herein to the contrary notwithstanding, each Grantor shall remain
liable under each of the Receivables and Contracts to observe and perform all
the conditions and obligations to be observed and performed by it thereunder,
all in accordance with the terms of any agreement giving rise thereto. The
Administrative Agent and Lenders shall not have any obligation or liability
under any Receivable (or any agreement giving rise thereto) or Contract by
reason of or arising out of this Agreement or the receipt by the Administrative
Agent, any Lender or any other Secured Party of any payment relating thereto,
nor shall the Administrative Agent, any Lender or any other Secured Party be
obligated in any manner to perform any of the obligations of any Grantor under
or pursuant to any Receivable (or any agreement giving rise thereto) or
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

 

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6.3 Pledged Stock.

(a) Unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent’s intent to exercise its corresponding rights pursuant to
Section 6.3(b), (and to the extent not prohibited by and in accordance with the
Interim Financing Order (and the Final Financing Order, when applicable), each
Grantor shall be permitted to receive all dividends paid in respect of the
Pledged Stock and all payments made in respect of the Pledged Notes and to
exercise all voting and corporate or other organizational rights with respect to
the Investment Property; provided, however, that no vote shall be cast or
corporate or other organizational right exercised or other action taken which
would materially impair the Collateral in a manner not expressly permitted by
the Credit Agreement, this Agreement or any other Loan Document or which would
be inconsistent with or result in any violation of any provision of the Interim
Financing Order (and the Final Financing Order, when applicable), Credit
Agreement, this Agreement or any other Loan Document.

(b) If an Event of Default shall occur and be continuing and the Administrative
Agent shall give notice of its intent to exercise such rights to the relevant
Grantor (and to the extent in accordance with the Interim Financing Order (and
the Final Financing Order, when applicable), (i) the Administrative Agent shall
have the right to receive any and all cash dividends, payments or other Proceeds
paid in respect of the Investment Property and make application thereof to the
Obligations in the order set forth in Section 6.5, and (ii) any or all of the
Investment Property shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter,
during the continuance of such Event of Default, exercise (x) all voting,
corporate and other rights pertaining to such Investment Property at any meeting
of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and
all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability (except liabilities resulting from the gross negligence or
willful misconduct of the Administrative Agent (as determined by a court of
competent jurisdiction in a final, non-appealable judgment)) except to account
for property actually received by it, but the Administrative Agent shall have no
duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.

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

 

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6.4 Proceeds to be Turned Over to Administrative Agent.

Subject to the terms of the Financing Orders, in addition to the rights of the
Secured Parties specified in Section 6.1 with respect to payments of
Receivables, if an Event of Default shall occur and be continuing, upon receipt
by such Grantor of notice from the Administrative Agent, all Proceeds received
by any Grantor consisting of cash, checks and other similar near-cash items
shall be held by such Grantor in trust for the Administrative Agent and the
Lenders, segregated from other funds of such Grantor, and shall, upon the
request of the Administrative Agent (at the direction of the Required Lenders),
be turned over to the Administrative Agent forthwith upon receipt by such
Grantor in the exact form received by such Grantor (duly endorsed by such
Grantor to the Administrative Agent, if required). All Proceeds received by the
Administrative Agent hereunder shall be held by the Administrative Agent in a
Collateral Account maintained under its sole dominion and control. All Proceeds
while held by the Administrative Agent in a Collateral Account (or by such
Grantor in trust for the Administrative Agent, the Lenders and the other Secured
Parties) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.

6.5 Application of Proceeds.

Subject to the terms of the Financing Orders, if an Event of Default shall have
occurred and be continuing (but the Obligations shall not have been accelerated
pursuant to Section 8.01 of the Credit Agreement, the Administrative Agent may
apply all or any part of Proceeds constituting Collateral, whether or not held
in any Collateral Account, and any proceeds of the guarantee set forth in
Section 2, in payment of the Obligations in the order set forth in
Section 8.02(b) of the Credit Agreement.

6.6 Code and Other Remedies.

If an Event of Default shall occur and be continuing and to the extent in
accordance with the Interim Financing Order (and the Final Financing Order, when
applicable, the Administrative Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC, the Bankruptcy Code or any other applicable Law. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by Law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, have assigned to it, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease, license,
sublicense, assign, give option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker’s board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or

 

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on credit or for future delivery without assumption of any credit risk. The
Administrative Agent shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private sale conducted in a commercially
reasonable manner. Upon written demand from the Administrative Agent, each
Grantor shall grant, assign, convey or otherwise transfer to the Administrative
Agent an absolute assignment of all of such Grantor’s right, title and interest
in and to the Intellectual Property and shall execute and deliver to the
Administrative Agent such documents as are necessary or appropriate to carry out
the intent and purposes of this Agreement. The Administrative Agent or any
Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by Law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and released
to the extent permitted by Law. Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor’s premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs and expenses
of every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent, the Lenders and the other Secured
Parties hereunder, including, without limitation, reasonable attorneys’ fees and
disbursements, to the payment in whole or in part of the Obligations, in the
order set forth in Section 6.5 hereof, and only after such application and after
the payment by the Administrative Agent of any other amount required by any
provision of Law, including, without limitation, Section 9-615(a)(3) of the New
York UCC, need the Administrative Agent account for the surplus, if any, to any
Grantor. To the extent permitted by the Bankruptcy Code or other applicable Law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent, any Lender or any other Secured Party arising out of the
exercise by them of any rights hereunder, except for gross negligence or willful
misconduct on the part of any such Person. If any notice of a proposed sale or
other disposition of Collateral shall be required by Law, such notice shall be
deemed reasonable and proper if given at least 20 days before such sale or other
disposition.

6.7 Private Sales.

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

 

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(b) Subject to the Financing Orders, each Grantor agrees to use its best efforts
to do or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Pledged Stock pursuant to this
Section 6.7 valid and binding and in compliance with any and all other
applicable Requirements of Law. Each Grantor further agrees that a breach of any
of the covenants contained in this Section 6.7 will cause irreparable injury to
the Administrative Agent, the Lenders and each of the other Secured Parties,
that the Administrative Agent, the Lenders and each of the other Secured Parties
have no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives, to the extent
permitted by applicable Law, and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Credit Agreement.

6.8 Deficiency.

Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay its Obligations
and the reasonable fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.

6.9 Intellectual Property License.

The Grantors hereby grant the Administrative Agent a non-exclusive,
transferable, sublicensable, worldwide license and right, effective solely
during an Event of Default, to the maximum extent permitted by applicable Law
and to the extent of the Grantors’ interest therein, exercisable without payment
of royalty or other compensation, under and to any and all of the Intellectual
Property now or hereafter owned by, licensed to, or otherwise used by the
Grantors to purchase, use, market, repossess, possess, store, assemble,
manufacture, process, sell, transfer, distribute, lease, license and otherwise
exploit and dispose of any asset included in the Collateral to the extent the
Administrative Agent takes possession of such in accordance with the terms and
conditions of this Agreement and the Credit Agreement and the Interim Financing
Order (and when applicable, the Final Financing Order). For the avoidance of
doubt, in the event that any such Event of Default is cured in accordance with
the terms and conditions of this Agreement and the Credit Agreement, the
foregoing license shall automatically be suspended.

SECTION 7. THE ADMINISTRATIVE AGENT

7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc.

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

(i) in the name of such Grantor or its own name, or otherwise, take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under any Receivable or Contract or
with respect to any

 

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other Collateral and file any claim or take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under any
Receivable or Contract or with respect to any other Collateral whenever payable;

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

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

(iv) execute, in connection with any sale provided for in Section 6.6, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

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

Anything in this Section 7.1 to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.1 unless an Event of Default shall have occurred
and be continuing and only to the extent permitted by and in accordance with the
Interim Financing Order (and the Final Financing Order, when applicable).

 

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

(c) The expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 7.1, together with interest thereon
(which shall accrue only from the time upon which written demand therefor is
made by the Administrative Agent) at a rate per annum equal to the rate per
annum at which interest would then be payable on NM Term Loans that are Base
Rate Loans (which rate shall increase to the rate applicable to such Loans that
are past due for periods after the date that is 10 days after written demand for
payment has been made upon the Borrower by the Administrative Agent) under the
Credit Agreement, from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Administrative Agent on demand.

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

7.2 Duty of Administrative Agent.

The Administrative Agent’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under
Section 9-207 of the New York UCC, the Bankruptcy Code or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with similar
property for its own account. None of the Administrative Agent, any Lender, any
other Secured Party or any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Lenders hereunder are solely to protect the Administrative Agent’s, the
Lenders’ and each other Secured Party’s interests in the Collateral and shall
not impose any duty upon any of such Persons to exercise any such powers. The
Administrative Agent, the Lenders and the other Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.

7.3 Filing of Financing Statements.

Pursuant to any applicable Law, each Grantor authorizes the Administrative Agent
(or its designees) to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and

 

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in such offices as the Administrative Agent determines appropriate to perfect or
maintain the perfection of the security interests of the Administrative Agent
under this Agreement. Each Grantor authorizes the Administrative Agent to use
the collateral description “all personal property” or such similar language in
any such financing statements. Each Grantor hereby ratifies and authorizes the
filing by the Administrative Agent (or its designees) of any financing statement
with respect to the Collateral made prior to the date hereof.

7.4 Authority of Administrative Agent.

Each Grantor acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Grantors, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Secured Parties with full and valid authority so to act or
refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.

SECTION 8. MISCELLANEOUS

8.1 Amendments in Writing.

None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except in accordance with Section 11.01 of
the Credit Agreement.

8.2 Notices.

All notices, requests and demands to or upon the Administrative Agent or any
Grantor hereunder shall be effected in the manner provided for in Section 11.02
of the Credit Agreement; provided that any such notice, request or demand to or
upon any Guarantor shall be addressed to such Guarantor at its notice address
set forth on Schedule 1.

8.3 No Waiver by Course of Conduct; Cumulative Remedies.

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

 

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8.4 Enforcement Expenses; Indemnification.

(a) To the same extent that the Loan Parties are required under such
circumstances to do so pursuant to Section 11.04(a) of the Credit Agreement,
each Guarantor jointly and severally agrees to pay or reimburse each of the
Secured Parties for all reasonable invoiced, out-of-pocket costs and expenses
(including the reasonable and documented fees, charges and expenses of PJT
Partners LP under the PJT Letter Agreement, O’Melveny & Myers LLP, Richards
Layton & Finger, P.A., and Covington & Burling LLP) incurred in collecting
against such Guarantor under the guarantee contained in Section 2 or otherwise
enforcing or preserving any rights under this Agreement and the other Loan
Documents to which such Guarantor is a party.

(b) Each Grantor jointly and severally agrees to pay, and to hold each of the
Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.

(c) To the same extent that the Loan Parties are required to do so under such
circumstances pursuant to Section 11.04(b) of the Credit Agreement and subject
to the Financing Orders, each Guarantor jointly and severally agrees to pay, and
to hold each Indemnitee harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and each
of the other Loan Documents.

(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.

8.5 Successors and Assigns.

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

8.6 Set-Off.

Subject to the terms of the Financing Orders, each Grantor hereby irrevocably
authorizes the Administrative Agent and each Lender at any time after the Loans
and other amounts payable under the Credit Agreement shall have become due and
payable pursuant to Article VIII of the Credit Agreement, without notice to such
Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the

 

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obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent, any Lender or any other Secured Party has made any
demand for payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Administrative Agent and each Lender shall notify
such Grantor promptly of any such set-off and the application made by the
Administrative Agent or such Lender of the proceeds thereof, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each Lender under this
Section 8.6 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Administrative Agent or such
Lender may have.

8.7 Counterparts.

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

8.8 Severability.

Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

8.9 Section Headings.

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

8.10 Integration.

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

8.11 GOVERNING LAW.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK AND (TO THE EXTENT APPLICABLE) THE
BANKRUPTCY CODE.

 

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8.12 Submission To Jurisdiction; Waivers.

Each Grantor hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
exclusive general jurisdiction of the Bankruptcy Court or, if the Bankruptcy
Court does not have (or abstains from) jurisdiction, courts of the State of New
York, the courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;

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

(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

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

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

8.13 Acknowledgements.

Each Grantor hereby acknowledges that:

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

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

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

8.14 Additional Grantors.

Each Subsidiary of the Borrower that is required to become a party to this
Agreement pursuant to Section 6.09 of the Credit Agreement shall become a
Grantor for all purposes of this Agreement upon execution and delivery by such
Subsidiary of an Assumption Agreement in the form of Annex 1 hereto.

 

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8.15 Releases.

(a) At such time as the Loans and the other Obligations (other than Secured
Hedge Agreement Obligations and Secured Cash Management Obligations to the
extent (x) such Obligations have been secured or backstopped to the satisfaction
of the Lender holding such Obligations or (y) the Lender holding such
Obligations has otherwise consented to such exclusion) shall have been paid in
full in cash and the NM Commitments have been terminated, the Collateral shall
be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the Administrative Agent and each Grantor hereunder shall terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantors. At the request and sole
expense of any Grantor following any such termination, the Administrative Agent
shall deliver to such Grantor any Collateral held by the Administrative Agent
hereunder, and execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such termination and to authorize
the filing by Grantors of any necessary UCC terminations or other terminations
or releases.

(b) If any of the Collateral shall be sold, transferred or otherwise disposed of
by any Grantor in a transaction permitted by the Credit Agreement, then the
security interests in such Collateral shall be automatically released without
further action by any party and the Administrative Agent, at the request and
sole expense of such Grantor, shall execute and deliver to such Grantor all
releases or other documents reasonably necessary or desirable for the release of
the Liens created hereby on such Collateral. For the avoidance of doubt, the
Administrative Agent shall promptly (and the Lenders hereby authorize the
Administrative Agent to) take such action and execute any such documents as may
be reasonably requested by the Borrower (at the Borrower’s expense) to evidence
the release of any Liens created by any Loan Document. At the request and sole
expense of the Borrower, a Subsidiary Guarantor shall be released from its
obligations hereunder in the event that all the Capital Stock of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a transaction
permitted by the Credit Agreement; provided that the Borrower shall have
delivered to the Administrative Agent a certification by the Borrower stating
that such transaction is in compliance with the Credit Agreement and the other
Loan Documents.

8.16 WAIVER OF JURY TRIAL.

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

8.17 Financing Orders. Notwithstanding anything herein to the contrary, the
Liens and security interests granted to the Administrative Agent pursuant to
this Agreement and the exercise of any right or remedy by the Administrative
Agent hereunder, in each case, with respect to the Collateral are subject to the
limitations and provisions of the Financing Orders. In the event of any conflict
between the terms of the Financing Orders and the terms of this Agreement, the
terms of the Financing Orders shall govern and control.

[Signature Pages Follow]

 

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